Marketing - Creating and Capturing Customer Value

***Marketing*** CREATING AND CAPTURING CUSTOMER VALUE **Objective 1: What is marketing?** **Marketing**- Social and managerial process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return; Satisfying customers' ne...

***Marketing*** CREATING AND CAPTURING CUSTOMER VALUE **Objective 1: What is marketing?** **Marketing**- Social and managerial process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return; Satisfying customers' needs; - Managing \[to build strong customer relationships\] profitable customer relationships by promising superior value and deliver satisfaction in order to capture value from customers. (Walmart- "save money. Live better"; McDonalds- "I'm lovin' it"). Dependable on coming to repurchase. - Long-term customer satisfaction \> short-term deception (MacBook - unsatisfying customers' needs - gaming) (Pen - blots - not buying again- loss of customers) **Value** - BUY it *Five step process* \[Kotler marketing process\] A diagram of a customer relationship Description automatically generated (Creating value to customers and building customer relationships -- to understand consumers and create value.) The 5 core marketing concepts are the pillars upon what marketing is based on. **Objective 2: Understanding the Marketplace and Customer Needs** - **Understand** marketplace and customer needs and wants. (James W. Cabela spends hours reading through customers' comments and circles important customer issues- builds strong customer relationships) 1. ***Needs***: State of felt deprivation; common in all people; **Marketing cannot create needs, but can satisfy them.** a. *Physical* -- food; clothing; safety b. *Social* - belonging; affection; status; entertainment. c. *Individual* -- knowledge; self-expression (brands) 2. ***Wants***: The form that human needs take as they are shaped by culture and individual personality and are desires for specific satisfiers of the deeper human needs; changes from one individual to another. (American *needs* food but *wants* a Big Mac) 3. ***Demands***: Wants backed by buying power; people demand products with benefits that add up to the most value and satisfaction. Needs fulfilled through **Market offering**- anything that can be offered for sale or exchange that can satisfy a need or a want as: goods \[physical/ tangible product\]; services \[intangible & no ownership of anything\]; experiences; organisations; information. (fast food restaurants -- supplying goods \[food; drinks\], services \[cooking; seating\] and an experience \[family friendly environment\]; banking; home repair services) **Marketing Myopia**- mistake of focusing on the physical aspects of products instead of the benefits and experiences produced by these products; Marketers should never focus only on existing wants and lose sight of underlying customer needs -- focus on benefit and experiences people receive with their product; \[improving products without any customer feedback.\] (Nokia; Kodak: inability to adapt to changing markets- focused on their film cameras and invested more in them, instead of new technology of digital cameras- Sony & Canon took pro-active approach) **Customer-perceived value and satisfaction** -- Customer satisfaction is the extent to which a product's perceived \[Customer satisfaction measures how satisfied customers are with a product\]; The consumer's evaluation of the difference between all the benefits and the costs of a marketing offers relative to those competing offers. Variety of products to choose from; will choose a product that they perceive/expect to give them the most value and satisfaction; marketers should set the right level of expectations. Customers [think]: *Expensive price = good quality* raise expectations and makes it harder to satisfy them.  **Exchange** -- the act of obtaining a desired object from someone by offering something in return; When customers are buying something, they will be exchanging something of value, usually money (*monetary transaction*) / (*barter transaction*- between companies) and getting something of value in return such as a good/service. (Politics with vote) Exchange is important in the long run because [a customer will buy repeatedly if a good relationship is formed.] Marketing -\> **Relationship Marketing** -- the process of creating, maintaining and enhancing strong value-laden relationships with customers and other stakeholders*; 'How should our customers reach us?'* (loyalty schemes -- to attract customers for repurchasing- ensure long term profitability; points- increasing value customers receive) **Markets**- all the actual and potential buyers of a product/service; Buyers share a particular need/want that can be satisfied through exchange relationships. *Modern Marketing System/Activities*- serving a market of final customers in the face of competitors. A diagram of a company Description automatically generated \[Marketing intermediaries- agents; wholesalers; retailers\] (Banks: students- hold promise of sale to continue with same bank- potential customers in the future) (Newlyweds: potential customers to Pampers- may have kids) **Objective 3: Designing a Customer-Driven Marketing Strategy & Preparing an Integrated Marketing Plan and Program** - Design a **customer-driven marketing** strategy. **Marketing management**- the art and science of choosing target markets and building profitable relationships with them; manager's aim is to find, attract, keep, and grow target customers by creating, delivering and communicating superior customer value; *'What will we serve (target market)?' and 'How can we serve them?'