Chapter-1: Marketing- Creation of

Customer Value
 Learning Objectives

1.Discuss what marketing is and describe its core concepts

2.Define marketing management and explain five orientations of
marketing management
3.Discuss customer relationship management and strategies for
customer relationship management
4.Describe the importance of marketing and its challenges in the
technologically connected millennium.
 Marketing defined

‘Marketing means creating value for the customers to make a long-lasting

relationship which in turn will maximize the value (profit) of the
organization’ (Kotler and Armstrong., 2018).
‘Marketing is a managerial and social procedure by which people can get
what they need and want through creating and exchanging value with
others’ (Kotler and Armstrong, 2016).
The marketing process
Core concepts of Marketing
 Need, Want, and Demand
 Need: Need is the state of feeling deprivation.
 Want: Shaping a need with culture and personal preferences is called a want.
 Demand: Demand is the number of goods and services that an individual is willing
and able to buy at a given price in a given time period.

Marketing Myopia: Myopia theory suggests that a company can do better if they
concentrate more on customers rather than just selling their products. Not listening to the
customers will make the company’s product obsolete as another company will come up
with a more customer-oriented solution.
 Marketing Offers
Products, Services and Experiences:
Additional support by Berger Paint and Banglalink can give them competitive edge over
competitors.
 Value and Satisfaction
Customer value is the difference between the benefit that a customer can gain by using the product
and the cost of obtaining the product, in comparison to competing offers.
• The cost may include the price of the product, transportation cost, physiological and psychological
cost (cost of thinking and judging whether the product would be satisfactory or not) of the
customer.
• Companies can offer different packages to suit the diverse needs of the customers such that the
company’s offers become more value-adding to the customers.
• For example, Grameenphone has several mobile communication packages to deliver the best-
suited value according to the diverse needs of the callers.
 Exchange and Transaction
Exchange: Exchange is the way of gaining the wanted product from another party by giving another thing in
return’ (Kotler and Armstrong, 2016).
Transaction: In a transaction, two parties trade in the sense that there must be an economic exchange.
• The main difference between exchange and transaction is that in exchange there may not be any money
involved but a transaction necessarily involves money.
• Exchange and transaction processes have important roles to play in obtaining products and services.
 The market
The market is the combination of actual and potential buyers. The first group is currently
buying the product and later may buy it if the product is available to them. The current size of
the market can be measured by adding the number of people who have the need, willingness to
buy, and the ability to pay the bill charged by the seller.

Company
Supplier Marketing End users
Competitors Intermediaries

Figure 1.3: Elements of modern marketing system

 Importance of Marketing

Creation of form utility: When

fabrics is made into dress, form utility
is created.
Time utility: It means having a
An ATM machine not only provides place
product available when you want it. utility (you don’t need to visit a Bank
branch to withdraw and deposit money),
but also offers time utility as anyone can
withdraw money from an ATM 24/7. ATM
in that sense means Any Time Money.
 Importance of Marketing
Information utility: This utility is created by informing
prospective buyers that a product exists.
Place utility: It exists when a product is readily accessible to
potential customers.
Possession utility: When the customer buys a product and Advertisements can create awareness about a new
thus get the ownership of it, possession utility is created. product thus provide information utility to both
customers and marketers.

In service marketing, describing the process

of acquiring a service through
advertisement can add value to the
customers.
 Marketing Management
Target market: The group of people whom the organization is choosing to serve is called a target
market.
Marketing mix: Decisions about product/service category, price-setting mechanism, selection of
advertising and sales promotional tools and distribution policies. The combination of these activities is
called a marketing mix.
Marketing management: Ultimately two major tasks that have to be done by the marketing managers
are, selecting target customers and finding the best possible way to please those customers to build a
long-lasting and profitable relationship is called marketing management.
Marketing management is the combination of customer management and demand management.
 Marketing Management

De-marketing: Marketing to decrease demand

temporarily or permanently is called de-marketing.

Fantasy Kingdom considers Tuesday as Family

Day and offers 50% discount in entry fee to
encourage visitors to visit the park in off-peak
days (peak period is Friday and Saturday
weekly holidays). To shift and create more usage at nightly hours, Grameenphone has
special rate from 12 AM to 8 AM.
 Concepts of Marketing Management
The production concept: . The production
concept advocates that the consumers buy products
that are accessible and inexpensive. The main
focuses of the marketing managers were on large
scale production and distribution.
The product concept: The consumers buy
products that offer a better quality, superior New and advanced Lifebuoy hand
performance, and attributes- is the principle of the wash, New and improved Vim, 4G
technology by Teletalk are showing
product concept. And companies should heavily the quality improvement initiative by
the marketers
invest in continuous improvement of the existing
products.
 Concepts of Marketing Management

The Selling concept: The selling concept of marketing

entails that consumers will not buy products or services
from an organization unless the organization undertakes
large-scale promotional efforts.

