Lecture 1
23/09/2019
Chapter 1 ‘’The nature of Marketing’’
What is marketing?
The marketing concept can be expressed as ‘’the achievement of corporate goals through meeting and exceeding
customer needs better than competition’’. Company activities should be focused on providing customer
satisfaction. Managers must acknowledge the importance of customer perceptions of quality in driving their
satisfaction, and of satisfaction in driving loyalty and complaint behavior. The achievement of customer
satisfaction relies on integrated effort. To achieve this, management must believe that corporate goals can be
achieved through satisfied customers.
The key components are:
1. Customer orientation Corporate activities are focused upon providing customer satisfaction
2. Integrated effort All staff accept the responsibility for creating customer satisfaction
3. Goal achievement The belief that corporate goals can be achieved through customer satisfaction
Companies can be viewed as being either:
- Inward looking Focus is on making things or providing services but with significant attention being paid
to the efficiency with which internal operations and processes conducted.
- Outward looking Starting with the customer and work backwards from an understanding of what
customers truly value.
By maintaining an outside-in focus, companies can understand what customers value and how to consistently
innovate new sources of value that keep bringing them back. Doing so efficiently ensures that value is created and
delivered at a profit to the company ultimate goal.
, ‘’Foundations of Marketing’’ by John Fahy, David Jobber, 6th edition, ISBN 9781526847348
The nature of customer value
Customer value is the key to a successful business. Generally speaking, customer value is framed as a dual
exchange concept.
- In order to be successful, firms have to create perceived value for customers. But customers too return
value to firms, both directly through purchases and indirectly through referrals and word-of-mouth
promotions
- The concept can also be considered at a social level, in terms of benefits from both individual’s and
society’s point of view
- The concept can also be considered in a semiotic sense, where cultural meanings are mediated through
consumption, and constantly reconstructed among multiple actors
Customer value is often expressed in terms of the definition below and it’s important to note that it’s customers
and not organizations that define what represents value:
Customer value = perceived benefits – perceived sacrifice
- Perceived benefits can be derived from the product, the associated service and the image of the
company. Conveying benefits is a critical marketing task and is central to positioning and branding.
- Perceived sacrifice is the total cost associated with buying the product. Not just monetary costs, but also
the time and energy involved in the purchase. Marketers need to be aware of another critical sacrifice:
the potential psychological cost of not making the right decision. Uncertainty means that people perceive
risk when purchasing.
A further key to marketing success is to ensure that the value offered exceeds that of competitors. Companies
need to avoid the mistake of setting customer expectations too high through exaggerated promotional claims
since thus can lead to dissatisfaction if performance falls short of expectations.
Expectations need to be exceeded for commercial success so that
customers are delighted with the outcome. In order to understand
the concept of customer satisfaction, the Keno model (Figure 1)
helps to separate characteristics that cause dissatisfaction,
satisfaction and delight. Three characteristics underlie the model:
- Must be Expected, taken for granted. Lack of these causes
annoyance but their presence only brings dissatisfaction up
to a neutral level.
- More is better Take satisfaction past neutral and into the
positive satisfaction range.
- Delighters Unexpected. Their absence doesn’t cause Figure 1: Creating customer satisfaction (Keno
dissatisfaction, but their presence delights the customer. model)
Four core forms of customer value:
1. Price value one of the most powerful customer motivations to purchase is because a product is
perceived as being cheaper than those offered by competitors.
2. Performance value some customers are more concerned about the product performance. What
they’re looking for are the latest features, and they are attracted to products by their functionality and
perceived quality levels.
3. Emotional value the only real difference that exists between brands is in the mind of the consumer
and this is what is known as emotional value. Emotional value is (often) created through marketing
activity.
4. Relational value another important motive to purchase is the quality of service received by the
customer. When the customer finds a good-quality service provider, they may be willing to stay with this
provider and, as the relationship builds, a high level of trust becomes established between parties.
Central to this notion is the lifetime value of a customer, which is the recognition by the company of
potential sales, profits and endorsements that come from a repeat customer who stays with the company
, ‘’Foundations of Marketing’’ by John Fahy, David Jobber, 6th edition, ISBN 9781526847348
for several years. All kinds of organizations are now becoming proficient users of customer relationship
management (CRM) systems to get to know their customers better and interact with them on a daily
basis.
