Principles of Marketing

Eighteenth Edition

Chapter 1

Marketing: Creating
Customer Value and
Engagement

Presented by
Prof. Ahmad Yahia Ebeid

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Learning Objectives
1.1 Define marketing and outline the steps in the marketing
process.
1.2 Explain the importance of understanding the
marketplace and customers and identify the five core
marketplace concepts.
1.3 Identify the key elements of a customer value-driven
marketing strategy and discuss the marketing
management orientations that guide marketing strategy.
1.4 Discuss customer relationship management and identify
strategies for creating value for customers and capturing
value from customers in return.
1.5 Describe the major trends and forces that are changing
the marketing landscape in this age of relationships.
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First Stop: Amazon
Amazon does much more than just sell goods online. It
engages customers and creates satisfying customer
experiences. “The thing that drives everything is creating
genuine value for customers,” says Amazon founder Jeff
Bezos.

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Learning Objective 1
Define marketing and outline the steps in the marketing
process.

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What is Marketing? (1 of 2)
Marketing is a process by which companies create value
for customers and build strong customer relationships in
order to capture value from customers in return.

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What is Marketing? (2 of 2)
Marketing is all around you, in good old traditional forms and
in a host of new forms, from websites and mobile apps to
online videos and social media.

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What Is Marketing?

• Sound marketing is critical to the success of every

organization.
• Marketing is used by large for-profit firms, such as Google,
Target, Coca-Cola and Microsoft as well as not-for-profit
organizations, such as colleges, hospitals, museums,
symphony orchestras, and even churches.

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Forms of Marketing

Traditional Contemporary

• Making a sale • Satisfying customer

• Abundance of needs
products in the • Imaginative Web
nearby shopping sites and mobile
centers phone apps, blogs,
• Television, magazine, online videos, and
and direct-mail ads social media
• Reach customers
directly, personally,
and interactively
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Forms of Marketing

• Therefore, marketing in the old sense refers to

making a sale—“telling and selling”.

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Goals of Marketing

– Attract new customers by promising superior value

– Keep and grow current customers by delivering
satisfaction

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Figure 1.1 The Marketing Process:
Creating and Capturing Customer
Value

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Learning Objective 2
Explain the importance of understanding the marketplace
and customers and identify the five core marketplace
concepts.

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Understanding the Marketplace and
Customer Needs (1 of 5)
Needs are states of felt deprivation.
Wants are the form human needs take as they are shaped by culture and
individual personality.
Demands are human wants that are backed by buying power.

Staying close to customers: Airbnb’s CEO Brian Chesky and co-founder Joe
Gebbia regularly stay at the company’s host locations, helping them shape new
customer solutions based on real user experiences.

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Understanding the Marketplace and
Customer Needs (2 of 5)
• Market offerings are some combination of products, services,
information, or experiences offered to a market to satisfy a need or
want.
• Marketing myopia—paying more attention to the specific products
than to the benefits and experiences produced

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Understanding the Marketplace and
Customer Needs (2 of 5)
• Marketing myopia- refers to sellers paying more attention to
the specific products a company offers than to the benefits
and experiences produced by these products.

• They forget that a product is only a tool to solve a

consumer problem. These sellers will have trouble if a new
product comes along that serves the customer’s needs
better or less expensively. The customer will have the
same need but will want the new product.

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Understanding the Marketplace and
Customer Needs (3 of 5)
Customers form expectations about the value and
satisfaction of market offerings.
– Satisfied customers buy again
– Dissatisfied customers switch to competitors
Exchange is the act of obtaining a desired object from
someone by offering something in return.
Marketing actions try to create, maintain, and grow desirable
exchange relationships.

