Armstrong CH01

Chapter 1
Marketing: Creating
and capturing
customer value
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Marketing: Creating and capturing customer value

Learning objectives
Objective 1
Define marketing and outline the steps in the marketing
process.
Objective 2
Explain the importance of understanding customers and
the marketplace, and identify the five core marketplace
concepts.
Objective 3
Identify the key elements of a customer-driven
marketing strategy and discuss the marketing
management
orientations that guide marketing strategy.
Objective 4
Discuss customer relationship management and identify
strategies for creating value for customers and capturing
value from
customers in return.
Objective 5
Describe the main trends and forces that are changing
the
marketing landscape in this age of relationships.
Copyright 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781486002696/Armstrong/Principles of Marketing/6e
What is Marketing? Marketing defined
We
We define
define marketing
marketing as
as the
the activity,
activity, set
set of
of
institutions,
institutions, and
and processes
processes for
for creating,
creating,
communicating,
communicating, delivering,
delivering, and
and exchanging
exchanging
offerings
offerings that
that have
have value
value for
for customers,
customers, clients,
clients,
partners,
partners, and
and society
society at
at large.
large.
See
See American
American Marketing
Marketing Association,
Association, <http
<http
://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx
://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx >,
>, accessed
accessed
January
2014
January 2014
A model of the marketing process
Understanding the marketplace & customer needs
As
As aa first
first step,
step, marketers
marketers need
need to
to understand
understand
customer
customer needs,
needs, wants
wants and
and demands,
demands, and
the
the marketplace
marketplace within
within which
which they operate.
Customer needs, wants and demands
a)
Needs
b)
Wants
c)
Demands
Core marketing concepts
What is Marketing? Core Marketing Concepts

CV
Discussion question
What is the difference between

needs, wants and demands?
Give specific examples
8
Market offerings: Goods, services and experiences

A
A market
market offering
offering is
is aa product
product that
that is
is some
some combination
combination of
of goods,
goods,
services
services and
and experiences
experiences that
that can
can be
be offered
offered to
to aa market
market to
to satisfy
satisfy aa
need
need or
or want.
want.
In
In the
the broadest
broadest sense,
sense,
market
market offerings
offerings
include
include
Goods
Goods
Services/experiences
Services/experiences
Persons
Persons
Places
Places
Organisations
Organisations
Information
Information
Ideas
Ideas
Market offerings: Products, services and other

market offerings
Social
Social causes
causes
Services
Services
Products
Products &
& brands
brands
10
Exchanges, transactions and relationships
Exchange
Exchange is
is the
the act
act of
of obtaining
obtaining aa desired
desired object
object from
from
someone
someone by
by offering
offering something
something in
in return.
return.
A
A transaction
transaction is
is aa trade
trade between
between two
two parties
parties that
that
involves
involves at
at least
least two
two things
things of
of value,
value, agreed-upon
agreed-upon
conditions,
conditions, and
and aa time
time and
and place
place of
of agreement.
agreement.
11
Exchanges, transactions and relationships
A
A market
market
Actual
Actual buyers
buyers
Potential
Potential buyers
buyers
These buyers share a particular need or want that can be

satisfied through exchange relationships.
12
Elements of a modern marketing system
13
Designing a customer-driven marketing strategy
Marketing management is the art and science

of choosing target markets and building
profitable relationships with them.
14
Designing a customer-driven marketing strategy

To design a winning marketing strategy, the marketing manager
must answer two important questions:
What customers will we serve?

(i.e. Who is our target market?)
How can we serve these customers best?

