Chapter 1

CHAPTER 1
MARKETING: MANAGING
PROFITABLE CUSTOMER
RELATIONSHIPS
Learning Goals
• Define marketing and the marketing
process.
• Explain the importance of understanding
customers and identify the five core
marketplace concepts
• Identify the elements of a customer-driven
marketing strategy and discuss the
marketing management orientations.
• Discuss customer relationship
management and creating value for and
capturing value from customers
• Describe the major trends and forces
changing the marketing landscape
What is Marketing?
• Marketing Defined:
“Marketing is a social and
managerial process by which
individuals and groups
obtain what they need and
want through creating and
exchanging value with
others”
• Marketing is about managing
profitable customer
relationships
– Attracting new customers
– Retaining and growing
current customers
The Marketing Process

A Five-Step Process
• Understand the marketplace and
customer needs and wants
• Design a customer-driven
marketing strategy
• Construct a marketing program
that delivers superior value
• Build profitable relationships and
create customer delight
• Capture value from customers to
create profits and customer quality
Understanding the
Marketplace
• Needs, wants, and demands
• Marketing offers: including
products, services and experiences
• Value and satisfaction
• Exchange, transactions and
relationships
• Markets
• Need
– State of felt deprivation
– Example: Need food
• Wants
– The form of needs as shaped by culture
and the individual
– Example: Want a Big Mac
• Demands
– Wants which are backed by buying
power
Understanding the
Marketplace
relationships
• Markets
• Marketing offer
– Combination of products, services,
information or experiences that satisfy a
need or want
– Offer may include services, activities,
people, places, information or ideas
Understanding the
Marketplace
relationships
• Markets
• Value
– Customers form expectations regarding
value
– Marketers must deliver value to
consumers
• Satisfaction
– A satisfied customer will buy again and
tell others about their good experience
Understanding the
Marketplace
relationships
• Markets
• Exchange
– The act of obtaining a desired object
from someone by offering something in
return
– One exchange is not the goal,
relationships with several exchanges are
the goal
– Relationships are built through
delivering value and satisfaction
Understanding the
Marketplace
relationships
• Markets
• Market
– Set of actual and potential buyers of a
product
– Marketers seek buyers that are
profitable
Marketing Management
• Marketing management is the
art and science of choosing
target markets and building
profitable relationships with
them.
– This definition must include
answers to two questions:
•What customers will we
serve?
•How can we serve these
customers best?
Selecting Customers and
Creating Value
• Customer Management
– What customers will we serve?
– Marketers select customers that
can be served profitably
• Value Proposition
– How can we serve these
customers best?
– Includes the set of benefits or
values a company promises to
deliver to consumers to satisfy
their needs
Marketing Management
• Production concept
• Product concept
• Selling concept
• Marketing concept
The Marketing Plan
• Transforms the marketing
strategy into action
• Includes the marketing mix
and the 4P’s of marketing
– Product
– Price
– Place
– Promotion
Building Customer
Relationships
• CRM – Customer relationship
management
• The overall process of building
and maintaining profitable
customer relationships by
delivering superior customer
value and satisfaction. It
deals with all aspects of
acquiring, keeping and
growing customers.
Value and Satisfaction
• Perceived Value
– The customer’s evaluation of
the difference between
benefits and costs.
– Customers often do not
judge values and costs
accurately or objectively.
• Customer Satisfaction
– Product’s perceived
performance relative to
customer’s expectations.
Capturing Value from

Customers
• Customer Loyalty and
Retention
• Share of Customer
• Customer Equity
• Customer delight leads to
emotional relationships and
loyalty
• Customer Lifetime Value shows
true worth of a customer
Customers
Retention
• Customer Equity
• Share of customer’s purchase
in a product category.
• Achieved through offering
greater variety, cross-sell and
up-sell strategies.
Customers
Retention
• Customer Equity
• The combined customer lifetime
values of all current and potential
customers.
• Measures a firm’s performance, but
in a manner that looks to the future.
• Choosing the “best” customers is
key
Marketing Landscape
• Digital age
• Globalization
• Ethics and social responsibility
• Not-for-profit marketing
• Marketing relationships
• Growth of the Internet
• Advances in telecommunications,
information, transportation
– Customer research and tracking
– Product development
– Distribution
– New advertising tools
– 24/7 marketing through the Internet
Marketing Landscape
• Digital age
• Globalization
• Geographical and cultural
distances have shrunk
– Greater market coverage
– More options for purchasing and
manufacturing
– Increased competition from
foreign competitors
Marketing Landscape
• Digital age
• Globalization
• Marketers need to take great
responsibility for the impact of their
actions
– Caring capitalism is a way to
differentiate your company
Marketing Landscape
• Digital age
• Globalization
• Many organizations are realizing the
importance of strategic marketing
– Performing arts
– Government agencies
– Colleges
– Hospitals
– Churches
Marketing Landscape
• Digital age
• Globalization
• Profits through managing long-term
customer equity
– Improve customer knowledge
– Target profitable customers
– Keep profitable customers
What is Marketing
• The process of building

profitable customer
relationships by creating value
for\ customers and capturing
value in return

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CHAPTER 1

The Marketing Process

Capturing Value from

• The process of building

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