Principles of Marketing

Marketing: Managing
Profitable Customer
Relationships
Learning Objectives
After studying this chapter, you should be able to:
1. Define marketing and outline the steps in the marketing
process
2. Explain the importance of understanding customers and the
marketplace, and identify the five core marketplace concepts
3. Identify the key elements of a customer-driven marketing
strategy and discuss the marketing management orientations
that guide marketing strategy
4. Discuss customer relationship management, and identify
strategies for creating value for customers and capturing value
from customers in return
5. Describe the major trends and forces that are changing the
marketing landscape in this age of relationships

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Chapter Concepts

1. What Is Marketing?
2. Understanding the Marketplace and Customer Needs
3. Designing a Customer-Driven Marketing Strategy
4. Preparing an Integrated Marketing Plan and Program
5. Building Customer Relationships
6. Capturing Value from Customers
7. The New Marketing Landscape
8. So, What Is Marketing? Pulling It All Together

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What Is Marketing?

Marketing Defined

Marketing is the process by which companies

create value for customers and build strong
customer relationships to capture value from
customers in return

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What Is Marketing?
The Marketing Process

1. Understand the marketplace and customer wants

and needs
2. Design a customer-driven marketing strategy
3. Construct a marketing plan that delivers superior
value
4. Build profitable relationships and create customer
satisfaction
5. Capture value from customers to create profit and
customer equity

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Understanding the Marketplace
and Customer Needs

Customer Needs, Wants, and Demands

• Needs are states of deprivation

• Physical—food, clothing, warmth, safety
• Social—belonging and affection
• Individual—knowledge and self-
expression

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Understanding the Marketplace
and Customer Needs

Customer Needs, Wants, and Demands

Wants are the form that needs take as they

are shaped by culture and individual
personality

Demands are wants backed by buying power

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Understanding the Marketplace
and Customer Needs

Market Offerings—Products, Services, and

Experiences

Market offerings are some combination of

products, services, information, or
experiences offered to a market to satisfy a
need or want

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Understanding the Marketplace
and Customer Needs
Market Offerings—Products, Services, and
Experiences

Marketing myopia is focusing only on existing

wants and losing sight of underlying
consumer needs

Exchange is the act of obtaining a desired

object from someone by offering something
in return

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Understanding the Marketplace
and Customer Needs

Customer Value and Satisfaction

• Expectations
• Customers
• Value and satisfaction
• Marketers
• Set the right level of expectations
• Not too high or too low

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 Understanding the Marketplace
and Customer Needs

Exchanges and Relationships

Exchange is the act of obtaining a desired

object from someone by offering
something in return

Relationships consist of actions to build

and maintain desirable relationships

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Understanding the Marketplace
and Customer Needs
Markets are the set of actual and potential buyers
of a product
Marketing system consists of all of the actors
(suppliers, company, competitors,
intermediaries, and end users) in the system
who are affected by major environmental forces
• Demographic
• Economic
• Physical
• Technological
• Political–legal
• Socio-cultural
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Designing a Customer-Driven
Marketing Strategy

Marketing Management

Marketing management is the art and

science of choosing target markets and
building profitable relationships with them
• What customers will we serve?
• How can we best serve these customers?

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Designing a Customer-Driven
Marketing Strategy

Selecting Customers to Serve

Market segmentation: Dividing the markets

into segments of customers

Target marketing: Which segments to go

after

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Designing a Customer-Driven
Marketing Strategy

Selecting Customers to Serve

De-marketing: Marketing to reduce demand

temporarily or permanently; the aim is not
to destroy demand but to reduce or shift it.

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Designing a Customer-Driven
Marketing Strategy

Selecting Customers to Serve

Marketing management is:

• Customer management
• Demand management

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Designing a Customer-Driven
Marketing Strategy

Choosing a Value Proposition

The value proposition is the set of

benefits or values a company
promises to deliver to customers
to satisfy their needs

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Designing a Customer-Driven
Marketing Strategy

Marketing Management Orientations

• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal concept

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Designing a Customer-Driven
Marketing Strategy

Marketing Management Orientations

Production concept is the idea that

consumers will favor products that are
available or highly affordable

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Designing a Customer-Driven
Marketing Strategy

Marketing Management Orientations

Product concept is the idea that consumers

will favor products that offer the most
quality, performance, and features for which
the organization should therefore devote its
energy to making continuous improvements

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Designing a Customer-Driven
Marketing Strategy