(i.e. What is our value proposition?)
15
Discussion question
Why is it important to a
marketer to decide which
customers they will serve?
16
Managing customer demand: Sources of demand
New
New customers
customers
AAmarketing
marketing
organisations
organisationsdemand
demand
comes
comesfrom
fromtwo
two
groups
groups
(potential
(potential customers)
customers)
Repeat
Repeat customers
customers
(existing
(existing customers)
customers)
17
Managing customer demand
Marketing
Marketing
decisions
decisions
Finding,
Finding, increasing
increasing and
and
retaining
retaining demand
demand
Changing
Changing or
or reducing
reducing
demand
demand
18
Managing customer demand
19
Managing customer demand: De-marketing

Many
Many service
service firms
firms &
& not-fornot-forprofit
profit organisations
organisations need
need to
to
engage
engage in
in de-marketing
de-marketing
Permanently:
Permanently: to
to
discourage
discourage anti-social
anti-social
behaviours.
behaviours.
Temporarily:
Temporarily: to
to cope
cope with
with
peak
peak demand
demand periods
periods &&
overfull
overfull demand.
demand.
20
The value proposition
The
The marketing
marketing
organisations
organisations
value
value
proposition
proposition
is
is the
the set
set of
of benefits
benefits or
or values
values
that
that itit promises
promises to
to deliver
deliver to
to
customers
customers to
to satisfy
satisfy their
their needs
needs
should
should differentiate
differentiate brands
brands and
and
position
position them
them in
in the
the marketplace
marketplace
21
Marketing management orientations

Five concepts or philosophies guide marketing efforts:
Production
Productionconcept:
concept: focus
focus on
on production
production &&
distribution
distribution efficiency
efficiency
Product
Productconcept:
concept: focus
focus on
on continuous
continuous product
product
improvements
improvements
Selling
Sellingconcept:
concept: focus
focus on
on large-scale
large-scale selling
selling and
and
promotion
promotion (used
(used extensively
extensively with
with unsought
unsought goods)
goods)
Marketing
Marketingconcept:
concept: focus
focus on
on understanding
understanding customer
customer
needs
needs and
and wants,
wants, and
and delivering
delivering satisfaction
satisfaction efficiently
efficiently
Societal
Societalmarketing
marketingconcept:
concept: deliver
deliver value
value in
in ways
ways
that
that maintain
maintain both
both the
the consumers
consumersand
and societys
societys
wellbeing
wellbeing
22
23
24
Preparing an integrated marketing program
The
The marketing
marketing
program
program
builds
builds customer
customer relationships
relationships by
by
transforming
transforming the
the marketing
marketing
strategy
strategy into
into action
action
consists
consists of
of the
the firms
firmsmarketing
marketing
mix
mix that
that is,
is, the
the set
set of
of marketing
marketing
tools
tools the
the firm
firm uses
uses to
to implement
implement
its
its marketing
marketing strategy
strategy
25
The extended marketing mix
26
Building customer relationships
Customer
Customer relationship
relationship management
management (CRM)
(CRM) is
is the
the
overall
overall process
process of
of building
building and
and maintaining
maintaining profitable
profitable
customer
customer relationships
relationships by
by delivering
delivering superior
superior customer
customer
value
value and
and satisfaction.
satisfaction.
27
Relationship building blocks: Customer value

and satisfaction
Perceived
Perceived
Value
value
Value
value
The
Thecustomers
customersevaluation
evaluationof
ofthe
the
difference
differencebetween
betweenall
allthe
the
benefits
benefitsand
andthe
thecosts
costsof
ofaamarket
market
offering
relative
to
those
offering relative to thoseof
of
competing
competingofferings.
offerings.
Customer
Customer
satisfaction
satisfaction
Depends
Dependson
onthe
theproducts
products
perceived
perceivedperformance
performancerelative
relative
to
toaabuyers
buyersexpectations.
expectations.
28
Customer relationship levels and tools

Marketers can build relationships at different levels depending on
the target market
Basic
Basicrelationship
relationship
Full
Fullpartnership
partnership
Frequency
Frequencymarketing
marketingprograms
programs
Club
Clubmarketing
marketingprograms
programs
29
Frequency marketing programs

