Summary Foundations of Marketing
Chapter 1 Marketing
What is marketing?
Marketing: The process by which companies engage customers, build strong customer relationships,
and create customer value in order to capture value from customers in return.
Goals:
Attract new customers by promising superior value
Keep and grow current customers by delivering satisfaction
The marketing process for creating and capturing customer value:
1. Understand the marketplace and customer needs and wants.
2. Design a customer value driven marketing strategy.
3. Construct an integrated marketing program that delivers superior value.
4. Engage customers, build profitable relationships, and create customer delight.
5. Capture value from customers in return to create profits and customer equity.
Understanding the marketplace and customer needs
As a first step, marketers need to understand customer needs and wants and the marketplace in
which they operate. There are 5 core customer and marketplace concepts:
1. Customer needs, wants and demands
Needs: States of felt deprivation. Physical needs: food, clothing, warmth and safety. Social needs:
belonging and affection. Individual needs: knowledge and self-expression. Marketers did not create
these needs, they are a basic part of the human makeup.
Wants: The form human needs take as they are shaped by culture and individual personality. Ex. An
American needs food but want a Big Mac.
Demands: Human want that are backed by buying power.
2. Market offerings (products, services and experiences)
Marketing offerings: Some combination of products, services, information or experiences offered to
a market to satisfy a need or want.
Marketing offerings are not limited to physical products. They also include services, activities,
persons, places, organizations, information 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 product.
By orchestrating several services and products, companies create brand experiences for consumers.
Ex. Disneyland.
3. Customer value and satisfaction
Customers form expectations about the value and satisfaction that various market offerings will
deliver and buy accordingly. Marketers must be careful to set the right level of expectations. If they
set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they set
expectations too high, buyers will be disappointed.
4. Exchanges and relationships
Exchange: The act of obtaining a desired object from someone by offering something in return.
Marketing consists of actions taken to create, maintain and grow desirable exchange relationships
with target audiences involving a product, service, idea or other object. Companies want to build
strong relationships by consistently delivering superior customer value.
1
, 5. Markets
Market: The set of all actual and potential buyers of a product or service.
These buyers share a particular need or want that can be satisfied through exchange relationships.
Marketing means managing markets to bring about profitable customer relationships. However,
creating these relationships takes work.
Marketing is not only carried out by sellers, but buyers also carry out marketing. Consumers market
when they search for products, interact with companies to obtain information and make their
purchases.
The figure above shows the main elements in a marketing system. Each party in the system adds
value for the next level. The arrows represent relationships that must be developed and managed.
Designing a customer value-driven marketing strategy
Marketing management: The art and science of choosing target markets and building profitable
relationships with them. It’s aim is to engage, keep and grow target customers by creating, delivering
and communicating superior customer value.
To design a winning marketing strategy, the marketing manager must answer two important
questions: What customers will we serve? and How can we serve these customers best?
Selecting customers to serve
A company decides whom it will service by dividing the market into segments of customers (market
segmentation) and selecting which segments it will go after (target marketing). Simply put,
marketing management is customer management and demand management.
Choosing a value proposition
The company must also decide how it will differentiate and position itself in the marketplace.
Value proposition: the set of benefits or values a brand promises to deliver to consumers to satisfy
their needs. Ex. Facebook helps you “connect and share with the people in your life”.
Marketing management orientations
There are 5 concepts under which organizations design and carry out their marketing strategies:
1. The production concept
The idea that consumers will favour products that are available and highly affordable; therefore, the
organization should focus on improving production and distribution efficiency.
2. The product concept
The idea that consumers will favour products that offer the most quality, performance and features;
therefore, the organization should devote its energy to making continuous product improvements.
2
, 3. The selling concept
The idea that consumers will not buy enough of the firm’s products unless the firm undertakes a
large-scale selling and promotion effort.
4. The marketing concept
A philosophy in which achieving organizational goals depends on knowing the needs and wants of
target markets and delivering the desired satisfactions better than competitors do.
The job is not to find the right customers for your product, but the right product for your customers.
5. The societal marketing concept
The idea that a company’s marketing decisions should consider consumers’ wants, the company’s
requirements, consumers’ long-run interests, and society’s long-run interests.
Preparing an Integrated Marketing Plan and Program
The marketer develops an integrated marketing program that will actually deliver the intended value
to target customers. It consists of the firm’s marketing mix, the set of marketing tools the firm uses
to implement its marketing strategy. The major marketing mix tools are classified into four broad
groups:
Product: the firm must first create a need-satisfying market offering.
