1. Marketing - Creating and Capturing Customer Value
Chapter 1

2. Rest Stop: Previewing the Concepts
Define marketing and outline the steps in the marketing process
Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts
Identify the key elements of a customer-driven marketing strategy
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3. Rest Stop: Previewing the Concepts
Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return
Describe the major trends and forces that are changing the marketing landscape in this age of relationships
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4. First Stop: JetBlue: A Deep Passion for Creating Customer Value and Relationships
Goal - Creating first-rate, customer-satisfying experiences
Customer-centric - Basic amenities that exceed customer expectations, more legroom, free snacks, free Wi-Fi in terminals, and entertainment systems for every seat
Results - High customer loyalty scores, high customer recommendations, record revenues of $3.8 billion
Whereas passengers on most competing airlines regard flying as an experience just to be tolerated, many JetBlue customers actually look forward to flying. At JetBlue, customer care starts with basic amenities that exceed customer expectations, especially for a low-cost carrier. But it’s the JetBlue culture—the near-obsessive focus on the customer flying experience—that creates not just satisfied JetBlue customers, but delighted ones. And customers themselves spread the good word about JetBlue with evangelistic zeal.
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5. What Is Marketing?
The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return
Goals
Attract new customers by promising superior value
Keep and grow current customers by delivering satisfaction
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6. Marketing Making a sale—“telling and selling”
OLD view of marketing
Making a sale—“telling and selling”
NEW view of marketing
Satisfying customer needs
Note to Instructor: Students can be asked to compare old and new advertising campaigns for a few brands to determine if the changed view of marketing is reflected in the advertising messages used by the brands.
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7. Figure 1.1 - A Simple Model of the Marketing Process
In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value.
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8. Understanding the Marketplace and Customer Needs
Marketers must understand five core customer and marketplace concepts:
Needs, wants, and demands
Market offerings ( products , services , and experiences )
Value and satisfaction
Exchanges and relationships
Markets
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9. Needs Wants Demands States of felt deprivation
The form human needs take as they are shaped by culture and individual personality
Wants
Human wants that are backed up by buying power
Demands
Wants are the form human needs take as they are shaped by culture and individual personality. An American needs food but wants a Big Mac, french fries, and a soft drink. A person in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by one’s society and are described in terms of objects that will satisfy those needs.
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10. Customer Needs, Wants, and Demands
Types of needs
Physical needs
Food, clothing, warmth, and safety
Social needs
Belonging and affection
Individual needs
Learning, knowledge, and self-expression
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11. Market Offerings—Products, Services, and Experiences
Some combination of products, services, information, or experiences offered to a market to satisfy a need or want
Market Offerings—Products, Services, and Experiences
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12. Market Offerings—Products, Services, and Experiences
Not limited to physical products
Include entities such as persons , places , organizations, information, and ideas
The U.S. Forest Service markets the idea of reconnecting young people with exploring the joys of nature firsthand
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13. The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products
Marketing Myopia
Note to Instructors: Ask students to consider some well-known examples of marketing myopia and develop strategies to help companies avoid marketing myopia in the future.
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14. Customer Value and Satisfaction
Customers form expectations about the value and satisfaction that various market offerings will deliver
If marketers set expectations too low, they may satisfy those who buy but fail to attract enough buyers
If marketers set expectations too high, buyers will be disappointed
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15. Exchanges and Relationships
Exchange: The act of obtaining a desired object from someone by offering something in return
Relationships
Marketing actions build and maintain exchange relationships with target audiences involving an idea, product, service, or other object
Marketers build strong relationships by consistently delivering superior customer value
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16. The set of all actual and potential buyers of a product or service
Markets
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17. Figure 1.2 - A Modern Marketing System
Not to Instructors: Each party in the marketing system adds value to the transaction. For example, Walmart cannot fulfill its promise of low prices unless its suppliers provide low costs. Ford cannot deliver a high quality car-ownership experience unless its dealers provide outstanding service. The arrows in the diagram represent all the relationships that must be developed and managed to create customer value and profitable customer relationships.
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18. Designing a Customer-Driven Marketing Strategy
Designing a winning marketing strategy requires answers to the following questions:
What customers will we serve (what’s our target market)?
How can we serve these customers best (what’s our value proposition)?