Marketing Management Orientations

Selling concept is the idea that consumers

will not buy enough of the firm’s products
unless it undertakes a large scale selling and
promotion effort

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Designing a Customer-Driven
Marketing Strategy

Marketing Management Orientations

Marketing concept is the idea that achieving

organizational goals depends on knowing
the needs and wants of the target markets
and delivering the desired satisfactions
better than competitors do

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Designing a Customer-Driven
Marketing Strategy
Marketing Management Orientations

Societal marketing concept is the idea that

a company should make good marketing
decisions by considering consumers’ wants,
the company’s requirements, consumers’
long-term interests, and society’s long-run
interests

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Preparing an Integrated
Marketing Plan and Program
Marketing Mix

The marketing mix is the set of tools (four

Ps) the firm uses to implement its marketing
strategy
• Product
• Price
• Promotion
• Place
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Preparing an Integrated
Marketing Plan and Program

Integrated Marketing Program

Integrated marketing program is a

comprehensive plan that communicates and
delivers the intended value to chosen
customers

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Building Customer Relationships

Customer Relationship Management

(CRM)

Customer relationship management is the

overall process of building and maintaining
profitable customer relationships by
delivering superior value and satisfaction

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Building Customer Relationships

Customer Relationship Management

(CRM)

Customer perceived value is the difference between

total customer value and total customer cost

Customer satisfaction is the extent to which a

product’s perceived performance matches a buyer’s
expectations

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Building Customer Relationships

Customer Relationship Management

(CRM)
Customer Relationship Levels and Tools

• Basic relationship
• Full relationships
• Frequency marketing programs
• Club marketing programs
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Building Customer Relationships
The Changing Nature of Customer Relationships

Relating with more carefully selected customers

uses selective relationship management to target
fewer, more profitable customers
Relating for the long term uses customer
relationship management to retain current
customers and build profitable, long-term
relationships
Relating directly uses direct marketing tools
(telephone, mail order, kiosks, Internet) to make
direct connections with customers

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Building Customer Relationships

Partner Relationship Management

Partner relationship management refers to

working closely with partners in other
company departments and outside the
company to jointly bring greater value to
customers

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Building Customer Relationships
Partner Relationship Management

Partners inside the company is every function area

interacting with customers
• Electronically
• Cross-functional teams

Partners outside the company is how marketers

connect with their suppliers, channel partners, and
competitors by developing partnerships

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Building Customer Relationships

Partner Relationship Management

Supply chain is a channel that stretches from

raw materials to components to final
products to final buyers
• Supply management
• Strategic partners
• Strategic alliances

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Capturing Value from Customers

Creating Customer Loyalty and Retention

Customer lifetime value is the value of

the entire stream of purchases that the
customer would make over a lifetime of
patronage

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Capturing Value from Customers

Growing Share of Customer

Share of customer is the portion of the

customer’s purchasing that a company gets
in its product categories

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Capturing Value from Customers

Building Customer Equity

Customer equity is the total combined

customer lifetime values of all of the
company’s customers

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Capturing Value from Customers
Building Customer Equity

Building the right relationships with the

right customers involves treating
customers as assets that need to be
managed and maximized
• Different types of customers require different
relationship management strategies
• Build the right relationship with the right
customers

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The New Marketing Landscape

Major Developments

• Digital age
• Globalization
• Ethics and social responsibility
• Not-for-profit marketing

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The New Marketing Landscape
The New Digital Age
• Recent technology has had a major impact on the
ways marketers connect with and bring value to
their customers
• Market research
• Learning about and tracking customers
• Create new customized products
• Distribution
• Communication
• Video conferencing
• Online data services
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The New Marketing Landscape

The New Digital Age

Internet—creates marketplaces and

marketspaces
• Information
• Entertainment
• Communication

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 The New Marketing Landscape

Rapid Globalization

• The world is smaller

• Think globally, act locally

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 The New Marketing Landscape

The Call for More Ethics and Social Responsibility

Marketers are being called upon to take greater

responsibility for the social and
environmental impact of their actions in a
global economy

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The New Marketing Landscape

The Call for More Ethics and Social Responsibility

Social marketing campaigns encourage

energy conservation and concern for the
environment or discourage smoking,
excessive drinking, and drug use

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The New Marketing Landscape

The Growth for Not-for-Profit Marketing

• Colleges
• Hospitals
• Museums
• Zoos
• Orchestras
• Religious groups
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