Creating and Capturing Customer Value

Marketing Management Class 1 Instructor Dr D K Batra

What is marketing?

Marketing is building profitable customer relationships. The aim of marketing is to create value for customers and to capture value in return. Companies know if they take care of their customers ( delivering on their promises) , market share and profits will follow. Definition: We define marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others.

Marketing process
Figure 1

Capture value from Customers to Create profits and Customer quality

Build profitable Relationships and Create customer delight

Construct a Marketing program That delivers Superior value Design a Customer-driven Marketing strategy Understand The marketplace And customer needs And wants

2. Understanding the Marketplace and Customer Needs

Customer Needs, Wants, and Demands
States of deprivation Physicalfood, clothing, warmth, safety Socialbelonging and affection Individualknowledge and self-expression

Needs Wants Demands

Form that human needs take as they are shaped by culture and individual personality

Human wants backed by buying power

Understanding the marketplace and consumer needs:

There are five core marketplace concepts;

1- Needs, wants, and demands;

Needs are states of felt deprivation. All humanity have the same needs;

Physical needs:

Food, clothing, shelter, safety. Belonging, affection. Learning, knowledge, self-expression

Social needs:

Individual needs:

Understanding the marketplace and consumer needs:

There are five core marketplace concepts; Wants; are needs shaped by culture and individual personality. Example; An Delhiiite needs for food but wants a Big Mac. A Chinese needs for food but wants frog legs. Demands are wants combined with buying power. Example; Porsche or Kia. Marketers spends time and money for a market research to understand the customers needs, wants, and demands.

Understanding the marketplace and consumer needs:

There are five core marketplace concepts;

2- Products, Services, Experiences

consumer needs and wants are fulfilled through a marketing offer, which is some combination of products, services, or experiences offered to a market to satisfy a need. Products; tangible, like food, goodsetc. Services; intangible, banking, telecometc. Experiences; Brand experiences, like theater.

2. Understanding the Marketplace and Customer Needs

Customer Value and Satisfaction Expectations

Customers
Value and satisfaction

Marketers
Set the right level of expectations Not too high or low

Eg David Ogilvy on Rolls Royce Mercedes Benz IMRB and AAM Zara Wal-Mart Leprosy Mission Chic Shampoo

Understanding the marketplace and consumer needs:

Marketing Myopia Sellers pay more attention to the specific products they offer than to the benefits and experiences produced by the products. They focus on the wants and lose sight of the needs. An article published by Harvard Business school defined the term marketing Myopia; - Marketing myopia is true for all companies who define their markets too narrowly. urging organizations to define their industries broadly to take advantage of growth opportunities. Experience shows that when a business has redefined its market, it has continued to grow as new targets are set .

Examples of Marketing Myopia

Company

Xerox

We make copying Definition equipment

We help improve office Suggestion productivity

Missouri-Pacific We run a railroad Railroad

We are a people-andgoods mover

Carrier

We make air conditioners We provide climate co and furnaces in the home

Kodak continued to focus on manufacturing traditional film-based cameras long after competitors introduced digital models. Kodak suffered from:

1-11

Marketing myopia Poor partner relationship management Outside-in perspective Customer driven strategy

Kodak Video on digital Photogra phy

Kodak ignored consumers desire for digitized photos that could be printed at home or shared over the Internet.
2011 Pearson Education, Inc. publishing as Prentice Hall

Understanding the marketplace and consumer needs:

There are five core marketplace concepts; 3- Value and Satisfaction If the performance and the customers experience is lower than expectations, then customer satisfaction is low. If the performance and the customers experience meets expectations, then the customer is satisfied. Need a

HOLE not a drill

If the performance and the customers experience exceeds expectations, then the customer is delighted.

Understanding the marketplace and consumer needs:

There are five core marketplace concepts; 4- Exchange, transactions, and relationships Exchange.

The act of obtaining a desired object from someone by offering something in return.

Transaction

- consists of a trade values between two parties. The goal of marketers is to build solid relationship with customers and retaining them by delivering superior value.

