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Principles of Marketing

Chapter 1: Marketing

Creating Customer Value and Engagement

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What Is Marketing? �

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What Is Marketing?

Marketing is a process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

Create value -> Build strong relationship -> Capture value

The goal:

Attract new customers, AND
Grow the current customer base.

Discussion Question

Ask students for examples of either national or local companies that are excellent at marketing and ask how they reflect the definition given in this slide.

Perhaps the simplest definition of marketing is engaging customers and managing profitable customer relationships.

The twofold goal of marketing is to:

attract new customers by promising superior value
grow current customers by delivering satisfaction

Sound marketing is critical to the success of every organization:

large for-profit firms
not-for-profit organizations

You already know a lot about marketing—it’s all around you:

products at your nearby shopping mall
ads that fill your TV screen and magazines, or stuff your mailbox
imaginative web sites and mobile phone apps
blogs, online videos, and social media

Today’s marketers reach you directly, personally, and interactively. They want to become a part of your life and enrich your experiences with their brands—to help you live their brands.

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Why we need Marketing?

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Answers these questions, and a lot more!

Which newspapers/magazines should we advertise in?
Which product categories (cookies, snacks, candy etc.) should we offer?
Whether we should introduce a new flavor in an existing range of cookies?
What price should we charge for our products?
What geographic markets should we compete in?
What level of production is required?

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Marketing Misconceptions

“Sales are down, so we need to cut our marketing budget.”

“We Are successful, so we don’t need marketing.”

“We have a marketing plan: We’re running ads.”

“We’re too small. We don’t need a marketing plan.”

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The Value of Marketing

Financial success often depends on marketing ability

Successful marketing builds demand for products and services, which, in turn, creates jobs

Marketing builds strong brands and a loyal customer base, intangible assets that contribute heavily to the value of a firm

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Marketing Process

1) Understanding the Marketplace and Customer Needs

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Core Marketing Concepts

Needs: the basic human requirements such as for air, food, water, clothing, and shelter

Wants: specific objects that might satisfy the need

Demands: wants for specific products backed by an ability to pay

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Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands

States of deprivation

Physical—food, clothing, warmth, safety
Social—belonging and affection
Individual—knowledge and self-expression

Needs

Form that needs take as they are shaped by culture and individual personality
(Not necessary, but which consumers wish for)

Wants

Wants backed by buying power (able)

Demands

Marketing is all about creating value for customers. So, as the first step in the marketing process, the company must fully understand consumers and

the marketplace in which it operates.

Discussion Question

Ask the students to

1) Give an example of a product (good or service) they purchased recently

2) Tell how that product satisfied a need, want or demand.

Human needs include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression.

Wants are the form human needs take as they are shaped by one’s society and are described in terms of objects that will satisfy those needs.

When backed by buying power, wants become demands.

Outstanding marketing companies go to great lengths to learn about and understand their customers’ needs, wants, and demands.

http://www.marketing91.com/needs-wants-and-demands/

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Sara is a college student, and it's finals week

Need (Basic Human Requirement):

Sara needs to pass the class to avoid retaking it and disappointing her parents.

Want (Cultural & Personal Preference):

Sara wants an A because she likes to improve her GPA.

Demand (Want + Buying Power):

Sara demands a guaranteed A and is willing to hire a tutor, buy expensive study guides, and bribe her group project teammates with snacks to make it happen.

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Think!

Customers have needs, wants, and demand.

How do you fulfill these needs and wants?

By offering product, service, or an experience (Market offerings)

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Student Scenario

Dana is a student who wants to ace her marketing exam.

Product (Tangible Item):

Dana buys a KD 20 textbook because she thinks owning it will magically make her smarter.

Service (Intangible Assistance):

Dana realizes she must understand the material, so she pays for a tutoring session to help her study.

Experience (Memorable Interaction):

Instead of traditional studying, Dana joins a live interactive marketing workshop, where she plays real-world business simulations, competes in fun case studies, and walks away feeling like a marketing genius.

