CHAPTER 1 | Marketing: Creating Customer Value and Engagement 29

Author Pause here and think about

Comment how you’d answer this
What Is Marketing?
question before studying marketing. Then Marketing, more than any other business function, deals with customers. Although we will
see how your answer changes as you read soon explore more-detailed definitions of marketing, perhaps the simplest definition is this
the chapter. one: Marketing is engaging customers and managing profitable customer relationships. The two-
fold goal of marketing is to attract new customers by promising superior value and to keep
and grow current customers by delivering satisfaction.
For example, McDonald’s fulfills its “i’m lovin’ it” motto by being “our customers’
favorite place and way to eat” the world over, giving it nearly as much market share as
its nearest four competitors combined. Walmart has become the world’s largest retailer—
and the world’s largest company—by delivering on its promise, “Save Money. Live Better.”
Facebook has attracted more than a billion active Web and mobile users worldwide by help-
ing them to “connect and share with the people in their lives.”
Sound marketing is critical to the success of every organization. Large for-profit firms,
such as Google, Target, Procter & Gamble, Coca-Cola, and Microsoft, use marketing. But so
do not-for-profit organizations, such as colleges, hospitals, museums, symphony orches-
tras, and even churches.
You already know a lot about marketing—it’s all
around you. Marketing comes to you in the good old tradi-
tional forms: You see it in the abundance of products at your
nearby shopping mall and the ads that fill your TV screen,
spice up your magazines, or stuff your mailbox. But in re-
cent years, marketers have assembled a host of new market-
ing approaches, everything from imaginative Web sites and
mobile phone apps to blogs, online videos, and social media.
These new approaches do more than just blast out messages
to the masses. They reach you directly, personally, and inter-
actively. Today’s marketers want to become a part of your
life and enrich your experiences with their brands—to help
you live their brands.
At home, at school, where you work, and where you
play, you see marketing in almost everything you do. Yet,
there is much more to marketing than meets the consumer’s
casual eye. Behind it all is a massive network of people, tech-
Marketing is all around you, in good old traditional forms and in a
nologies, and activities competing for your attention and
host of new forms, from Web sites and mobile phone apps to videos
and online social media. purchases. This book will give you a complete introduction
Justin Lewis
to the basic concepts and practices of today’s marketing. In this chapter, we begin by defin-
ing marketing and the marketing process.

Marketing Defined
What is marketing? Many people think of marketing as only selling and advertising. We are
bombarded every day with TV commercials, catalogs, spiels from salespeople, and online
pitches. However, selling and advertising are only the tip of the marketing iceberg.
Today, marketing must be understood not in the old sense of making a sale—“telling
and selling”—but in the new sense of satisfying customer needs. If the marketer engages con-
sumers effectively, understands their needs, develops products that provide superior cus-
tomer value, and prices, distributes, and promotes them well, these products will sell easily.
In fact, according to management guru Peter Drucker, “The aim of marketing is to make
selling unnecessary.”2 Selling and advertising are only part of a larger marketing mix—a set
of marketing tools that work together to engage customers, satisfy customer needs, and
build customer relationships.
Broadly defined, marketing is a social and managerial process by which individuals
Marketing and organizations obtain what they need and want through creating and exchanging value
The process by which companies create with others. In a narrower business context, marketing involves building profitable, value-
value for customers and build strong laden exchange relationships with customers. Hence, we define marketing as the process
customer relationships in order to capture by which companies create value for customers and build strong customer relationships in
value from customers in return. order to capture value from customers in return.3
30 PART 1 | Defining Marketing and the Marketing Process
The Marketing Process
Figure 1.1 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. By creating value for consumers, they in
turn capture value from consumers in the form of sales, profits, and long-term customer equity.
In this chapter and the next, we will examine the steps of this simple model of mar-
keting. In this chapter, we review each step but focus more on the customer relationship
steps—understanding customers, engaging and building relationships with customers, and
capturing value from customers. In Chapter 2, we look more deeply into the second and third
steps—designing value-creating marketing strategies and constructing marketing programs.

Author Marketing is all about creating Understanding the Marketplace and Customer Needs
Comment value for customers. So, as
the first step in the marketing process, As a first step, marketers need to understand customer needs and wants and the market-
the company must fully understand place in which they operate. We examine five core customer and marketplace concepts:
consumers and the marketplace in which (1) needs, wants, and demands; (2) market offerings (products, services, and experiences); (3) value
it operates. and satisfaction; (4) exchanges and relationships; and (5) markets.

