0. Marketing: Managing Profitable Customer Relationships
Chapter 1

1. 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

2. Goal 1: Define marketing and the marketing process.
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
Goal 1: Define marketing and the marketing process.

3. Chapter 1 Marketing: Managing Profitable Customer Relationships
Marketing : A process that help companies create value for customers and build strong customer relationships to get value in return from customers.
Key elements of Marketing Definition:
Social and managerial process
Needs and wants
Creating and exchanging value with others.

4. 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
Goal 1: Define marketing and the marketing process.

5. profitable relationships
Marketing Process
A model of marketing process
Build
profitable relationships
and create
customer delight
Understand
customer
needs and wants
Capture
customer value
from customer to
create profits
and
customer quality
Design customer
oriented
marketing strategy
Construct
marketing program
that delivers
superior value

6. Understanding the Marketplace
Core Concepts
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
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction
Exchange, transactions and relationships
Markets
Goal 2: Identify the five core marketplace concepts.

7. Understanding the Marketplace
Core Concepts
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
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction
Exchange, transactions and relationships
Markets
Goal 2: Identify the five core marketplace concepts.

8. Understanding the Marketplace
Core Concepts
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
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction
Exchange, transactions and relationships
Markets
Goal 2: Identify the five core marketplace concepts.

9. Understanding the Marketplace
Core Concepts
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
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction
Exchange, transactions and relationships
Markets
Goal 2: Identify the five core marketplace concepts.

10. Understanding the Marketplace
Core Concepts
Market
Set of actual and potential buyers of a product
Marketers seek buyers that are profitable
Needs, wants, and demands
Marketing offers: including products, services and experiences
Value and satisfaction
Exchange, transactions and relationships
Markets
Goal 2: Identify the five core marketplace concepts.

11. Modern Marketing System
Suppliers
Modern Marketing System
Modern Marketing System
This CTR corresponds to Figure 1-3 on p.11 and relates to the material on p. 10.
Competitors
Company
(Marketer)
Marketing
Intermediaries
The Marketing System
A modern marketing system consist of four levels of activity. In a very real sense, each level influences the other levels. Each level adds value to the system.
Discussion Note: Consumers add value to the system when they buy products. Their purchase price in turn funds the efforts (as profits) of each of the other layers to create more value as the system continues the cycle.
Suppliers. This level provides the inputs to the production of goods and services.
Company and Competitors. Each company adds value to supplies to create the products (goods, services, or both) offered to various markets.
Marketing Intermediaries. Because of specialization, one or more other firms can get products to consumers more efficiently than most producers can (though there are important exceptions).
End User Market. The consumer is the “final cause” of the efforts of each level of the marketing system.
Discussion Note: Ask students to comment on whether the schematic should have “dotted line” feedback connection from the end user to each level of the system. What form of communication does that feedback take? Purchase? Satisfaction level? Brand loyalty? Brand switching? You might encourage students to remember this system perspective throughout the course and relate examples back to this CTR from time to time.
Environment
Environment
End User
Market

12. Design a customer-driven marketing strategy
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?
Goal 3: Identify elements of a customer-driven strategy.

13. Design a customer-driven marketing strategy
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
Goal 3: Identify elements of a customer-driven strategy.

14. Marketing Management Design a customer-driven marketing strategy
Marketing Orientations
Selling concept
Marketing concept
Production concept
Product concept
Societal marketing concept
Goal 3: Identify elements of a customer-driven strategy.

15. Societal Marketing Concept
Five Marketing Philosophies
This CTR relates to the material on pp
Teaching Tip: You may find it useful to ask students to give their definitions of philosophy. How do they use philosophies for studying? dating? planning their time? Work from their examples to the idea that businesses too have philosophies about how to get things done.
Design a customer-driven marketing strategy Marketing Management Philosophies
Consumers favor products that are
available and highly affordable
Improve production and distribution
Consumers favor products that offer
the most quality, performance, and
innovative features
Consumers will buy products only if
the company promotes/ sells these
product
Focuses on needs/ wants of target
markets & delivering satisfaction
better than competitors
markets & delivering superior value
Society’s well-being
Production Concept
Product Concept
The Production Concept. One of the oldest concepts, it holds that consumers favor products that are available and affordable. Management emphasizes production and distribution efficiency. Examples from the text include Ford's Model T and Texas Instruments.
The Product Concept . This concept focuses on the actual product in an effort to continuously improve quality, performance, and features. May lead to marketing myopia or the tendency to too narrowly define the scope of one's business. Consumers buy products for their benefits, not their features.
The Selling Concept. This concept views consumers as unwillingly customers whose inherent opposition must be overcome to make a sale. It is most often used today for unsought goods. The selling concept tends to encourage sellers to misrepresent the true nature of their products or services and can lead to problems in maintaining high customer satisfaction.
The Marketing Concept. This concept links the company's success with the consumer's continuing satisfaction. Its "outside-in" approach starts with a well defined target market, an analysis of their needs and wants, and then builds the company's offering around meeting those needs better than the competition (Note: the selling and marketing concepts are contrasted on the following CTR of Figure 1-4).
The Societal Marketing Concept. This concept adds to the marketing concept the idea that the company should contribute to the betterment of society as a whole (Note: The societal marketing concept is developed in more detail on a following CTR of Figure 1-5 and the accompanying notes).
Selling Concept
Marketing Concept
Societal Marketing Concept

