marketing creating and capturing customer value

PRINCIPLES OF MARKETING - MRKT 209 - 2016. DR. AHMAD FARAZ – CBA - UOD

Marketing: Creating & Capturing Customer Value Background, Introduction, Marketing Process.

Lecture

1


What is a Market


Back Ground

The term “marketing” is derived from the word market, which refers to a group of sellers and buyers that co-operate to exchange goods and services.

The modern concept of marketing evolved during and after the industrial revolution in the 19th and 20th centuries.

Today “marketing” is a humanistic subject, a force that shaped our wants & created our life style


Marketing evolutions

Production-oriented era

Sales-oriented era

Market-oriented era

Value-based marketing era


What is Marketing


What is Marketing

Marketing means when customers know all about your product, choose it over the competition and then keep coming back to buy more. When they love your product enough to recommend you to friends. When the bee finds a great source of nectar it uses the waggle dance to let all the other bees know where to go. Customers are the same. That’s how marketing works.


Marketing is managing profitable customer relationship

Marketing is not about you. It is about your customers.

It is not about how great your business is.

It is about the needs your customer have.

SELLING is Marketing

But, MARKETING is not Selling

What is Marketing


Definition of Marketing?

“The process of planning and executing the

conception, pricing, promotion and distribution of

ideas, goods and services to create exchanges that

satisfy individual and organizational objectives.”



“The management process responsible for

identifying, anticipating and satisfying customer

requirements profitably."



“Satisfying needs and wants through an exchange

process”

Marketing is a process by which companies create

value for customers and build strong customer

relationships to capture value from customers in

return.


Marketing, Selling & Merchandizing Marketing is a broader concept which is driven from customer’s

demand.

Selling is one part of marketing which deals with persuading

customers to buy products that are available with seller.

Merchandizing refers to the process offering a variety of products to

a retail consumer in a manner which stimulates demand.

Differentiating Marketing


Why SALES is not Marketing Marketing Sales

Period A modern concept A traditional concept

Approach

Determine future needs and has a

strategy in place to meet those needs for

the long term relationship.

Makes customer demand match the

products the company currently offers.

Focus

Fulfill customer's wants and needs thru

products or services the company

can offer. Building relationship.

Fulfill sales volume objectives.

Make money.

Horizon An investment, Longer term results Looks profitable but Short term

Scope

Products are tailor made as per customer

needs (market research), products satisfy

those needs.

Promotions to advertise those products.

Customers don’t have much input,

product is created for as per company's

idea. They persuade the customer

to purchase the product to fulfill her

needs.


Marketing Sales

Strategy Pull Push

Concept Marketing is a wider concept Sales is a narrower concept

Priority

Marketing shows how to reach to

the Customers and build long

lasting relationship

Selling is the ultimate result of

marketing.

Identity

Marketing targets the construction of a

brand identity so that it becomes easily

associated with need fulfillment.

Sales is the strategy of meeting needs in

an opportunistic, individual method,

driven by human interaction. There's no

premise of brand identity, longevity or

continuity. It's simply the ability to meet a

need at the right time.

Why SALES is not Marketing (cont.)


Why Marketing? • IMPORTANCE OF MARKETING

1. Marketing helps to achieve, maintain and raise the

standards of living

- Marketing is means through which production and purchasing

power are converted into consumption.

- Better marketing Mass production Low cost

More buying power Higher standard of living.

2. Marketing increases employment opportunities

- Marketing functions / sub-functions (Buying, Selling, Transport,

Warehousing, Financing, Risk management etc)

- These functions create need for different specializations

- About 30-40% population depends directly or indirectly on

marketing


Why Marketing? • IMPORTANCE OF MARKETING

3. Marketing increases national income

- More purchasing power increase in national income

4. Helps maintain economic stability & development

- By maintaining demand and supply balance

5. Link between producer & consumer

6. Removes imbalance of supply & demand by

transferring surpluses

7. Marketing promotes product awareness to the public

Marketing Promotes Product Awareness to the Public


Why Marketing?

9. Marketing helps decision making process (what, when

& how much to produce, store or transport)

10. Helps change management & innovations

• IMPORTANCE OF MARKETING

8. Marketing generates revenue, by generating sales &

thereby profits


Marketing is defined Marketing is more than selling and advertising.

Old understanding of Marketing was, Telling & Selling.

New sense of Marketing is, Satisfying customer needs.

Marketing is more than selling and advertising.


Marketing process A process by which companies create value for customers

and build strong relationships in order to capture value from

customers.


Understanding Marketplace & Customer needs To understand our customers, their needs and wants and the

market place where they operate, must observe five core

customer and marketing concepts.

Customer needs, wants & Demands.

