Creating and Capturing

Customer Value

Usman Afzal, Principle of Marketing, Bahria University, Islamabad, 2016.

Learning Objectives
Explain marketing as a concept and outline the steps in the

marketing process.
Appreciate the importance of understanding customers and the

marketplace, and identify the five core marketplace concepts.

Recognize the key elements of a customer driven marketing

strategy and discuss the marketing management orientations

that guide marketing strategy.
Gain familiarity with the concept of creating value for

customers and capturing value from customers in return.

Develop an understanding of the major trends that are changing

the marketing landscape.

Marketing creates
associations in the
minds of actual and
potential customers

Marketers tell
the story about service
V
a
Marketer work with others to design l
and deliver a great product or service u
e

O
f
f
Marketers deliver profit in the process
e
of satisfying customer needs and wants r
Customers have
i
needs, wants, or desire
n
g

Marketing is a process by which companies create

value for customer and build strong associations in
their minds about the value offering in order to
capture value from customers in return.

MARRIOT

CK Euphoria
Marketers tell
the story about the
product

The Marketing Process

Understanding
Customer Needs,
Wants, and the
Marketplace

Design a Customer
Driven Marketing
Strategy

Construct an
Integrated
Marketing Program
that Delivers
Superior Value

Capturing Value from

Customers to Create
Profits and Customer
Equity

Build Profitable
Relationships and
Create Customer
Delight

Capture Value from

customers in return

Source: Principles of Marketing: A South Asian Perspective, Ch 1.: p.5

UNDERSTANDING
Needs

Wants

Demands

Customer
Needs,Wants and Demands

States of felt Deprivation

Basic physical needs for food, clothing, warmth and safety
Social Needs for belonging and affection
Individual needs for knowledge, curiosity and self
expression
Directed at specific objects
Want are the form taken by human needs as they are
shaped by culture and individual personality.
People have almost unlimited wants but limited resources.
They want to choose products that provide the most value
and satisfaction for their money.
When backed by buying power, wants become demands.
Consumers view products as bundles of benefits.
Consumers choose products that add up to the most value
and satisfaction.

D
E
M
A
N
D
S
T
A
T
E
S

Negative

Dental Work, Vaccination

No

Italiano Language Course

Latent

E-Cig; Hybrid Cars, Solar Panel

Declining

Cassette Player

Irregular

Air conditioners; Tourist Resorts

Full

I-Phone 6s

Overfull

Milkpack

Unwholesome

Cigarettes; Alcohol

UNDERSTANDING

the Market Offerings

and Marketplace

Market Offering
Market offerings are some form of combination of products, services,

information, or experiences offered to a market to satisfy a need or want.

Physical Products: Lux,Tarang, Euphoria,TagheuerWatch etc.

Services: Activities or benefits offered for sale that are essentially

intangible and do not result in the ownership of anything but

experiences. E.g., Banking,Air Travel, Hotel Stays, and Tourism etc.

Market Offering may also include other entities, such as:

Events
Experiences
Persons
Places
Organizations
Information
Ideas

By taking rides in the amusement or water parks, customers enjoy the thrill provided by these experiences.
Organization create, stage, and market experiences based on the concept of theme parks.

Using the technique of

celebrity endorsement,
Government of Pakistan
through Shahid Afridi

markets the information

that an enlightened KPK
needs to

Eradicate Polio!!

Customer Value and Satisfaction

How do customers choose among these many market offerings?

CustomerValue:
Customer value is the difference between the values the customer gains

from owning and using a product and the costs of obtaining the products.

Customers often do not judge product value and costs accurately or

objectively.They act on perceived value.

Satisfaction:
Customer satisfaction depends on a products perceived performance in

delivering value relative to a buyers expectation.

If the products performance falls short of the customers expectations,

the buyer is dissatisfied.

Customer satisfaction is closely linked to quality.

Exchanges and Relationships

Marketing occurs when people decide to satisfy needs and wants through

exchange relationships.

Exchange is the act of obtaining a desired object from someone by

offering something in return.

Marketing consists of actions taken to build and maintain desirable

exchange relationships with target audiences , involving:
A product
Service
Idea or other object

Market
Traditionally, a market was a physical place where buyers and seller

gathered to buy and sell goods.

Marketers use the term market to cover various groupings of customers.

They view sellers as constituting the industry and buyers as constituting

the market.

Communication

Industry
(a collection
of sellers)

Products / Services

Market (a
collection of
buyers)

Money

Information

A simple marketing system

Core Concepts: Understanding the Marketplace and Consumer Needs

DESIGNING

a Customer Driven
Market Strategy

Customer Driven Marketing Strategy

To design a winning marketing strategy, the marketer must answer

two important questions:

What customer will we serve (what is our target market?)

How can we serve these customers best (what is our value

proposition?)

Customer Driven Marketing Strategy

What is a Value Proposition?

The whole cluster of
benefits the
company promises
to deliver.
Value proposition
differentiates one
Brand from another

Mercedes-Benz
The best or nothing.

