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Principles of Marketing

Dr. Karim

Chapter 1: Creating Customer Value and Engagement

Ke y w o r d s
Process: a series of actions or steps taken in order to
achieve a particular end.
Stakeholders: A party that has an interest in an enterprise
or project. The primary stakeholders in a typical
corporation are its investors, employees, customers and
suppliers.

Ke y w o r d s
Value: The worth that a product has in the mind of the consumer.
The consumer's perceived value of a good or service affects the price
that he or she is willing to pay for it. For the most part, consumers are
unaware of the true cost of production for the products they buy. Instead,
they simply have an internal feeling for how much certain products are
worth to them. Thus, in order to obtain a higher price for their products,
producers may pursue marketing strategies to create a higher perceived
value for their products. Value, a central marketing concept, is primarily
a combination of quality, service, and price (qsp), called the customer
value triad. Value perceptions increase with quality and service but
decrease with price.

W h a t is M a rke t ing?
One of the good definitions of 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
Kotler.

Another definition: Marketing is an organizational


function

and a set of processes for creating,

communicating, and delivering value to customers


and for managing customer relationships in ways

A Simplified Model of The Marketing Process

Goals of Marketing
To satisfy customers needs
To attract new customers by promising
superior value.
To keep & grow current customers by
delivering satisfaction.

What Is Marketed?

ETC..

1-18

Who Markets?

A marketer is someone who seeks a


responseattention, a purchase, a
vote,

donationfrom

party, called the prospect.

another

Core Definitions
Market:

The set of actual and

potential buyers of a product. These


people share a need or want that
can be satisfied through exchange
relationships.
Exchange: Process of obtaining a

desired product from someone by


offering something in return.

Core Definitions - Need

Needs - basic human


requirements

Types of Needs
Physical:
Food, clothing, shelter, safety

Social:
Belonging, affection

Individual:
Learning, knowledge, self-expression

Core Definitions - Want


Wants - needs become wants when
they

are

objects

directed

that

might

to

specific

satisfy

the

need. Wants are shaped by the


society.

A U.S. consumer needs food but may


want a Philly cheesesteak and an
iced tea. A person in Afghanistan
needs food but may want rice,

Core Definitions - Demands


Demands are wants for
specific

products

backed by an ability
to pay.
Many people want a
Ferrari ; only a few
are able to buy one.

Core Definitions Market


Offering
For each target market, the
firm develops a tangible
market

offering

combination of products,
information,
experiences -

and
that it

positions in the minds of


the target buyers.

Core Definitions Brand


A brand is a name, term, sign, symbol, design, or
a

combination

of

these,

that

identifies

the

products or services of one seller or group of


sellers and differentiates them from those of
competitors.
A brand name such as McDonalds carries many
associations in peoples minds that make up its image:
hamburgers,

cleanliness,

convenience,

courteous

service, and golden arches. All companies strive to build


a brand image with as many strong, favorable, and
unique brand associations as possible.

Core Defi nitions - Competition


Competition includes all the actual and potential
and

rival offerings

substitutes a buyer might consider.

An automobile manufacturer can buy steel from U.S. Steel in the


United States, from a foreign firm in Japan or Korea, or it can buy
aluminium for certain parts from Alcoa to reduce the cars weight,
or engineered plastics from Saudi Basic Industries Corporation
(SABIC) instead of steel.

Core Definitions Customer Satisfaction


Customer satisfaction
depends

on

the

products

perceived

performance relative
to

expectations.

buyers

Satisfaction
Expectatio
n
8

Performance
10

Expectatio
n
10

Performance
8

If performance is higher than expectations, satisfaction is


high.
If performance is lower than expectations, satisfaction is
low.

C o r e D e fi n i t i o n s - M a r ke t i n g
Environment

- The Marketing Environment refers to the actors and forces

outside

of

the

marketing

department

marketing management ability to build

that

affect

and maintain

successful relationships with target customers.


- The Marketing Environment is made up of:
1. The microenvironment consists of the actors close to the

company that affect its ability to serve its customers.


