A. Creating and Capturing customer value (1)

CREATING AND CAPTURING CUSTOMER VALUE

Chapter Overview

• Focuses on the fundamentals of creating and capturing customer value in marketing.

Syllabus

• Topics covered:

  • Definition of Marketing

  • Marketing Process

  • Customer Needs, Wants, and Demands

  • Market Offerings: Goods, Services, Experiences

  • Customer Value and Satisfaction

  • Exchanges and Relationships in Marketing

  • Concepts of Markets

  • Marketing Management Orientations

  • Customer Relationship Management

  • Building Customer Loyalty and Retention

  • Growing Market and Revenue Share

  • Building Customer Equity

  • Introduction to Marketing Mix: 4Ps and 7Ps

Marketing Definition

• Marketing: Engaging customers and managing profitable relationships.

  • Aim: Attract new customers and retain/expand satisfaction of current customers.

  • Evolving focus from sales to customer satisfaction.

The Marketing Process

1. Understand the marketplace and customer needs/wants

2. Create value for customers and build relationships

3. Design a customer-driven marketing strategy

4. Construct an integrated marketing program for superior value delivery

5. Build profitable customer relationships and delight customers

6. Capture value from customers in exchange for profits and equity.

Customer Understanding

• Marketplace: Comprising actual and potential buyers with shared needs/wants.

• Core Concepts:

  1. Needs, Wants, Demands

  2. Market Offerings

  3. Value and Satisfaction

  4. Exchanges and Relationships

Customer Needs, Wants, and Demands

• Needs: States of felt deprivation (basic needs, social needs, individual needs).

• Wants: Shaped by culture and individual personality; specific objects that satisfy needs.

• Demands: Wants backed by purchasing power.

Market Offerings

• Combinations of products, services, information, or experiences to satisfy customer needs/wants.

  • Intangible Offerings: Services are intangible activities provided (e.g., banking, travel).

  • Marketing Myopia: Focusing too heavily on products instead of the benefits they deliver.

Value and Satisfaction

• Consumers compare expected value with actual satisfaction from offerings.

• Importance of setting accurate expectations to ensure customer satisfaction and loyalty.

Exchanges and Relationships

• Marketing facilitates exchanges by meeting customer needs through value creation and relationship management.

• Aim: Build strong exchange relationships and offer superior customer value.

Markets

• Defined as groups of actual and potential buyers sharing specific needs/wants.

  • Marketing manages these markets to build profitable relationships.

  • Activities include consumer research, product development, communication, distribution, pricing, and service.

Marketing Management

• Marketing Management: The art and science of selecting target markets and building profitable relationships.

• Key Philosophies for Strategy Design:

  • Production concept, Product concept, Selling concept, Marketing concept, Societal marketing concept.

Marketing Orientations

• Production Concept: Focus on efficiency and affordability.

• Product Concept: Emphasis on quality/performance improvements.

• Selling Concept: Aggressive selling needed to achieve sales volume.

• Marketing Concept: Focus on customer needs as a route to profit.

• Societal Marketing Concept: Balances company profits with consumer and societal welfare.

Marketing Mix

• 4Ps: Product, Price, Place, Promotion - tools to deliver customer value.

• 7Ps: Extends to include People, Process, Physical evidence for improved marketing strategies.

Integrated Marketing Plan

• Develops customer relationships by transforming marketing strategies into actionable plans.

• Tools must be blended into a coherent marketing program.

Customer Relationship Management (CRM)

• Central process of managing profitable customer relationships by delivering value/satisfaction.

• Key goal: Customer satisfaction leads to loyalty and positive word-of-mouth.

Customer Loyalty and Retention

• Loyalty results in longer customer life and increased spending.

• Understanding and managing customer lifetime value is critical for profitability.

Customer Equity

• Evaluation based on total combined customer lifetime values.

• Higher loyalty = higher customer equity = better overall firm performance.

Customer Relationship Groups

• True Friends: High profitability and fit; aim for continuous engagement.

• Barnacles: Low profitability; potential for cost-cutting if unprofitable.

• Butterflies: High profit potential; good fit but short-term engagement.

• Strangers: Low fit and profit; minimal resource investment.

Summary

• Marketing creates value for customers to capture value in return.

• Understanding customer needs and delivering superior value is at the core of building profitable relationships.

• Successful marketing strategies require a blend of understanding, strategy design, and execution.