Chapter no 01
Defining Marketing and the marketing process
Marketing defined
Marketing: the process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return.
Marketing isn’t just selling or advertising. Those are only small parts of it.
Modern marketing focuses on understanding and satisfying customer needs.
If companies do this well—by creating valuable products, pricing them right, and promoting
them effectively—the products sell easily.
Peter Drucker said, “The aim of marketing is to make selling unnecessary.”
Marketing involves a five-step process:
1. Understanding customers.
2. Creating customer value.
3. Building relationships.
4. Capturing value in return (profits, loyalty).
The first four steps focus on customers; the last one focuses on company gain.
Customer Needs, Wants, and Demands
• Needs: Basic human requirements like food, shelter, belonging, knowledge, and
self-expression.
• Wants: Needs shaped by culture and personality (e.g., Americans want burgers;
others want rice or yams).
• Demands: Wants backed by purchasing power.
Marketers study what customers need, want, and can afford, using research and data to
understand them deeply.
Market Offerings—Products, Services, and Experiences
Market offerings are the products, services, information, or experiences offered to
satisfy needs and wants.
They include not only physical goods but also services (like airlines, hotels, banks) and
even ideas (like safety campaigns).
Marketing Myopia happens when sellers focus too much on their products instead of
customer benefits.
Example: A company selling drill bits should realize customers actually want holes, not the
bits themselves.
Good marketers focus on creating experiences—like Disney offering a magical world
rather than just an amusement park.
Customer Value and Satisfaction
Customers compare products based on the value and satisfaction they expect.
If expectations are too low, few buy.
If expectations are too high, they get disappointed.
So marketers must promise the right level and then deliver it.
Value and satisfaction form the foundation for long-term customer relationships.
Exchanges and Relationships
Marketing occurs through exchange—getting something by offering something in return.
It’s not limited to buying; for example, a politician seeks votes or a church seeks members.
Marketing aims to build strong, lasting exchange relationships by consistently delivering
superior value.
Markets
A market is all actual and potential buyers of a product or service.
Marketing means managing these markets to build profitable customer relationships.
Sellers find buyers, identify their needs, and design suitable offerings.
Consumers, too, engage in marketing when they research and choose what to buy.
Modern marketing is two-way due to digital tools—customers now influence companies
and even each other.
Company success depends on how well the entire marketing system (suppliers,
intermediaries, competitors) serves customers.
Marketing Management
Marketing management is about choosing target markets and building profitable
relationships.
Two main questions guide this process:
1. What customers will we serve? (Target market)
2. How will we serve them best? (Value proposition)
Selecting Customers to Serve
Companies can’t serve everyone.
They must divide the market into groups (market segmentation) and choose which ones to
serve (target marketing).
Serving everyone leads to weak performance; focusing on the right customers leads to profit.
Thus, marketing management is both customer and demand management.
Choosing a Value Proposition
A value proposition is the set of benefits a brand promises to deliver.
It answers: Why should I buy from you and not someone else?
Examples:
• BMW: “The ultimate driving machine.”
• Facebook: “Connect and share with the people in your life.”
A strong value proposition gives a brand an advantage in its target market.
Marketing Management Orientations
Five main concepts guide marketing strategies:
1. Production Concept – Focus on producing affordable, available products. Risk:
ignoring customer needs.
2. Product Concept – Focus on making quality and improved products. Risk:
marketing myopia (ignoring what customers actually want).
3. Selling Concept – Focus on heavy selling and promotion, often for unsought goods
like insurance. Risk: short-term sales, weak relationships.
4. Marketing Concept – Focus on finding products that fit customer needs better than
competitors. Starts with customer needs, not company products.
5. Societal Marketing Concept – Focus on satisfying customer needs while also
benefiting society and the environment for the long term.
Customer Relationship Management (CRM)
CRM is the process of building and maintaining profitable relationships by delivering
superior value and satisfaction.
It covers acquiring, engaging, and growing customers.
Key elements:
• Customer Value: Customers buy from firms offering the most perceived value
(benefits minus costs).
• Customer Satisfaction: Depends on how product performance matches
expectations.
o Below expectations → dissatisfaction
o Meets expectations → satisfaction
o Exceeds expectations → delight
Delighted customers stay loyal and promote the brand to others.
Smart companies promise realistically but deliver more than expected.
Customer Engagement Marketing
This means making brands an active part of customers’ lives—encouraging them to
interact, share experiences, and feel involved in the brand community.
Capturing Value from Customers
After creating customer value, the company captures value in return through sales,
loyalty, and profits.
1. Customer Loyalty and Retention:
Satisfied customers stay loyal and spread positive word of mouth.
Even a small drop in satisfaction can cause a big loss in loyalty.
It’s cheaper to keep existing customers than to find new ones.
2. Share of Customer:
Companies aim to increase the portion of a customer’s spending in their category (e.g.,
banks want “share of wallet,” restaurants want “share of stomach”).
3. Customer Equity:
This is the total lifetime value of all customers—a measure of future profitability.
Loyal, satisfied customers raise customer equity and strengthen a company’s long-term
success.
