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Chapter 1
Marketing:
Creating Customer Value and
Engagement
Edited by: Najoud Alhuwaishel 2022
Learning Objectives
1-1 Define marketing and outline the steps in the marketing process.
1-2 Explain the importance of understanding the marketplace and customers and identify the five core marketplace
concepts.
1-3 Identify the key elements of a customer-driven marketing strategy and discuss the marketing management
orientations that guide marketing strategy.
1-4 Discuss customer relationship management and identify strategies for creating value for customers and
capturing value from customers in return.
1-5 Describe the major trends and forces that are changing the marketing landscape in this age of relationships.
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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.
■ The goals of marketing are to:
1. attract new customers by promising superior value
2. grow current customers by delivering satisfaction
■ Marketing is critical to the success of every organization:
• large for-profit firms
• not-for-profit organizations
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The Marketing Process Steps
These five-step process forms the marketing framework:
❖ In the first four steps, companies work to understand consumers, create customer
value, and build strong customer relationships.
❖ In the final step, companies capture (gather) the rewards of creating superior
customer value in the form of sales, profits, and long-term customer equity.
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The five core marketplace concepts:
1. Needs, Wants, and demands
2. Market offerings
3. Value and satisfaction
4. Exchange and relationships
5. Markets
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Understanding the Marketplace and Customer Needs
■ Needs are states of felt deprivation.
■ Wants are the form human needs take as they are shaped by culture and
individual personality.
■ Demands are human wants that are backed by buying power.
■ 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.
■ When backed by buying power, wants become demands.
■ Marketing companies go to great lengths to learn about and understand
their customers’ needs, wants, and demands.
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Understanding the Marketplace and Customer Needs
■Market offerings are some combination of products, services, information, or
experiences offered to a market to satisfy a need or want.
■It include other entities, such as persons, places, organizations, information, and
ideas.
■Marketing myopia is focusing only on existing wants and losing sight of underlying
consumer needs..
■Many sellers suffer from the mistake of paying more attention to the specific
products they offer than to the benefits and experiences produced by these products.
■Smart marketers orchestrate several services and products, thereby creating brand
experiences for consumers.
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Understanding the Marketplace and
Customer Needs
■ Exchange is the act of obtaining a desired object from someone by offering
something in return.
■ Marketing actions try to create, maintain, and grow desirable exchange
relationships with target audiences involving a product, service, idea, or other
object.
■ Marketing occurs when people decide to satisfy their needs and wants through
exchange relationships.
■ Companies want to build strong relationships by consistently delivering superior
customer value.
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Understanding the Marketplace and Customer Needs
■ A Market is set of actual and potential buyers of a product or service.
These buyers share a particular need or want that can be satisfied through
exchange relationships.
■ Sellers must search for buyers, identify their needs, design good market
offerings, set prices for them, promote them, and store and deliver them.
■ Consumers market when they:
1. search for products
2. interact with companies to obtain information
3. make purchases
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Understanding the Marketplace and Customer Needs
▪ Thus, in addition to customer relationship management, companies must
also deal with customer-managed relationships as customers are
empowered and marketing is made a two-way affair.
▪ Marketing means managing markets to bring about profitable customer
relationships.
▪ Activities such as consumer research, product development,
communication, distribution, pricing, and service are core marketing
activities.
▪ Buyers also carry out marketing, thus, in addition to customer
relationship management, today’s marketers must also deal effectively
with customer-managed relationships.
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Understanding the Marketplace and Customer Needs
■ The main elements in a marketing system:
■ Each party in the system adds value for the next level and is affected by major
environmental forces (demographic, economic, natural, technological, political,
and social/cultural).
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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 (target market)?
The company fully understands its consumers and the marketplace, it must
decide which customers it will serve and how it will bring them value.
▪ How can we best serve these customers (value proposition)?
The marketing manager’s aim is growing target customers by creating,
delivering, and communicating superior customer value.
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Designing a Customer Value-Driven Marketing Strategy
Target Market
■The company must select first the customer to serve.
■It does this by dividing the market into segments of customers (Market
Segmentation), and then selecting which segments it will go after (Target
Market)
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Designing a Customer Value-Driven Marketing Strategy
Value Proposition
■ A brand’s value proposition is the set of benefits or values it promises to
deliver to customers to satisfy their needs.
E.g. Facebook helps you “connect and share with the people in your life”
■ The company must decide how it will serve targeted customers how it
will differentiate and position itself in the marketplace
Value Proposition Examples
Writing Value Proposition
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Designing a Customer Value-Driven Marketing
Strategy
■ 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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Designing a Customer Value-Driven Marketing Strategy
• There are five alternative concepts under which organizations
design and carry out their marketing strategies:
Societal
Production Product Selling Marketing
Marketing
concept concept concept concept
concept
• Marketing management wants to design strategies that will
build profitable relationships with target consumers.
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Designing a Customer Value-Driven Marketing Strategy
1. Production concept:
■ Consumers will favor products that are available and highly affordable.
■ It is still a useful philosophy in some situations. However, it can lead to
marketing myopia and losing sight of the real objective satisfying
customer needs and building customer relationships.
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Designing a Customer Value-Driven Marketing Strategy
2. Product concept: Consumers favor products that offer the most quality,
performance, and features.