Frequency marketing/Loyalty marketing
programs
Operate on a quasi-club basis. Members are
issued with a card and accrue points for every
purchase made using the card. These points can
subsequently be exchanged for goods, bonuses or
cash.
30
Discussion question
How many loyalty cards do you

carry in your wallet? Of these, how
many do you personally feel relate
to you deeply and interactively?
31
The changing nature of relationships
Relating
Relatingmore
morecarefully
carefullywith
withselected
selected
customers
customers
Relating
Relatingmore
moredeeply
deeplyand
andinteractively
interactively
Customer-managed
Customer-managedrelationships
relationships
Online
Onlinesocial
socialnetworks
networks
Consumer-generated
Consumer-generatedmarketing
marketing
32
Relationship marketing: Customer lifetime value
Customer
Customerlifetime
lifetime
value
value(CLV):
(CLV): refers
refers to
to
the
the value
value of
of an
an entire
entire
stream
stream of
of purchases
purchases
that
that the
the customer
customer
would
would make
make over
over aa
lifetime
lifetime of
of patronage
patronage
33
Capturing value from customers
Creating
customer
loyalty &
retention
Growing share
of customer
Building
customer equity
Building the
right
relationship with
customers
34
Building the right relationship with the right

customers
35
The changing marketing landscape

The
Theuncertain
uncertainworld
worldeconomy
economy
Measuring
Measuringmarketings
marketingscontribution
contributionto
toorganisational
organisational
performance
performance
Growth
Growthof
ofnot-for-profit
not-for-profitmarketing
marketing
The
Thedigital
digitalage
age
Rapid
Rapidglobalisation
globalisation
Sustainable
Sustainablemarketing:
marketing:the
thecall
callfor
forsocial
socialresponsibility
responsibility
36
The changing marketing landscape: The digital age

The
TheIT
ITexplosion
explosionisisaccelerating
acceleratingthe
therate
rateof
ofchange
changeand
andthe
the
emergence
of
new
global
competitors
as
various
markets
emergence of new global competitors as various markets
become
becomeattractive
attractivedue
dueto
tothe
thelower
lowercosts
costsoffered
offeredto
tomany
many
industries
by
technology
such
as
the
internet.
industries by technology such as the internet.
37
So, what is marketing? Pulling it all together
38
Suggested online resources

Open source websites
Australian Marketing Institute, http://www.ami.org.au or AMI Facebook,
https://www.facebook.com/australianmarketinginstitute
Marketing Association of NZ, http://www.marketing.org.nz
The Body Shop, Social and environmental reporting page, http://
www.thebodyshop.com.au/about-us/social-and-environmental-reporting
.aspx
Articles
The art of creating a magnetic value proposition (includes many
examples), https://www.helpscout.net/blog/value-proposition
Videos
Heart of Selling: How to Identify Your Prospects Real Needs (6
minutes), http://www.youtube.com/watch?v=7tuIZUswQTg
Sony case study in relationship marketing & social media (2 minutes),
http://www.karmarama.com/case-studies/sony
Copyright 2015 Pearson Australia (a division of Pearson Australia Group Pty Ltd) 9781486002696/Armstrong/Principles of Marketing/6 th edition
39
40

Armstrong CH01

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Armstrong CH01

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Chapter 1

Marketing: Creating and capturing customer value

What is Marketing? Marketing defined

A model of the marketing process

Understanding the marketplace & customer needs

Customer needs, wants and demands

Core marketing concepts

What is Marketing? Core Marketing Concepts

What is the difference between

Market offerings: Goods, services and experiences

Market offerings: Products, services and other

Exchanges, transactions and relationships

Exchanges, transactions and relationships

These buyers share a particular need or want that can be

Elements of a modern marketing system

Designing a customer-driven marketing strategy

Marketing management is the art and science

Designing a customer-driven marketing strategy

What customers will we serve?

How can we serve these customers best?

Managing customer demand: Sources of demand

Managing customer demand

Managing customer demand

Managing customer demand: De-marketing

The value proposition

Marketing management orientations

Marketing management orientations

Marketing management orientations

Preparing an integrated marketing program

The extended marketing mix

Building customer relationships

Relationship building blocks: Customer value

Customer relationship levels and tools

Frequency marketing programs

How many loyalty cards do you

The changing nature of relationships

Relationship marketing: Customer lifetime value

Capturing value from customers

Building the right relationship with the right

The changing marketing landscape

The changing marketing landscape: The digital age

So, what is marketing? Pulling it all together

Suggested online resources

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