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Watch out!!!�Marketing Myopia

Marketing myopia is focusing only on existing wants and losing sight of underlying consumer needs.

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Consumers usually face a broad array of products and services that might satisfy a given need.

How do they choose among these many market offerings?

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Marketing Process

Designing a Customer Value-Driven Marketing Strategy

Preparing an Integrated Marketing Plan and Program

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Designing a Customer Value-Driven Marketing Strategy

Marketing management is the art and science of choosing target markets and building profitable relationships with them.

What customers will we serve?
How can we best serve these customers?

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Think!

Should companies target all customers?

Why or why not?

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Trying to target everyone is like a student taking every single class—it’s overwhelming, expensive, and unnecessary. The key is finding the right customers and focusing on them for better results.

If a student spends time studying every single subject instead of focusing on their major, they’ll be exhausted and fail everything.

Imagine a pizza place that also sells sushi, burgers, and tacos. People would be confused—are they a pizza place or just a random food court?

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Designing a Customer Value-Driven Marketing Strategy

Market segmentation refers to dividing the markets into segments of customers. (e.g. slicing a cake/diving students based on majors)

Target marketing refers to which segments to go after.

(e.g. picking a piece of the sliced cake/ choosing marketing majors)

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To design a winning marketing strategy, the marketing manager must answer two important questions:

What customers we will serve (what’s our target market)?

How can we serve these customers best (what’s our value proposition)?

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Designing a Customer Value-Driven Marketing Strategy

Choosing a Value Proposition

A brand’s value proposition is the set of benefits or values it promises to deliver to customers to satisfy their needs.

Value propositions differentiate one brand from another.

They answer the customer’s question,

“Why should I buy your brand rather than a competitor’s?”

Value proposition: Vine gives you “the best way to see and share life in motion” through “short, beautiful, looping videos in a simple and fun way for your friends and family to see.”

Discussion Question

Have the students evaluate one of the following value propositions in terms of how well the company delivers on the proposition.

BMW promises “the ultimate driving machine”

Nissan Leaf electric car is “100% electric. Zero gas. Zero tailpipe.”

New Balance’s Minimus shoes are “like barefoot only better.”

Vibram FiveFingers shoes: “You are the technology.”

Facebook helps you “connect and share with the people in your life”

YouTube “provides a place for people to connect, inform, and inspire others across the globe.”

The 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.

Value propositions differentiate one brand from another. They answer the customer’s question, “Why should I buy your brand rather than a competitor’s?” Companies must design strong value propositions that give them the greatest advantage in their target markets.

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Nike makes it clear that anyone can become a Nike Member, reflecting the company’s penchant for promoting inclusivity.

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Designing a Customer Value-Driven Marketing Strategy

Marketing Management Orientations

Production concept

Product concept

Selling concept

Marketing concept

Societal concept

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Marketing Management Orientations

Production concept:

Consumers will favor products that are available and highly affordable.

Managers concentrate on achieving high production efficiency, low costs, and mass distribution.

A good example of a production concept is India and China

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Product Concept

Consumers favor products that offer the most quality, performance, and features.

The focus is on continuous product improvements.

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Is product concept always bad?

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Designing a Customer Value-Driven Marketing Strategy

Selling concept:

Consumers will not buy enough of the firm’s products unless the firm undertakes a large-scale selling and promotion effort.

Their aim is to sell what they make rather than make what the market wants.

Focuses on creating sales-transaction rather than long term profitable relationships.

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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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Designing a Customer Value-Driven Marketing Strategy

Marketing concept:

Know the needs and wants of the target markets and deliver the desired satisfactions better than competitors.

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Designing a Customer Value-Driven Marketing Strategy

Marketing Management Orientations

Societal marketing:

The company’s marketing decisions should consider”

consumers’ wants,
the company’s requirements,
consumers’ long-run interests, and
society’s long-run interests.

