Principles of MarketingbyPhilip Kotler

Chapter 1

Marketing: Managing Profitable Customer Relationship

Marketing

customer.

Marketing Defined

What is Marketing?

Marketing is the process by which companies create value for customers & build strong customer relationships in order to capture value from customers in return.

Marketing is all about” satisfying customer needs”

Goal of Marketing:

To attract new customers by promising superior value.

To keep & grow current customers by delivering satisfaction

A simple model of the marketing process

Understand the marketplace & customer needs & wants

Design a customer driven marketing strategy

Create value for customers &

build customer relationships

Capture value from customers in return

Construct an integrated marketing

program that delivers

superior value

Build profitablerelationships & create customer

delight

Capture value from customers to create profits & customer equity.

Core definitions

Needs: Needs are the basic human requirements

e.g food, water, air, shelter.

Wants: Are the form human needs take as shaped

by culture and individual responsibility.

Demands: Human wants that are backed by buying power.

Market offering: Some combination of products, services, information, or experiences offered to a market to satisfy a need or want. Eg, banks, airlines.

Marketing Myopia: The mistake of paying more attention to the specific products a company offers than to the benefits & experiences produced by these products.

Exchange: Process of obtaining a desired product from someone by offering something in return.

Market: The set of all actual & potential buyers of a product or service.

Marketing Management: The art & science of choosing target markets & building profitable relationships with them.

Value Proposition: A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.

Winning Marketing Strategy

What customers will we serve?

(what’s our target market)- Divide the market into customer segments.- Select which segments will it go after.

How can we serve these customers best?

(what’s our value proposition)

- Differentiating & positioning the product in minds of consumers.

Five Organizational Concepts

1. Production Concept

2. Product Concept

3. Selling Concept

4. Marketing Concept

5. Societal Marketing Concept

Production Concept

The idea that consumers will favor products that are available & highly affordable & that the organization should therefore focus on improving production & distribution efficiency.

Product Concept

The idea that consumers will favor products that offer the most quality, performance, & features thereby devoting a company’s energy to making continuous product improvements.

Make & sell concept Focus on making superior products No customer input Less competitor product examination. “ Marketing Myopia”

Selling Concept

The idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling & promotion effort.

Practiced most aggressively with unsought goods eg, insurance, encyclopedias.

Focuses on creating sales-transactions rather than long term profitable relationships.

“Political Relationships”

Marketing Concept

The marketing management philosophy that achieving organizational goals depends on knowing the needs & wants of target markets & delivering the desired satisfactions better than competitors.

Sense & respond philosophy. Finding right products for customers Customer-driving marketing – understanding

customer needs even better than the customers themselves.

Contrast between Sales Concept & Marketing Concept

Factory Products Selling &Promoting Profits through sales volume

a. THE SELLING CONCEPT

b. THE MARKETING CONCEPT

Target Customer Integrated Profits through

Market Needs Marketing customer satisfaction

Starting Point Focus Means Ends

Societal Marketing Concept

Holds that marketing strategy should deliver value to customers in a way that maintains or improves both consumers & the societies well-being.

Societal marketing concept

Society

(Human Welfare)

Consumers

(Want Satisfaction)

Company

(Profits)

Customer Relationship Management

CRM 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.

Customer Satisfaction depends on a product’s perceived performance relative to a buyer’s expectations.

Performance = Expectation

Customer Satisfaction= Customer Loyalty= Better Performance

Customer delight- promising only what a company can deliver, & then delivering more than promised.

Changing Nature of Customer Relationships

Relating 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 Equity

Companies 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 company’s current & potential customers.

It is a better measure of a firms performance than current sales or market share.

More Loyal firm’s = Higher firm’s Profitable customers Customer Equity

Building Right relationships with Right customers

Which customers should the company acquire & retain?

The company can classify customers according to their potential profitability & projected loyalty manage its relationships with them accordingly.

Customer Relationship Groups

Strangers …. Low profitability/ Less Loyal. Butterflies …. Profitable/ not Loyal True Friends …. Profitable/ Loyal Barnacles …. Not Profitable/ Highly Loyal

Different types of customers require different relationship strategies, therefore goal is to :

“Build right relationships with the right customers”

Customer Relationship Groups

Butterflies

Good fit between company’s offerings & customer needs;

High profit potential

True Friends

Good fit between company’s offerings & customer needs;

Highest profit potential

Strangers

Little fit between company’s offerings & customer needs;

Lowest profit potential

Barnacles

Limited fit between company’s offerings & customer needs;

Low profit potential

High

Profitability

Low

Profitability

Short- term customers Long-term customers

Projected Loyalty