GBUS 207: Principles of Marketing

GBUS 207
PRINCIPLES OF MARKETING
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GBUS207 Principles of Marketing (First Semester, 2014/15 Academic
Otto Afiuc GIMPA Business School
Lecture 1:
Creating and Capturing Customer Value
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Creating and capturing customer value Objectives
Objective Outline
Define marketing and outline the steps in the marketing process
Explain the importance of understanding the market place and customers

and identify the five core marketplace concepts
Identify the key elements of a customer-driven marketing strategy and

discuss the marketing management orientations that guide marketing
strategy
Discuss customer relationship management and identify strategies for

creating value for customers and capturing value from customers in return
Discuss the major trends and forces that are changing the marketing
landscape in this age of relationships
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Creating and capturing customer value Outline
Outline
What is marketing
Understanding the marketplace and customer needs
Designing a customer-driven marketing strategy
Preparing an integrated marketing plan and programme
Building customer relationships
Capturing value from customers
The changing marketing Landscape
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Creating and capturing customer value What is Marketing
Marketing Defined
Simple definition:
Managing profitable customer relationships
The twofold goal:

Attracting new customers by promising superior value
Keeping and growing existing customers by delivering

satisfaction
Marketing is not synonymous with sales and advertising
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Marketing Defined
Marketing consists of the strategies and tactics used to identify,

create and maintain satisfying relationships with customers that
result in value for both the customer and the marketer
Marketing is a social and managerial process by which
individuals and groups obtain what they need and want through
creating and exchanging value with others
The 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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The Marketing Process Model
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Creating and capturing customer value Understanding the Marketplace and Consumer Needs
The Five Core Customer and Marketplace Concepts
Needs, Wants, and Demands
Marketing Offers
Value and Satisfaction
Exchange, Transactions, and Relationships
Markets
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Creating and capturing customer value 5 Core Customer and Marketplace Concepts
Needs, Wants and Demands

Needs
A state of felt deprivation
They include physical, social and individual needs
Marketers do not create them basic part of the human makeup
Wants
The form taken by a human need as shaped by culture and
individual personality
They are described in terms of objects that will satisfy needs
Marketers influence wants
Demands
Human wants that are backed by buying power
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Needs, Wants and Demands

People need food, air, water, clothing, and shelter to survive. They also
have a strong need for health, education, entertainment and other
services
The above needs become wants when they are directed to specific objects
that might satisfy the need. A Ghanaian needs food but may want Banku
and hot pepper with grilled tilapia. Wants are shaped by one's society and
are described in terms of objects that will satisfy needs. Unlike needs,
wants are unlimited
Demands are wants for specific products backed by an ability to pay.

Many people want luxury cars but lack in purchasing power
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5 Core Customer and Marketplace Concepts
Creating and capturing customer value
Market Offerings
Consumers needs and wants are fulfilled through Market Offerings
Market Offerings is some combination of products, services, information, or

experiences offered to a market to satisfy a need or want
Market offerings also include persons, places, organizations, and ideas
Marketing Myopia:
The mistake of paying more attention to the specific products a company
offers than to the benefits and experiences produced by these products
Focus only on existing wants and lose sight of underlying customer needs,
forgetting the fact that product is only the tool to solve consumer problem
Smart marketers look beyond the attributes of the products and services
they sell, and create brand experiences for consumers
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Customer Value and Satisfaction
How do Customers choose among market offerings?

They form expectations about the value and satisfaction that
various market offerings will deliver
Customer value and satisfaction are key building blocks for

developing and managing customer relationships
Customer Value is the difference between the values the

customer gains from owning and using the product and the costs of
obtaining the product
Customer Satisfaction is the extent to which a products

perceived performance matches a buyers expectation
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Exchange:
The act of obtaining a desired object from someone by offering
something in return
Conditions for exchange to take place:
There must be at least two parties
Each party must have something that might be of value to the
other party
Each party is capable of communication and delivery
Each party is free to accept or reject the offer
Each party believes it is appropriate or desirable to deal with the
other party
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Transactions:
If an agreement is reached, we say that a transaction has taken
place it is the basic unit of exchange
It consists of a trade of values between two parties
Dimensions of transactions:
At least two things of value
Agreed upon conditions
A time of agreement
A place of agreement
Usually a legal system arises to support and enforce compliance of
the transaction
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Relationships:
Exist between two parties who grow more trust, are more
knowledgeable and interested in helping each other
Relationship marketing cuts down on transaction costs
and time
Its ultimate outcome is the building of a unique company
asset known as marketing network
Marketing network consist of the company and the firms with
which it has built solid, dependable business relationships
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Markets
The concept of exchange and relationships lead to the concept of a market
It consist of all the actual and potential buyers of a product or service who share a
particular need or want that can be satisfied through exchange relationships
The size of a market depends upon the number of persons who exhibit the need,
have resources that interest others, and are willing to offer these resources in
exchange for what they want
Examples of markets as used by Business people:

