Unit 2: THE MARKETING PROCESS CONTINUED

2nd STEP – Designing a customer-driven marketing strategy

To design a winning marketing strategy, the marketing manager must answer two important
questions: (A.) What customers will we serve (what’s our target market)? and (B.) how can
we serve these customers best (what’s our value proposition)?

A. Selecting Customers to Serve

The company must first decide whom it will serve. It does this by dividing the market into
segments of customers (market segmentation) and selecting which segments it will go after
(target marketing). Some people think of marketing management as finding as many customers
as possible and increasing demand. But marketing managers know that they cannot serve all
customers in every way. By trying to serve all customers, they may not serve any customers well.
Instead, the company wants to select only customers that it can serve well and profitably. For
example, Rolls-Royce and Bentley profitably targets affluent professionals; Toyota and Suzuki
profitably targets families with more modest means.

Let’s do a practical application of the concept of selecting customers to serve. Let us assume
that an internationally renowned franchise of a Mango Shake company will sell their mango
shake products in the canteen of SPSPS. One cup sells for P500. Would you consider buying? And
let us analyze further, in a class of 45 students, how many would probably buy the P500 mango
shake at the canteen?

So you see the point now of why selecting the right customers is necessary? You may have a
superior product to offer but there are several factors that must be considered. It is safe to say
that the company who wishes to sell mango shake at that amount at the SPSPS canteen might
have a few or no customers at all. Will this make good business for them? Definitely not.
Regardless if the mango shake is filled with all sorts of extras and all goodies you can imagine, a
P500 per cup price is very restrictive.

But does this mean they won’t be able to sell elsewhere? Of course not. Probably if they
placed themselves in a high-end mall or at a premium university where the students daily
allowance averages, P2,000 per day, then we are talking big business.

So the point of this exaggerated example emphasizes the importance of choosing the right
market, the right market segments, and ultimately the decision to choose the right target market.
 What is Market Segmentation?

Dividing a market into a smaller groups of buyers with distinct needs, characteristics, or
behaviors who might require separate products or marketing mix.

Target Market

Consists of a set of buyers who share common needs or characteristics that the company
decides to serve.

Buyers may differ in their wants, resources, locations, buying attitudes, and buying practices.

Hence, companies divide large, heterogeneous markets into smaller segments that can be
reached more efficiently and effectively with products and services that match their unique needs.

B. Choosing the Value Proposition

The company must also decide how it will serve targeted customers—how it will differentiate and
position itself in the marketplace. A brand’s value proposition is the set of benefits or values it
promises to deliver to consumers to satisfy their needs. At Metrobank, they say “You’re in Good
Hands.” whereas with BDO, they say “We Find Ways.” The beauty soap Olay, promises that you
“Look and feel younger in just 7 showers”, whereas Dove promises “Younger and fairer looking skin
in just 7 days!” Such value propositions differentiate one brand from another. They answer the
customer’s question, “Why should I buy your brand rather than a competitor’s?” Companies must
design strong value propositions that give them the greatest advantage in their target markets. For
example, the

Marketing Management Orientations

Marketing management wants to design strategies that will build profitable relationships with
target consumers. But what philosophy should guide these marketing strategies? What weight
should be given to the interests of customers, the organization, and society? Very often, these
interests conflict. There are five alternative concepts under which organizations design and carry
out their marketing strategies: the production, product, selling, marketing, and societal marketing
concepts.
 Production concept is the idea that consumers will favor products that are available or highly
affordable.
Product concept is the idea that consumers will favor products that offer the most quality,
performance, and features. Organization should therefore devote its energy to making continuous
product improvements. 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.
Marketing Concept holds that achieving
organizational goals depends on knowing
the needs and wants of target markets and
delivering the desired satisfactions better
than competitors do. Under the marketing
concept, customer focus and value are the
paths to sales and profits. Instead of a
product-centered “make and sell”
philosophy, the marketing concept is a
customer-centered “sense and respond”
philosophy. The job is not to find the right
customers for your product but to find the
right products for your customers. Smart car is positioned as compact, yet comfortable; agile, yet
economical; and safe, yet ecological. It’s “sheer automotive genius in a totally fun, efficient package.
Smart thinking, indeed.”