Price: it must then decide how much it will charge for the offering.
Place: how it will make the offering available to target consumers.
Promotion: the firm must engage target consumers, communicate about the offering, and
persuade consumers of the offer’s merits.
Engaging Customers and Managing Customer Relationship
Customer relationship management: the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction.
Customer-perceived value: the customer’s evaluation of the difference between all the benefits and
all the costs of a market offering relative to those of competing offers.
Customer satisfaction: the extent to which a product’s perceived performance matches a buyer’s
expectations.
Customer-engagement marketing: making the brand a meaningful part of consumers’ conversations
and lives by fostering direct and continuous customer involvement in shaping brand conversations,
experiences, and community.
Consumer-generated marketing: brand exchanges created by consumers themselves – both invited
and uninvited- by which consumers are playing an increasing role in shaping their own brand
experiences and those of other consumers.
Partner relationship management: working closely with partners in other company departments and
outside the company to jointly bring greater value to customers.
Capturing Value from Customers
Good customer relationship management creates customer satisfaction which in turn creates
customer loyalty.
Customer lifetime value: the value of the entire stream of purchases a customer makes over a
lifetime of patronage.
Share of customer: the portion of the customer’s purchasing that a company gets in its product
categories.
3
,Customer equity: the total combined customer lifetime values of all of the company’s current and
potential customers. The more loyal the customers, the higher the customer equity.
Building the right relationship with the right customers:
The Changing Marketing Landscape
There are 5 major trends and forces that are changing the marketing landscape and challenging
marketing strategy:
1. The digital age: digital and social media marketing: using digital marketing tools such as
Websites, social media, mobile apps and ads, online video, email, and blogs to engage
consumers anywhere, at any time, via their digital divices.
2. The changing economic environment: after the great recession people bought less.
3. The growth of not-for-profit marketing: marketing has become a major part of the strategies
of not-for-profit organizations, such as college, hospitals, zoos, etc.
4. Rapid globalization: marketers must look at the ways in which they relate with the broader
world around them.
5. Sustainable marketing: the call for more environmental and social responsibility; corporate
ethics and social responsibility have become hot topics for almost every business.
An expanded model of the marketing process:
4
, Chapter 2 Company and Marketing Strategy
Company-wide Strategic Planning: Defining Marketing’s Role
Strategic planning: the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities.
Companies usually prepare annual plans, long-range plans and strategic plans. The annual and long-
range plans deal with the company’s current businesses and how to keep them going. The strategic
plan involves adapting the firm to take advantage of opportunities in its constantly changing
environment.
Steps in strategic planning:
Defining a market-oriented mission:
mission statement: a statement of the organization’s purpose – what it wants to accomplish
in the larger environment. A mission statement shouldn’t be product-oriented but market-
oriented.
Setting company objectives and goals: the company needs to turn its broad mission into
detailed supporting objectives for each level of management.
Designing the business portfolio:
business portfolio: the collection of businesses and products that make up the company.
Portfolio analysis: the process by which management evaluates the products and businesses
that make up the company.
Management’s first step is to identify the key businesses that make up the company called, strategic
business units (SBU’s).
Using the Boston Consulting Group Approach, a company classifies all its SBUs according to the
growth-share matrix: a portfolio-planning method that evaluates a company’s SBUs in terms of
market growth rate and relative market share. There are 4 types of SBUs:
1. Stars: stars are high-growth, high-share businesses or products. They often need heavy
investments to finance their rapid growth.
2. Cash cows: cash cows are low-growth, high-share businesses or products. These established
and successful SBUs need less investment to hold their market share.
3. Question marks: question marks are low-share business units in high-growth markets. They
require a lot of cash to hold their share or increase it.
4. Dogs: dogs are low-growth, low-share businesses and products. They may generate enough
cash to maintain themselves but do not promise to be large sources of cash.
Product/market expansion grid: a portfolio-planning tool for identifying company growth
opportunities through market penetration, market development, product development, or
diversification:
Market penetration: company growth by increasing sales of current products to current
market segments without changing the product.
Market development: company growth by identifying and developing new market segments
for current company products.
Product development: company growth by offering modified or new products to current
market segments.
Diversification: company growth through starting up or acquiring businesses outside the
company’s current products and markets.
