operate. We examine five core customer and marketplace concepts:

Marketing is engaging customers and managing profitable customer relationships.The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value and satisfaction.Hence, we define marketing as the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return.

1.2 Explain the importance of understanding the marketplace and customers and identify the five core marketplace concepts.As a first step, marketers need to understand customer needs and wants and the marketplace in which they

operate. We examine five core customer and marketplace concepts: 

(1) needs, wants, and demands;  (2) market offerings (products, services, and experiences);  (3) value and satisfaction;  (4) exchanges and relationships; and  (5) markets. 

1.Needs, wants and demands:

Human needs are states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self expression.  Wants are the form human needs take as they are shaped by culture and individual personality. Wants are shaped by one’s society and are described in terms of objects that will satisfy those needs. When backed by buying power, wants become demands . Given their wants and resources, people demand products and services with benefits that add up to the most value and satisfaction.  2.Market offerings (products, services, and experiences) Consumers’ needs and wants are fulfilled through market offerings —some combination of products, services, information, or experiences offered to a market to satisfy a need or a want. Market offerings are not limited to physical products. They also include services. Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products. These sellers suffer from marketing myopia . They are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs. They forget that a product is only a tool to solve a consumer problem.  3.Value and Satisfaction Consumers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many market offerings? Customers form expectations about the value and satisfaction that various market offerings will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. 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. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships.

4.Exchanges and Relationships Marketing occurs when people decide to satisfy their needs and wants through exchange relationships.Exchange is the act of obtaining a desired object from someone by offering something in return. In the broadest sense, the marketer tries to bring about a response to some market offering.  5.Markets 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 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. Consumers do marketing when they search for products, interact with companies to obtain information, and make their purchases. Thus, in addition to customer relationship management, today’s marketers must also deal effectively with customer-managed relationships. Marketers are no longer asking only “How can we influence our customers?” but also “How can our customers influence us?” and even “How can our customers influence each other?” 1.3 Identify the key elements of a customer value–driven marketing strategy and discuss the marketing management orientations that guide marketing strategy.We define marketing management as the art and science of choosing target markets and building profitable relationships with them. The marketing manager’s aim is to engage, keep, and grow target customers by creating, delivering, and communicating superior customer value.  1 / 4

To design a winning marketing strategy, the marketing manager must answer two important questions: What customers will we serve (what’s our target market)? and How can we serve these customers best (what’s our value proposition)?The company must first decide whom it will serve. It does this 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.The company must also decide how it will serve targeted customers—how it will differentiate and position itself in the marketplace. A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.  There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing, and societal marketing concepts.  The production concept holds that consumers will favor products that are available and highly affordable.Therefore, management should focus on improving production and distribution efficiency.  The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements.  Many companies follow the selling concept , which holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as life insurance or blood donations.The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits. Instead of a product centered make-and-sell philosophy, the marketing concept is a customer-centered sense-and-respond philosophy. The job is not to find the right customers for your product but to find the right products for your customers.  The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare.  The concept of shared value focuses on creating economic value in a way that also creates value for society.  Companies should balance three considerations in setting their marketing strategies: company profits, consumer wants, and society’s interests.The major marketing mix tools are classified into four broad groups, called the four Ps of marketing: product, price, place, and promotion. To deliver on its value proposition, the firm must first create a need-satisfying market offering (product). It must then decide how much it will charge for the offering (price) and how it will make the offering available to target consumers (place). Finally, it must engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits (promotion).

1.4 Discuss customer relationship management and identify strategies for creating value for customers and capturing value from customers in return.The first three steps in the marketing process— understanding the marketplace and customer needs, designing a customer value–driven marketing strategy, and constructing a marketing program—all lead up to the fourth and most important step: engaging customers and managing profitable customer relationships.  Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging, and growing customers.  A customer buys from the firm that offers the highest 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.

Important: They act on perceived value.

Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations.  The new marketing is customer-engagement marketing — fostering direct and continuous customer involvement in shaping brand conversations, brand experiences, and brand community. Customer-engagement marketing goes beyond just selling a brand to consumers. Its goal is to make the brand a meaningful part of consumers’ conversations and lives. Thus, marketers are now embracing not only customer relationship management but also customer managed relationships, in which customers connect with companies and with each other to help forge and share their own brand experiences. Beyond building brand loyalty and purchasing, marketers want to create customer brand advocacy , by which satisfied customers initiate favorable interactions with others about a brand. Greater consumer empowerment means that companies can no longer rely on marketing by intrusion. Instead, they must practice marketing by attraction—creating market offerings and messages that engage consumers rather than interrupt them. 2 / 4