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19. The art and science of choosing target markets and building profitable relationships with them
Marketing Management
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20. Selecting Customers to Serve
Market segmentation - Dividing the market into segments of customers
Target marketing - Selecting one or more segments to cultivate
Note to Instructors: List the various criteria on which markets can be segmented. Present students with a hypothetical product and ask them to develop a segmentation plan for that product. Students must justify their choice of segmentation criteria.
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21. Choosing a Value Proposition
Value proposition: The set of benefits or values a company promises to deliver to consumers to satisfy their needs
Note to Instructors: A company must 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. For instance, BMW promises “the ultimate driving machine,” whereas the diminutive Smart car suggests that you “Open your mind to the car that challenges the status quo.” 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?”
The smart car is positioned as compact, yet comfortable; agile, yet economical; and safe, yet ecological.
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22. Marketing Management Orientations
Organizations design and carry out their marketing strategies under five alternate concepts:
Production concept
Product concept
Selling concept
Marketing concept
Societal Marketing concept
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23. The Production Concept
Consumers will favor products that are available and highly affordable
The organization should focus on improving production and distribution efficiency
Note to Instructors: An example of companies who follow the production concept are personal computer maker Lenovo and home appliance maker Haier, which dominate the highly competitive, price-sensitive Chinese market through low labor costs, high production efficiency, and mass distribution. However, although useful in some situations, the production concept can lead to marketing myopia.
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24. The Product Concept
Consumers will favor products that offer the most quality, performance, and features
The organization should devote its energy to making continuous product improvements
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25. The Selling Concept
Consumers will not buy enough of the firm’s products unless the firm undertakes a large-scale selling and promotion effort
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26. The Marketing Concept
Achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do
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27. Figure 1.3 - The Selling and Marketing Concepts Contrasted
Note to Instructors: The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquest—getting short-term sales with little concern about who buys or why. In contrast, the marketing concept takes an outside-in perspective. The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers. In turn, it yields profits by creating relationships with the right customers based on customer value and satisfaction.
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28. The Societal Marketing Concept
A company’s marketing decisions should consider consumer’s wants, the company’s desires, consumers’ long-run interests and society’s long-run interests
Note to Instructor
The text describes UPS as a good example of a company that follows the societal marketing concept. UPS proactively seeks opportunities to act responsibly. For example, UPS employees have volunteered millions of hours to United Way’s Live United campaign to improve the education, income, and health of the nation’s communities. UPS knows that doing what’s right benefits both consumers and the company.
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29. The Societal Marketing Concept
Calls for sustainable marketing—socially and environmentally responsible marketing that meets the present needs of consumers while also preserving the ability of future generations to meet their needs
According to UPS, social
responsibility “isn’t just good for the planet. It’s good for business.”
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30. Figure 1.4 - The Considerations Underlying the Societal Marketing Concept
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31. Preparing an Integrated Marketing Plan and Program
Marketing mix tools
Product
Price
Place (Distribution)
Promotion
The firm must blend each marketing mix tool into a comprehensive integrated marketing program
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32. Customer Relationship Management
The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction
Customer Relationship Management
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33. Customer Perceived Value
The customer’s evaluation of the difference between all of the benefits and all of the costs of a marketing offer relative to those of competing offers
Customer Perceived Value
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34. Customer Satisfaction
The extent to which the product’s perceived performance matches a buyer’s expectations
Customer Satisfaction
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35. Customer Satisfaction
For companies interested in delighting customers, exceptional value and service become part of the overall company culture
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36. Marketing at Work
In-N-Out Burger delights customers by focusing on friendly service and what it does well: making really good hamburgers, really good fries, and really good shakes
Note to Instructors: Ask students to compare In-N-Out Burger’s marketing mix with McDonald’s marketing mix.
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37. Customer Relationships
Firms may choose to build relationships at different levels
Loyalty and retention programs to build relationships include
Frequency marketing programs
Club marketing programs
JetBlue Airways offers its TrueBlue members frequent-flyer points they can use on any seat on any JetBlue flight with no blackout dates
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38. The Changing Nature of Customer Relationships
Customer profitability analysis eliminates losing customers and selects profitable ones with whom relationships should be developed
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39. Changing Nature of Relationships
Firms interact with customers using new technologies such as social networking, , Web sites, blogs, cell phones, and video sharing
Cold Stone Creamery uses a variety of social media to engage customers on a more personal, interactive level
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40. Customer-Managed Relationships
Marketing relationships in which customers, empowered by digital technologies, interact with companies and with each other to shape their relationships with brands
Customer-Managed Relationships
Note to Instructor: Ask students to describe the ways in which they themselves initiate and maintain relationships with brands. Students can suggest ways by which marketers can make it easier for customers to interact with the company or brand.
