Kotler, Armstrong
Principles of Marketing 4e
Chapter 1
Marketing: Creating Customer
Value and Satisfaction, Profitably
Chapter Objectives (1)
1. Define marketing, employing such key elements as
value, customer relationships, needs, wants and
demands.
2. Discuss marketing management and elaborate on
the basic ideas of demand management and
building profitable customer relationships.
3. List the marketing management philosophies and
be able to distinguish between them.
4. Analyse the key marketing challenges of this
century and reflect on the ways these might be
overcome.
What Is Marketing?
• An activity, set of institutions and
processes for creating,
communicating, delivering and
exchanging offerings that have value
for customers, clients, partners and
society at large.
The Marketing Process
Selling and Promotion are:
A. are synonymous with the term marketing
B. are only the tip of the marketing iceberg
C. are the most important marketing
functions
D. are the least important marketing
functions
E. are not part of marketing
Understanding the Marketplace
and Customer Needs
• Marketers need to understand customer
needs, wants and demands and the
marketplace within which they operate.
Needs, Wants and Demands (1)
• Human needs are the most basic concept
underlying marketing.
– Humans have many complex needs including physical,
social and individual needs.
– Marketers stimulate rather than create these needs, they
are part of human make up.
– When a need is not satisfied, a person will either try to
reduce the need or look for an object that will satisfy it.
– People in less economically developed societies might try
to reduce their desires and satisfy them with what is
available.
– People in industrial societies might try to develop objects
that will satisfy their needs.
Needs, Wants and Demands (2)
• Wants are the form taken by human needs
and are shaped by culture and individual
personality.
– For example, a hungry person in Australia,
Singapore or Hong Kong might want
something different for lunch from a hungry
person in the South Pacific.
– As a society evolves, the wants of its
members expand.
– Marketers try to provide more want-satisfying
goods and services.
Needs, Wants and Demands (3)
• Demands are the human wants that are backed up
by buying power.
– Customers view products as bundles of benefits and
choose the products that give them the best bundle for
their money.
– Outstanding companies go to great lengths to learn about
and understand their customers’ needs, wants and
demands.
– They conduct customer research, analyse and monitor
customer behaviour, complaints, inquiry, warranty and
service performance data.
– Understanding customer needs, wants, and demands in
detail provides important input for designing marketing
strategies.
Want supported by buying power is best
described as a(n):
A.
B.
C.
D.
E.
need
desire
demand
exchange
manifestation of greed
Market Offerings: Goods, Services
and Experiences
• A market offering is a product that is some
combination of goods, services and experiences
that can be offered to a market to satisfy a need or
want.
• A product includes physical objects, services,
persons, places, ideas and organisations. Anything
that satisfies a need can be called a product.
• Marketers often use the expression goods and
services to distinguish between tangible and
intangible ones. However these should be viewed
as continuum and not as a basic dichotomy.
Customer Perceived Value and
Satisfaction
• Customer perceived value is the difference
between the values the customer gains in
owning and using a product and the costs of
obtaining the product.
• Customer Satisfaction is the extent to which a
product’s perceived performance matches a
buyer’s expectations.
Exchange, Transactions and
Relationships (1)
• Exchange is the act of obtaining a desired object
from someone by offering something in return.
• Exchange means that people do not need to prey on
others, depend on donations or possess the skills to
produce every necessity for themselves.
• Exchange is the core concept of marketing. For an
exchange to take place, several conditions must be
satisfied:
• At least two parties must participate and each
must have something of value to the other.
• Each party must want to deal with the other and
be free to accept or reject an offer.
• Each party must be able to communicate and
deliver.
Exchange, Transactions and
Relationships (2)
• A transaction is marketing’s unit of
measurement.
• A transaction consists of a trade of value
between two parties.
• In transactions it must be possible to state
that what each party is giving and gaining.
• Relationship marketing is the process of
creating, maintaining and enhancing strong,
value-laden relationships with customers and
other stakeholders.
Markets
• Market - A set of all actual and
potential buyers of a product
A Simple Marketing System
Marketing
• Marketing means managing markets to
bring about exchanges for the purpose of
satisfying human needs and wants.
• Marketing is carried out by both sellers
and buyers, and company purchasing
agents.
Elements of a Modern Marketing
System
Designing a Customer-Driven
Marketing Strategy
• Marketing management is:
– The analysis, planning, implementation and
control of programs designed to create,
communicate and deliver value to customers and
facilitate managing customer relationships in
ways that enable the organisation to meet its
objectives and those of its stakeholders.
• A winning marketing strategy asks ‘what
customers will we serve?’ and ‘Who is our
target market?’
Selecting Customers to Serve
• Marketers cannot serve all customers in
every way with a single market offering.
• It is necessary to select customers that
can be served well and profitably.
• Demarketing is marketing in which the
task is to temporarily or permanently
reduce demand
Selecting Customers to Serve
• Managing demand means managing customers who come
from two groups: new and repeat customers.
