Marketing:

An Introduction
10e
Part 1: Marketing & the Marketing Process
Objective Outline:
 Define marketing & outline the steps in the marketing process
 Explain the importance of understanding customers & the marketplace &
identify the five core marketplace concepts
 Identify the key elements of a customer-driven marketing strategy & discuss
the marketing management orientations that guide marketing strategy
 Discuss customer relationship management & identify strategies for creating
value for customers & capturing value from customers in return
 Describe the major trends & forces that are changing the marketing landscape
in this age of relationships
What is Marketing?

 Marketing
 Is managing profitable customer relationship
 A social & managerial process by which individuals & organizations obtain
what they need & want through creating & exchanging value
 The process by which companies create value for customers & build strong
customer relationships in order to capture value from customers in return

 Goal of Marketing: (1) To attract new customers by promising superior value

& (2) To keep & grow current customers by delivering satisfaction
 A Simple Model of the Marketing Process

Capture value
Create value FOR customers & build customer relationships
FROM customers in
return

Construct
Understands Capture
an Build
the Design a value from
integrated profitable
marketplac customer- customers
marketing relationships
e& driven to create
program & create
customer marketing profits &
that delivers customer
needs & strategy customer
superior delight
wants equity
value
 Step 1: Understanding the marketplace &
customer needs
 The five core customer & marketplace concepts:
1. Needs, Wants & Demands
2. Market Offerings (Products, Services & Experiences)
3. Customer Value & Satisfaction
4. Exchanges & Relationships
5. Markets
 Needs, Wants & Demands
Needs
 States of felt deprivation
 Physical Needs (food, clothing, warmth & safety), Social Needs (belonging &
affection) & Individual Needs (knowledge & self-expression)

Wants
 The form of human needs take as shaped by culture & individual personality
 Ex: An American needs for food but wants a Big Mac. A Chinese needs for food
but wants frog legs. A Filipino needs food but wants rice & adobo
Demands
 Human wants that are backed by buying power
 Ex: Car – Suzuki, Toyota or Kia

Outstanding marketing companies go to great lengths to learn about & understand

their customer needs, wants & demands. For example, Zappos (a web seller),
CEO Hsieh uses Twitter to build more personal connections with customers &
employees
 Market Offerings
(Products, Services & Experiences)
Market Offerings
 Some combination of products, services, information or experiences offered
to a market to satisfy a need or want

Product
 Anything offered to a market for attention, acquisition, use, or consumption that
might satisfy a need or want.

Service
 Activities or benefits offered for sale that are essentially intangible & do not
result in the ownership of anything. Ex: banking, airline, hotel, etc.
Experiences
 Ex: theater, theme parks, etc.

Marketing myopia
 The mistake of paying more attention to the specific products a company offers than
to the benefits & experiences produced by these products. Companies focus on the
“wants” and lose sight of the “needs.”
 Marketing Myopia
In 1948 Edwin Land - a Harvard dropout launched
the first instant camera - the Polaroid.
Polaroid went on and dominated the instant camera
market for about 50 years. In the mid 70's KODAK and Polaroid started to have
their products with copyright infringements that cost both companies dearly.
In 2001, Polaroid filed for bankruptcy. In 2012 it seems KODAK is headed the
same way preparing to file for bankruptcy.
According to a recent article in the Sydney Morning Herald, 'the company's
story has become a popular business school case study of failure to adapt to
change.'
Bryan Lukas, a professor of marketing at the University of Melbourne told
the paper. ''What you have is a classic example of what is referred to as
marketing myopia. 'They were focused on the things they were doing at the
time … Kodak said 'we make films', rather than saying 'we create storage
possibilities for memories.' ''
So as you can see, this is a story about the ability to survive by adapting to
change. There are some strong messages here for all of us who wish to survive.
 Customer Value & Satisfaction

Consumers make buying choices based upon their perceptions of the value that
various products and services deliver.

Customer value is based upon the consumer’s assessment of the product’s overall
capacity to satisfy his or her needs.