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Customer Value and Satisfaction

• Setting the right level of expectations

– Low expectations may fail to attract buyers
– High expectations may disappoint buyers

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Understanding the Marketplace and
Customer Needs (4 of 5)
A market is the set of actual and potential buyers.
Consumers market when they:
• search for products
• interact with companies to obtain information
• make purchases

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Understanding the Marketplace and
Customer Needs (5 of 5)
Figure 1.2 A Modern Marketing System

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Understanding the Marketplace
and Customer Needs
Markets are the set of actual and potential buyers of
a product
Marketing system consists of all of the actors
(suppliers, company, competitors, intermediaries,
and end users) in the system who are affected by
major environmental forces
• Demographic
• Economic
• Technological
• Political–legal
• Socio-cultural
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Learning Objective 3
Identify the key elements of a customer value-driven
marketing strategy and discuss the marketing management
orientations that guide marketing strategy.

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Designing a Customer Value-Driven
Marketing Strategy (1 of 6)
Marketing management is the art and science of choosing
target markets and building profitable relationships with
them.
• What customers will we serve (target market)?
• How can we best serve these customers (value
proposition)?

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Designing a Customer-Driven Marketing
Strategy
Selecting Customers to Serve

Market segmentation: Dividing the markets into

segments of customers

Target marketing: Which segments to go after

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Reserved
Designing a Customer Value-Driven
Marketing Strategy (2 of 6)
A brand’s value proposition is the set of benefits or values it
promises to deliver to customers to satisfy their needs.
Value propositions: Sonos positions its Sonos One with Amazon
Alexa as “The smart speaker for music lovers.” It gives you all the
advantages of Alexa but with high-quality Sonos sound.

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Designing a Customer Value-Driven
Marketing Strategy
Choosing a value
proposition - the
company must decide
how it will differentiate
and position itself in the
marketplace.

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Designing a Customer-Driven Marketing
Strategy
Selecting Customers to Serve

De-marketing: Marketing to reduce demand

temporarily or permanently; the aim is not to
destroy demand but to reduce or shift it.

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Designing a Customer Value-Driven
Marketing Strategy (3 of 6)
• Production concept
• Product concept
• Selling concept
• Marketing concept
• Societal Marketing concept

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Designing a Customer-Driven Marketing
Strategy
Marketing Management Orientations

Production concept is the idea that consumers

will favor products that are available or highly
affordable

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Reserved
Designing a Customer-Driven Marketing
Strategy
Marketing Management Orientations

Product concept is the idea that consumers will

favor products that offer the most quality,
performance, and features for which the
organization should therefore devote its
energy to making continuous improvements

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Reserved
Designing a Customer-Driven Marketing
Strategy
Marketing Management Orientations

Selling concept is the idea that consumers will

not buy enough of the firm’s products unless
it undertakes a large scale selling and
promotion effort

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Designing a Customer-Driven Marketing
Strategy
Marketing Management Orientations

Marketing concept is the idea that achieving

organizational goals depends on knowing the
needs and wants of the target markets and
delivering the desired satisfactions better
than competitors do

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Designing a Customer Value-Driven
Marketing Strategy (4 of 6)
Figure 1.3 Selling and Marketing Concepts Contrasted

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Designing a Customer Value-Driven
Marketing Strategy (5 of 6)
Societal marketing:
The company’s marketing decisions should consider consumers’
wants, the company’s requirements, consumers’ long-run
interests, and society’s long-run interests.
Figure 1.4 Three Considerations Underlying the Societal
Marketing Concept

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Designing a Customer Value-Driven
Marketing Strategy (6 of 6)
The marketing mix is comprised of a set of tools known a
the four Ps:
• product
• price
• promotion
• place
Integrated marketing program—a comprehensive plan that
communicates and delivers intended value

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Learning Objective 4
Discuss customer relationship management and identify
strategies for creating value for customers and capturing
value from customers in return.

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Managing Customer Relationships
and Capturing Customer Value (1 of 9)
Customer relationship management—the overall process
of building and maintaining profitable customer relationships
by delivering superior customer value and satisfaction.

