Gbus 207. 1

GBUS 207
PRINCIPLES OF
MARKETING
1
GBUS207 Principles of Marketing (First Semester, 2014/15
Otto Afiuc GIMPA Business School
Lecture 1:
Creating and Capturing Customer Value
2
Creating and capturing customer value Objectives
Objective Outline
Define marketing and outline the steps in the marketing process
Explain the importance of understanding the market place and

customers and identify the five core marketplace concepts
Identify the key elements of a customer-driven marketing strategy

and discuss the marketing management orientations that guide
marketing strategy
Discuss customer relationship management and identify

strategies for creating value for customers and capturing value
from customers in return
Discuss the major trends and forces that are changing the
marketing landscape in this age of relationships
3
Creating and capturing customer value Outline
Outline
What is marketing
Understanding the marketplace and customer needs
Designing a customer-driven marketing strategy
Preparing an integrated marketing plan and

programme
Building customer relationships
Capturing value from customers
The changing marketing Landscape
4
Creating and capturing customer value What is Marketing
Marketing Defined
Simple definition:
Managing profitable customer relationships
The twofold goal:

Attracting new customers by promising superior
value
Keeping and growing existing customers by
delivering satisfaction
Marketing is not synonymous with sales and

advertising
5
Marketing Defined
Marketing consists of the strategies and tactics used to

identify, create and maintain satisfying relationships
with customers that result in value for both the
customer and the marketer
Marketing is a social and managerial process by which
individuals and groups obtain what they need and want
through creating and exchanging value with others
The process by which companies create value for

customers and build strong customer relationships in
order to capture value from customers in return 6
The Marketing Process Model
7
Creating and capturing customer Understanding the Marketplace and Consumer
value Needs
The Five Core Customer and Marketplace
Concepts
Needs, Wants, and Demands
Marketing Offers
Value and Satisfaction
Exchange, Transactions, and Relationships
Markets
8
5 Core Customer and Marketplace
Creating and capturing customer value Concepts
Needs, Wants and Demands

Needs
A state of felt deprivation
They include physical, social and individual needs
Marketers do not create them basic part of the human makeup
Wants
The form taken by a human need as shaped by culture and
individual personality
They are described in terms of objects that will satisfy needs
Marketers influence wants
Demands
Human wants that are backed by buying power
9
Needs, Wants and Demands

People need food, air, water, clothing, and shelter to survive.
They also have a strong need for health, education,
entertainment and other services
The above needs become wants when they are directed to

specific objects that might satisfy the need. A Ghanaian needs
food but may want Banku and hot pepper with grilled tilapia.
Wants are shaped by one's society and are described in terms of
objects that will satisfy needs. Unlike needs, wants are unlimited
Demands are wants for specific products backed by an ability to

pay. Many people want luxury cars but lack in purchasing power
10
Market Offerings
Consumers needs and wants are fulfilled through Market Offerings
Market Offerings is some combination of products, services, information, or

experiences offered to a market to satisfy a need or want
Market offerings also include persons, places, organizations, and ideas
Marketing Myopia:
The mistake of paying more attention to the specific products a company
offers than to the benefits and experiences produced by these products
Focus only on existing wants and lose sight of underlying customer needs,
forgetting the fact that product is only the tool to solve consumer problem
Smart marketers look beyond the attributes of the products and services
they sell, and create brand experiences for consumers
11
Customer Value and Satisfaction
How do Customers choose among market offerings?

They form expectations about the value and
satisfaction that various market offerings will deliver
Customer value and satisfaction are key building blocks for

developing and managing customer relationships
Customer Value is the difference between the values the

customer gains from owning and using the product and the
costs of obtaining the product
Customer Satisfaction is the extent to which a products

perceived performance matches a buyers expectation
12
Exchange:
The act of obtaining a desired object from someone by
offering something in return
Conditions for exchange to take place:
There must be at least two parties
Each party must have something that might be of value
to the other party
Each party is capable of communication and delivery
Each party is free to accept or reject the offer
Each party believes it is appropriate or desirable to deal
with the other party
13

Transactions:
If an agreement is reached, we say that a transaction
has taken place it is the basic unit of exchange
It consists of a trade of values between two parties
Dimensions of transactions:
At least two things of value
Agreed upon conditions
A time of agreement
A place of agreement
Usually a legal system arises to support and enforce
compliance of the transaction
14
Relationships:
Exist between two parties who grow more trust, are
more knowledgeable and interested in helping each
other
Relationship marketing cuts down on transaction costs
and time
Its ultimate outcome is the building of a unique
company asset known as marketing network
Marketing network consist of the company and the firms
with which it has built solid, dependable business
relationships
15
Markets
The concept of exchange and relationships lead to the concept of a market
It consist of all the actual and potential buyers of a product or service who
share a particular need or want that can be satisfied through exchange
relationships
The size of a market depends upon the number of persons who exhibit the
need, have resources that interest others, and are willing to offer these
resources in exchange for what they want
Examples of markets as used by Business people:
Needs Markets such as diet-seeking market
Product Markets such as the car market
Demographic markets such as the young adult market
Geographic Markets such as the Ghanaian market

