Chapter 1 Marketing In A Changing World: Creating Customer
CHAPTER 1
MARKETING IN A CHANGING WORLD: CREATING CUSTOMER
VALUE AND SATISFACTION
CHAPTER OBJECTIVES
1. Define what marketing is and discuss its core concepts.
2. Explain the relationships between customer value, satisfaction, and quality.
3. Define marketing management and understand how marketers manage demand and
build profitable customer relationships.
4. Compare the five marketing management philosophies.
5. Analyze the major challenges facing marketers headings into the next century.
CHAPTER OVERVIEW
Marketing is part of all of our lives and touches us in some way every day. To be successful each company that deals with customers on a daily basis must not only be customer-driven, but customer-obsessed. The best way to achieve this objective is to develop a sound marketing function within the organization. Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Marketing is a key factor in business success. The marketing function not only deals with the production and distribution of products and services, but it also is concerned with the ethical and social responsibility functions found in the domestic and global environment. Marketing and its core concepts, the exchange relationship, a brief description of marketing management, the five major philosophies of marketing thought and practice, marketing challenges in the new millennium, marketing’s relationship to the information technology boom and the Internet, and the new marketing landscape are the topics presented in this introductory chapter.
CHAPTER OUTLINE
1. Introduction
a. Today’s successful companies at all levels have one thing in common.
b. All successful companies are strongly customer focused and heavily committed
to marketing.
c. To be successful an organization motivates everyone in the organization to
produce superior value for their customers, leading to high levels of customer
satisfaction.
2. What is Marketing?
a. Creating customer value and satisfaction are at the very heart of modern
marketing thinking and practice.
b. A very simple definition of marketing is that it is the delivery of customer
satisfaction at a profit.
c. You already know a lot about marketing--it’s all around you.
Marketing Defined
d. Many people think of marketing only as selling and advertising.
1). Marketing is no longer “telling and selling.”
2). Marketing’s new sense is concerned with satisfying customer needs.
e. Marketing is defined as a social and managerial process by which individuals and
groups obtain what they need and want through creating and exchanging products
and value with others.
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the Issues #1 Here; Use Figure 1-1 Here; Use Power Point 1-2, 1-3 Here *****
Needs, Wants, and Demands
c. Human needs are the most basic concept underlying marketing. A human need is
a state of felt deprivation.
1). Humans have many complex needs.
a). Basic, physical needs for food, clothing, warmth, and safety.
b). Social needs for belonging and affection.
c). Individual needs for knowledge and self-expression.
2). These needs are part of the basic human makeup.
d. Another concept in marketing is human wants. A human want is the form that a
human need takes as shaped by culture and individual personality.
e. Demands are human wants that are backed by buying power.
1). Consumers view products as bundles of benefits and choose products that give
them the best bundle for their money.
2). People demand products with the benefits that add up to the most satisfaction.
f. Outstanding marketing companies go to great lengths to learn about and
understand their customer’s needs, wants, and demands.
g. The outstanding company strives to stay close to the customer.
***** Use Key Terms needs, wants, and demands Here; Use Power Point 1-3, 1-4
Here *****
Products and Services
h. A product is anything that can be offered to a market to satisfy a need or want.
A service is an activity or benefit offered for sale that is essentially intangible and
does not result in the ownership of anything.
1). The concept of product is not limited to physical objects and can include
persons, places, organizations, activities, and ideas.
2). Be careful of paying attention to the product and not the benefit being satisfied.
3). “Marketing myopia” is caused by shortsightedness or losing sight of underlying
customer needs by only focusing on existing wants.
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Value, Satisfaction, and Quality
i. Customer value is the difference between the values that the customer gains from
owning and using a product and the costs of obtaining the product. Customers do
usually judge product values and costs accurately or objectively--they act on
perceived value.
j. Customer satisfaction depends on a product’s perceived performance in delivering
value relative to a buyer’s expectations. If performance exceeds expectations, the
buyer is delighted (certainly a worthy goal of the marketing company).
1). Smart companies aim to delight customers by promising only what they can
deliver, then delivering more than they promise.
2). The aim of successful companies today is total customer satisfaction.
3). Customer delight creates an emotional affinity for a product or service, not just
a rational preference, and this creates high customer loyalty.
4). Quality has a direct impact on product or service performance. Quality is
defined in terms of customer satisfaction.
k. The term total quality management (TQM) is an approach in which all the
company’s people are involved in constantly improving the quality of products,
services, and business processes. Marketers have two major responsibilities in a
quality-centered company:
1). They must participate in forming strategies that will help the company win
through total quality excellence--they must be the customer’s watchdog.
2). Marketers must deliver marketing quality as well as production quality.
***** Key Terms customer value, customer satisfaction, and total quality
management (TQM) Here; Use Chapter Objective #2 Here; Use Discussing
the Issues #2 Here; Use Marketing At Work 1-1 Here; Use Power Point 1-3, 1-6
Here *****
Exchanges, Transactions, and Relationships
l. Marketing occurs when people decide to satisfy needs and wants through exchange.
Exchange is the act of obtaining a desired object from someone by offering some-
thing in return.
1). Exchange is only one of many ways to obtain a desired object.
2). Exchange allows a society to produce much more than it would with any
alternative system.
m. Whereas exchange is a core concept of marketing, a transaction (a trade of values
between two parties) is marketing’s unit of measurement. A transaction usually
involves at least two things of value, agreed-upon conditions, a time of agreement,
and a place of agreement. Most involve money, a response, and action.
n. Transactions in marketing are part of a larger idea of relationship marketing.
