The Principles of Marketing
Chapter 1 (page 2-36)
Objective 1 What is marketing?
Marketing is a process by which companies create value for customers and build strong customer
relationships to capture value from customers in return. Marketing is managing profitable customer
relationships.
Today, marketing must be understood not in the old sense of making a sale - “telling and selling” - but in the
new sense of satisfying customer needs. If the marketer understands consumer needs; develops products
that provide superior customer value; and prices, distributes, and promotes them effectively, these products
will sell easily.
Some examples of companies who perform excellent marketing:
• Wal-Mart which has become the world’s largest retailer—and the world’s largest company—by
delivering on its promise, “Save money. Live Better.”
• At Disney theme parks, “imaginers” work wonders in their quest to “make a dream come true
today.”
• Apple fulfills its motto to “Think Different” with dazzling, customer-driven innovation that captures
customer imaginations and loyalty. Its wildly successful iPod grabs more than 70 percent of the
music player market; its iTunes music store captures nearly 90 percent of the song download
business.
The marketing process is very simple. The first four steps are to create value for customers and the last step is
to capture value from customers:
Objective 2 Understanding the marketplace and customer needs? (step 1)
As a first step, marketers need to understand customer needs and wants and the marketplace in which they
operate. We examine five core customer and marketplace concepts:
1. Needs, wants and demands: the needs (states of deprivation; physical: food, clothing, social:
belonging and affection, individual: knowledge and self-expression), the wants (form that needs take
as they are shaped by culture and individual personality) and the demands (wants backing by buying
power).
2. Market offerings (products, services, and experiences): some combination of products, services,
information, or experiences offered to a market to satisfy. Marketing myopia is focusing only on
existing wants and losing sight of underlying consumer needs. They forget that a product is only a
tool to solve a customer problem.
3. Value and satisfaction: customers form expectations about the value and satisfaction that various
market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about
their good experiences. Dissatisfied customers often switch to competitors and disparage the
product to others.
4. Exchanges and relationships: exchange is the act of obtaining a desired object from someone by
offering something in return. The response may be more than simply buying or trading products and
services.
5. Markets: the set of actual and potential buyers of a product or service. These buyers share a need or
want that can be satisfied through exchange relationships.
, Objective 3.1 Design a customer-driven marketing strategy (step 2)
Marketing management is the art and science of choosing target markets and building profitable
relationships with them. To design a winning marketing strategy, a manager must ask two questions:
• What customers will we serve?
This is done by market segmentation (refers to dividing the markets into segments of customers)
and target marketing (refers to which segments to go after). Simply put,
• How can we best serve these customers? (What’s our value proposition?)
The value proposition is the set of benefits or values a company promises to deliver to customers to
satisfy their needs. It differentiates and positions a company in the marketplace.
Market management wants to design strategies that will build profitable relationships with target consumers.
There are five alternative concepts under which organisations design and carry out their marketing strategies:
• The production concept: the idea that consumers will favour products that are available or highly
affordable. Management should focus on improving production and distribution efficiency.
• The product concept: the idea that consumers will favour products that offer the most quality,
performance, and features. Organization should therefore devote its energy to making continuous
product improvements. However, focusing only on the company’s products can also lead to
marketing myopia.
• The selling product: the idea that consumers will not buy enough of the firm’s products unless it
undertakes a large scale selling and promotion effort. Such aggressive selling, however, carries high
risks. It focuses on creating sales transactions rather than on building long-term, profitable customer
relationships.
• The marketing product: 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.
• The societal marketing concept: the idea that a company should make good marketing decisions by
considering consumers’ wants, the company’s
requirements, consumers’ long-term interests,
and society’s long-run interests. As seen in the
picture, companies should balance three
considerations in setting their marketing
strategies.
Objective 3.2 Preparing an integrated marketing plan
and program (step 3)
The marketing program builds customer relationships by transforming the marketing strategy into action. It
consists of the firm’s marketing mix: the set of tools (four P’s: product, price, place & promotion) the firm
uses to implement its marketing strategy. The firm must blend each marketing mix tool into a comprehensive
integrated marketing program, which is a comprehensive plan that communicates and delivers the intended
value to chosen customers.
Objective 4.1 Building customer’s relationships (step 4)
The fourth and most major step is building profitable customer relationships: Customer Relationship
Management (CRM). CRM is the overall process of building and maintaining profitable customer relationships
by delivering superior customer value and satisfaction.
There are two relationship building blocks:
• Customer-perceived value: the difference between total customer value (volgens de customer) and
total customer cost.
• Satisfaction: The extent to which a product’s perceived performance matches a buyer’s
expectations.
Companies can build customer relationships at many levels, depending on the nature of the target market.
One can have a basic relationship (low-margin customers, e.g. through the use of a website or brand-building
advertising) or a full partnership (e.g. retailers). Marketers can use specific marketing tools to develop
Chapter 1 (page 2-36)
Objective 1 What is marketing?
