Chapter 1 Creating and Capturing Customer Value Marketing Marketing involves creating value for customers and building 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 Exchanges and Relationships Exchange Marketing The act of obtaining a desired object from someone by offering something in return Consists of creating maintaining and growing desirable exchange relationships with target audiences Marketers build strong relationships by consistently delivering superior customer value Figure 1 1 The Marketing Process Creating and Capturing Customer Value This figure presents a simple five step model of the marketing process for creating and capturing customer value 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 The rewards are in the form of sales profits and long term customer equity Marketing Process Understanding the Marketplace and Customer Needs Core customer and marketplace concepts Needs wants and demands Market offerings products services and experiences Markets Value and satisfaction Exchanges and relationships Markets Set of all actual and potential buyers of a product or service Consumers market Search for products Interact with companies to obtain information Make purchases Customer managed relationships are important as customers are empowered and marketing is made a two way affair Market Offerings Combination of products services information or experiences Offered to a market to satisfy a need or want Entities products services persons places organizations information and ideas Marketing myopia Paying more attention to the specific products a company offers than to the benefits and experiences produced by these products Customer Needs Wants and Demands Needs States of felt deprivation Physical needs Food clothing warmth and safety Social needs Belonging and affection Individual needs Knowledge and self expression Wants Demands For taken by human needs when shaped by culture and individual personality Human wants that are backed by buying power Designing a Customer Driven Marketing Strategy Selecting customers to serve done through market segmentation Choosing a value proposition Marketing management orientations Production concept A brand s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs the idea that consumers will favor products that are available and highly affordable where as the company focuses on production and distribution efficiency the idea that consumers will favor products that offer the most quality performance and features where the company focuses on continuous product improvement Product concept Selling concept Marketing concept the idea that consumers will not buy enough of the firm s products unless the firm undertakes a large scale selling and promotion effort a philosophy in which achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do Societal marketing concept the idea that a company s marketing decisions should consider consumers wants the company s requirements consumers long run interests and society s long run interests Marketing Concept Organizations exist to satisfy customer needs and wants while meeting organizational objectives An exchange relationship focusing on meeting customer expectations Is about customer perception of what he or she is buying is critical It is in contrast to related concepts of production product selling and societal Figure 1 3 The Selling and Marketing Concepts Contrasted This figure contrasts the selling concept and the marketing concept The selling concept takes an inside out view that focuses on existing products and heavy selling The aim is to sell what the company makes rather than make what the customer wants The marketing concept takes an outside in view that focuses on satisfying customer needs as a path to profits It starts with a well defined market focuses on customer needs and integrates all the marketing activities that affect customers Figure 1 4 Three Considerations Underlying the Societal Marketing Concept This figure shows that companies should balance three considerations in setting their marketing strategies company profits consumer wants and society s interests Marketing Mix Set of marketing tools the firm uses to implement an integrated marketing strategy or program 1 2 3 4 Product firm must first create a need satisfying market offering Price It must then decide how much it will charge for the offering Place and how it will make the offering available to target consumers Promotion Finally it must communicate with target customers about the offering and persuade them of its merits Each tool should be blended into a comprehensive integrated marketing program Typically called the 4 P s of Marketing that create value for the customer The Four P s of the Marketing Mix The marketing mix is the set of tactical marketing tools that the firm blends to produce the response it wants in the target market This figure shows the marketing tools under each P 1 The first tool is product which refers to the goods and services combination the company 2 The second tool is price which is the amount of money customers must pay to obtain the 3 The third tool is place which includes the company activities that make the product 4 The fourth tool is promotion which refers to activities that communicate the merits of the product and persuade target customers to buy it offers to the target market product available to target consumers An effective marketing program blends the marketing mix elements into an integrated marketing program designed to achieve the company s marketing objectives by delivering value to consumers Customer Relationship Management Delivering superior customer value and satisfaction to build and maintain profitable customer relationships Customer perceived value Customer s evaluation of the difference between all the benefits and costs of a marketing offer relative to those of competing offers Importantly customers often do not judge values and costs accurately or objectively They act on perceived value To some consumers value might mean