* **Market segmentation**- dividing the markets into segments of customers. [*Marketing Management Orientation***:**] **Production concept**- holds that consumers will favour those products that are wildly available and low in cost. Managers of production-oriented organisations concentrate on achieving high production efficiency and wide distribution. \[mass production= cheaper\] **Product concept** -- holds that consumers will favour those products that offer the most quality, performance, or innovative features. Managers in product-oriented organisations focus their energy on making superior products and improving them over time. +-----------------------------------------------------------------------+ | **Basis of Difference** **Product Concept** | | | | **Production Concept** | | ------------------------- ----------------------------------------- | | --------------------------------------------------------------------- | | -------------------------------------- ------------------------------ | | --------------------------------------------------------------------- | | ------------------------------------------------------------- | | Belief It was believed that consumers favoured, | | superior quality products and thereby, profits can be maximised by in | | creasing the quality of the product. It was believed that consumers | | favoured readily available and affordable products and thereby profi | | ts can be maximised by increasing the volume of production. | | Focus of the business Focus was on improving the quality of the | | product, adding new features, etc. | | Focus was on enhancing the qua | | ntity of production and reducing the average cost of production. | | Methodology Emphasis on improving the features and qu | | ality of product. | | Emphasis on improving the prod | | uction efficiency of the business. | +-----------------------------------------------------------------------+ **Selling concept**- Consumers, if left alone, will ordinarily not buy enough of a company's product. Managers of such organizations will focus their efforts on aggressive selling and promotional methods (making it more attractive for customers to buy; convincing people to buy); inside-out perspective- focuses on existing products to end with profits through sales volume *Aggressive sales*- dependant on sales rather than long-term relationships with customers (Insurance companies; Melita, etc.; teleshopping; reminders; politics) \[Heavy promotion- (advertising, free samples, discounts, limited-time offers)\] *Unsought products*- products that the average consumer does not think of buying. (hospitals: donating blood) **Marketing concept**- the key to achieving organisational goals consists of being more effective that competitors in integrated marketing activities towards determining and satisfying the needs and wants of target markets; Focusing on customers; determine and satisfy customer needs; build relationships -\> long term; outside-in perspective- focuses on customer needs and ends with profits through customer satisfaction; Greater and long-term profit is achieved by successfully satisfying customers' needs over the long term. All employees in an organization must follow the work together to fulfil customers' needs by melding together an organization's various departments therefore creating a unified experience for customer; assisting customers to make better choices. (McDonalds; Tesla; Apple; Body shop; Pret A Manger); *Customer-driven marketing*- understanding customer needs to create products and services that meet existing needs. *Target markets*- a set of buyers with common needs or characteristics that a company decides to serve. Comparing selling and marketing concept: Selling concept: Takes an inside-out perspective Marketing concept: Takes an outside-in perspective **Societal marketing concept**- the organization's task is to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer's society or well-being.  To [design] a *customer-driven marketing strategy*, marketers must decide on: - Which customers they should serve - How they can serve them in the best possible way. Different people have different wants because of differences in personality and culture and therefore marketers cannot serve all customers. Instead, they will have to target (focus their efforts on) particular groups of customers known as market segments (Topic 5) and create and offer products for that group. **Target marketing**- Process of identifying and choosing which segments to go after. Companies should develop a **Value Proposition**- the set of values/benefits a company is promising to deliver to customers to satisfy their needs; Differentiates a brand from another because they answer an important question- *'Why should I buy your brand instead of your competitor's?'* There are 5 alternative concepts under which organizations can choose to conduct their marketing activities and create successful relationships with customers. The major difference between these concepts is the weight given to consumers, the organisation and society. An organisation must decide which concept to use as a philosophy to guide their marketing strategies and activities. \[Consumer- buying product for final use\] - Construct an **integrated marketing programmer** that delivers superior value. For marketers to create a strategy that outlines which customers they are going to serve and how to do so in a manner that will create value for the targeted customers. \[Creates something of value for selected segments of target markets\] Marketing plan- outlines how the company will blend the marketing mix together to achieve its objectives- Laid out to develop how they will put into action to deliver the intended values to targeted customers. **Marketing mix**- the set of controllable tactical marketing tools (4Ps) that the firm blends together to produce the response it wants in the target market and thus achieve its objectives. 