MARKETING

management
Orientations

The Production Concept

Traditional and oldest orientation guiding sellers.
Consumers will prefer products that are widely available & affordable.
Concentrate on achieving high production efficiency, low costs and mass
distribution.
Eg: - Standard Raw Materials and Components, Suzuki Mehran in Pakistan,
Lenovo and Haier in China, CDs

The Product Concept

Consumers favor products that offer most in quality, performance and innovative
features.
Marketing strategy under this orientation is to focus on continuous product
improvments.
Caught in a love-affair with their product.
Digital Camera, CPU.

The Selling Concept

Consumers, if left alone, wont buy enough of the organizations products.

Must undertake an aggressive selling and promotion effort.
Practiced most aggressively with unsought goods.
Eg:- Insurance & Encyclopedias.
Aim is to sell what they make rather than make what the market wants.
E.g., Unsought goods: Q-mobile, Solar Heating, Life Insurance, Telebrands

The Marketing Concept

Customer Centered instead of Product Centered.
Not to find right customers for your products, but to find right products for your
customers.
Reactive Market Orientation Understanding and meeting customers expressed
needs.
Proactive Market Orientation - Understanding and meeting customers latent needs.
Total Market Orientation. Lead customers where they want to go before they know
where they want to go.

The selling and Marketing Concepts Contrasted

Starting point
Factory

Focus
Existing
Products

Means
Selling &
promoting

Ends
Profits through
Sales Volume

The selling concept

Market

Customer
needs

Integrated
marketing

The marketing concept

Profits through
Customer
Satisfaction

The Societal Marketing

Concept
Societal Marketing Concept questions whether marketing
concept overlooks possible conflicts between consumer
short-run wants and consumer long-run welfare.

Is a firm that satisfies the immediate needs and wants of

target markets always doing whats best for consumers in
the long run?
According to this concept, marketing strategy should
deliver value to customers in a way that improves both the
consumers and society wellbeing.
Examples: Body Shop; Johnson & Johnsons

Considerations Underlying the Societal Marketing Concept

Society
(Human Welfare)

Societal
Marketing
Concept

Consumers

Company

(Want Satisfaction)

(Profits)

PREPARING

an Integrated Marketing Plan

and Program

Integrated Marketing Plan and Program

a comprehensive plan that
communicates and actually delivers the intended value to
chosen customers.

An integrated marketing program is

The aim is to build customer relationships by transforming the

marketing strategy into action.

Consists of the firms marketing mix, the set of marketing tools

(four Ps) the firm uses to implement its marketing strategy. It

includes:

Product
Price
Place
Promotion

Four Elements of Marketing Mix

Product
Price

Solution
Value

Placement

Access

Promotion

Information

A firm must blend the marketing mix tools into a comprehensive

Integrated marketing program that communicates and delivers
the intended Value to Chosen Customers

BUILDING

CUSTOMER
RELATIONSHIPS

Customer Relationship Management

Building and managing customer relationships is the most

important step in the marketing process.

CRM is the overall process of building and managing profitable

customer relationships by delivering superior customer value and

satisfaction.
It deals with all aspects of acquiring, keeping, and growing

customers.

Relationship Building Blocks: Customer Value

and Satisfaction
Attracting and retaining customers can be a difficult task.

Customers often face a bewildering (confusing) array of products

and services from which to choose.

A customer buys from the firm that offers the highest perceived

value.
A customer rebuys from the firm if the products perceived

performance matches with his or her expectations.

Relationship Building Blocks: Customer Value

and Satisfaction
Customer- perceived
value
Customers evaluation
of difference between
all the benefits and all
the costs of a marketing
offer relative to those
of competing offers.

Customer satisfaction
The extent to which a
products
perceived
performance matches a
buyers expectations.

Determinants of Customer Perceived Value

Total perceived benefits

Total customer cost

Product benefit

Monetary cost

Services benefit

Time cost

Personnel benefit

Energy cost

Image benefit

Psychological cost

Serenas passion for satisfying customers is expressed in its aims to provide its guests a true spirit into the
local ways of life. Guests can stay in luxurious surroundings and experience a service second to none.

Relationship Building Blocks

Customer perceived value: It depends on the customers evaluation of the
difference between the total benefits and total costs of a marketing offer.

Customers often do not judge values and costs objectively or accurately.

For example, Do Ammar Bilal Green Label dress shirts, really provide superior

quality and that sophisticated look that make them worth the higher price? Its
all the matter of personal value perceptions.

Customer satisfaction: It depends on the products perceived performance

relative to a buyers expectations.
If the product performance falls short of expectations, the customer is

dissatisfied.

If performance matches expectation the customer is satisfied.

If performance exceeds expectations, the customer is highly satisfied or

delighted.

The Changing Nature of Customer Relationships

In existing times, companies are building deeper, more direct, and more

lasting relationships with more carefully selected customers.

Most marketers realize that they dont want relationships with every

customer.

They use selective relationship management to target fewer, more

profitable customers.

Once firm identify profitable customers firms can create attractive offers

to capture these customers and earn their loyalty.