One form of customer-engagement marketing is consumer generated marketing , by which consumers themselves play roles in shaping their own brand experiences and those of others. As consumers become more connected and empowered and as the boom in digital and social media continues, consumer brand engagement —whether invited by marketers or not—will be an increasingly important marketing force.In addition to being good at customer relationship management, marketers must also be good at partner relationship management —working with others inside and outside the company to jointly engage and bring more value to their customers. Traditionally, marketers have been charged with understanding customers and representing customer needs to different company departments. However, in today’s more connected world, every functional area in the organization can interact with customers. Rather than letting each department go its own way, firms must link all departments in the cause of creating customer value. Marketers must also partner with suppliers, channel partners, and others outside the company. Marketing channels consist of distributors, retailers, and others who connect the company to its buyers. The supply chain Author Comment describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers.Through supply chain management, companies today are strengthening their connections with partners all along the supply chain. They know that their fortunes rest on how well their entire supply chain performs against competitors’ supply chains.  The first four steps in the marketing process outlined in Figure 1.1 involve engaging customers and building customer relationships by creating and delivering superior customer value. The final step involves capturing value in return in the form of sales, market share, advocacy, and profits.  Creating Customer Loyalty and Retention Satisfied customers remain loyal and talk favorably to others about the company and its products. The aim of customer relationship management is to create not only customer satisfaction but also customer delight. Loyal customers spend more and stay around longer. Research also shows that it’s five times cheaper to keep an old customer than acquire a new one -> customer lifetime value.Growing Share of Customer  Beyond simply retaining good customers to capture customer lifetime value, good customer relationship management can help marketers increase their share of customers —the share they get of the customer’s purchasing in their product categories.  Building Customer Equity Companies want to not only create profitable customers but also “own” them for life, earn a greater share of their purchases, and capture their customer lifetime value.What Is Customer Equity?The ultimate aim of customer relationship management is to produce high customer equity. Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers.  As such, it’s a measure of the future value of the company’s customer base. Clearly, 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. Whereas sales and market share reflect the past and present, customer equity suggests the future.

1.5  Describe the major trends and forces that are changing the marketing landscape in this age of relationships.In this section, we examine the major trends and forces that are changing the marketing landscape and challenging marketing strategy. We look at four major developments: the digital age, the growth of not-for-profit marketing, rapid globalization, and the call for sustainable marketing practices.  Online, social media, and mobile marketing are having a huge impact on customer engagement. The key is to blend digital approaches with traditional marketing to create a smoothly integrated marketing strategy and mix.  Artificial intelligence (AI) has burst onto the marketing scene. AI involves machines that think and learn in a way that looks and feels human but with a lot more analytical capacity. Marketers can use AI to analyze data at lightning speed and apply the insights to engage customers in real time and help them through the buying process.  What is marketing? Simply put, marketing is the process of engaging customers and building profitable customer relationships by creating value for customers and capturing value in return.

2.1 Explain company-wide strategic planning and its four steps.This is the focus of strategic planning —the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.Marketing planning occurs at the business-unit, product, and market levels. It supports company strategic planning with more detailed plans for specific marketing opportunities. 3 / 4

A mission statement   is a statement of the organization’s purpose—what it wants to accomplish in the larger environment. A clear mission statement acts as an “invisible hand” that guides people in the organization.

2.2 Discuss how to design business portfolios and develop growth strategies.Guided by the company’s mission statement and objectives, management now must plan its business portfolio —the collection of businesses and products that make up the company. The best business portfolio   is the one that best fits the company’s strengths and weaknesses to opportunities in the environment.Business portfolio planning involves two steps. First, the company must analyze its current business portfolio and determine which businesses should receive more, less, or no investment. Second, it must shape the future portfolio by developing strategies for growth and downsizing.The major activity in strategic planning is business portfolio analysis, whereby management evaluates the products and businesses that make up the company. The company will want to put strong resources into its more profitable businesses and phase down or drop its weaker ones.Management’s first step is to identify the key businesses that make up the company, called strategic business units (SBUs).The company next assesses the attractiveness of its various SBUs and decides how much support each deserves.The purpose of strategic planning is to find ways in which the company can best use its strengths to take advantage of attractive opportunities in the environment. For this reason, most standard portfolio analysis methods evaluate SBUs on two important dimensions: the attractiveness of the SBU’s market or industry and the strength of the SBU’s position in that market or industry.A company classifies all its SBUs according to the growth-share matrix. On the vertical axis, market growth rate provides a measure of market attractiveness. On the horizontal axis, relative market share serves as a measure of company strength in the market. The growth-share matrix defines four types of SBUs: 1.Stars: They often need heavy investments to finance their rapid growth. Eventually their growth will slow down, and they will turn into cash cows.

2.Cash cows: These established and successful SBUs need less investment to hold their market share.Thus, they produce a lot of the cash that the company uses to pay its bills and support other SBUs that need investment.

3.Question marks: They require a lot of cash to hold their share, let alone increase it. Management has to think hard about which question marks it should try to build into stars and which should be phased out.

4.Dogs: They may generate enough cash to maintain themselves but do not promise to be large sources of cash.

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