The challenge for organisations is to try to become a value leader on one of these four dimensions. Those that
achieve these leadership positions tent to be significantly more successful than their peers thus is because they
have a clearly defined customer value proposition or unique selling point (USP), which is a reason why customers
return to them again and again. The key role of customer value enables us to offer the following definition of
marketing:
Marketing is the delivery of value to customers at a profit
The development of marketing
There’s no guarantee that all companies will
adopt a marketing orientation. Many firms today
are characterized by an inward-looking stance,
Figure 2: Alternative business orientations: production capabilities
where their focus is on existing products or the
internal operations of the company.
- Figure 2(a) illustrates product orientation in its crudest form. The focus is on current production
capabilities.
- Figure 2(b) shows many any other organizations are characterized by what can be describes as an
excessive sales force. They may possess good products and services but believe that the focus of
marketing should be on ensuring that customers buy these offerings.
- Figure 2(c) illustrates the failure of many businesses that were excessively product or sales focused then
led to increasing attention to the needs of customers. Customer needs and preferences change rapidly,
and close contact with them is necessary to understand these changes.
Sometimes these three orientations are presented as being chronological, with the production orientation
(1930s), followed by the sales orientation (1950s), and then the customer orientation emerging in the 1960s and
1970s. Nevertheless, all three practices are still commonplace.
The societal marketing concept holds that marketing strategy should deliver value to customers in a way that
maintains or improves both customer’s and society’s well-being.
Market-driven or outside-in firms seek to anticipate as well as identify consumer needs and build the resource
profiles necessary to meet current and anticipated future demand. In short, the differences between market-
oriented businesses and internally oriented business are summarized in Table 1.
Market-oriented businesses Internally oriented businesses
Customer concern throughout business Convenience comes first
Know customer choice criteria and match with Assume price and product performance key to most
marketing mix sales
Segment by customer differences Segment by product
Invest in market research (MR) and track market Rely on anecdotes and received wisdom
changes
Welcome change Cherish status quo
Try to understand competition Ignore competition
, ‘’Foundations of Marketing’’ by John Fahy, David Jobber, 6th edition, ISBN 9781526847348
Marketing spend regarded as an investment Marketing spend regarded as a luxury
Innovation rewarded Innovation punished
Search for latent markets Stick with the same
Be fast Why rush?
Strive for competitive advantage Happy to be me-too
Table 1: Market-oriented business versus internally oriented businesses
The scope of marketing
Value exchange that drives organizations to create some form of value and exchange it for something that they
need. Marketing is the delivery of value to customers at a profit. However, marketing is also:
- Political campaigns
- Branding exercises by universities
- Arts and media
- Social marketing & non-profit
Social marketing refers to the use of marketing techniques in order to change or maintain people’s behavior for
the benefit of the individual or society as a whole (e.g. anti-smoking, drink awareness, sexual health, exercise).
The scope of social marketing has grown significantly over the years to embrace cultural theory, critical
perspectives and systems-level theory, giving rise to a greater emphasis on the notion of social good.
Marketing and business performance
In many companies, marketing is seen as the central engine of business growth. These companies view marketing
a an investment, not a cost, and continue to spend money on marketing even during recessions when sales and
demand drop. For some though, the issue is not whether marketing works, but rather that it works too well. It has
been equated with trickery and deception, and with persuading people (often those on low incomes) to buy
products they don’t really need.
Too often, marketers justify their investments in terms of increasing customer awareness, sales volume or market
share. Doyle proposes the concept of value-based marketing, where the objective of marketing is seen as
contributing to the maximization of shareholder value. This approach helps to clarify the importance of
investment in marketing assets and helps to dissuade management from making arbitrary cuts in marketing
expenditure in times of economic difficulty.
To further explore the link between marketing activities and firm performance, a chain of marketing productivity
has been identified, which demonstrates how marketing investments eventually are reflected in firm outcomes.
The chain begins with the firm’s strategy, which is then translated into specific tactics (e.g. advertising campaign).
These campaigns have an impact on customers, which in turn feeds through market impacts and financial
impacts, and ultimately to the value of the firm.
Planning marketing activity
For marketing efforts to be effective, it is essential that a planned
approach is taken. The process by which businesses analyze the
environment and their capabilities, decide upon courses of
marketing action and implement those decisions is called
marketing planning. The following key questions need to be
asked when thinking about marketing planning decisions:
- Where are we now and how did we get there?
Business mission, marketing audit, SWOT analysis
- Where would we like to be? Marketing objectives
- How do we get there? Marketing strategy, marketing
mix decisions (organization implementation),
recommendations Figure 3: The marketing planning process (Chapter 12)
Once decisions have been made about where the organization
wants to go, the next steps involve deciding on how to get there. At a strategic
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