 If the performance and the customer’s experience is lower than expectations,

then customer satisfaction is low.
 If the performance and the customer’s experience meets expectations, then
the customer is satisfied.
 If the performance and the customer’s experience exceeds expectations, then
the customer is delighted.
 Exchanges & Relationships
Exchange
 The act of obtaining a desired object from someone by offering something in
return

Transaction
 Trade between two parties
 Involves at least two things of value, agreed upon conditions, a time of
agreement and a place of agreement

The goal of marketers is to build solid relationship with customers and retaining
them by delivering superior value
 Markets
Market
 The set of all actual & potential buyers of a product or service

A Modern Marketing System

Consumers

Major environmental forces

Step 2: Designing a customer-driven marketing
strategy
Marketing Management
 The art & science of choosing target markets & building profitable
relationships with them
 Also called customer management or demand management

To design a winning marketing strategy, marketing manager must answer these 2

important questions: (1) What’s our target market? (2) What’s our value
proposition?
Selecting customers to serve (What’s our target market?)
 The company must first decide who it will serve by market segmentation &
target marketing

Choosing value proposition (What’s our value proposition?)

 The company must also decide how it will serve targeted customers – how it
will differentiate & position itself in the marketplace
 Value proposition – the set of benefits or values it promises to deliver to
consumers to satisfy their needs. It answers the question: “Why should I buy
your brand rather than a competitor’s?” A company must decide how it will
differentiate itself from other competitors.
 Marketing Management Philosophies
 5 Concepts under which organizations design & carry out
their marketing strategies

Production Concept
 The idea that consumers will favor products that are
available & highly affordable thus, the organization
should focus on improving production & distribution
efficiently
 Ex: computer maker Lenovo, Mcdo, Jollibee

Product Concept
 The idea that consumers will favor products that offer
the most quality, performance & features thus, the
organization should focus on making continuous product
improvements
 Ex: Hybrid cars like Toyota Prius, Ferrari 599 hybrid,
Nokia
Selling Concept

 The idea that consumers will not buy enough of the firm’s
products unless it undertakes a large-scale selling &
promotion effort
 Ex: Insurance policy, smoke detectors, club membership, etc.

Marketing Concept
 Achieving organizational goals depends on knowing the needs & wants of target
markets & delivering the desired satisfactions better than competitors do.
The job is not to find the right customers for your product, but the right products for
your customers.
 Ex: Disney Land, Marriott Hotel
The Selling & Marketing Concepts Contrasted

Starting
point Focus Means Ends

Selling Selling Profits

Existing
philosophy Factory products Promoting Through
Sales volume

Profits
Marketing Customer Integrated Through
philosophy Market needs Marketing Customer
Satisfaction
Societal Marketing Concept

 The idea that a company’s marketing decisions

should consider consumers’ wants, the company’s
requirements, consumers’ long-run interests &
society’s long-run interests
 Ex: Johnson & Johnson
The Considerations Underlying the Societal
Marketing Concept

Society
(Human Welfare)

Societal
Marketing
Consumers Concept Company
(Want Satisfaction) (Profits)
 Step 3: Preparing an integrated marketing
plan & program
 The marketing program builds customer relationships by transforming the
marketing strategy into action. It consists of the firm’s marketing mix
 Marketing Mix – the set of marketing tools the firm uses to implement its
marketing strategy. It is classified into 4 broad groups called the 4 Ps of
Marketing: Product, Price, Place & Promotion
Activity:

 In your own words, what is marketing? Write down your definitions.

 What does marketing mean to you? How does it affect your life on a daily
basis?
 What brand of shoes did you purchase last? Describe your relationships with
Nike, Adidas, Converse or whatever brand of shoes you purchased.
 Step 4: Building customer relationships

Customer Relationship Management (CRM)

 The overall process of building & maintaining profitable customer
relationships by delivering superior customer value & satisfaction

The key to building lasting customer relationships is to create superior customer

value & satisfaction

Customer-Perceived Value
 The customer’s evaluation of the difference between all the benefits & all the
costs of a marketing offer relative to those of competing offers
Customer Satisfaction
 The extent to which a product’s perceived performance matches a buyer’s
expectations

Customer Relationship Levels & Tools

 Basic Relationships – thru brand-building advertising, sales promotions & Web
sites.
 Full Partnerships – working closely with large retailers
 Frequency Marketing Programs – reward customers who buy frequently or in
large amounts
 Club Marketing Programs – offer members special benefits & create member
communities
The changing nature of customer relationships

Relating with more carefully selected customers

 Most marketers realize that they don’t want relationships with every
customer. Instead, they target fewer, more profitable customers

Relating more deeply & interactively

 Marketers are incorporating new, more interactive approaches that
help build targeted, two-way customer relationships. The marketing
world is now embracing not just CRM but also customer-managed
relationships
Customer-managed relationships
 Marketing relationships in which customers, empowered by today’s new
digital technologies, interact with companies and with each other to shape
their relationships with brands