16. Marketing & Sales Concepts Contrasted
Marketing and Sales Concept Contrasted
This CTR corresponds to Figure 1-4 on p. 15 and to the material on pp
Marketing & Sales Concepts Contrasted
The Selling Concept
Starting
Point
Focus
Means
Ends
Factory
Existing
Products
Selling
and
Promoting
Profits
through
Volume
The Marketing Concept
Comparisons and Contrasts:
The Selling Concept takes an inside-out perspective -- looking at the company’s needs and wants in terms of existing products and ways to find customers for them. The Marketing Concept takes an outside-in perspective - identifying the needs and wants of a clearly defined market and adjusting company efforts to make products that meet the needs.
Discussion Note: Promotional tone may help indicate whether a company practices the selling or the marketing concept. Selling involves persuasion -- convincing the customer of their need to buy existing products. Marketing, at its best, involves information -- bringing the developed product to the awareness of a target market that recognizes need satisfying products.
As the text notes, companies can let their own success lock them into a rigid selling structure. As times change, and they always do, those companies fail to see the need for meeting new and emerging consumer needs. The marketing concept helps companies focus on customer need satisfaction, leading to long-term success by customer retention.
Market
Customer
Needs
Integrated
Marketing
Profits
through
Satisfaction

17. Societal Marketing Concept
This CTR corresponds to Figure 1-5 on p. 16 and relates to the material on pp
Society
(Human Welfare)
Societal
Marketing
Concept
The Societal Marketing Concept
The Societal Marketing Concept holds that the organization should determine the needs, wants, and interests of target markets. In delivering the desired satisfactions more effectively and efficiently than the competition, the company should also maintain or improve both the consumer’s and society’s well being.
Discussion Note: You may wish to consider extra-textual class discussion identifying the pros and cons of the societal marketing concept.
Pros: Reasons for adopting the societal marketing concept include:
1. Public expectations. Social expectations of business have increased. 2. Long-run profits. Socially responsible marketing may lead to more secure long-run profits Ethical obligation. Business should recognize that responsible actions are right for their own sake Public image. A good public image helps firms gain more customers, better employees, access to money markets, and other benefits Better environment. Involvement by business can help solve difficult social problems, creating a better quality of life and a more desirable community in which to attract and hold skilled employees Balance of responsibility and power. Marketers have a large amount of power in society that requires an equally large amount of responsibility Stockholder interests. Socially responsible companies are considered less risky and safer investments 9. Possession of resources. Business has the financial resources, technical experts, and managerial talent to provide to support public causes.
Cons: Reasons for not adopting the societal marketing concept include:
1. Violation of profit maximization. 2. Dilution of purpose. The pursuit of social goals dilutes business’s primary purpose Costs. Many socially responsible activities don’t pay their way. 4. Too much power. Business is already one of the most powerful institutions in society Lack of skills. Marketers may be poorly qualified to deal with social issues Lack of accountability. There are no direct lines of social accountability from the business sector to the public Lack of broad public support. Even favorable attitudes are general and lack consensus on specific actions marketers should take on social issues.
Consumers
(Wants)
Company
(Profits)

18. Construct a marketing program that delivers superior value
Transforms the marketing strategy into action
Includes the marketing mix and the 4P’s of marketing
Product
Price
Place
Promotion
Goal 3: Identify elements of a customer-driven strategy.

19. 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.
Goal 4: Discuss CRM and capturing value.

20. 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.
Goal 4: Discuss CRM and capturing value.

21. Not All Customers are Equal
Basic Relationships
Low-margin customers
Full Partnerships
Key customers
Selective relationship management
Weeding out unprofitable customers
Goal 4: Discuss CRM and capturing value.

22. Capturing Value from Customers
Key Concepts
Customer delight leads to emotional relationships and loyalty
Customer Lifetime Value shows true worth of a customer
Customer Loyalty and Retention
Share of Customer
Customer Equity
Goal 4: Discuss CRM and capturing value.

23. Capturing Value from Customers
Key Concepts
Share of customer’s purchase in a product category.
Achieved through offering greater variety, cross-sell and up-sell strategies.
Customer Loyalty and Retention
Share of Customer
Customer Equity
Goal 4: Discuss CRM and capturing value.

24. Capturing Value from Customers
Key Concepts
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
Customer Loyalty and Retention
Share of Customer
Customer Equity
Goal 4: Discuss CRM and capturing value.

25. Goal 5: Discuss trends and forces.
Marketing Landscape
Challenges
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
Digital age
Globalization
Ethics and social responsibility
Not-for-profit marketing
Marketing relationships
Goal 5: Discuss trends and forces.

26. Goal 5: Discuss trends and forces.
Marketing Landscape
Challenges
Geographical and cultural distances have shrunk
Greater market coverage
More options for purchasing and manufacturing
Increased competition from foreign competitors
Digital age
Globalization
Ethics and social responsibility
Not-for-profit marketing
Marketing relationships
Goal 5: Discuss trends and forces.

27. Goal 5: Discuss trends and forces.
Marketing Landscape
Challenges
Marketers need to take great responsibility for the impact of their actions
Caring capitalism is a way to differentiate your company
Digital age
Globalization
Ethics and social responsibility
Not-for-profit marketing
Marketing relationships
Goal 5: Discuss trends and forces.

28. Goal 5: Discuss trends and forces.
Marketing Landscape
Challenges
Many organizations are realizing the importance of strategic marketing
Performing arts
Government agencies
Colleges
Hospitals
Churches
Digital age
Globalization
Ethics and social responsibility
Not-for-profit marketing
Marketing relationships
Goal 5: Discuss trends and forces.

29. Goal 5: Discuss trends and forces.
Marketing Landscape
Challenges
Profits through managing long-term customer equity
Improve customer knowledge
Target profitable customers
Keep profitable customers
Digital age
Globalization
Ethics and social responsibility
Not-for-profit marketing
Marketing relationships
Goal 5: Discuss trends and forces.

30. What is Marketing
The process of building profitable customer relationships by creating value for customers and capturing value in return