• Keeping existing customers is important as the cost to attract
new customers is five times as much.
• Marketers retain customers by ensuring that branded goods,
services and experiences offer intrinsic value and that there is
a sense of excitement or enjoyment associated with the
marketing offering and communication used.
• Context is important - excitement is not always appropriate.
• The key to offering excitement is involvement and interactivity.
Emotional Engagement
Choosing a Value Proposition
• The organisation must decide how it will
serve targeted customers - how it will
differentiate and position itself in the
marketplace.
• A value proposition is the set of benefits or
values it promises to deliver to consumers
to satisfy their needs.
Marketing Management Orientations
• The Production Concept
– Consumers favour products that are available and highly
affordable.
• The Product Concept
– Consumers favour products that offer the most quality,
performance and innovative features.
• The Selling Concept
– Consumers won’t buy enough of the organisation’s
products unless the organisations undertakes a largescale selling and promotion effort.
• The Marketing Concept
– Achieving organisational goals depends on determining
the needs and wants of target markets and delivering the
desired satisfaction more effectively and efficiently than
competitors.
Selling and Marketing Concepts
Societal Marketing
• Organisations should determine the
needs, wants and interests of target
markets and deliver the desired
satisfaction more effectively and
efficiently than competitors in a way
that maintains or improves the
customer’s and society’s well-being.
Considerations Underlying the
Societal Marketing Concept
Preparing an Integrated Marketing
Program
• The company’s marketing strategy
outlines which customers the company will
serve and how it will create value.
• The integrated marketing program is
developed to actually deliver the value to
target customers.
• The program builds relationships by
transforming the strategy into action, it
consists of the marketing mix.
The Extended Marketing Mix
Building Customer Relationships
• The first three steps in the marketing
process:
– Understanding the marketplace and customer
needs
– Designing a customer-driven strategy
– Marketing programs lead to the most
important step: building profitable customer
relationships.
Customer Relationship Management
(CRM)
• CRM is the overall process of building and
maintaining profitable customer relationships
by delivering superior customer value and
satisfaction.
• CRM deals with all aspects of acquiring,
keeping and growing customers.
Relationship Building Blocks:
Customer Value and Satisfaction
• The key to building long lasting relations is to create
superior customer value and satisfaction.
– Customer Perceived Value is the evaluation of
the difference between the benefits and all the
costs of a market offering relative to those of
competing offers.
– Customer Satisfaction depends on the product’s
perceived performance matches a buyer’s
expectations. If the product’s performance falls
short of expectations, the buyer is dissatisfied. If
the performance matches or exceeds
expectations, the buyer is satisfied or delighted.
The Changing Nature of Customer
Relationships
• Companies are building more direct and
lasting relationships with more carefully
selected customers.
– Companies now use customer profitability
analysis to identify losing customers and relate to
winning customers (selective relationship
management).
– CRM is used to retain current customers and
build long term relationships with them.
– Companies aim to connect more deeply with
customers and more directly. Direct marketing is
booming.
Capturing Value from Customers
• Creating Customer Loyalty and Retention
– Good CRM creates customer delight. Delighted
customers remain loyal and talk favourably about
the company.
• Growing Share of Customer
– Good CRM can help marketers to increase their
share of customer.
• Building Customer Equity
– This is the combined discounted customer
lifetime values of all the company’s current and
potential customers.
Building the Right Relationship with
the Right Customers
The New Marketing Landscape
• Marketing operates within a dynamic global
environment. Rapid changes can quickly
make a winning strategy out of date.
• Today’s companies deal with changing
customer values and orientations, market
maturity in many industries, movement of
manufacturing to least cost countries,
environmental degradation, increased global
competition, and many other economic,
political and social problems.
The New Marketing Landscape
• Problems can also become marketing
opportunities. New trends include: growth of
not for profit marketing; rapid globalisation; IT,
changing world economy and the call for
more socially responsible actions.
The New Marketing Landscape
• The growth of not-for-profit marketing:
– Including philanthropic organisations, universities,
hospitals, museums, symphony orchestras and
even churches.
• Rapid Globalisation:
– Most marketing organisations are touched by
global competition.
• Customer Information and Digital Marketing:
– The IT explosion is accelerating the rate if change
and emergence of global competitors.
The New Marketing Landscape
• The changing world economy:
– Many countries have grown poorer; around the
world people’s needs are greater but many lack
the means to pay for necessary goods.
• The call for more ethical behaviour and social
responsibility:
– There is an increased call for companies to take
responsibility for the social and environmental
impact of their actions.
Each of the following conditions must be satisfied
for an exchange to take place except:
A. the existence of a monetary system
B. two parties each possessing something
of value to the other
C. the ability to accept or reject the offer
D. ability to communicate and deliver
E. each party wanting to deal with the other