Consumer-generated marketing
 Brand exchanges created by consumers themselves – both invited &
uninvited – by which consumers are playing an increasing role in shaping
their own brand experiences & those of other consumers
 Partner Relationship Management

 Working closely with partners in other company to jointly bring greater value
to customers

 Partners inside the company

 Marketing partners outside the firm, through the Supply Chain Management (a
longer channel stretching from raw materials to components to final products
that are carried to the final buyers), many companies today are strengthening
their connections with their partners all along the supply chain
 Step 5: Capturing the value from customers

Outcomes of creating customer value:

1. Creating customer loyalty & retention
 Delighted customers remain loyal and talk favorably to
others about the company and its products, and turn
to be life-time value.
 Customer lifetime value – the value of the entire
stream of purchases that the customer would make
over a lifetime patronage
2. Growing share of customer
 Share of customer – the portion of the customer’s purchasing that a
company gets in its product categories. Ex: banks want to increase “share
of wallet,” supermarkets & restaurants want to get more “share of
stomach”
 Many companies are increasing their variety of products
and services to increase their profits form existing
customers. Amazon offer videos, toys, electronics,
beside books.

3. Building customer equity

 Customer equity – the total combined customer
lifetime values of all of the company’s customers
 Building the right relationships with the right
customers
 The company can classify customers according to their
potential profitability & manage its relationships with
them accordingly

Customer Relationship Groups

Projected loyalty
Short-term customers Long-term customers

Butterflies True friends

High
Profitability
Good fit between company’s Good fit between company’s
Offerings and customer’s Offerings and customer’s
Potential Needs. High profit potential Needs, highest profit potential
Profitability
Low Strangers Barnacles
Profitability
Little fit between company’s Limited fit between company's
Offerings and customer’s Offerings and customer’s
Needs, lowest profit potential Needs, low profit potential
 Butterflies
 We can enjoy them for only a short while & then, they are gone
 Ex: stock market investors who trade shares often & in large amounts but
who enjoy hunting out the best deals without building a regular
relationship with any single brokerage company

 True Friends
 The firm wants to make continuous relationship investments to delight
these customers & nurture, retain & grow them.
 It wants to turn true friends into “true believers” who come back regularly
& tell others about their good experiences with company
 Strangers
 Don’t invest in anything with them

 Barnacles
 They create a drag. They are the most problematic customers
 Ex: Smaller bank customers who bank regularly but do not generate enough
returns to cover the costs of maintaining their accounts
 TRENDS & FORCES THAT ARE THE CHANGING
MARKETING LANDSCAPE
Uncertain economic environment
- inflation, deflation, depression, taxes

Digital age
- the rise of internet (a vast public web of computer networks that connects
users of all types all around the world to each other & to an amazingly large
information repository)
 TRENDS & FORCES THAT ARE THE CHANGING
MARKETING LANDSCAPE
Rapid globalization
- companies are now globally connected with their partners & customers

Sustainable marketing – the call for more social responsibility

- Mitsubishi Mirage (eco-friendly car because it is fuel efficient), Makati with
their full implementation of banning the use of plastics, hybrid cars (cars
that are charged no need for fuel)
 TRENDS & FORCES THAT ARE THE CHANGING
MARKETING LANDSCAPE
Growth of not-for–profit marketing
- marketing has become a major part of strategies of not-for–profit
organizations such as colleges, hospitals, museums, zoos & even churches
 EXPANDED MODEL OF THE MARKETING PROCESS
Create value FOR customers & build customer relationships Capture value FROM
customers in return
Understands Design a Construct an Build profitable Capture value
the customer- integrated relationships & from customers
marketing to create
marketplace & driven program that
create
customer needs marketing customer profits &
delivers superior
& wants strategy delight customer
value
equity

Select Product design: Customer Create

Research customers to build strong relationship satisfied, loyal
customer & serve: market brands management: customers
marketplace segmentation & build strong
targeting Pricing: create relationships Capture
value with chosen customer
Decide on a customer lifetime value
Manage Distribution:
value Partner
marketing manage
proposition: relationship Increase share
information & demand &
differentiation management: of market &
customer data supply chains
& positioning build strong share of
Promotion: relationships customer
communicate with marketing
the value partners
proposition

Harness marketing Manage global Ensure ethical &

technology markets social responsibility
Activity:

 What is marketing & what does it seek to accomplish?

 What does marketing mean to you? How does it affect your life on a daily
basis?
 Think of a company for which you are a “true friend.” What strategy does
this company use to manage its relationship with you?