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41. Consumer-Generated Marketing
Brand exchanges created by consumers by which consumers play an increasing role in shaping their own brand experiences and those of other consumers
Harnessing consumer-generated marketing: H. J. Heinz invited
consumers to submit homemade ads for its ketchup brand on YouTube
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42. Partner Relationship Management
Working closely with others inside and outside the company to jointly bring more value to customers
Partners inside the firm:
Cross-functional teams
Partners outside the firm:
Supply chain and channel partners
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43. Customer lifetime value
The value of the entire stream of purchases that the customer would make over a lifetime of patronage
Customer lifetime value
The portion of the customer’s purchasing that a company gets in its product categories
Share of customer
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44. Capturing Value From Customers
Superior customer value leads to highly satisfied loyal customers who buy more
Note to Instructors: Explain that losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. For example, the average customer at Stew Leonard’s spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years. If this customer has an unhappy experience and switches to another supermarket, Stew Leonard’s has lost
$50,000 in lifetime revenue. The loss can be much greater if the disappointed customer shares the bad experience with other customers and causes them to defect. In fact, a company can lose money on a specific transaction but still benefit greatly from a long-term relationship. This means that companies must aim high in building customer relationships.
Stew Leonard’s customer service policy emphasizes the importance of bringing customers back to the stores for repeat sales
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45. Customer Equity
The total combined customer lifetime values of all the company’s current and potential customers
Note to Instructors: Discuss the case of Cadillac given in the test. Though Cadillac had a huge share of the luxury car market, most of its buyers were in the older age brackets and average customer lifetime value was falling. In recent years, Cadillac has struggled to make the Caddy cool again by targeting a younger generation of consumers, in order to maximize the customer lifetime value of these customers.
To increase customer lifetime value
and customer equity, Cadillac needs to make the Caddy cool again by
targeting a younger generation of customers
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46. Figure 1.5 - Customer Relationship Groups
Note to Instructors: Each of the four customer relationship groups requires a different relationship management strategy. The company will not gain anything by investing time and resources in developing relationships with strangers. For butterflies, the company should create satisfying and profitable transactions, capturing as much of their business as possible in the short time during which they buy from the company. Efforts to convert butterflies into loyal customers are rarely successful. True friends have the potential to generate good profit for the company. The firm should make continuous relationship investments to delight these customers and nurture, retain, and grow them. The company may be able to improve the profitability of barnacles by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be “fired.”
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47. The Changing Marketing Landscape
Economic uncertainties
Growth in digital technology
Rapid globalization
Sustainable marketing
Growth of not-for-profit marketing
In the current economic environment, companies must emphasize the value in their value propositions, as Target did when it shifted the balance more toward the “Pay Less” half of its “Expect More. Pay Less” positioning
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48. Marketing at Work
The recession from 2008 to 2009 undermined consumer confidence
The post-recession era has seen a shift in spending patterns, with consumers becoming more frugal
Note to Instructors: Discuss what the move towards sensible consumption means for marketers. How does this shift in the consumer mind-set influence product, pricing, promotion and distribution decisions?
Even as the economy strengthens, rather than reverting to their old free-spending ways, Americans are now showing an enthusiasm for sensible consumption not seen in decades
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49. Figure 1.6 - An Expanded Model of the Marketing Process
Note to Instructors: The underlying concept of the entire text is that marketing creates value for customers in order to capture value from customers in return. Throughout the marketing process, marketers practice customer relationship management to create customer satisfaction and delight. In creating customer value and relationships, however, the company cannot go it alone. It must work closely with marketing partners both inside the company and throughout its marketing system. Thus, beyond practicing good customer relationship management, firms must also practice good partner relationship management.
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50. Rest Stop: Reviewing the Concepts
Define marketing and outline the steps in the marketing process
Explain the importance of understanding customers and the marketplace and identify the five core marketplace concepts
Identify the key elements of a customer-driven marketing strategy
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall

51. Rest Stop: Reviewing the Concepts
Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return
Describe the major trends and forces that are changing the marketing landscape in this age of relationships
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall

52. Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.
Copyright © 2013 Pearson Education, Inc.  
Publishing as Prentice Hall
Copyright 2013, Pearson Education Inc., Publishing as Prentice-Hall