16
Modern Marketing System

Arrows represent relationships that
suppliers
must be developed and managed
to create customer value and
Company profitable customer relationships
Competitors
(marketer)
Each party in the system adds

value
Marketing
intermediaries
All of the factors in the system are
affected by major environmental
forces (demographic, economic,
Final consumers
technological, political/legal,
Major environment forces social/cultural)
17
Creating and capturing customer Designing a Customer-Driven Marketing
value Strategy
Marketing Management
It is the art and science of choosing target markets and

building profitable relationships with them
The marketing managers aim is to find, attract, keep,
and grow target customers by creating, delivering and
communicating superior customer value
The marketing manager must answer two important
questions to design a winning marketing strategy:
What customers will we serve (what is our target
market)?
How can we serve these customers best (what is our
value proposition)?
18
value Strategy
Marketing Management Orientations

The production concept
Consumers will favour products that are available and highly
affordable
Focus is on improving production and distribution efficiency
The product concept

Consumers will favour products that offer the most in quality,
performance, and innovative features
Focus is on making continuous product improvement
The selling concept

Consumers will not buy enough of the firms products unless it
undertakes a large-scale selling and promotion effort
Focus is on creating sales transactions rather than on building long-
term profitable customer relationships
19
value Strategy
The marketing concept

Achieving organisational goals depends on
knowing the needs and wants of target markets
and delivering the desired satisfaction better than
competitors do
Focus is on customer value and satisfaction
Starts with a well-defined market, focuses on
customer needs, and integrates all the marketing
activities that affect customers
Yields profits by creating relationships with the
right customers based on customer value and
satisfaction
20
value Strategy
The societal marketing concept
Marketing strategy should deliver value to customers in a way that
maintains or improves both the customers and societys well-being
Calls for sustainable marketing, socially and environmentally
responsible marketing that meets present needs of consumers and
businesses while also preserving or enhancing the ability of future
generations to meet their needs
Society (Human
welfare)
Consumers (Want Company

Satisfaction) (Profits)
Fig: Three Considerations underlying the societal marketing

concept
21
Creating and capturing customer Preparing an Integrated Marketing Programme
value and Plan
Integrated Marketing Plan and Programme

The marketer develops an integrated marketing programme that
will deliver the intended value to target customers and build
customer relationships by transforming the marketing strategy
into action
The marketing programme consists of the firms marketing mix,
the set of marketing tools the firm uses to implement its
marketing strategy.
The major tools are called the four Ps of marketing: product,
price, place and promotion
The firm must blend these mix tools into a comprehensive,
integrated marketing programme that communicates and
delivers the intended value to chosen customers
22
Creating and capturing customer Building Customer
value Relationships
Customer Relationship Management CRM
It is perhaps the most important concept of modern

marketing
It is the overall process of building and maintaining
profitable customer relationships by delivering
superior customer value and satisfaction
It deals with all aspects of acquiring, keeping, and
growing customers
Marketers must be concerned with the lifetime value
of the customer
23
Building Customer
Creating and capturing customer value
Relationships
Relationship Building Blocks: Customer Value and
Satisfaction
Customer perceived value: customers evaluation of the difference
between all the benefits and all the costs of a market offering relative to
those of competing offers
Value proposition: intended value at the companys side
Evaluation: subjective and personal; difference among
How we make a purchase decision; select brand with greatest CPV
Customer satisfaction: the extent to which a products perceived
performance matches a buyers expectations
an extent of match, between; highly satisfied and delighted
Higher levels of CS lead to greater customer loyalty, better
company performance in turn
CRM: process of building and maintaining profitable customer relationships
by delivering superior customer value & satisfaction
24
Building Customer
Relationships
Customer Relationship Levels and Tools
Companies build appropriate customer relationships at

different levels, depending on the nature of the market
Low-margin customers, basic relationships
High-margin customers, full partnerships
There are tools developed for gaining customer loyalty
and retention, such as frequency marketing
programme, club marketing programmes, etc.
Reward customers who buy frequently or in large
amounts
Offer members special benefits and create member
communities
25
Capturing Value from
Customers
Creating Customer Loyalty and Retention
The first four steps in the marketing process involve

building customer relationships by creating and
delivering superior customer value
By creating superior customer value, the firm creates
highly satisfied customers who stay loyal and buy
more
The outcomes of creating marketing value are:
Customer loyalty and retention
Share of market and share of customer
Customer equity
26
Customers
Creating Customer Loyalty and Retention
Even a slight drop from complete satisfaction can create an

