Creating and Capturing Customer

Value
COURSE #1

Daniela Ionita,
Lecturer - Marketing Department

Objectives
Define marketing and other key
concepts
Identify different marketing
orientations
Describe major trends and forces

What is marketing?
1935 1985
Marketing is
the
performance
of business
activities that
direct the flow
of goods and
services from
producers to
consumers.

1985 2004
Marketing is
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.

2004 now
Marketing is
the activity,
set of
institutions,
and processes
for creating,
communicatin
g, delivering,
and
exchanging
offerings that
have value for
customers,
partners, and
society at
large.

Value- key concept

The concept of value has a long history, being initially investigated
by economists ( Smith A., Marshall A.), and later developed by
researchers in the area of management and marketing.
The significance of this concept is extremely varied - market
equilibrium price, ability of something to meet a need, etc.
Can be evaluated from different perspectives (customer, the
company, the shareholders, etc.).
Requires a compromise between what the customer receives and
what pays in exchange.

Company orientation toward the

marketplace (1/2)
The Production
Concept
It holds that
consumers prefer
products that are
widely available
and inexpensive.
Managers
concentrate on
achieving high
production
efficiency, low
costs, and mass
distribution.
Makes sense in
developing
countries such as
China or when
marketers want to
expand the market.

The Product
Concept

The Selling
Concept

Consumers favor
products offering the
most quality,
performance, or
innovative features
(perfect product).
Bettermousetrap
fallacy (better
product will by itself
lead people to beat
a path to their door.
A new or improved
product will not
necessarily be
successful).

Consumers, if left
alone, wont buy
enough of the
organizations
products.
Based on hard
selling -> risky. It
assumes customers
coaxed into buying a
product not only
wont return or badmouth it but might
even buy it again.
Makes sense when
firms with
overcapacity aim
to sell what they
make, rather than
make what the
market wants.

Company orientation toward the

marketplace (2/2)
The Marketing
Concept
The job is to find not
the right customers for
your products, but the
right products for
your customers.
Selling focuses on the
needs of the seller;
marketing on the needs
of the buyer. Selling is
preoccupied with the
sellers need to convert
his product into cash;
marketing with the idea
of satisfying the needs
of the customer Theodore Levitt. [In
1983, he proposed a
definition for corporate
purpose: Rather than
merely making money,
it is to create and keep
a customer].

The Societal
Marketing Concept
Conflicts between
consumer short-run
wants and consumer
long-run welfare.
Deliver value to
customers in a way that
maintains both
consumer and
society well being
Sustainable marketing
= socially and
environmentally
responsible marketing
that meets the present Company
needs while preserving (profits)
the ability of future
generations to meet
their needs.

Society
(human
welfare)

Societal
marketi
ng
concept

Consume
rs (want
satisfacti
on)

What is marketed? (1/2)

GOODS -

the bulk of most countries production and marketing efforts (food

products, cars, refrigerators, televisions, machines, etc)

SERVICES - the work of airlines, hotels, car rental firms, barbers and beauticians,
maintenance and repair people, accountants, bankers, lawyers, engineers,
doctors, software programmers, and management consultants. Many market
offerings mix goods and services, such as a fast-food meal (advanced economies:
7030 services-to-goods mix)

EVENTS - major trade shows, artistic performances, global sporting events

(Olympics, World Cup)

EXPERIENCES

- Walt Disney Worlds Magic Kingdom or customized experiences

(such as a week at a baseball camp with retired baseball greats, a four-day rock
and roll fantasy camp, or a climb up Mount Everest)

PERSONS - artists, musicians, CEOs, physicians, high-profile lawyers and

financiers, and other (David Beckham, Oprah Winfrey, Rolling Stones)

What is marketed? (2/2)

PLACES - cities, states, regions, and whole nations compete to

attract tourists, residents, factories, and company headquarters
(Las Vegas Convention & Visitors Authority succeeded with its
provocative ad campaign, What Happens Here, Stays Here,
portraying Las Vegas as an adult playground)
PROPERTIES - intangible rights of ownership to either real
property (real estate) or financial property (stocks and bonds)
ORGANIZATIONS - work to build a strong, favorable, and unique
image in the minds of their target publics. Universities, museums,
performing arts organizations, corporations, and nonprofits all use
marketing to boost their public images and compete for audiences
and funds.
INFORMATION - the production, packaging, and distribution of
information are major industries.
IDEAS - social marketers are busy promoting such ideas as
Friends Dont Let Friends Drive Drunk and A Mind Is a Terrible
Thing to Waste.