■ The focus is on continuous product improvements. Product quality and
improvement are important parts of most marketing strategies. However,
focusing only on the company’s products can also lead to marketing
myopia.
■ 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.
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Designing a Customer Value-Driven Marketing Strategy
3. Selling concept: Consumers will not buy enough of the firm’s products
unless the firm undertakes a large-scale selling and promotion effort.
■ It is typically practiced with unsought goods those that buyers do not
normally think of buying, such as life insurance or blood donations.
These industries must be good at tracking down prospects and selling
them on a product’s benefits.
■ Such aggressive selling, however, carries high risks. It focuses on
creating sales transactions rather than on building long-term, profitable
customer relationships.
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Designing a Customer Value-Driven Marketing Strategy
4. Marketing concept: Know the needs and wants of the target markets
and deliver the desired satisfactions better than competitors.
■ The customer focus and value are the paths to sales and profits.
■ Instead of a product-centered make-and-sell philosophy, the marketing
concept is a customer-centered sense-and-respond philosophy. The job is
not to find the right customers for your product but to find the right
products for your customers.
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■ The selling concept takes an inside-out perspective. It starts with the factory, focuses
on the company’s existing products, and calls for heavy selling and promotion to obtain
profitable sales.
■ The marketing concept takes an outside-in perspective. It starts with a well-defined
market, focuses on customer needs, and integrates all the marketing activities that
affect customers. In turn, it yields profits by creating relationships with the right
customers based on customer value and satisfaction
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Designing a Customer Value-Driven Marketing Strategy
5. 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.
■ 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
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Designing a Customer Value-Driven Marketing Strategy
Preparing an Integrated Marketing Program
■ The marketing program consists of the firm’s marketing mix that that the firm uses
to implement marketing strategy.
■ The marketing mix is comprised of a set of tools known a
the four Ps:
– product
– price the set of marketing tools the firm uses to implement its
– promotion marketing strategy.
– place
■ It should be an Integrated marketing program: a comprehensive plan that
communicates and delivers intended value
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Designing a Customer Value-Driven Marketing Strategy
Preparing an Integrated Marketing Program
■ The marketing program builds customer relationships by transforming the
marketing strategy into action.
➢ 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).
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Managing Customer Relationships and Capturing
Customer Value
■ 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, engaging, and growing customers.
■ It involves managing detailed information about individual customers
and carefully managing customer touch points to maximize customer
loyalty.
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Managing Customer Relationships and
Capturing Customer Value
▪ 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.
▪ Satisfied customers are more likely to be loyal customers and give the company a larger
share of their business.
▪ 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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Managing Customer Relationships and
Capturing Customer Value
Relationship Building Blocks Customer- Customer
▪ The key to building lasting perceived value satisfaction
customer relationships is to
create superior customer value • The difference •The extent to
and satisfaction. between total which perceived
▪ Satisfied customers are more customer performance
likely to be loyal customers and perceived matches a
give the company a larger share benefits and buyer’s
customer cost expectations
of their business.
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Managing Customer Relationships and Capturing
Customer Value
A- Managing Customer Relationships
1. 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.
2. Consumer-Generated Marketing: Companies themselves are inviting consumers
to play a more active role in shaping products and brand content. Brand exchanges
created by consumers themselves and consumers are playing an increasing role in
shaping brand experiences in blogs, video-sharing sites, social media, and other
digital forum.
3. Partner relationship management Involves working closely with partners in other
company departments and outside the company to jointly bring greater value to
customers such as suppliers, channel partners, and others outside the company.
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Managing Customer Relationships and Capturing
Customer Value
B- Capturing Customer Value
1. Customer lifetime value: is the value of the entire stream of purchases that the
customer would make over a lifetime of patronage. Good customer relationship
management creates customer satisfaction. In turn, satisfied customers remain
loyal and talk favorably to others about the company and its products.
2. Share of customer: It is the portion of the customer’s purchasing that a company
gets in its product categories.
3. Customer equity: is the total combined customer lifetime values of all of the
company’s customers. It is a measure of the future value of the company’s customer
base.
■ Whereas sales and market share reflect the past, customer equity suggests the
future.
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Managing Customer Relationships and Capturing Customer Value
Building the right relationship with the right customers
(Not all customers, not even all loyal customers, are good investments)
The goal is to build the right relationships with the right customers.
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Managing Customer Relationships
and Capturing Customer Value
Building the right relationship with the right customers
(Not all customers, not even all loyal customers, are good investments)
■ Strangers show low potential profitability and little projected loyalty.
■ Butterflies are potentially profitable but not loyal.
■ True friends are both profitable and loyal.
■ Barnacles are highly loyal but not very profitable.
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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The Changing Marketing Landscape
■ Digital and social media marketing involves using digital marketing tools such
as web sites, social media, mobile ads and apps, online videos, e-mail, and blogs
that engage consumers anywhere, at any time, via their digital devices.
■The explosive growth in digital technology has fundamentally changed the way
we live how we communicate, share information, access entertainment, and shop.
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The Changing Marketing Landscape
■ Not-for-profit marketing growth : marketing has also
become a major part of the strategies of many not-for-profit
organizations, such as colleges, hospitals,
■ Rapid globalization :Company, large or small, is touched in
some way by global competition
■Sustainable marketing: The call for more environmental
and social responsibility.
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So, What Is Marketing? Pulling It All Together
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