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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.
م 06:44 25/09/2012 1 Principles of marketing
Dr. Rasha ElNaggar
The Marketing Process
Marketing is a five stage process:
Understanding the marketplace and customers
needs and wants
Build profitable
relationships and create customer
delight
Construct an integrated marketing
MIX (program)
that delivers superior
value
Design a customer
driven marketing strategy
Capture value from customers to create customer delight
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An expanded model of the marketing process
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Create satisfied customers
Capture customer lifetime value
Increase share of market and share of
customer
Understanding the
marketplace and
customer needs and
wants
Select customers to
serve: market
segmentation and
targeting
Managing marketing
information and
customer data
Research customer
market place
Build profitable
relationships and
create customer
delight
Construct an
integrated
marketing program:
MARKETING MIX
4Ps
Design a customer
driven marketing
strategy
Decide on a value
preposition
Product and service
design
Pricing
Promotion:
communicating
customer value
Distribution:
managing demand
and supply chain
Creating value for customers and build customer relationships Capture value from customers
in return
Understanding the market place and customer needs and wants
It involve considering five core concepts
1st 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.
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2ND 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
3rd concept: customer value and satisfaction Two building blocks for developing and managing customer relationships
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4th 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.
5th 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.
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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
1st: selecting customers to serve
This is known as market segmentation
2nd: 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
3rd:marketing management orientations:
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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
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Dr. Rasha ElNaggar
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
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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 .
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4Cs 4Ps
Customer solution Product
Customer cost Price
convenience Place
communication Promotion
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 customer-perceived 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.
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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.
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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.
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