Market offerings – product services & experiences

Customer value & satisfaction

Exchange and relationships

Markets


Needs - state of felt deprivation including physical, social, and individual

needs. Needs are basic requirements of life; things necessary for survival.

Understanding NEED

Physical:

Food, clothing, shelter, safety

Social:

Belonging, affection

Individual:

Learning, knowledge, self-

expression


Understanding Primary & Secondary NEEDS Primary needs are biological or physical needs that are

essential to life. (water, food, clothing and shelter).

Secondary needs are wants or acquired needs they are more

likely desires. (safety, love, respect, creativity)


Wants – a form of human need, shaped by culture & individual personality

Every thing that is desirable but not necessary in order to survive is a WANT.

Understanding WANTS


Understanding DEMAND Demand – is just more than the desire to have something.

A want supported by the willingness & ability to buy makes a demand for any

product or service.

Demand

Any type of want Buying power

If a person wants a luxury car but unable to pay for it, than there is no

demand from his side. The relationship between the price and quantity

demanded is known as demand.


Understanding MARKET OFFERINGS

Market offerings are some

combination of products, services,

information, or experiences offered

to a market to satisfy its needs or

wants.

Market Offerings: Products, Services & Experiences

Marketing myopia is mistake of

focusing only on existing wants

and losing sight of underlying

consumer needs.


Understanding customer VALUE & SATISFACTION Customer value & satisfaction

Customers

• Value and satisfaction

Marketers

• Set the right level of expectations

• Not too high or low


Understanding EXCHANGE & RELATIONSHIP Exchange and relationship

The act of obtaining a desired object from someone by

offering something in return. Marketers aim at building strong

relationships by consistently delivering superior customer

value.

Exchange is one of the four ways people can obtain products.

a. Self production.

b. Coercion.

c. Begging.

d. Exchange.


Five conditions of exchange.

1. At least two parties.

2. Each party has something that might be of value to the other party.

3. Each party is capable of communication & delivery.

4. Each party is free to accept or reject the offer.

5. Each party believes it is appropriate or desirable to deal with the other party.

Understanding EXCHANGE & RELATIONSHIP


Markets

It consists of all potential consumers sharing a

particular need or want who might be willing & able to

engage in exchange to satisfy that need or want.

Understanding MARKETS

A market is the set of actual and potential buyers of a product.


Marketing Concepts

Production concept

Product concept

Selling concept

Marketing concept

Societal concept

Marketing management design strategy that built profitable

relationship with target consumers.

Five alternative concepts under which organizations design

and carry out their marketing strategies.


Production concept is the idea that consumers will favor

products that are available and highly affordable.

Marketing Concept PRODUCTION

Production in large volume, at low cost will be acceptable to

customers.


Marketing Concept PRODUCT Product concept is the idea that consumers will favor products

that offer the most quality, performance, and features.

An organization should therefore devote its energy to making

continuous product improvements.

Focuses on design and quality of products

Believes that customers will automatically buy products

of high quality

R&D is essential element

Do not bother to study the market & consumer in depth


Selling concept is the idea that consumers will not buy enough

of the firm’s products unless it assumes a large scale selling

and promotion effort.

Marketing Concept SELLING


Marketing concept is the idea that achieving organizational

goals depends on knowing the needs and wants of the target

markets and delivering the desired satisfactions better than

the competition.

Concept MARKETING

Marketing concept is a customer centric “sense and respond”.

The job is not to find the right customers for the product but

to find the right products for your customers.

In return it generates profits by developing long lasting

relationships with the right customer based on customer

value and satisfaction.


Societal Marketing Societal marketing concept

is the idea that a company’s marketing

decisions should consider consumers’

wants, the company’s requirements,

consumers’ long-term interests, and

society’s long-term interests.


Customer Loyalty & Retention Customer lifetime value is the value of the entire stream of

purchases that the customer would make over a lifetime of

patronage. Loyalty programs tracks consumer purchases and

provides estimates of Customer Lifetime Value.

Motivate repeat buying by providing

rewards to customers based on how

much business they do with the

company


CRM


The way company decides to serve its targeted customers

and how to differentiate and position itself in the market.

Choosing a VALUE PROPOSITION

Value proposition is those benefits that are promised to

the customers to satisfy their needs.

“The Ultimate Driving Machine”

“Touching is believing”


Customer Value Proposition (CVP)

Offer the right product

To your target customers

At a price that is acceptable to them

Based on their perception of the value

At a cost that gives you a profit


Next CLASS Building CUSTOMER EQUITY it is important to develop and grow the customers because

the customers you have now and the ones you will have in the future

will create value for your company. There is no business

without customers.

