CHAPTER 1

Creating Customer Relationships and

Value through Marketing

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 Learning Objectives

After reading Chapter 1, you should be able to:

1. Define marketing and identify the diverse factors influencing

marketing actions.

2. Explain how marketing discovers and satisfies consumer needs.

3. Distinguish between marketing mix factors and environmental forces.

4. Explain how organizations build strong customer relationships and

customer value through marketing.

5. Describe the characteristics of a market orientation. 1-2

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 A Famous Story: Marketing shoes

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 Send a team to have a market survey

Facts
– True secondary data
– Blue sky, dusty ground
• No one wearing shoes
Conclusion
• No Demand
• No need => No habit => No desire => No market
• Same as selling a comb to a monk who has no hairs.
• Give up this market
Question
• What is Demand?
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 Demand
• Demand is a measure of the desire that
potential customers have for a product
or service . . . plus their willingness
and ability to pay for it.

Hv willingness not equals to hv ability

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 Send the 2nd Team

Conclusion
• A huge market!!! Go! Go! Go!
Question
• Why ?
• Currently no competition > Enter it as quickly as
possible to get the first mover advantage.
• As long as you can sell your benefits to the market,
people will buy your products.

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 Send the 3rd team

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 Converting needs to wants

• The need for fitness

becomes a desire for
exercise classes

Copyright © 2001 by Harcourt, Inc. All rights reserved. 1-8

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 How to convert want to a product
Solve the problem Summary
Promote the concept to customers
How to create demand

Team Conclusions Concepts

1 No demand No market

2 People buy what you sell Selling concept

3 People buy what satisfies their Marketing concept

needs / solves their problem(s)

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 MARKETING: DELIVERING VALUE TO CUSTOMERS

Marketing seeks to:

1. Discover needs and wants of customers
2. Satisfy them Eg shoes
Exchange

AMA Definition
of Marketing

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 HOW MARKETING DISCOVERS CONSUMER NEEDS

The challenge: new products.

Consumers may not know or cannot describe what they need or want.

40% of new products fail! Customers do not find the need of the product
Sell the ‘dream’ of what can u achieve after

The challenge: using the product

• “Focus on the consumer benefit”

• “Learn from past mistakes”

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 Marketing

Marketing is the activity for

creating, communicating,
Balance the cost and the benefits
given to customer
Eg: reduce the price

delivering, and exchanging

offerings that benefit its
customers, the organization, its
stakeholders, and society at large.

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 FIGURE 1-2 A marketing department relates to many people,
organizations, and environmental forces.

Exchange not products, but relationship, with suppliers n

customers

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 WHAT IS NEEDED FOR MARKETING TO OCCUR?
Marketing responsibility to find the unsatisfied
needs
1. Two+ parties with unsatisfied needs
MC in exam
2. A desire and ability to be satisfied 5 choice
3. A way for the parties to communicate Find the not
included one
4. Something to exchange

Domino’s Pizza

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 FIGURE 1-3 Marketing seeks to discover consumer needs through
research and then satisfy them with a marketing program.

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 HOW MARKETING SATISFIES CONSUMER NEEDS: THE FOUR Ps

Target market
The 4 Ps: Controllable marketing mix factors
• Product
• Promotion
• Price
• Place

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 HOW MARKETING DISCOVERS CONSUMER NEEDS:
ENVIRONMENTAL FORCES
Customer value proposition
Uncontrollable environmental forces
• Social
• Competitive
• Economic
• Regulatory
• Technological

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 THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS
ARE BUILT
Customer value
Customer value strategies
• Best price: Weekly lowest price in supermarket
• Best service: Private Banking Service in HSBC or Citibank
• Best product: Starbucks

Target Ad Nordstrom Ad Starbucks Ad

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 Customer Value Proposition

Customer value proposition is the cluster of benefits that an

organization promises customers to satisfy their needs.

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 How to do marketing?
Marketing Process
Δ

1. Customers needs and wants

2. Marketing strategy Next page
3. Marketing program (implementation of the strategy)
4. Create “delights” now and build “relationship” in the long
run
5. Capture customer values (i.e. $$ in return of what you
created for them)
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<#> 1-20
 Marketing Management Orientations:
1. Production Concept
[Link] [Link]

What are the key concerns among production people?