Major trends that are changing

the marketing landscape

1) The changing economic

environment
2008- Great Recession
left consumers short of money and
confidence as they faced losses in income,
a severe credit crunch, declining home values and rising unemployment.

Americans have changed their lifestyles in many different ways to make ends
meet during this recession. Seventy-one percent have bought less expensive
brands, 57% have cut back or canceled vacation plans, 3 in 10 have cut back
on alcohol or cigarette consumption and 24% among adults ages 18 to 29
have moved back in with their parents. Coupled with this economic imperative
is a willful desire for a simpler, more meaningful and less acquisitive lifestyle
(www.forbes.com).
Companies have aligned their marketing strategies emphasizing value (value
for money, practicality, durability)

2) The digital age

The digital revolution radically
changed the way individuals
and companies interact.
Digital technology has changed
the way we live,
communicate, learn and
shop (78% Internet access out
of which 71% shop online ->
consumer online retail $162
billion.
Small regional companies were
suddenly given access to much
larger markets. Concepts such
as On-demand services and
manufacturing and rapidly
dropping technology costs
made possible innovations in all
aspects of industry and
everyday life.

Major impact on the ways

companies bring value to
customers:
learn about and track
customers;
create products tailored to
individual customer needs;
new ways of communicating.

3) The growth of not-for

profit marketing
Colleges, hospitals, museums,
zoos, symphony orchestra,
churches -> support, funds and
membership
Social marketing campaigns:
encourage energy conservation,
concern for the environment,
discourage smoking, excessive
drinking, drug use.
US government is the nation s 28th
largest advertiser with an annual budget
of $1,1 billion?

4) Rapid globalization
The world is shrinking rapidly with the
advent of faster communication
and transportation
->global trade grows
-> global competition intensifies
-> firms that stay at home to play it
safe might not only lose their
chances to enter other markets
but also risk losing their home
markets.
Challenges: unstable governments
and currencies, restrictive policies
and regulations, high trade
barriers

Otis Elevator is headquartered

in USA. It offers products in
more than 200 countries (83%
of sales outside US). It gets
elevator door system from
France, small geared parts from
Spain, electronics from Germany
and special motor drives from
Japan. It operates manufacturing
facilities in Americas, Europe
and Asia
and engineering
centers in US, Austria, Brazil,
China, Czech Republik, France,
Germany, India, Italy, Japan,

5)Sustainable marketing
the call for more social
responsibility
Consumerist + environmentalism movements are forcing
marketers to reexamine their relationships with social values
and natural environment
Some are practicing caring capitalism; others are resisting such
movements and comply only when forced by legislation
Sustainable marketing = an opportunity to do well by doing good.
E.g. Unilever Sustainable Living Plan (Dove, Lipton, Omo, Rexona,
Knorr, Cif, , Domestos, Rama, Signal)

The marketing process

By creating value for customers,
marketers capture value from
customers in return!

Understanding the marketplace

and customer needs

(1)Needs, Wants, and

Demands
Needs - basic human requirements such as for air, food, water, clothing,
shelter, recreation, education, and entertainment.
Wants needs directed to specific objects that might satisfy the need.
Demands - wants for specific products backed by an ability to pay.
Some customers have needs of which they are not fully conscious or that
they cannot articulate. We can distinguish five types of needs:
1. Stated needs (The customer wants an inexpensive car.)
2. Real needs (The customer wants a car whose operating cost, not initial price, is low.)
3. Unstated needs (The customer expects good service from the dealer.)
4. Delight needs (The customer would like the dealer to include an onboard GPS navigation
system.)
5. Secret needs (The customer wants friends to see him or her as a savvy consumer.)