5
Chapter 1 Marketing
What is marketing?
Marketing: The process by which companies engage customers, build strong customer relationships,
and create customer value in order to capture value from customers in return.
Goals:
Attract new customers by promising superior value
Keep and grow current customers by delivering satisfaction
The marketing process for creating and capturing customer value:
1. Understand the marketplace and customer needs and wants.
2. Design a customer value driven marketing strategy.
3. Construct an integrated marketing program that delivers superior value.
4. Engage customers, build profitable relationships, and create customer delight.
5. Capture value from customers in return to create profits and customer equity.
Understanding the marketplace and customer needs
As a first step, marketers need to understand customer needs and wants and the marketplace in
which they operate. There are 5 core customer and marketplace concepts:
1. Customer needs, wants and demands
Needs: States of felt deprivation. Physical needs: food, clothing, warmth and safety. Social needs:
belonging and affection. Individual needs: knowledge and self-expression. Marketers did not create
these needs, they are a basic part of the human makeup.
Wants: The form human needs take as they are shaped by culture and individual personality. Ex. An
American needs food but want a Big Mac.
Demands: Human want that are backed by buying power.
2. Market offerings (products, services and experiences)
Marketing offerings: Some combination of products, services, information or experiences offered to
a market to satisfy a need or want.
Marketing offerings are not limited to physical products. They also include services, activities,
persons, places, organizations, information 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 product.
By orchestrating several services and products, companies create brand experiences for consumers.
Ex. Disneyland.
3. Customer value and satisfaction
Customers form expectations about the value and satisfaction that various market offerings will
deliver and buy accordingly. Marketers must be careful to set the right level of expectations. If they
set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they set
expectations too high, buyers will be disappointed.
4. Exchanges and relationships
Exchange: The act of obtaining a desired object from someone by offering something in return.
Marketing consists of actions taken to create, maintain and grow desirable exchange relationships
with target audiences involving a product, service, idea or other object. Companies want to build
strong relationships by consistently delivering superior customer value.
1
, 5. Markets
Market: The set of all actual and potential buyers of a product or service.
These buyers share a particular need or want that can be satisfied through exchange relationships.
Marketing means managing markets to bring about profitable customer relationships. However,
creating these relationships takes work.
Marketing is not only carried out by sellers, but buyers also carry out marketing. Consumers market
when they search for products, interact with companies to obtain information and make their
purchases.
The figure above shows the main elements in a marketing system. Each party in the system adds
value for the next level. The arrows represent relationships that must be developed and managed.
Designing a customer value-driven marketing strategy
Marketing management: The art and science of choosing target markets and building profitable
relationships with them. It’s aim is to engage, keep and grow target customers by creating, delivering
and communicating superior customer value.
To design a winning marketing strategy, the marketing manager must answer two important
questions: What customers will we serve? and How can we serve these customers best?
Selecting customers to serve
A company decides whom it will service by dividing the market into segments of customers (market
segmentation) and selecting which segments it will go after (target marketing). Simply put,
marketing management is customer management and demand management.
Choosing a value proposition
The company must also decide how it will differentiate and position itself in the marketplace.
Value proposition: the set of benefits or values a brand promises to deliver to consumers to satisfy
their needs. Ex. Facebook helps you “connect and share with the people in your life”.
Marketing management orientations
There are 5 concepts under which organizations design and carry out their marketing strategies:
1. The production concept
The idea that consumers will favour products that are available and highly affordable; therefore, the
organization should focus on improving production and distribution efficiency.
2. The product concept
The idea that consumers will favour products that offer the most quality, performance and features;
therefore, the organization should devote its energy to making continuous product improvements.
2
, 3. The selling concept
The idea that consumers will not buy enough of the firm’s products unless the firm undertakes a
large-scale selling and promotion effort.
4. The marketing concept
A philosophy in which achieving organizational goals depends on knowing the needs and wants of
target markets and delivering the desired satisfactions better than competitors do.
The job is not to find the right customers for your product, but the right product for your customers.
5. The societal marketing concept
The idea that a company’s marketing decisions should consider consumers’ wants, the company’s
requirements, consumers’ long-run interests, and society’s long-run interests.
Preparing an Integrated Marketing Plan and Program
The marketer develops an integrated marketing program that will actually deliver the intended value
to target customers. It consists of the firm’s marketing mix, the set of marketing tools the firm uses
to implement its marketing strategy. The major marketing mix tools are classified into four broad
groups:
Product: the firm must first create a need-satisfying market offering.