FedEx recognizes the value of

customer loyalty and retention.

They are transforming the

industry approach to delivering

the packages by air.

Customer Equity is the total combined customer lifetime value of all the

company’s current and potential customers. The ultimate aim of CRM is to develop high level of customer equity.


Rapid Globalization

Ethics & Social Responsibility

Not-for-Profit Marketing

Changing Economic

Environment

The Digital Age

The changing MARKETING LANDSCAPE


Next CLASS The changing MARKETING LANDSCAPE

The Digital Age


The recent technology boom has had a major impact on the ways marketers connect with and bring value to their customers.

Fundamentally changed the way we live.

New DIGITAL AGE

Today marketers creating new products and services by learning and tracking customers and matching their needs.


New DIGITAL AGE

Marketers are communicating with customers as one-to-one.

Online marketing is the fastest growing form of marketing.

YEAR Users Population % Pop.

2000 200,000 21,624,422 0.9 %

2003 1,500,000 21,771,609 6.9 %

2005 2,540,000 23,595,634 10.8 %

2007 4,700,000 24,069,943 19.5 %

2009 7,761,800 28,686,633 27.1 %

2010 9,800,000 25,731,776 38.1 %

2012 13,000,000 26,534,504 49.0 %

Presently Online business transections are more than $5 trillion.

Both genders are equally adopting the technological advancement.


Changing Economic

Environment



Beginning 2008, the US and world economic experienced a great recession, stock markets, banks and business plunged, trillion of dollars market value simply evaporated.

Changing ECONOMC ENVIRONMENT

Many consumers rethink their spending priorities and cur back their buying. Changed their buying habits and consumption patterns.

In response, all industries aligned their marketing strategies as, PayLess – Expect More.

Smart companies and marketers build market share and strengthen customer relationship at the expense of competitors who cut back marketing cost.

In stead of slashing prices, they created value why their brands worth it.


Rapid Globalization



World is transforming into a global village. Today almost every company is touched in some way by Global competition.

Rapid GLOBALIZATION

Today, companies are not only trying to sell more of their locally produced goods in international markets, they are also buying more supplies and components from abroad.

Globalizations is dominating the world since the 19th century. The term implies worldly combination of various cultures, styles, economic policies, ideas, etc. It must not be confused with “making things common around the world”.


Rapid GLOBALIZATION McDonald’s is one of the most popular fast food

restaurants in Kingdom of Saudi Arabia.

Today, companies are not only selling more of their locally produced goods in international markets but also buying more supplies and components abroad.

US companies are facing competition from Asian companies such as; Toyota, Nokia, Nestle, Sony and Samsung.


Ethics & Social Responsibility



Ethics & SOCIAL RESPONSIBILITY Marketers always value relationships, same as the one we have with

this Earth. Today marketing are developing and addressing sustainable marketing practices.

Marketing also highlighted, Corporate ethics and social responsibility.

Today companies can not ignore the environment and society. Even customers expect companies to deliver value in a socially and environmentally responsible way..

Some companies budging only when forced by legislation or organized consumer outcries. More forward-looking companies, however, readily accept their responsibility.


Not-for-Profit Marketing



In recent years, marketing also has become a major part of the strategies of many not-for profit organizations (colleges, hospitals, museums, zoos, music clubs and even churches).

Government agencies have also shown an increased interest in Marketing (U.S. military attract recruits).

Government developing social marketing campaigns to encourage energy conservation, environment concerns, anti-smoking, excessive drinking, child labor and drug use.

Marketing Not-For-PROFIT


KEY LEARNINGS Marketing is the process of building profitable customer

relationships by creating value for customers and capturing value in return.


Perhaps the most important step in the marketing process involves building value based profitable relationships with target customers.

Marketing creates customer satisfaction and delight.

Marketing process create value for customers. In the final step, the company win the rewards of its strong customer relationships by capturing value from customers.

Finally, today’s marketing and companies must take into account three additional factors. In building customer and partner relationships, they must harness marketing technology, take advantage of global opportunities, and ensure that they do business in an ethical and socially responsible way.

KEY LEARNINGS


Goals of Marketing Marketing is

managing profitable customer relationships.

Goals:

1. Attract new customers by promising superior value.

2. Keep and grow current customers by delivering satisfaction


Marketing terms Markets.

It consists of all potential consumers sharing a particular need or

want who might be willing & able to engage in exchange to satisfy

that need or want.

Marketing.

It means Working with markets to actualize potential exchanges for

the purpose of satisfying human needs & wants.

Marketer.

It means someone seeking a resource from someone else &

willing to offer something of value in exchange.

Market offerings are some combination of products, services, information, or experiences offered to a market to satisfy its needs or wants.

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