Needs Markets such as diet-seeking market
Product Markets such as the car market
Demographic markets such as the young adult market
Geographic Markets such as the Ghanaian market
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Modern Marketing System

Arrows represent relationships that must
suppliers
be developed and managed to create
customer value and profitable customer
Company
Competitors relationships
(marketer)
Each party in the system adds value
All of the factors in the system are

Marketing
intermediaries
affected by major environmental forces
(demographic, economic, technological,
political/legal, social/cultural)
Final consumers
Major environment forces

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Creating and capturing customer value Designing a Customer-Driven Marketing Strategy
Marketing Management
It is the art and science of choosing target markets and

building profitable relationships with them
The marketing managers aim is to find, attract, keep, and
grow target customers by creating, delivering and
communicating superior customer value
The marketing manager must answer two important questions
to design a winning marketing strategy:
What customers will we serve (what is our target market)?
How can we serve these customers best (what is our value
proposition)?
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Marketing Management Orientations
The production concept

Consumers will favour products that are available and highly affordable
Focus is on improving production and distribution efficiency
The product concept
Consumers will favour products that offer the most in quality,
performance, and innovative features
Focus is on making continuous product improvement
The selling concept
Consumers will not buy enough of the firms products unless it
undertakes a large-scale selling and promotion effort
Focus is on creating sales transactions rather than on building long-term
profitable customer relationships
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The marketing concept

Achieving organisational goals depends on knowing the
needs and wants of target markets and delivering the
desired satisfaction better than competitors do
Focus is on customer value and satisfaction
Starts with a well-defined market, focuses on customer
needs, and integrates all the marketing activities that
affect customers
Yields profits by creating relationships with the right
customers based on customer value and satisfaction
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The societal marketing concept
Marketing strategy should deliver value to customers in a way that maintains
or improves both the customers and societys well-being
Calls for sustainable marketing, socially and environmentally responsible
marketing that meets present needs of consumers and businesses while also
preserving or enhancing the ability of future generations to meet their needs
Society (Human
welfare)
Consumers (Want Company

Satisfaction) (Profits)
Fig: Three Considerations underlying the societal marketing concept
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Creating and capturing customer value Preparing an Integrated Marketing Programme and Plan
Integrated Marketing Plan and Programme

The marketer develops an integrated marketing programme that will
deliver the intended value to target customers and build customer
relationships by transforming the marketing strategy into action
The marketing programme consists of the firms marketing mix, the set of
marketing tools the firm uses to implement its marketing strategy.
The major tools are called the four Ps of marketing: product, price, place
and promotion
The firm must blend these mix tools into a comprehensive, integrated
marketing programme that communicates and delivers the intended value
to chosen customers
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Creating and capturing customer value Building Customer Relationships
Customer Relationship Management CRM
It is perhaps the most important concept of modern

marketing
It is the overall process of building and maintaining profitable
customer relationships by delivering superior customer value
and satisfaction
It deals with all aspects of acquiring, keeping, and growing
customers
Marketers must be concerned with the lifetime value of the
customer
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Creating and capturing customer value Building Customer Relationships
Relationship Building Blocks: Customer Value and
Satisfaction
Customer perceived value: customers evaluation of the difference between all the
benefits and all the costs of a market offering relative to those of competing offers
Value proposition: intended value at the companys side
Evaluation: subjective and personal; difference among
How we make a purchase decision; select brand with greatest CPV
Customer satisfaction: the extent to which a products perceived performance
matches a buyers expectations
an extent of match, between; highly satisfied and delighted
Higher levels of CS lead to greater customer loyalty, better company
performance in turn
CRM: process of building and maintaining profitable customer relationships by
delivering superior customer value & satisfaction
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Building Customer Relationships
Customer Relationship Levels and Tools
Companies build appropriate customer relationships at

different levels, depending on the nature of the market
Low-margin customers, basic relationships
High-margin customers, full partnerships
There are tools developed for gaining customer loyalty and
retention, such as frequency marketing programme, club
marketing programmes, etc.
Reward customers who buy frequently or in large
amounts
Offer members special benefits and create member
communities
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Creating and capturing customer value Capturing Value from Customers
Creating Customer Loyalty and Retention
The first four steps in the marketing process involve building

customer relationships by creating and delivering superior
customer value
By creating superior customer value, the firm creates highly
satisfied customers who stay loyal and buy more
The outcomes of creating marketing value are:
Customer loyalty and retention
Share of market and share of customer
Customer equity
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Capturing Value from Customers
Creating Customer Loyalty and Retention
Even a slight drop from complete satisfaction can create an