Price: it must then decide how much it will charge for the offering.
Place: how it will make the offering available to target consumers.
Promotion: the firm must engage target consumers, communicate about the offering, and
persuade consumers of the offer’s merits.
Engaging Customers and Managing Customer Relationship
Customer relationship management: the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction.
Customer-perceived value: the customer’s evaluation of the difference between all the benefits and
all the costs of a market offering relative to those of competing offers.
Customer satisfaction: the extent to which a product’s perceived performance matches a buyer’s
expectations.
Customer-engagement marketing: making the brand a meaningful part of consumers’ conversations
and lives by fostering direct and continuous customer involvement in shaping brand conversations,
experiences, and community.
Consumer-generated marketing: brand exchanges created by consumers themselves – both invited
and uninvited- by which consumers are playing an increasing role in shaping their own brand
experiences and those of other consumers.
Partner relationship management: working closely with partners in other company departments and
outside the company to jointly bring greater value to customers.
Capturing Value from Customers
Good customer relationship management creates customer satisfaction which in turn creates
customer loyalty.
Customer lifetime value: the value of the entire stream of purchases a customer makes over a
lifetime of patronage.
Share of customer: the portion of the customer’s purchasing that a company gets in its product
categories.
3
,Customer equity: the total combined customer lifetime values of all of the company’s current and
potential customers. The more loyal the customers, the higher the customer equity.
Building the right relationship with the right customers:
The Changing Marketing Landscape
There are 5 major trends and forces that are changing the marketing landscape and challenging
marketing strategy:
1. The digital age: digital and social media marketing: using digital marketing tools such as
Websites, social media, mobile apps and ads, online video, email, and blogs to engage
consumers anywhere, at any time, via their digital divices.
2. The changing economic environment: after the great recession people bought less.
3. The growth of not-for-profit marketing: marketing has become a major part of the strategies
of not-for-profit organizations, such as college, hospitals, zoos, etc.
4. Rapid globalization: marketers must look at the ways in which they relate with the broader
world around them.
5. Sustainable marketing: the call for more environmental and social responsibility; corporate
ethics and social responsibility have become hot topics for almost every business.
An expanded model of the marketing process:
4
, Chapter 2 Company and Marketing Strategy
Company-wide Strategic Planning: Defining Marketing’s Role
Strategic planning: the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities.
Companies usually prepare annual plans, long-range plans and strategic plans. The annual and long-
range plans deal with the company’s current businesses and how to keep them going. The strategic
plan involves adapting the firm to take advantage of opportunities in its constantly changing
environment.
Steps in strategic planning:
Defining a market-oriented mission:
mission statement: a statement of the organization’s purpose – what it wants to accomplish
in the larger environment. A mission statement shouldn’t be product-oriented but market-
oriented.
Setting company objectives and goals: the company needs to turn its broad mission into
detailed supporting objectives for each level of management.
Designing the business portfolio:
business portfolio: the collection of businesses and products that make up the company.
Portfolio analysis: the process by which management evaluates the products and businesses
that make up the company.
Management’s first step is to identify the key businesses that make up the company called, strategic
business units (SBU’s).
Using the Boston Consulting Group Approach, a company classifies all its SBUs according to the
growth-share matrix: a portfolio-planning method that evaluates a company’s SBUs in terms of
market growth rate and relative market share. There are 4 types of SBUs:
1. Stars: stars are high-growth, high-share businesses or products. They often need heavy
investments to finance their rapid growth.
2. Cash cows: cash cows are low-growth, high-share businesses or products. These established
and successful SBUs need less investment to hold their market share.
3. Question marks: question marks are low-share business units in high-growth markets. They
require a lot of cash to hold their share or increase it.
4. Dogs: dogs are low-growth, low-share businesses and products. They may generate enough
cash to maintain themselves but do not promise to be large sources of cash.
Product/market expansion grid: a portfolio-planning tool for identifying company growth
opportunities through market penetration, market development, product development, or
diversification:
Market penetration: company growth by increasing sales of current products to current
market segments without changing the product.
Market development: company growth by identifying and developing new market segments
for current company products.
Product development: company growth by offering modified or new products to current
market segments.
Diversification: company growth through starting up or acquiring businesses outside the
company’s current products and markets.
5