Discussion Questions

What companies can you identify with social marketing?

What do these companies do that ties to the societal marketing concept?

Students might be familiar with many different companies that practice societal marketing through their corporate social responsibility (CSR) initiatives. Students might be familiar with local retailers who are also involved in societal marketing. They will note that these companies donate, contribute, or offer services to charities and not-for-profit organizations.

The societal marketing concept questions whether the pure 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 what’s best for its consumers in the long run?

The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well-being. It calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.

Even more broadly, many leading business and marketing thinkers are now preaching the concept of shared value, which recognizes that societal needs, not just economic needs, define markets.

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Designing a Customer Value-Driven Marketing Strategy

Marketing Management Orientations

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Summary

Orientation	Main Focus	Key Idea	Example Company/Product
Production	Mass production & low cost	Customers prefer products that are affordable and easily available	Early Ford Model T; basic bottled water
Product	High quality & innovation	Customers want the best quality, features, and performance	Apple (early iPhones), Rolex watches
Selling	Aggressive promotion & sales	Customers will not buy unless persuaded	Life insurance, timeshare vacations
Marketing	Customer needs & satisfaction	Understand and deliver what customers want better than competitors	Amazon, Starbucks
Societal Marketing	Customers + society’s long-term interest	Balance profit, customer satisfaction, and social/environmental responsibility	Patagonia, The Body Shop

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The company’s marketing strategy outlines which customers it will serve (the target market) and how it will create value for these customers (the value proposition).

Next, the marketer develops an integrated marketing program that will deliver the intended value to target customers. (marketing mix)

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Marketing Process

3) Preparing an Integrated Marketing Plan and Program

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Preparing an Integrated Marketing Plan and Program

The marketing mix is the set of tools (four Ps) the firm uses to implement its marketing strategy. This set includes product, price, promotion, and place.

An integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers.

The company’s marketing strategy outlines which customers it will serve and how it will create value for these customers.

Next, the marketer develops an integrated marketing program that will actually deliver the intended value to target customers. The marketing program builds customer relationships by transforming the marketing strategy into action. It consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement its marketing strategy.

The major marketing mix tools are classified into four broad groups called the four Ps of marketing: product, price, place, and promotion. To deliver on its value proposition, the firm must first create a need-satisfying market offering (product). It must then decide how much it will charge for the offering (price) and how it will make the offering available to target consumers (place). Finally, it must engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits (promotion).

The firm must blend each marketing mix tool into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers.

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Marketing Process

4) Building Customer Relationships

Customer Relationship Management
Engaging Customers

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Building Customer Relationships

A) Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

Customer Perceived value:

Total perceived benefits (Luxury car) – customer costs (expensive)

Customer Satisfaction:

Product performance (free upgrade) > expectations (regular)

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The first three steps in the marketing process—understanding the marketplace and customer needs, designing a customer value-driven marketing strategy, and constructing a marketing program—all lead up to the fourth and most important step: building and managing profitable customer relationships.

We first discuss the basics of customer relationship management. Then, we examine how companies go about engaging customers on a deeper level in this age of digital and social marketing.

Customer relationship management is perhaps the most important concept of modern marketing. Some marketers define it narrowly as a customer data management activity (a practice called CRM). By this definition, it involves managing detailed information about individual customers and carefully managing customer touchpoints to maximize customer loyalty.

In the broader sense, customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging, and growing customers.

The key to building lasting customer relationships is to create superior customer value and satisfaction. Satisfied customers are more likely to be loyal customers and give the company a larger share of their business.

A customer buys from the firm that offers the highest customer-perceived value—the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers.

Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations. If the product’s performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted.

Outstanding marketing companies go out of their way to keep important customers satisfied. Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance. Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise.

Delighted customers not only make repeat purchases but also become willing marketing partners and “customer evangelists” who spread the word about their good experiences to others.