enormous drop in loyalty, which result in losing a customer
Customer lifetime value: the value of the entire stream of
purchases that a customer would make over a lifetime of
patronage
Assessing customer lifetime value makes sense in that,
working to retain and grow customers makes good
economic sense
The aim of CRM is to create not just customer satisfaction, but
customer delight which results in customer loyalty and brings
good company performance
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Growing Share of Customer
Share of customer: the portion of the customers purchasing

that a company gets in its product categories
Share of wallet, share of stomach, etc.
To increase the share of customers, firms can offer greater
variety to current customers, or cross-sell and up-sell in order
to market more products and services to existing customers
Cross-sell: to provide existing customers the opportunity
to purchase additional (complement) items offered by the
company
Up-sell: to induce the customer to purchase more
expensive items, upgrades or other add-ons
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Building Customer Equity
Companies want not only to create profitable customers, but

to own them for life, and that comes to Customer Equity
What is Customer Equity?
Customer Equity: the total combined customer lifetime
values of all the companys customers
The ultimate aim of CRM is to produce high customer
equity
Customer equity is a better measure of a firms
performance than current sales or market share
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Building the Right Relationship with the Right Customers

Different types of customer require different relationship management
strategies. The goal is to build right relationships with right customers
Butterflies: True friends:

Potential profitability
Good fit between offerings and Good fit between companys offerings and
High customers needs; high profit potential customers needs; highest profit potential
profitability
Create profitable transactions and Continuous relationship investment
cease investing next round.
low Strangers: Barnacles:

Little fit between offerings & customers Limited fit between offerings and
profitability needs; lowest profit potential customers needs; low profit potential
No investment Problematic; Improve profitability or fire
Short-term customers long-term customers
Projected loyalty
Fig: Customer relationship groups

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The Changing Marketing Landscape

Technological advances, rapid globalization, and continuing
social and economic shifts are causing marketplace changes.
Major marketing developments can be grouped under the
theme of Connecting
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Connecting Advances in computers,
Via technology telecommunications, video-
conferencing, etc. are major
forces.
Databases allow for
customization of products,
messages and analysis of
needs.
The Internet
Facilitates anytime,
anywhere connections
Facilitates CRM
Creates market spaces
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Connecting Partner relationship management
With marketing partners involves:
Connecting inside the
company
Connecting with outside
partners
Supply chain management
Strategic alliances
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Connecting Globalization
With the world Competition
New opportunities
Greater concern for
environmental and social
responsibility
Increased marketing by
nonprofit and public-sector
entities
Social marketing
campaigns
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The End
THANK YOU
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GBUS 207: Principles of Marketing

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GBUS 207

Creating and Capturing Customer Value

Define marketing and outline the steps in the marketing process

Explain the importance of understanding the market place and customers

Identify the key elements of a customer-driven marketing strategy and

Discuss customer relationship management and identify strategies for

Understanding the marketplace and customer needs

Designing a customer-driven marketing strategy

Preparing an integrated marketing plan and programme

Building customer relationships

Capturing value from customers

The changing marketing Landscape

The twofold goal:

Keeping and growing existing customers by delivering

Marketing is not synonymous with sales and advertising

Marketing consists of the strategies and tactics used to identify,

The Marketing Process Model

The Five Core Customer and Marketplace Concepts

Needs, Wants, and Demands

Value and Satisfaction

Exchange, Transactions, and Relationships

Needs, Wants and Demands

Needs, Wants and Demands

Demands are wants for specific products backed by an ability to pay.

Consumers needs and wants are fulfilled through Market Offerings

Market Offerings is some combination of products, services, information, or

Market offerings also include persons, places, organizations, and ideas

Customer Value and Satisfaction

How do Customers choose among market offerings?

Customer value and satisfaction are key building blocks for

Customer Value is the difference between the values the

Customer Satisfaction is the extent to which a products

Exchange, Transactions, and Relationships

Exchange, Transactions, and Relationships

Exchange, Transactions, and Relationships

Examples of markets as used by Business people:

Product Markets such as the car market

Demographic markets such as the young adult market

Geographic Markets such as the Ghanaian market

Modern Marketing System

Each party in the system adds value

All of the factors in the system are

Major environment forces

It is the art and science of choosing target markets and

Marketing Management Orientations

The production concept

Marketing Management Orientations

The marketing concept

Marketing Management Orientations

Consumers (Want Company

Fig: Three Considerations underlying the societal marketing concept

Integrated Marketing Plan and Programme

Customer Relationship Management CRM

It is perhaps the most important concept of modern

Customer Relationship Levels and Tools

Companies build appropriate customer relationships at

Creating Customer Loyalty and Retention

The first four steps in the marketing process involve building

Creating Customer Loyalty and Retention

Even a slight drop from complete satisfaction can create an

Growing Share of Customer

Share of customer: the portion of the customers purchasing

Building Customer Equity