These forces are partially controllable by the company.
2. The macroenvironment consists of the larger societal

forces that affect the microenvironment. These forces


are uncontrollable by the company.

Core Definitions - Marketing Myopia


Marketing

Myopia:

The

mistake

of

paying more attention to the specific


products a company offers than to the
benefits & experiences produced by
these products.
The fundamental concept to take away
from

marketing

marketers

should

myopia
look

is

towards

that
the

market and modify the company and


products
looking

accordingly
towards

the

rather
company,

than
its

potential and then catering the market.

An Example of
Marketing Myopia:
Kodak Polaroid

Five Organizational
Concepts

There are five alternative concepts under


which organizations design and carry out
their marketing strategies:
1.
2.
3.
4.
5.

Production Concept
Product Concept
Selling Concept
Marketing Concept
Societal Marketing Concept

Production Concept
The production concept holds that consumers
will favor products that are available and highly
affordable.

Therefore,

management

should

focus on improving production and distribution


efficiency.
This concept is one of the oldest orientations that
guides sellers and it is still a useful philosophy in
some

situations.

For

example,

computer

maker

Lenovo dominates the highly competitive, pricesensitive Chinese PC market through low labor costs,

Product Concept
The product concept holds that consumers will favor
products that offer the most in quality, performance,
and innovative features. Under this concept, marketing
strategy
focuses
on
making
continuous
product
improvements.
Product quality and improvement are important parts of
most marketing strategies. However, focusing only on the
companys products can also lead to marketing myopia. For
example, some manufacturers believe that if they can
build a better mousetrap, the world will beat a path to
their doors. But they are often rudely shocked. Buyers
may be looking for a better solution to a mouse problem
but not necessarily for a better mousetrap. The better
solution might be a chemical spray, an exterminating
service, a house cat, or something else that works even
better than a mousetrap.

Selling Concept
The selling concept holds that consumers will not buy
enough of the firms products unless it undertakes a
large-scale selling and promotion effort.
The selling concept is typically practiced with unsought goods
those that buyers do not normally think of buying, such as
insurance. These industries must be good at tracking down
prospects and selling them on a products benefits. Such
aggressive selling, however, carries high risks. It focuses on
creating sales transactions rather than on building long-term,
profitable customer relationships. The aim often is to sell what
the company makes rather than making what the market
wants. It assumes that customers who are coaxed into buying
the product will like it.

Marketing Concept
The

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.

Societal Marketing Concept


The

societal

whether

the

marketing
pure

concept

marketing

questions

concept

overlooks

possible conflicts between consumer short-run wants


and consumer long-run welfare.
The

societal

marketing

marketing

strategy

concept

should

holds

deliver

that

value

to

customers in a way that maintains or improves


both the

Society (Human
consumers
Welfare) and societys

Consumers (Want

Societal
marketi
ng

well-being.

Company (Profits)

Societal Marketing Concept- An


Applied Example:
Bottled Water

Customer Relationship
Management
CRM is the process of building &
maintaining profitable customer
relationships by delivering superior
customer value & satisfaction.
Customer Perceived Value: The
customers evaluation of the
difference between all the benefits &
all the costs of a market offering
relative to those of competing
products.

Changing Nature of Customer


Relationships
Relating with More Carefully selected
Customers:
- Selective Relationship Management
Weeding out losing customers &
targeting & pampering winning ones

Relating for the Long term:


Using CRM to retain current customers &
building profitable long-term relationships with
them.

Relating Directly: Using direct marketing


tools such as telephone, mail order catalogs &
kiosks. Eg Dell & Amazon.

Creating Customer Loyalty &


Retention
losing customers does not mean
losing a single sale but in fact losing
the entire stream of purchases that
the customer would make over a
lifetime.
Customer lifetime value: The
value of the entire stream of
purchases that a customer would

Customer Equity
Companies should not just acquire customers, but
keep & grow them as well.
The ultimate aim of customer relationship
management is to produce high customer equity.
Customer Equity is the combined discounted
customer lifetime values of all the companys
current & potential customers.
It is a better measure of a firms performance than
current sales or market share.
More Loyal firms
Profitable customers

Higher firms
Customer Equity

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