Beyond creating short-term transactions, marketers need to build long-term
relationships with valued customers, distributors, dealers, and suppliers.
Ultimately, a company wants to build a unique company asset called a marketing
network (the company and all its supporting stakeholders). The goal of
relationship marketing is to deliver long-term value to the customer and thereby
secure customer satisfaction and retention of patronage. To build this relationship
(beyond offering consistently high value and satisfaction), the marketer can:
1). Add financial benefits.
2). Add social benefits.
3). Add structural ties.
4). Seek profitable customers.
***** Use Key Terms exchange, transaction, and relationship marketing Here ; Use
Discussing the Issues #2 Here; Use Power Point 1-3, 1-7, 1-8, 1-9 Here *****
Markets
o. The concepts of exchange and relationships lead to the concept of a market. A
market is the set of actual and potential buyers of a product.
1). Originally a market was a place where buyers and sellers gathered to exchange
goods (such as a village square).
2). Economists use the term to designate a collection of buyers and sellers who
transact in a particular product class (as in the housing market).
3). Marketers see buyers as constituting a market.
4). Modern economies operate on the principle of division of labor, where each
person specializes in producing something, receives payment, and buys needed
things with this money. Thus, modern economies abound in markets.
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Marketing
p. The concept of markets brings one full circle to the concept of marketing.
1). Sellers must search for buyers, identify their needs, design good products and
services, set prices for them, promote them, and store and deliver them.
2). A modern marketing system includes all of the elements necessary to bring
buyers and sellers together.
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Point 1-12) Here *****
3. Marketing Management
a. Marketing management is defined as the analysis, planning, implementation, and
control of programs designed to create, build, and maintain beneficial exchanges
with target buyers for the purpose of achieving organizational objectives.
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Use Power Point 1-13 Here *****
Demand Management
b. Marketing management is concerned not only with finding and increasing demand,
but also with changing or even reducing it.
1). Demarketing’s aim is to reduce demand temporarily or permanently (move
traffic away from a popular tourist attraction during peak demand times).
2). In reality, marketing management is really demand management.
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Building Profitable Customer Relationships
c. Managing demand means managing customers.
1). Demand comes from new customers and repeat customers.
2). Today, besides making efforts to attract new customers, marketers are going all
out to retain and build relationships with existing customers. It costs five
times as much to attract a new customer as it does to keep a current customer
satisfied.
d. Because of changing demographics, a slow-growth economy, more sophisticated
competitors, and overcapacity in many industries, many markets and market shares
are shrinking.
e. The key to successful customer retention is superior customer value and satis-
faction.
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Point 1-13 Here *****
4. Marketing Management Philosophies
a. There are five alternative concepts under which organizations conduct their market-
ing activities: the production, product, selling, marketing, and societal marketing
concepts.
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Point 1-14 Here *****
The Production Concept
b. The production concept holds that consumers will favor products that are available
and highly affordable and that management should, therefore, focus on improving
production and distribution efficiency. This is one of the oldest philosophies that
guides sellers.
c. The production concept is useful when:
1). Demand for a product exceeds the supply.
2). The product’s cost is too high and improved productivity is needed to bring it
down.
d. The risk with this concept is in focusing company operations too narrowly. Do
not ignore the desires of the market.
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The Product Concept
e. The product concept states that consumers will favor products that offer the most
quality, performance, and features. The organization should, therefore,
devote its energy to making continuous product improvements.
1). Some manufacturers mistakenly believe that if they “build a better mousetrap,”
consumers will beat a path to their door just for their product.
2). The product concept can also lead to “marketing myopia,” the failure to see the
challenges being presented by other products.
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The Selling Concept
f. Many organizations follow the selling concept. The selling concept is the idea that
consumers will not buy enough of the organization’s products unless the organiza-
tion undertakes a large-scale selling and promotion effort.
1). This concept is typically practiced with unsought goods (those that buyers do
not normally think of buying).
2). To be successful with this concept, the organization must be good at tracking
down the interested buyer and selling them on product benefits.
3). Industries that use this concept usually have overcapacity. Their aim is to sell
what they make rather than make what will sell in the market.
4). There are not only high risks with this approach but low satisfaction by
customers.
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The Marketing Concept
g. The marketing concept holds that achieving organizational goals depends on
determining the needs and wants of target markets and delivering the desired
satisfactions more effectively and efficiently than competitors.
h. The marketing and selling concepts are often confused. The primary differences
are:
1). The selling concept takes an “inside-out” perspective (focuses on existing
products and uses heavy promotion and selling efforts).
2). The marketing concept takes an “outside-in” perspective (focuses on customer
needs, values, and satisfactions).
i. Many companies claim to adopt the marketing concept but really do not unless they
commit to market-focused and customer-driven philosophies.
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1-14 and 1-15 Here *****
The Societal Marketing Concept
j. The societal marketing concept holds that the organization should determine the
needs, wants, and interests of target markets. It should then deliver the desired
satisfactions more effectively and efficiently than competitors in a way that
maintains or improves the consumer’s and the society’s well-being.
1). The societal marketing concept is the newest of the marketing philosophies.
2). It questions whether the pure marketing concept is adequate given the wide
variety of societal problems and ills.
3). According to the societal marketing concept, the pure marketing concept
overlooks possible conflicts between short-run consumer wants and long-