Customer Needs, Wants, and Demands

Needs The most basic concept underlying marketing is that of human needs. Human needs are
States of felt deprivation. states of felt deprivation. They include basic physical needs for food, clothing, warmth, and
safety; social needs for belonging and affection; and individual needs for knowledge and self-
expression. Marketers did not create these needs; they are a basic part of the human makeup.
Wants Wants are the form human needs take as they are shaped by culture and individual per-
The form human needs take as they sonality. An American needs food but wants a Big Mac, french fries, and a soft drink. A person
are shaped by culture and individual in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped
personality. by one’s society and are described in terms of objects that will satisfy those needs. When
backed by buying power, wants become demands. Given their wants and resources, people
Demands demand products and services with benefits that add up to the most value and satisfaction.
Human wants that are backed by buying
Outstanding marketing companies go to great lengths to learn about and understand
power.
their customers’ needs, wants, and demands. They conduct consumer research, analyze
mountains of customer data, and observe customers as they shop and interact, offline and
online. People at all levels of the company—including top management—stay close to
customers:4
Walmart president and CEO Michael Duke and his entire execu-
tive team make regular store and in-home visits with customers
to get to know them and understand their needs. Top McDon-
ald’s marketers hold frequent Twitter chats, connecting directly
with McDonald’s Twitter followers, both fans and critics, to
learn their thoughts about topics ranging from nutrition and
sustainability to products and brand promotions. And Bos-
ton Market CEO George Michel makes frequent visits to com-
pany restaurants, working in the dining room and engaging
customers to learn about “the good, the bad, and the ugly.” He
also stays connected by reading customer messages on the Bos-
ton Market Web site and has even cold-called customers for in-
sights. “Being close to the customer is critically important,” says
Michel. “I get to learn what they value, what they appreciate.”

Market Offerings—Products, Services,

and Experiences
Staying close to customers: Boston Market CEO George Michel Consumers’ needs and wants are fulfilled through market
frequently visits the company’s restaurants, working in the dining offerings—some combination of products, services, infor-
room and engaging customers to learn about “the good, the bad, mation, or experiences offered to a market to satisfy a need or
and the ugly.” a want. Market offerings are not limited to physical products.
Invision for Boston Market They also include services—activities or benefits offered for
 CHAPTER 1 | Marketing: Creating Customer Value and Engagement 31
FIGURE | 1.1
The Marketing Process: Creating and Capturing Customer Value
Create value for customers and Capture value from
build customer relationships customers in return

Construct an
Understand the Design a Build profitable Capture value
integrated
marketplace and customer value- relationships and from customers to
marketing program
customer needs driven marketing
that delivers
create customer create profits and
and wants strategy
superior value
delight customer equity