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Managing Customer Relationships
and Capturing Customer Value (2 of 9)
Relationship Building Blocks
• Customer-perceived value
– The difference between total
customer perceived benefits and
customer cost
• Customer satisfaction
– The extent to which perceived
performance matches a buyer’s
expectations
Customer satisfaction: Customer service
champion L.L.Bean was founded on a
philosophy of complete customer
satisfaction. “If you are not 100%
satisfied with one of our products, you
may return it within one year of
purchase for a refund.”
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Managing Customer Relationships
and Capturing Customer Value (3 of 9)
Customer-Engagement Marketing
Fosters direct and continuous
customer involvement in shaping
brand conversations, experiences,
and community.
Engaging customers: Rather than
using intrusive, hard-sell product
pitches, Bark interacts with
customers in humorous ways about
their favorite mutual topic—“the
weird dogs we live with and the
funny things they do.”

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Managing Customer Relationships
and Capturing Customer Value (4 of 9)
Consumer-Generated Marketing
Brand exchanges created by consumers themselves.
Consumers are playing an increasing role in shaping brand experiences.
Consumer-generated marketing: “Charmingly low-budget” fanmade Tesla ads
drew millions of online views and sparked interactions among dedicated Tesla
fans.

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Managing Customer Relationships
and Capturing Customer Value (5 of 9)
Partner relationship management involves working closely
with partners in other company departments and outside the
company to jointly bring greater value to customers.

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Managing Customer Relationships
and Capturing Customer Value (6 of 9)
Customer lifetime value is the value of the entire stream of purchases that the
customer would make over a lifetime of patronage.
Customer lifetime value: To keep customers coming back, Stew Leonard’s has
created the “Disneyland of dairy stores.” Rule #1—The customer is always right.
Rule #2—If the customer is ever wrong, reread Rule #1.

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Managing Customer Relationships
and Capturing Customer Value (7 of 9)
Share of customer is the portion of the customer’s
purchasing that a company gets in its product categories.

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Managing Customer Relationships
and Capturing Customer Value (8 of 9)
Customer equity is the total combined customer lifetime values of all of
the company’s customers.
Managing customer equity: To increase customer equity, Cadillac is
making the classic car cool again among younger buyers. For example,
says GM, “Cadillac will lead the company to an all-electric future.”

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Managing Customer Relationships
and Capturing Customer Value (9 of 9)
Figure 1.5 Customer Relationship Groups

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Learning Objective 5
Describe the major trends and forces that are changing the
marketing landscape in this age of relationships.

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The Changing Marketing Landscape
(1 of 5)

• Digital Age
• Changing Economic Environment
• Growth of Not-for-Profit Marketing
• Rapid Globalization
• Sustainable Marketing

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The Changing Marketing Landscape
(2 of 5)

We live in the age of Internet of Things, where everything is

connected to everything else.
Digital and social media marketing involves using digital
marketing tools such as websites, social media, mobile ads
and apps, online videos, email, and blogs that engage
consumers anywhere, at any time, via their digital devices.

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The Changing Marketing Landscape
(3 of 5)

• Social media provide exciting opportunities to extend

customer engagement and get people talking about a
brand.
• Mobile marketing: Using mobile channels to stimulate
immediate buying, make shopping easier, and enrich the
brand experience.
• Big Data and AI: Brands can use big data to gain deep
customer insights, personalize marketing offers, and
improve customer engagements and service.

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The Changing Marketing Landscape
(4 of 5)
Not-for-profit marketing is growing, as sound marketing
can help organizations attract membership, funds, and
support.

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The Changing Marketing Landscape
(5 of 5)

• Rapid Globalization: Managers around the world are

taking both local and global views of the company’s:
– Industry
– Competitors
– Opportunities
• Sustainable Marketing: Corporate ethics and social
responsibility have become important for every business.

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So, What Is Marketing? Pulling It All
Together
Figure 1.6 An Expanded Model of the Marketing Process

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