Let’s differentiate the Selling concept from the Marketing concept. Pay attention to the end
goal of each concept! Therefore we say, in selling concept, the main goal is profit. But in the
marketing concept, the ultimate goal is Satisfaction!
As marketers, it is our job to marry both goals such that we end up with customers who are
very satisfied, and a company having earned from the customers satisfaction using the
product sold.

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.
It calls for sustainable marketing, socially and environmentally responsible marketing that meets
the present needs of consumers and businesses while also preserving or enhancing the ability of
future generations to meet their needs.

Consider today’s bottled water industry. You may view bottled water companies as offering a
convenient, tasty, and healthy product. Its packaging suggests “green” images of pristine lakes and
snow-capped mountains. Yet making, filling, and shipping billions of plastic bottles generates huge
amounts of carbon dioxide emissions that contribute substantially to global warming. Further, the
plastic bottles pose a substantial recycling and solid waste disposal problem. Thus, in satisfying
short-term consumer wants, the bottled water industry may be causing environmental problems
that run against society’s long-run interests.
3rd STEP – Construct and integrated marketing program that delivers superior value

The company’s marketing strategy outlines which customers it will serve and how it will
create value for these customers. Next, the marketer develops an integrated marketing program
that will actually deliver the intended value to target customers. The marketing program builds
customer relationships by transforming the marketing strategy into action. It consists of the firm’s
marketing mix, the set of marketing tools the firm uses to implement its marketing strategy.

The major marketing mix tools are classified into four broad groups, called the four Ps of
marketing: product, price, place, and promotion. To deliver on its value proposition, the firm must
first create a need-satisfying market offering (product). It must decide how much it will charge for

the offering (price) and how it will make the offering available to target consumers (place). Finally,
it must communicate with target customers about the offering and persuade them of its merits
(promotion). The firm must blend each marketing mix tool into a comprehensive integrated
marketing program that communicates and delivers the intended value to chosen customers.

4th STEP – Build profitable relationships and create customer delight

The first three steps in the marketing process—understanding the marketplace

and customer needs, designing a customer-driven marketing strategy, and constructing a
marketing program—all lead up to the fourth and most important step: building profitable
customer relationships.
 In order to maintain a profitable relationship, marketers should be able to set the right level
of expectation – not too high and not too low. Setting the right expectations will set the key for the
acceptance of your product in the market. Example, let us put ourselves in the shoes of an owner
of a business or company who wishes to sell a beauty pill. We will market the beauty pill with a
promise that if you take them, you would eventually look like your favorite celebrity! Can you
imagine the expectation that you will get from the promise that you have given? What happens if
after consuming a box of pills, you still look like yourself and nowhere near that of the celebrities
that you are hoping to look like like Lee Min Ho, Brad Pitt, Piolo Pascual….or Song Hye Kyo, Gong
Seung- yeon, Liza Soberano, Catriona Gray, etc. Can you imagine your disappointment? What
would you think will be the response of the customers? Will you expect a repeat order? Will you
be able to create a following or create loyal to? The answer must be obvious.

Our main goal should always be customer satisfaction!

Customer satisfaction depends on the product’s perceived performance relative to a

buyer’s expectations. If the product’s performance falls short of expectations, the customer is
dissatisfied. If performance matches expectations, the customer is satisfied. If performance
exceeds expectations, the customer is highly satisfied or delighted.

Outstanding marketing companies go out of their way to keep important customers

satisfied. A number of studies show that higher levels of customer satisfaction lead to greater
customer loyalty, which in turn results in better company performance. Smart companies aim to
delight customers by promising only what they can deliver and then delivering more than they
promise. Delighted customers not only make repeat purchases but also become willing marketing
partners and “customer evangelists” who spread the word about their good experiences to others.