This important figure shows marketing in

sale that are essentially intangible and do not result in the ownership of anything. Examples
a nutshell. By creating value for customers,
marketers capture value from customers ininclude banking, airline, hotel, retailing, and home repair services.
return. This five-step process forms the
marketing framework for the rest of the
More broadly, market offerings also include other entities, such as persons, places, orga-
chapter and the remainder of the text. nizations, information, and ideas. For example, the “Pure Michigan” campaign markets the
state of Michigan as a tourism destination that “lets unspoiled nature and authentic charac-
ter revive your spirits.” And the Ad Council and the National Highway Traffic Safety Ad-
ministration created a “Stop the Texts. Stop the Wrecks.” campaign that markets the idea of
Market offerings eliminating texting while driving. The campaign points out that a texting driver is 23 times
Some combination of products, services, more likely to get into a crash than a non-texting driver.5
information, or experiences offered to a Many sellers make the mistake of paying more attention to the specific products they
market to satisfy a need or want. offer than to the benefits and experiences produced by these products. These sellers suffer
from marketing myopia. They are so taken with their products that they focus only on
Marketing myopia existing wants and lose sight of underlying customer needs.6 They forget that a product
The mistake of paying more attention to is only a tool to solve a consumer problem. A manufacturer of quarter-inch drill bits may
the specific products a company offers think that the customer needs a drill bit. But what the customer really needs is a quarter-
than to the benefits and experiences inch hole. These sellers will have trouble if a new product comes along that serves the
produced by these products. customer’s need better or less expensively. The customer will have the same need but will
want the new product.
Smart marketers look beyond the attributes of the products and services they sell. By
orchestrating several services and products, they create brand experiences for consumers. For
example, you don’t just visit Walt Disney World Resort; you immerse yourself and your
family in a world of wonder, a world where dreams come true and things still work the way
they should. “Let the magic begin!” says Disney.
Similarly, Angry Birds is much
more than just a mobile game app. To
more than 200 million fans a month in 116
countries, it’s a deeply involving experi-
ence. As one observer puts it: “Angry
Birds land is a state of mind—a digital
immersion in addictively cheerful de-
struction, a refuge from the boredom of
subway commutes and doctors’ waiting
rooms, where the fine art of sling-shot-
ting tiny brightly hued birds at wooden
fortresses to vanquish pigs taking shel-
ter inside makes eminent sense and is
immensely satisfying.” So far, in all its
forms, Angry Birds has been downloaded
more than two billion times. The game’s
creator, Rovio, plans to expand the Angry
Birds experience through everything from
animated short videos (called Angry Birds
Marketing experiences: More than just a mobile game app, Angry Birds is “a digital Toons) and three-dimensional animated
immersion in addictively cheerful destruction.” Creator Rovio plans to expand the Angry movies to a growing list of new games,
Birds experience through animated videos, licensed products, and even Angry Birds- licensed toys, apparel, yard art, and even
branded playgrounds and activity parks. Angry Birds–branded playgrounds, ac-
Archivo CEET GDA Photo Service/Newscom tivity parks, and theme parks.7
 CHAPTER 4 | Managing Marketing Information to Gain Customer Insights 135
can also obtain important intelligence information from suppliers, resellers, and key cus-
tomers. Intelligence seekers can also pour through any of thousands of online databases.
Some are free. For example, the U.S. Security and Exchange Commission’s database pro-
vides a huge stockpile of financial information on public competitors, and the U.S. Patent
Office and Trademark database reveals patents that competitors have filed. For a fee,
companies can also subscribe to any of the more than 3,000 online databases and infor-
mation search services, such as Hoover’s, LexisNexis, and Dun & Bradstreet. Today’s
marketers have an almost overwhelming amount of competitor information only a few
keystrokes away.
The intelligence game goes both ways. Facing determined competitive marketing in-
telligence efforts by competitors, most companies take steps to protect their own informa-
tion. For example, Apple is obsessed with secrecy, and it passes that obsession along to its
employees. “At Apple everything is a secret,” says an insider. “Apple wants new products
to remain in stealth mode until their release dates.” Information leaks about new products
before they are introduced gives the competition time to respond, raises customer expec-
tations, and can steal thunder and sales from current products. So Apple employees are
taught a “loose-lips-sink-ships” mentality: A T-shirt for sale in the company store reads,
“I visited the Apple campus, but that’s all I’m allowed to say.”10
One self-admitted corporate spy advises that companies should try conducting market-
ing intelligence investigations of themselves, looking for potentially damaging information
leaks. They should start by “vacuuming up” everything they can find in the public record,
including job postings, court records, company advertisements and blogs, Web pages, press
releases, online business reports, social media postings by customers and employees, and
other information available to inquisitive competitors.11
The growing use of marketing intelligence also raises ethical issues. Some intelligence-
gathering techniques may involve questionable ethics. Clearly, companies should take ad-
vantage of publicly available information. However, they should not stoop to snoop. With
all the legitimate intelligence sources now available, a company does not need to break the
law or accepted codes of ethics to get good intelligence.

Author Whereas marketing intel-

Comment ligence involves actively scan-
Marketing Research
ning the general marketing environment, In addition to marketing intelligence information about general consumer, competitor,
marketing research involves more focused and marketplace happenings, marketers often need formal studies that provide customer
studies to gain customer insights relating and market insights for specific marketing situations and decisions. For example, Bud-
to specific marketing decisions. weiser wants to know what appeals will be most effective in its Super Bowl advertising.
Yahoo! wants to know how Web searchers will react to a proposed redesign of its site. Or
Samsung wants to know how many and what kinds of people will buy its next-generation,
ultrathin televisions. In such situations, managers will need marketing research.
Marketing research Marketing research is the systematic design, collection, analysis, and reporting of
The systematic design, collection, data relevant to a specific marketing situation facing an organization. Companies use mar-
analysis, and reporting of data relevant to keting research in a wide variety of situations. For example, marketing research gives mar-
a specific marketing situation facing an keters insights into customer motivations, purchase behavior, and satisfaction. It can help
organization. them to assess market potential and market share or measure the effectiveness of pricing,
product, distribution, and promotion activities.
Some large companies have their own research departments that work with marketing
This first step is probably the most difficult but also
the most important one. It guides the entire research managers on marketing research projects. In addition, these companies—like their smaller
process. It’s frustrating to reach the end of an counterparts—frequently hire outside research specialists to consult with management on
expensive research project only to learn that you’ve specific marketing problems and to conduct marketing research studies. Sometimes firms
addressed the wrong problem!
simply purchase data collected by outside firms to aid in their decision making.
The marketing research process has four steps (see Figure 4.2): defining the prob-
lem and research objectives, developing the research plan, implementing the research plan,
FIGURE | 4.2
and interpreting and reporting the findings.
The Marketing Research
Process
Defining the Developing the Implementing the
Interpreting and
problem and research plan research plan––
reporting
research for collecting collecting and
the findings
objectives information analyzing the data