Companies must help customers learn what they

want!

(2) Market offerings

Companies address customer needs by putting forth a value
proposition, a set of benefits that satisfy those needs. The
intangible value proposition is made physical by an offering,
which can be a combination of products, services, information,
and experiences.

Many sellers make the mistake of paying more attention to the

specific products they offer than to the benefits and experiences
produced by these products (marketing myopia they forget
that a product is only a tool to solve a consumer problem.
E.g. A manufacturer of quarter-inch drill bits may think that the
customer needs a drill bit. But what the customer really needs is
a quarter inch hole.

(3) Value and

Satisfaction

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?
based on VALUE

Customers form expectations about the value that

various market offerings will deliver and buy
accordingly.
Satisfied customers buy again and tell others about their
good experiences.
Dissatisfied customers often switch to competitors and
disparage the product to others

(3) Value and

Satisfaction

Satisfaction reflects a persons judgment of a

products perceived performance in relationship
to expectations.

Marketers must be careful to set the right level of expectations. If

they set expectations too low, they may satisfy those who buy but fail to
attract enough buyers. If they set expectations too high, buyers will be
disappointed

(4) Exchanges and

Relationships
Marketing occurs when people decide to satisfy their
needs and wants through exchange relationships.
Exchange is the act of obtaining a desired object
from someone by offering something in return.

In the broadest sense, the marketer tries to bring about

a response to some market offering. The response may
be more than simply buying the product.
Examples?

(4) Exchanges and

Relationships

Relationship vs Traditional
Model of Selling

(5) Markets
Traditionally, a market was a physical place
where buyers and sellers gathered to buy and sell
goods. Economists describe a market as a
collection of buyers and sellers who transact over a
particular product or product class.
Marketers use the term market to cover various
groupings of customers. They view sellers as
constituting the industry and buyers as
constituting the market. They talk about
product markets (the shoe market), demographic
markets (the youth market), and geographic
markets (the Chinese market);

A simple marketing
system

Key customer markets

Consumer Markets
Companies selling mass consumer goods and services such as juices, cosmetics, athletic shoes,
and air travel spend a great deal of time establishing a strong brand image by developing a
superior product and packaging, ensuring its availability, and backing it with engaging
communications and reliable service.

Business Markets
Companies selling business goods and services often face well-informed professional buyers
skilled at evaluating competitive offerings. Business buyers buy goods to make or resell a
product to others at a profit. Business marketers must demonstrate how their products will
help achieve higher revenue or lower costs. Advertising can play a role, but the sales
force, the price, and the companys reputation may play a greater one.

Nonprofit and Governmental Markets

Companies selling to nonprofit organizations with limited purchasing power such as churches,
universities, charitable organizations, and government agencies need to price carefully. Lower
selling prices affect the features and quality the seller can build into the offering. Much
government purchasing calls for bids, and buyers often focus on practical solutions and favor
the lowest bid in the absence of extenuating factors.

A model for a consumer

market
Marketing involves serving a market of final consumers in the face of competitors. The
company and the competitors research the market and interact with consumers to
understand their needs. Then they create and send their market offerings and messages to
consumers, either directly
or through marketing intermediaries

The marketing process

(cont)
The 5 steps process - By creating value for customers, marketers
capture value from customers in return

Evaluation system
100 points 35 points (seminars)
65 points (exam)

Seminars:
- 2 case studies (2 x 5 points)
= 10 points
- Mid-term project (mkt program) = 10 points
- Final project (product-market analysis) =
15 points
TOTAL = 35 points

Ever wonder what all those

advertising terms really mean?
NEW - Different color from previous design.
ALL NEW - Parts are not interchangeable with previous
design.
FOOLPROOF OPERATION - No provision for adjustments.
ADVANCED DESIGN - The advertising agency doesn't
understand it.
REDESIGNED - Previous flaws fixed - we hope.
YEARS OF DEVELOPMENT - We finally got one to work.
MAINTENANCE FREE - Impossible to fix.
MEETS ALL STANDARDS - Ours, not yours.
SOLID-STATE - Heavy as hell.