Chapter 1: Creating and capturing customer value

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David Rodgers
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1 Chapter 1: Creating and capturing customer value What is Marketing? Marketing is managing customer relationships. Marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others. Marketing is the process by which companies create value for customers and build strong customer relationships in return. 06:44 25/09/2012 1

The Marketing Process Marketing is a five stage process: Understanding the marketplace and customers needs and wants Design a customer driven marketing strategy Construct an integrated

2 The Marketing Process Marketing is a five stage process: Understanding the marketplace and customers needs and wants Design a customer driven marketing strategy Construct an integrated marketing MIX (program) that delivers superior value Build profitable relationships and create customer delight Capture value from customers to create customer delight 06:44 25/09/2012 2

3 An expanded model of the marketing process Creating value for customers and build customer relationships Capture value from customers in return Understanding the marketplace and customer needs and wants Research customer market place Managing marketing information and customer data Design a customer driven marketing strategy Select customers to serve: market segmentation and targeting Decide on a value preposition Construct an integrated marketing program: MARKETING MIX 4Ps Product and service design Pricing Distribution: managing demand and supply chain Build profitable relationships and create customer delight Create satisfied customers Capture customer lifetime value Increase share of market and share of customer Promotion: communicating customer value 07:07 25/09/2012 3

core concepts 1 st concept: customer needs

Wants are the form human needs take as they

4 Understanding the market place and customer needs and wants It involve considering five core concepts 1 st concept: customer needs and wants: Needs are states of felt deprivation. They include physical needs for food, warmth, and safety, social need s for belongings. Wants are the form human needs take as they are shaped by culture and individual personality. For example, eating fata and meat in ElAdha Feast. 07:07 25/09/2012 4

It is important for markets to pay attention to pay attention to t he benefits behind offerings and the way they will

5 2 ND Concept: Market offerings: Product, services and experiences Customer needs and wants are fulfilled through market offerings. They include products, services, ideas, information, organizations. It is important for markets to pay attention to pay attention to t he benefits behind offerings and the way they will fulfill needs and wants 3 rd concept: customer value and satisfaction Two building blocks for developing and managing customer relationships 06:44 25/09/2012 5

Marketing is about actions taken to build and maintain desirable exchange relationships with target audience involving a product, service idea or other object.

6 4 th concept: exchanges and relationships: Marketing occurs when people decide to satisfy needs and wants through exchange relationships. Exchange is the act of obtaining a desired object from someone by offering something in return. Marketing is about actions taken to build and maintain desirable exchange relationships with target audience involving a product, service idea or other object. 5 th concept: Market The market is a set of actual and potential buyers of a product. 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. This needs work which represented in searching for buyers, identify their needs design good market offerings, set prices for them, promote them and store and deliver them. Activities such as consumer research, product development, communication, distribution, pricing and service are core marketing activities. 06:44 25/09/2012 6

Designing a customer driven marketing strategy To design a customer driven marketing

And how we can serve these customers best?

is known as market segmentation 2 nd : Choosing a value preposition The company value

7 Designing a customer driven marketing strategy To design a customer driven marketing strategy : The company must first decide who we will serve? And how we can serve these customers best? This requires discussing three main concepts 1 st : selecting customers to serve This is known as market segmentation 2 nd : Choosing a value preposition The company value preposition is these set of benefits or values it promises to deliver to customers to satisfy their needs 3 rd :marketing management orientations: 06:44 25/09/2012 7

Marketing Management Orientation Marketing management wants to design strategies that will build profitable relationships with target consumers.

8 Marketing Management Orientation Marketing management wants to design strategies that will build profitable relationships with target consumers. But what philosophy should guide these marketing strategies? What weight should be given to the interests of customers, the organization, and society? Different philosophies are: The production philosophy: holds that consumers will favor products that are available and highly affordable. Therefore management should always focus on improving production and distribution efficiency. The product philosophy: holds that consumers will favor products that offer the most in quality, performance and innovative features. Under this concept market strategy works to achieve continuous product development. The selling philosophy: holds that consumers will not buy enough of the firms products unless it undertakes a large- scale selling and promotion efforts. The marketing philosophy: holds that achieving organizational goals depend on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. The societal marketing philosophy: holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumers' and society well being. Thus it considers three parties; society, company, consumers 06:44 25/09/2012 8

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10 Preparing an Integrated marketing plan (mix)= 4Ps It intends to deliver the intended value to target customers. The marketing program builds customer relationships by transforming the marketing strategy into action. 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 P s. Product Price Place Promotion 06:44 25/09/

11 An effective marketing program blends all of the marketing mix elements into an integrated marketing program designed to achieve the marketing objectives by delivering value to customers. However, the 4Ps concept takes the seller points of view, not the buyers view. From the buyers perspective, the four Ps might be better described as the four Cs. 4Ps Product Price Place Promotion 4Cs Customer solution Customer cost convenience communication 06:44 25/09/

Building Customer Relationships Understanding the market place and customer needs, designing a customer driven marketing strategy and constructing marketing programs all lead up to the fourth and

12 Building Customer Relationships Understanding the market place and customer needs, designing a customer driven marketing strategy and constructing marketing programs all lead up to the fourth and most important step: building profitable customer relationships. Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Customer value: Attracting and retaining customers can be a difficult task. Customers often face a bewildering array of products and services from which to choose. A customer buys from the firm that offers the highest customerperceived value (the difference between all the benefits and all the cists of a market offering relative to those of competing offers). Customer-perceived value: customer s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offer Customer satisfaction: Depends on the products perceived performance relative to a buyer s expectations. If perceptions is larger than expectations then the customer is satisfied. However, if expectations are bigger than perceptions then the customer is dissatisfied. 06:44 25/09/

13 Capturing customer value The outcomes of creating customer value is : Customer loyalty and retention: Losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage, which is known as customer lifetime value. Share of market and share of customer: the share producers get of the customers purchasing in their product categories. Customer equity: The total combined customer lifetime values of all of the company s customers. the more loyal the firm s profitable customers, the higher its customer equity. Customer equity may be a better measure of a firm s performance than current sales or market share. 06:44 25/09/

Then which customers should the company acquire and retain?

14 Building the right relationships with the right customers Companies should view customers as assets that need to be managed and maximized. But not all customers, not even all loyal customers are good investment. Then which customers should the company acquire and retain? The company can classify customers according to their potential profitability and manage its relationships with them accordingly. 06:44 25/09/