4Ps framework- for physical goods **Product (what we're offering to target customers)** **Price (the amount of money customers pay for a product)** **Promotion (communication with consumers & persuasion into buying it)** **Place (distribution)** ------------------------------------------------------- ------------------------------------------------------------- -------------------------------------------------------------------------- -------------------------- Variety List price Sales promotion (offers) Channels Quality Discounts Advertising Coverage Design Credit items Personal selling Location Features Payment period Public relations (improve relations w products) Inventory (storage) Brand name Direct marketing (individually focused; emails; brochures) Transport Packaging Product development Additional 3Ps- services/ extended marketing mix - Participants- people involved in providing and receiving the service. (Commitment; training; attitude; incentives; customer-to-customer contact) - Physical evidence- all the physical things that a purchaser of a service might encounter. (star rating; uniforms; how table is set; noise level; colour; layout) - Process- how the service is delivered. (Policies; procedures; employee/customer discretion) Difference between marketing goods and services= Services- intangible; may not offer good level of service each time/effected level of service - Build **profitable relationships** and create **customer delight**. Having good relationships with customers is important in today's highly competitive business environments. This makes customer relationship management (CRM) one of the most important concepts of modern marketing. CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. CRM involves gathering and managing information about individual customers and carefully managing customer contact points (or touch points) Customer contact points- points at which customers and businesses exchange information, buy products or services and handle transactions; to gain loyalty. In today's world these can be anywhere such as the packaging of products, offers (offering value), attitudes of staff, newsletters, banners, and pop-up windows in web browsers and many others. CRM deals with all aspects of gaining, maintaining and growing relationships with customers. Companies do not carry out the same level of relationship marketing with all customers because some customers are more important than others. Therefore, banks and mobile service providers try to attract students because they consider them to be potentially good customers in the future. **Customer value and satisfaction**- the key building blocks of relationship building; the key for successful relationships. This is because customers will buy products and services from the sellers that are offering them at most value. Besides offering good value and satisfaction, companies can: - Offer programmes that reward loyalty such as frequency marketing programme (loyalty schemes). - Customer engagement via social media and mobile apps (competitions; 'Share A Coke') - Use consumer generated marketing, sometimes invited consumers themselves to develop adverts for the company. (capture value from customers in return- sales, profits & long-term customer equity) - Capture value from customers to create **profit** and customers **equity.** The idea behind the marketing process is to understand customer needs and wants, design market offerings accordingly that offer value to customers thereby satisfying customers, gaining their loyalty which will result in more sales. This will generate long term profits for the company. CRM should aim to create customer delight to create satisfied and loyal customers who will, on turn, spread the word through word-of-mouth advertising; measure of what people expect and what they get; reaching expectations= satisfied; exceeding/meeting people's expectations= loyalty. If a customer is not served well by a company and is dissatisfied, there is a good chance that the customer will never go again/ will go and buy from a competitor. When this happens, the company will not have lost just a single sale but the entire future purchases that customer would have made over a lifetime. **Customer lifetime value**- the value of the entire stream of purchases that the customer would make over a lifetime of patronage; This means that companies must work hard and have good CRM to make sure to create customer delight which might even create an emotional relationship with a brand thus ensuring customer loyalty in the long term. Through good CRM a company can increase their **share of customer** which refers to the portion of the customer's purchasing that a company gets in its product categories (upgrading phones; making people spend more than their disposable income) To achieve this, a company can offer greater variety to customers, enabling it to cross-sell and/or up-sell to existing customers. **Cross-selling** -- selling a different product or service to an existing customer. **Up-selling** -- influencing a customer to purchase more expensive items, upgrades, or other add-ons. Apple Inc. through exceptional CRM offers good value to customers manages to retain their loyalty and manages to cross-sell and up-sell by offering various types of mobile devices, computers and peripherals. In return, it has very loyal customers who tend to buy several Apple products and peripherals over their lifetime. CRM- aims to achieve a high **customer equity** which refers to the total combined customer lifetime values of all the company's actual and potential customers. Companies should view customers as assets that can be managed. If managed properly, the lifetime value increases because of loyalty and repeat purchases. However not all customers are equally profitable even when they are loyal customers.