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 2. Product Concept:
“A Better PDA”
No need to sell, hv gd products jau wui have
ppl buy

PDA

[Link]
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 3. Selling Concept
Attractive promoter/ design

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 4. Marketing Concept

Marketing it as a second home, not just coffeevalue and

concept

[Link]
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 Difference between Selling and
Marketing Concepts
Startin Focus Means Ends
g
Point Selling Profits
Existing
Factory and through
Products Promoting
Volume
The
The Selling
Selling Concept
Concept

Profits
Customer Integrated
Market through
Needs Marketing
Satisfaction
The
The Marketing
Marketing Concept
Concept

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 LO 1-5
HOW MARKETING BECAME IMPORTANT
EVOLUTION OF THE MARKET ORIENTATION

 Customer Relationship
Management (CRM)
• Digital Marketing

• Loyalty Program
 Customer Experience
• What Firms Think They Offer Customers

• What Customers Say They Receive

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 FIGURE 1-5 Four different orientations in the history
of American business

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 Societal Marketing Concept

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 Societal Marketing
Concept
Society
(Human Welfare)

Societal
Marketing
Concept
Consumers Company
(Want Satisfaction) (Profits)
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 Marketing Myopia

- focusing products rather than customer

- concentrated on physical / functional

aspects NOT benefits customers can get

- not marketing-oriented
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 Table 1.3 Avoiding Marketing Myopia

Marketing-Oriented
Company Myopic Description
Description

“We are a communications

PCCW “We are a telephone company.”
company.”

“We are in the airline “We are in the transportation

Cathay Pacific
business.” business.”

“We are in the banking “We are in the financial

Hang Seng Bank
business.” services business.”

“We are in the video game “We are in the entertainment

Nintendo
business.” business.”

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 HOW MARKETING BECAME IMPORTANT
BREADTH AND DEPTH OF MARKETING 1

Who markets?
What is marketed? Hermitage Tour
• Products (Goods)
• Services
• Ideas

How can u define ur target market (q asked in

presentation)

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 HOW MARKETING BECAME IMPORTANT:
BREADTH AND DEPTH OF MARKETING 2
Who buys and uses what is marketed?
MC q about
Ultimate consumers utility n
Organizational buyers understand
Who benefits? concept n
defination
How consumers benefit: Utility
What form, solid or liquid
• Form utility: Producing the productOnline,
or service
f2f, depends on where people will need it, eg vending machine

• Place utility: Having the offering available where needed Convenience store n fast pass (affect by income)

• Time utility: Having the product or service available when needed

How the customer pay, eg big packs n frozen food in US
• Possession utility: Making an item easy to purchase
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Eg what kind of utility u can provide in the example
 Marketing

Marketing is the activity for creating, communicating, delivering, and

exchanging offerings that benefit its customers, the organization, its
stakeholders, and society at large.

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 Exchange

Exchange is the trade of things of value between a buyer and a seller so

that each is better off after the trade.

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 Market

A market consists of people with both the desire and the ability to buy
a specific offering.

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 Target Market

A target market consists of one or more specific groups of potential

consumers toward which an organization directs its marketing
program.

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 Marketing Mix

The marketing mix consists of the marketing manager’s controllable

factors—product, price, promotion, and place—that can be used to
solve a marketing problem.

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 Market Orientation 1

Market orientation focuses on efforts on (1) continuously collecting

information about customers’ needs, (2) sharing this information
across departments, and (3) using it to create customer value.

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 Customer Value Proposition

Customer value proposition is the cluster of benefits that an

organization promises customers to satisfy their needs.

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 Environmental Forces

Environmental forces are the uncontrollable forces that affect a

marketing decision and consist of social, economic, technological,
competitive, and regulatory forces.

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 Customer Value

Customer value is the unique combination of benefits received by

targeted buyers that includes quality, convenience, on-time delivery,
and both before-sale and after-sale service at a specific price.

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 Relationship Marketing

Relationship marketing links the organization to its individual

customers, employees, suppliers, and other partners for their mutual
long-term benefit.

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 Marketing Program

A marketing program is a plan that integrates the marketing mix to

provide a good, service, or idea to prospective buyers.

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 Market Segments

Market segments are the relatively homogeneous groups of

prospective buyers that (1) have common needs and (2) will respond
similarly to a marketing action.

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 Marketing Concept

A marketing concept is the idea that an organization should (1) strive

to satisfy the needs of consumers and (2) while also trying to achieve
the organization’s goals.

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 Market Orientation 2

A market orientation occurs when an organization focuses its efforts

on (1) continuously collecting information about customers’needs, (2)
sharing this information across departments, and (3) using it to create
customer value.

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 Customer Relationship Management (CRM)

Customer relationship management (CRM) is the process of

identifying prospective buyers, understanding them intimately, and
developing favorable long-term perceptions of the organization and its
offerings so that buyers will choose them in the marketplace.

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 Customer Experience

Customer experience is the internal response that customers have to

all aspects of an organization and its offering.

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 Societal Marketing Concept

Societal marketing concept is the view that organizations should satisfy

the needs of consumers in a way that provides for society’s well-being.

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 Product

A product is a good, service, or idea consisting of a bundle of tangible

and intangible attributes that satisfies consumers’ needs and is
received in exchange for money or something else of value.

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 Ultimate Consumers

Ultimate consumers consist of the people who use the products and
services purchased for a household. Also called consumers, buyers, or
customers.

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 Organizational Buyers

Organizational buyers are those manufacturers, wholesalers, retailers,

and government agencies that buy products and services for their own
use or for resale.

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 Utility

Utility consists of the benefits or customer value received by users of

the product.

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