Marketing is a process by which companies create value for customers and build strong customer
relationships to capture value from customers in return. Marketing is managing profitable customer
relationships.
Today, marketing must be understood not in the old sense of making a sale - “telling and selling” - but in the
new sense of satisfying customer needs. If the marketer understands consumer needs; develops products
that provide superior customer value; and prices, distributes, and promotes them effectively, these products
will sell easily.
Some examples of companies who perform excellent marketing:
• Wal-Mart which has become the world’s largest retailer—and the world’s largest company—by
delivering on its promise, “Save money. Live Better.”
• At Disney theme parks, “imaginers” work wonders in their quest to “make a dream come true
today.”
• Apple fulfills its motto to “Think Different” with dazzling, customer-driven innovation that captures
customer imaginations and loyalty. Its wildly successful iPod grabs more than 70 percent of the
music player market; its iTunes music store captures nearly 90 percent of the song download
business.
The marketing process is very simple. The first four steps are to create value for customers and the last step is
to capture value from customers:
Objective 2 Understanding the marketplace and customer needs? (step 1)
As a first step, marketers need to understand customer needs and wants and the marketplace in which they
operate. We examine five core customer and marketplace concepts:
1. Needs, wants and demands: the needs (states of deprivation; physical: food, clothing, social:
belonging and affection, individual: knowledge and self-expression), the wants (form that needs take
as they are shaped by culture and individual personality) and the demands (wants backing by buying
power).
2. Market offerings (products, services, and experiences): some combination of products, services,
information, or experiences offered to a market to satisfy. Marketing myopia is focusing only on
existing wants and losing sight of underlying consumer needs. They forget that a product is only a
tool to solve a customer problem.
3. Value and satisfaction: customers form expectations about the value and satisfaction that various
market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about
their good experiences. Dissatisfied customers often switch to competitors and disparage the
product to others.
4. Exchanges and relationships: exchange is the act of obtaining a desired object from someone by
offering something in return. The response may be more than simply buying or trading products and
services.
5. Markets: the set of actual and potential buyers of a product or service. These buyers share a need or
want that can be satisfied through exchange relationships.
, Objective 3.1 Design a customer-driven marketing strategy (step 2)
Marketing management is the art and science of choosing target markets and building profitable
relationships with them. To design a winning marketing strategy, a manager must ask two questions:
• What customers will we serve?
This is done by market segmentation (refers to dividing the markets into segments of customers)
and target marketing (refers to which segments to go after). Simply put,
• How can we best serve these customers? (What’s our value proposition?)
The value proposition is the set of benefits or values a company promises to deliver to customers to
satisfy their needs. It differentiates and positions a company in the marketplace.
Market management wants to design strategies that will build profitable relationships with target consumers.
There are five alternative concepts under which organisations design and carry out their marketing strategies:
• The production concept: the idea that consumers will favour products that are available or highly
affordable. Management should focus on improving production and distribution efficiency.
• The product concept: the idea that consumers will favour products that offer the most quality,
performance, and features. Organization should therefore devote its energy to making continuous
product improvements. However, focusing only on the company’s products can also lead to
marketing myopia.
• The selling product: the idea that consumers will not buy enough of the firm’s products unless it
undertakes a large scale selling and promotion effort. Such aggressive selling, however, carries high
risks. It focuses on creating sales transactions rather than on building long-term, profitable customer
relationships.
• The marketing product: 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.
• The societal marketing concept: the idea that a company should make good marketing decisions by
considering consumers’ wants, the company’s
requirements, consumers’ long-term interests,
and society’s long-run interests. As seen in the
picture, companies should balance three
considerations in setting their marketing
strategies.
Objective 3.2 Preparing an integrated marketing plan
and program (step 3)
The marketing program builds customer relationships by transforming the marketing strategy into action. It
consists of the firm’s marketing mix: the set of tools (four P’s: product, price, place & promotion) the firm
uses to implement its marketing strategy. The firm must blend each marketing mix tool into a comprehensive
integrated marketing program, which is a comprehensive plan that communicates and delivers the intended
value to chosen customers.
Objective 4.1 Building customer’s relationships (step 4)
The fourth and most major step is building profitable customer relationships: Customer Relationship
Management (CRM). CRM is the overall process of building and maintaining profitable customer relationships
by delivering superior customer value and satisfaction.
There are two relationship building blocks:
• Customer-perceived value: the difference between total customer value (volgens de customer) and
total customer cost.
• Satisfaction: The extent to which a product’s perceived performance matches a buyer’s
expectations.
Companies can build customer relationships at many levels, depending on the nature of the target market.
One can have a basic relationship (low-margin customers, e.g. through the use of a website or brand-building
advertising) or a full partnership (e.g. retailers). Marketers can use specific marketing tools to develop