5th STEP – Build profitable relationships and create customer delight

The first four steps in the marketing process outlined above involve building
customer relationships by creating and delivering superior customer value. The final step
involves capturing value in return in the form of current and future sales, market share,
and profits. By creating superior customer value, the firm creates highly satisfied
customers who stay loyal and buy more. This, in turn, means greater long-run returns for
the firm.
 UNIT 1 & 2 SUMMARY

• Define marketing and outline the steps in the marketing process.

Marketing is the process by which companies create value for customers and build
strong customer relationships in order to capture value from customers in return.

The marketing process involves five steps. The first four steps create value for
customers. First, marketers need to understand the marketplace and customer needs and
wants. Next, marketers design a customer-driven marketing strategy with the goal of
getting, keeping, and growing target customers. In the third step, marketers construct a
marketing program that actually delivers superior value. All of these steps form the basis
for the fourth step, building profitable customer relationships and creating customer
delight. In the final step, the company reaps the rewards of strong customer relationships
by capturing value from customers.

• Explain the importance of understanding customers and the marketplace and identify the
five core marketplace concepts.

Outstanding marketing companies go to great lengths to learn about and

understand their customers’ needs, wants, and demands. This understanding helps them
to design want-satisfying market offerings and build value-laden customer relationships
by which they can capture customer lifetime value and greater share of customer. The
result is increased long-term customer equity for the firm.

The core marketplace concepts are needs, wants, and demands; market offerings
(products, services, and experiences); value and satisfaction; exchange and relationships;
and markets. Wants are the form taken by human needs when shaped by culture and
individual personality. When backed by buying power, wants become demands. Companies
address needs by putting forth a value proposition, a set of benefits that they promise to
consumers to satisfy their needs. The value proposition is fulfilled through a market
offering, which delivers customer value and satisfaction, resulting in long-term exchange
relationships with customers.

• Identify the key elements of a customer-driven marketing strategy and discuss the marketing
management orientations that guide marketing strategy.

To design a winning marketing strategy, the company must first decide whom it will
serve. It does this by dividing the market into segments of customers (market
segmentation) and selecting which segments it will cultivate (target marketing). Next, the
company must decide how it will serve targeted customers (how it will differentiate and
position itself in the marketplace).

Marketing management can adopt one of five competing market orientations. The
production concept holds that management’s task is to improve production efficiency and
bring down prices. The product concept holds that consumers favor products that offer the
most in quality, performance, and innovative features; thus, little promotional effort is
required. The selling concept holds that consumers will not buy
enough of an organization’s products unless it undertakes a
large-scale selling and promotion effort. The marketing concept
holds that achieving organizational goals depends on
determining the needs and wants of target markets and
delivering the desired satisfactions more effectively and
efficiently than competitors do. The societal marketing concept
holds that generating customer satisfaction and long-run societal
well-being through sustainable marketing strategies keyed to
both achieving the company’s goals and fulfilling its
responsibilities.

• Discuss customer relationship management and identify

strategies for creating value for customers and capturing value from
customers in return.

Broadly defined, customer relationship management is the

process of building and maintaining profitable customer
relationships by delivering superior customer value and
satisfaction. The aim of customer relationship management is to
produce high customer equity, the total combined customer
lifetime values of all of the company’s customers. The key to
building lasting relationships is the creation of superior
customer value and satisfaction.

Companies want not only to acquire profitable customers

but also build relationships that will keep them and grow “share
of customer.” Different types of customers require different
customer relationship management strategies. The marketer’s
aim is to build the right relationships with the right customers. In
return for creating value for targeted customers, the company
captures value from customers in the form of profits and
customer equity.

In building customer relationships, good marketers

realize that they cannot do it alone. They must work closely with
marketing partners inside and outside the company. In addition
to being good at customer relationship management, they must
also be good at partner relationship management.