Kotler, Armstrong

Principles of Marketing

Session 2 and Chapter 1

Marketing: Creating Customer
Value and Satisfaction, Profitably

Agenda
Revision on Session 2
Identify core activities, customer base,
business values and direction
The marketing process
Understanding the market and customer
needs

Philip Kotler (the author)

Philip Kotler is an American
academic focused on marketing
The author of Marketing Management
among
dozens of other textbooks
and books,
he is the S.C. Johnson &
Son
Distinguished Professor of International
Marketing at the Kellogg School of Management
at Northwestern University
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Objectives
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
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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

Marketing Definition
Getting the right goods, to the right
people, in the right place, at the right time,
at the right price, with the level of
communication and at a profit (Chartered
Institute of Marketing)

The Marketing Process

Selling and Promotion are:

are synonymous with the term marketing

are only the tip of the marketing iceberg
are the most important marketing
functions
are the least important marketing
functions
are not part of marketing
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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

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Needs, Wants and Demands (2)

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

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Needs, Wants and Demands (3)

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

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Needs, Wants and Demands (4)

As a society evolves, the wants of its
members expand
Marketers try to provide more want-satisfying
goods and services

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Needs, Wants and Demands (5)

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

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Needs, Wants and Demands (6)

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

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Wants supported by buying power is

best described as a(n):
A.
B.
C.
D.
E.

need
desire
demand
exchange
manifestation of greed

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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

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Market Offerings: Goods, Services

and Experiences (2)
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

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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
products perceived performance matches a
buyers expectations

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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

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Exchange, Transactions and

Relationships (2)
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

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Exchange, Transactions and

Relationships (3)
A transaction is marketings 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

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Exchange, Transactions and

Relationships (3)
Relationship marketing is the process of
creating, maintaining and enhancing
strong, value-laden relationships with
customers and other stakeholders

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Markets
Market - A set of all actual and
potential buyers of a product

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A Simple Marketing System

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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

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Elements of a Modern Marketing

System

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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

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A Customer-Driven Marketing
Strategy
A winning marketing strategy asks what
customers will we serve? and Who is our
target market?

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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
De-marketing is marketing in which the
task is to temporarily or permanently
reduce demand

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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

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Selecting Customers to Serve

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

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Emotional Engagement

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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

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Marketing Management Orientations (1)

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

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Marketing Management Orientations (2)

The Selling Concept
Consumers wont buy enough of
the organisations products unless
the
organisations undertakes a large-scale 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
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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 customers and societys
well-being

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Considerations Underlying the

Societal Marketing Concept

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Preparing an Integrated Marketing

Program
The companys 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

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The Extended Marketing Mix

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Building Customer Relationships

The first three steps in the marketing
process:
1. Understanding the marketplace and
customer needs (research)
2. Designing a customer-driven strategy
3. Marketing programs lead to the most
important step: Building profitable
customer relationships

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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

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Relationship Building Blocks:

Customer Value and Satisfaction
The key to building long lasting relations is
to create superior customer value and
satisfaction.
1. 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
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Relationship Building Blocks:

Customer Value and Satisfaction (2)
2. Customer Satisfaction depends on the products
perceived performance matches a buyers
expectations
3. If the products performance falls short of
expectations, the buyer is dissatisfied
4. If the performance matches or exceeds
expectations, the buyer is satisfied or delighted

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The Changing Nature of Customer

Relationships
Companies are building more direct and lasting
relationships with more carefully selected
customers
1. Companies now use customer profitability
analysis to identify losing customers and
relate to winning customers (selective
relationship management)

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The Changing Nature of Customer

Relationships (2)
2. CRM is used to retain current customers and
build long term relationships with them
3. Companies aim to connect more deeply with
customers and more directly
4. Direct marketing is booming

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Direct Marketing
The practice of delivering promotional messages
directly to potential customers on an individual
basis as opposed to through a mass medium
e.g. telemarketing, emails, texts, online display
ads, flyers etc
Mass media is a means of public communication
reaching a large audience

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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

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Capturing Value from Customers (2)

Building Customer Equity
This is the combined discounted customer
lifetime values of all the companys current and
potential customers

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Building the Right Relationship with the Right

Customers

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The New Marketing Landscape

Marketing operates within a dynamic global
environment
Rapid changes can quickly make a winning
strategy out of date

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The New Marketing Landscape (2)

Todays 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

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The New Marketing Landscape (3)

Problems can also become marketing
opportunities
New trends include:
growth of not for profit marketing
rapid globalisation
IT
changing world economy
the call for more socially responsible actions
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The New Marketing Landscape

The growth of not-for-profit marketing:
Including philanthropic organisations,
universities, hospitals, museums,
symphony orchestras and even
churches

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The New Marketing Landscape

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

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The New Marketing Landscape

The changing world economy:
Many countries have grown poorer; around the
world peoples 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

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Next session
Revision Q&A
Strategic Marketing
See you tomorrow at 5pm

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