With the introduction of Club Red every member can sit back, talk and enjoy.
All you have to do is subscribe and consume Rs. 1,000 worth of airtime within a month
to enjoy a 50% discount on all calls to Mobilink numbers for the rest of the month

Retaining high-value customers: Mobilinks Club Red invites

the high-value Jazz subscribers to join the exclusive club and
benefit from the 50 percent discount on additional on-net
calls each month

Partner Relationship Management

Marketers cannot work alone, they must work closely with variety of

marketing partners.

Partner relationship management involves working closely with partners in

other company departments and outside the company to jointly bring greater
value to customers.

Partners Inside the Company

Every employee must be customer focused
Marketing is far too important to be left only to the marketing department
~David Packard
Firms are linking all departments in the cause of creating customer value.
Marketing Partners Outside the Firm
Success at building customer relationships also rest on how well the entire
supply chain performs against competitors supply chain.
Companies no longer treat suppliers, and marketing channels as vendors and

distributors .They treat all of them as partners in delivering customer value.

V
alue
CAPTURING from Customers

CapturingValue from Customers

The final step in the marketing process involves capturing

value in return from the customers in the form of current

and future sales, market share, and profits.

By creating and delivering superior customer value, the firm

creates highly satisfied customers who stay loyal, who buy

and continue to buy the company brands.

The outcomes of creating and delivering customer value

results in:
Creating Customer Loyalty and Retention
Growing Share of Customers
Building Customer Equity

Creating Customer Loyalty and Retention

Good customer relationship management creates customer

delight.

Delighted customers remain loyal and talk favorably to

others about the company and its products.

The concept of customer lifetime value has made it obvious

that loosing a customer means loosing more than a single

sale.

Customer lifetime value is the value of the entire stream of

purchases that the customer would make over a lifetime of

patronage.

Growing Share of Customers

Good customer relationship management can also help

marketers to increase their share of customers.

Share of customer is the proportion of the customers

purchasing that a company gets in its product

categories.

To increase share of customers, firms can offer great

variety to current customers.

For instance, a firm can create a program to market

more products and services to existing customers.

In order to capture a great share of each customers

spending budget, U-fone originally a telecom service
company now offers U-paisa ATM and Debit card to grow
the share of customer

Building Customer Equity

The ultimate aim of CRM is to produce high customer equity.
Customer equity is the total combined customer lifetime values of all of

the companys customers. It is the value of potential

future revenues generated by a company's all customers in a lifetime.

The only value your company will ever create is the value that comes

from customers the ones you have now and the ones you have in the
future.

The more loyal the firms profitable customers, the higher the firms

customer equity.

Customer equity is a better measure of performance than current sales

or market share. Whereas sales and market share reflect the past,
customer equity suggests the future.

Building Customer Equity

Companies should manage customer equity carefully.

They should view customers as assets that need to be

managed and maximized.

However, not all customers, not even all loyal

customers, are good investments.

A company can classify customers according to their

potential profitability and manage its relationship with

them accordingly.

Different

types of customers require different

relationship management strategies.

Potential Profitability

Building The Right Relationship with The Right Customers

High
profitability

Low
profitability

Butterflies:

True Friends:

Strangers:

Barnacles:

good fit between

company offerings
and customer
needs

little fit bet

company offerings
and customers
need

Short-term Customers

good fit bet

company offerings
and customer
needs

limited fit bet

company offerings
and customer
needs
Long-term Customers

Projected Loyalty

Category
True Friends
Butterflies
Barnacles

Strangers

Strategy
Approach softly: dont communicate too often, or theyll
ignore everything. Reward their loyalty with exclusive
access to special events and high quality, limited supply
products.
For the short time they buy, milk them with short term,
hard-sell-offers. After their purchasing drops off, stop
investing.
If you determine they have more money to spend , offer
them products related to those they have already
purchased.
Identify early, invest nothing.

The Changing Marketing Landscape

Major Developments
Digital age

Rapid
globalization

Ethics and
social
responsibility

Not-for-profit
marketing

Capture value from

customers in return

Create value for customers and

build customer relationships

Understand the
marketplace and
customer needs
and wants

Design a
customer-driven
marketing
strategy

Construct an
integrated
marketing program
that delivers
superior value

Build profitable
relationships and
create customer
delight

Capture value from

customers to create
profits and
customer equity

Research customers
and the marketplace

Select Customers to
serve: market
segmentation and
targeting

Product and service

design:
build strong brands

Customer relationship
management: build
strong relationships
with chosen customers

Create satisfied loyal

customers

Manage marketing
information and
customer data

Decide on a value
proposition:
differentiation and
positioning

Pricing:
create real value

Partner relationship
management: build
relationships with
marketing partners

Capture customer
lifetime value

Distribution:
manage demand and
supply chains

Increase share of
market and share of
customers

Promotion:
Communicate the
value proposition

Harness Marketing
Technology

Manage global
markets

Ensure ethical and social

responsibility

An extended model of the marketing process