enormous drop in loyalty, which result in losing a customer
Customer lifetime value: the value of the entire stream of
purchases that a customer would make over a lifetime of
patronage
Assessing customer lifetime value makes sense in that,
working to retain and grow customers makes good
economic sense
The aim of CRM is to create not just customer satisfaction,
but customer delight which results in customer loyalty and
brings good company performance
27
Customers
Growing Share of Customer
Share of customer: the portion of the customers

purchasing that a company gets in its product categories
Share of wallet, share of stomach, etc.
To increase the share of customers, firms can offer greater
variety to current customers, or cross-sell and up-sell in
order to market more products and services to existing
customers
Cross-sell: to provide existing customers the
opportunity to purchase additional (complement) items
offered by the company
Up-sell: to induce the customer to purchase more
expensive items, upgrades or other add-ons
28
Customers
Building Customer Equity
Companies want not only to create profitable

customers, but to own them for life, and that comes
to Customer Equity
What is Customer Equity?
Customer Equity: the total combined customer
lifetime values of all the companys customers
The ultimate aim of CRM is to produce high
customer equity
Customer equity is a better measure of a firms
performance than current sales or market share
29
Customers
Building the Right Relationship with the Right
Customers
Different types of customer require different relationship
management strategies. The goal is to build right relationships
with right customers
Butterflies: True friends:
Potential profitability
Good fit between offerings and Good fit between companys offerings
High customers needs; high profit and customers needs; highest profit
profitability potential potential
Create profitable transactions and Continuous relationship investment

cease investing next round.
low Strangers: Barnacles:

Little fit between offerings & Limited fit between offerings and
profitability customers needs; lowest profit customers needs; low profit potential
potential
Problematic; Improve profitability or
No investment fire
Short-term customers long-term customers
Projected loyalty
Fig: Customer relationship

groups 30
Customers
The Changing Marketing Landscape
Technological advances, rapid globalization, and
continuing social and economic shifts are causing
marketplace changes.
Major marketing developments can be grouped under
the theme of Connecting
31
Customers
Connecting Advances in computers,
Via technology telecommunications,
video-conferencing, etc.
are major forces.
Databases allow for
customization of
products, messages
and analysis of needs.
The Internet
Facilitates anytime,
anywhere connections
Facilitates CRM
Creates market spaces
32
Customers
Connecting Partner relationship
With marketing partners management involves:
Connecting inside the
company
Connecting with outside
partners
Supply chain
management
Strategic alliances
33
Customers
Connecting Globalization
With the world Competition
New opportunities
Greater concern for
environmental and social
responsibility
Increased marketing by
nonprofit and public-
sector entities
Social marketing
campaigns
34
The End
THANK YOU
35

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GBUS 207

Creating and Capturing Customer Value

Define marketing and outline the steps in the marketing process

Explain the importance of understanding the market place and

Identify the key elements of a customer-driven marketing strategy

Discuss customer relationship management and identify

Understanding the marketplace and customer needs

Designing a customer-driven marketing strategy

Preparing an integrated marketing plan and

Building customer relationships

Capturing value from customers

The changing marketing Landscape

The twofold goal:

Marketing is not synonymous with sales and

Marketing consists of the strategies and tactics used to

The process by which companies create value for

The Marketing Process Model

Value and Satisfaction

Exchange, Transactions, and Relationships

Needs, Wants and Demands

Needs, Wants and Demands

The above needs become wants when they are directed to

Demands are wants for specific products backed by an ability to

Market Offerings is some combination of products, services, information, or

Market offerings also include persons, places, organizations, and ideas

Customer Value and Satisfaction

How do Customers choose among market offerings?

Customer value and satisfaction are key building blocks for

Customer Value is the difference between the values the

Customer Satisfaction is the extent to which a products

Exchange, Transactions, and Relationships

Exchange, Transactions, and Relationships

Exchange, Transactions, and Relationships

Product Markets such as the car market

Demographic markets such as the young adult market

Geographic Markets such as the Ghanaian market

Modern Marketing System

Each party in the system adds

It is the art and science of choosing target markets and

Marketing Management Orientations

The product concept

The selling concept

The marketing concept

Consumers (Want Company

Fig: Three Considerations underlying the societal marketing

Integrated Marketing Plan and Programme

It is perhaps the most important concept of modern

Companies build appropriate customer relationships at

The first four steps in the marketing process involve

Even a slight drop from complete satisfaction can create an

Share of customer: the portion of the customers

Companies want not only to create profitable

Create profitable transactions and Continuous relationship investment

low Strangers: Barnacles:

Fig: Customer relationship

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