Principles of Marketing

Principles of MarketingDr. Karim Kobeissi

Chapter 1: Creating Customer Value and Engagement

Keywords Process: a series of actions or steps taken in order to achieve a particular end.Stakeholders: A party that has an interest in an enterprise or project. The primary stakeholders in a typical corporation are its investors, employees, customers and suppliers.

3Value: The worth that a product has in the mind of the consumer. The consumer's perceived value of a good or service affects the price that he or she is willing to pay for it. For the most part, consumers are unaware of the true cost of production for the products they buy. Instead, they simply have an internal feeling for how much certain products are worth to them. Thus, in order to obtain a higher price for their products, producers may pursue marketing strategies to create a higher perceived value for their products. Value, a central marketing concept, is primarily a combination of quality, service, and price (qsp), called the customer value triad. Value perceptions increase with quality and service but decrease with price.

Keywords 4What is Marketing?One of the good definitions of marketing is: The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return Kotler.

Another definition: Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Kotler.

5A Simplified Model of The Marketing Process

Goals of Marketing To satisfy customers needs

To attract new customers by promising superior value.

To keep & grow current customers by delivering satisfaction.

What Is Marketed?

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ETC..1-18

Who Markets?

A marketer is someone who seeks a responseattention, a purchase, a vote, a donationfrom another party, called the prospect. Market: The set of actual and potential buyers of a product. These people share a need or want that can be satisfied through exchange relationships.Exchange: Process of obtaining a desired product from someone by offering something in return.

Core DefinitionsCore Definitions - Need Needs - basic human requirementsTypes of NeedsPhysical:Food, clothing, shelter, safetySocial:Belonging, affectionIndividual:Learning, knowledge, self-expressionCore Definitions - WantWants - needs become wants when they are directed to specific objects that might satisfy the need. Wants are shaped by the society.

A U.S. consumer needs food but may want a Philly cheesesteak and an iced tea. A person in Afghanistan needs food but may want rice, lamb, and carrots.

Demands are wants for specific products backed by an ability to pay. Many people want a Ferrari ; only a few are able to buy one.

Core Definitions - Demands Core Definitions Market Offering For each target market, the firm develops a tangible market offering - a combination of products, information, and experiences - that it positions in the minds of the target buyers.

Core Definitions BrandA brand is a name, term, sign, symbol, design, or a combination of these, that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.A brand name such as McDonalds carries many associations in peoples minds that make up its image: hamburgers, cleanliness, convenience, courteous service, and golden arches. All companies strive to build a brand image with as many strong, favorable, and unique brand associations as possible.

Core Definitions - Competition Competition includes all the actual and potential rival offerings and substitutes a buyer might consider. An automobile manufacturer can buy steel from U.S. Steel in the United States, from a foreign firm in Japan or Korea, or it can buy aluminium for certain parts from Alcoa to reduce the cars weight, or engineered plastics from Saudi Basic Industries Corporation (SABIC) instead of steel. 28Core Definitions Customer SatisfactionCustomer satisfaction depends on the products perceived performance relative to a buyers expectations.

Satisfaction

ExpectationPerformance810

If performance is lower than expectations, satisfaction is low.If performance is higher than expectations, satisfaction is high.ExpectationPerformance108

Core Definitions - Marketing Environment

The Marketing Environment refers to the actors and forces outside of the marketing department that affect marketing management ability to build and maintain successful relationships with target customers. The Marketing Environment is made up of: The microenvironment consists of the actors close to the company that affect its ability to serve its customers. These forces are partially controllable by the company. The macroenvironment consists of the larger societal forces that affect the microenvironment. These forces are uncontrollable by the company.

32Core Definitions - Marketing Myopia Marketing Myopia: The mistake of paying more attention to the specific products a company offers than to the benefits & experiences produced by these products. The fundamental concept to take away from marketing myopia is that marketers should look towards the market and modify the company and products accordingly rather than looking towards the company, its potential and then catering the market.

An Example of Marketing Myopia: Kodak Polaroid

Five Organizational ConceptsThere are five alternative concepts under which organizations design and carry out their marketing strategies:

Production ConceptProduct ConceptSelling ConceptMarketing ConceptSocietal Marketing ConceptProduction ConceptThe production concept holds that consumers will favor products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. This concept is one of the oldest orientations that guides sellers and it is still a useful philosophy in some situations. For example, computer maker Lenovo dominates the highly competitive, price-sensitive Chinese PC market through low labor costs, high production efficiency, and mass distribution. However, although useful in some situations, the production concept can lead to marketing myopia.

Product ConceptThe product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements.

Product quality and improvement are important parts of most marketing strategies. However, focusing only on the companys products can also lead to marketing myopia. For example, some manufacturers believe that if they can build a better mousetrap, the world will beat a path to their doors. But they are often rudely shocked. Buyers may be looking for a better solution to a mouse problem but not necessarily for a better mousetrap. The better solution might be a chemical spray, an exterminating service, a house cat, or something else that works even better than a mousetrap.Selling ConceptThe selling concept holds that consumers will not buy enough of the firms products unless it undertakes a large-scale selling and promotion effort.The selling concept is typically practiced with unsought goodsthose that buyers do not normally think of buying, such as insurance. These industries must be good at tracking down prospects and selling them on a products benefits. Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships. The aim often is to sell what the company makes rather than making what the market wants. It assumes that customers who are coaxed into buying the product will like it.

Marketing ConceptThe marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits.

Societal Marketing ConceptThe societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare.The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumers and societys well-being.Societal marketing concept Society (Human Welfare)Consumers (Want Satisfaction) Company (Profits)Societal Marketing Concept- An Applied Example:Bottled Water

Customer Relationship ManagementCRM is the process of building & maintaining profitable customer relationships by delivering superior customer value & satisfaction. Customer Perceived Value: The customers evaluation of the difference between all the benefits & all the costs of a market offering relative to those of competing products. Changing Nature of Customer RelationshipsRelating with More Carefully selected Customers: - Selective Relationship Management Weeding out losing customers & targeting & pampering winning ones

Relating for the Long term: Using CRM to retain current customers & building profitable long-term relationships with them.

Relating Directly: Using direct marketing tools such as telephone, mail order catalogs & kiosks. Eg Dell & Amazon. Creating Customer Loyalty & Retention losing customers does not mean losing a single sale but in fact losing the entire stream of purchases that the customer would make over a lifetime.

Customer lifetime value: The value of the entire stream of purchases that a customer would make over a lifetime of patronage.

Customer EquityCompanies should not just acquire customers, but keep & grow them as well.The ultimate aim of customer relationship management is to produce high customer equity.Customer Equity is the combined discounted customer lifetime values of all the companys current & potential customers.It is a better measure of a firms performance than current sales or market share.

More Loyal firms = Higher firms Profitable customers Customer Equity