Understanding the marketplace and consumer needs:

There are five core marketplace concepts;

5- Markets The set of all actual and potential buyers of a product. Sellers must search for buyers, both buyers and sellers are carried out by marketing. - Elements of a Modern Marketing systems

3. Designing a Customer-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?

3. Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve

Market segmentation refers to dividing the markets into segments of customers Target marketing refers to which segments to go after

Video On Vodaofone

3. Designing a Customer-Driven Marketing Strategy

Selecting Customers to Serve

Demarketing is marketing to reduce demand temporarily or permanently; the aim is not to destroy demand but to reduce or shift it

3. Designing a Customer-Driven Marketing Strategy

Choosing a Value Proposition

The value proposition is the set of benefits or

values a company promises to deliver to customers to satisfy their needs

McDonalds Value preposition

3. Designing a Customer-Driven Marketing Strategy

Marketing Management Orientations

Production concept

Product concept

Selling concept

Marketing concept

Societal concept

Production concept is the idea that consumers will favor products that are available or highly affordable

Figure 3
Selling philosophy

Starting point

Focus

Means

Ends

Existing Selling Factory products Promoting

Profits Through Sales volume

Marketing philosophy

Customer Integrated Market needs Marketing

Profits Through Customer Satisfaction

Product concept is the idea that consumers will favor products that offer the most quality, performance, and features. Organizations should therefore devote its energy to making continuous product improvements.

Selling concept is the idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling and promotion effort

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 competitors do

Societal marketing concept is the idea that a company should make good marketing decisions by considering consumers wants, the companys requirements, consumers long-term interests, and societys long-run interests Water Bottles

Social Marketing philosophy Figure 4

Society (Human being)

Consumers Want satisfaction

Company (profits)

4. 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. It includes product, price, promotion, and place. Asian Paints Benetton , Coke in Rural Marekets Integrated marketing program is a comprehensive plan that communicates and delivers the intended value to chosen customers.

Two Questions for Marketers

What markets will we serve?

How can we serve these customers best?

Discussion Question

Why is it important to a marketer to decide which customers they will serve?

5. Building Customer Relationships

Customer Relationship Management (CRM)

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction What are different tangible and Intangible Values??

Building Customer Relationships

Relationship Building Blocks: Customer Value and Satisfaction
Customer perceived value The difference between total customer value and total customer cost Customer satisfaction The extent to which a products perceived performance matches a buyers expectations

Dominos Turnaround Pringle

Building Customer Relationships

Customer Relationship Levels and Tools

Basic Relationships

Angels and Demons

Communities Second Life My gala space

Visit the Website of Marico and Dell

Full Partnerships

Building Relationships Relationships span from the basic to tight integrated relationships. Successful relationships are built on:
Financial benefits; like VIP, Airline frequent miles Social benefits; like member of clubs, magazines Structural ties; like tracking orders online. Partner Relationship Marketing Every department in an organization contributes to customer satisfaction. Suppliers are carefully controlled through supply chain management. Strategic alliances create new opportunities to delight customers.

Outcomes of creating customer value;

1- Customer loyalty and retention; delighted customers remain loyal and talk favorably to others about the company and its products, and turn to be life-time value. Starbucks LL Bean Nordstorm 2- share of market and share of customer ; many companies are increasing their variety of products and services to increase their profits form existing customers. Amazon offer videos, toys, electronics, beside books. 3- customer equity; is the total combined customer lifetime values of all the companys customers. They view customers as an assets need to be maximized. Example
Shoppers Stop Nike store Portlands Video on Nivea story

Figure 5

less loyalty High Profitability

high loyalty

Butterflies True friends Good fit between companys Good fit between companys Offerings and customers Offerings and customers Needs. High profit potential Needs, highest profit potential

Low Strangers profitability Little fit between companys

Offerings and customers Needs, lowest profit potential

Barnacles Limited fit between company's Offerings and customers Needs, low profit potential

New Marketing Technologies

Technology has changed how marketers build value.

Internet and e-commerce/e-business. Fast and global communications. Wireless technologies.

International trade is the new frontier. Globalization Capitalism

Ethics and Responsibility

Worldwide consumerism and environmentalism movements exert. pressure for greater responsibility Seeking ways to make a profit by serving the best long-run interests of customers and communities.

Summary of Marketing Orientations

Orientation Production Product Sales Market Societal Focus is on Production and distribution efficiency Most quality product Product sales Consumers needs and wants In addition to consumers needs and wants, also consider benefits to the society