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Outstanding marketing companies go out of their way to keep important customers satisfied.

higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance.

Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise.

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Building Customer Relationships

B) Engaging Customers

Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumers’ conversations and lives.
Relating with more carefully selected customers
Relating more deeply and interactively by incorporating more interactive, two way relationships

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Capturing Value from Customers

Customer lifetime value is the value of the entire stream of purchases that the customer would make over a lifetime of �patronage.

Creating Customer Loyalty and Retention

Example,,, you like zain, so you stay with it over years. Calc how much you paid monthly..

At Stew Leonard’s profitable four-store supermarket, the lifetime revenue of a customer is $50,000. Because his average customer spends about $100 a week, shops 50 weeks a year, and remains in the area for about 10 years, losing one customer can be a significant loss.

Discussion Question

Ask students if they know of other retailers that build this kind of customer loyalty and retention.

Good customer relationship management creates customer satisfaction. In turn, satisfied customers remain loyal and talk favorably to others about the company and its products.

Studies show big differences in the loyalty of customers who are less satisfied, somewhat satisfied, and completely satisfied. Keeping customers loyal makes good economic sense. Loyal customers spend more and stay around longer. Research also shows that it’s five times cheaper to keep an old customer than acquire a new one. Conversely, customer defections can be costly. 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.

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Capturing Value from Customers

Why only retain when you can also get more from customers?

Share of customer is the portion of the customer’s purchasing that a company gets in its product categories.

Thus, banks want to increase “share of wallet.”

Growing Share of Customer

Beyond simply retaining good customers to capture customer lifetime value, good customer relationship management can help marketers increase their share of customer—the share they get of the customer’s purchasing in their product categories. Thus, banks want to increase “share of wallet.” Supermarkets and restaurants want to get more “share of stomach.” Car companies want to increase “share of garage,” and airlines want greater “share of travel.”

To increase share of customer, firms can offer greater variety to current customers or they can create programs to cross-sell and up-sell to market more products and services to existing customers. For example, Amazon is highly skilled at leveraging relationships with its 237 million customers to increase its share of each customer’s spending budget.

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Think.

What can you add to your business to increase share of profits?

Landscaping:

Car-washing:

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How does Abyat apply this concept of “Share of customer” wallet?

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Capturing Value from Customers�

Customer equity is the total combined customer lifetime values of all of the company’s customers.

“own” them for life

Building Customer Equity

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The point here is an important one:

Different types of customers require different engagement and relationship management strategies.

The goal is to build the right relationships with the right customers.

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Are all customers, including loyal customers, good investments?

Not all customers, not even all loyal customers, are good investments.

Which customers should the company acquire and retain?
The company can classify customers according to their potential profitability and projected loyalty.�

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Capturing Value from Customers

Building the Right Relationships with the Right Customers

FIGURE 1.5

Customer Relationship Groups

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1. True Friends (High Loyalty, High Profitability)
These are loyal customers who regularly shop and spend significantly.
How "Ya Hala" targets them:

Encourages repeat purchases with raffle draws (e.g., the more they spend, the more coupons they get).

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Butterflies (Low Loyalty, High Profitability)
These customers spend a lot but aren’t loyal to one brand/store.
How "Ya Hala" attracts them:

Limited-time offers and huge discounts that entice them to shop.

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Barnacles (High Loyalty, Low Profitability)
They are loyal but spend minimally, usually on necessities.
How "Ya Hala" engages them:

Discounts on essential products (e.g., groceries at LuLu Hyper).
Small-spend customers still get a chance to enter raffles for prizes, motivating additional purchases.

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Strangers (Low Loyalty, Low Profitability)
They shop sporadically and spend very little.
How "Ya Hala" tries to convert them:

No minimum spending requirement to enjoy basic discounts.
If they win a raffle or enjoy a promotion, they may be converted into Butterflies or True Friends.