Era of selling concepts. Marketers go for large

scale promotion to attract, retain and satisfy
their customers. Mobile telecommunication
companies practice selling concepts more
frequently.
 Concepts of Marketing Management

The marketing concept: The process by

which the firm offers the goods and services
as per the needs and wants of the target
market and providing the desired
gratification better than the competitors is
called the marketing concept.

Pran Masala mix was produced according to the preferences of

the users thus it is capable of answering all your quality spice
needs. Banglalink’s 1 second pulse is a relief to most mobile
users as they pay for the time they talk.
 Concepts of Marketing Management

The societal marketing concept: Delivering

superior value to the customers that will also
improve the well-being of the society is called
the societal marketing concept.

Bashundhara Tissue (above) deposits one taka per pack from sales
to the national eye foundation. Unilever encourages (above) kids to
wash hands five times a day to become bacteria-free. These
campaigns increase sales as well as contribution in social causes.
Givensee (left) donates their whole profit from sale to aged care
centers and thus contributing to the society.
 Customer Relationship Management

The way by which firms build and maintain gainful

bonding with the customer by offering greater value is
called customer relationship management.
Example: Banglalink and Robi understand this fact and
as a result, they offer 300% bonus talk time if someone
reactivates his/her old SIM (refer to Capsule 1.14).
Banglalink and Robi always welcome
Customer perceived value: is the gap between the amount their return customers with big
bonuses.
customer willing to pay and the value he/she actually
pays. This is also known as consumer surplus.
 Customer Relationship Management

Customer satisfaction: Customer satisfaction is the

difference between what the customers are expecting
from the product and the performance of the product.
Customer Loyalty and Retention: Highly satisfied
consumers become loyal to the brand; whenever they
want to buy a specific category of product, they choose a
specific company and their brands. Loyalty provides
many benefits to the organization. Satisfied/loyal Cost of FedEx’s delivery become
minimum when you need reliability, Banglalink has special offers for those
customers are less price sensitive. speed. Just relax it’s ‘FedEx’. who had been with the company for a
very long period of time. With such
offers Banglalink wants to empower
and retain their loyal clients.
 Levels and Strategies of Customer Relationship
A Basic relationship: In this category of relationship, the
organizations don’t necessarily keep relations by making frequent
calls to customers but they keep good relations with key consumers.
Full partnership: Those customers who provide significant profit to
the organization are recognized as full partners. Organizations
maintain full partner relations with them by contacting through the
mail, phone call or e-mail.
Agora’s Aponjon card and Aarong
Financial benefits: To retain the customers and to make them loyal, rewards card creates a member
community who has the chance to
organizations provide them with financial benefits. Many companies
get discounts and other privileges.
offer frequent marketing programs that reward customers who buy
frequently and in a large volume.
 Club Marketing Program: In this case, the companies create a
member group who buy more frequently and offer them special
discounts to create and retain more customer as the member of the
organization.
 Levels and Strategies of Customer Relationship
Social benefits: Companies offer social benefits to
their consumers to create member communities and
retain them for longer.
Structural ties: To build and maintain customer
relationships many firms build structural ties in
addition to monetary and social benefits. Many
companies link their customers with integrated
software. There is a popular way called Electronic Data BRAC Bank’s teacher’s loan package is not only
an honor to a community but also a business
Interchange (EDI), where companies are linked to their through social tie.
supplier or retailer.
Constructing the Right Associations with the Right
Customers

High Butterflies True Friends

Potential
Profitability Low Strangers Barnacles
Short-term Long-term
customers Customers
Projected Loyalty

Customer Relationship Groups

 Levels and Strategies of Customer Relationship
 ‘Strangers’ have a low potential for profitability for the organization with a short loyalty period. This group is not at
all profitable for the organization in the sense that there is a little chance that these customers will be with the
company for longer. The strategy for this type of customer should be to not invest anything in them.

 ‘Butterflies’ are profitable but not loyal. But the offers of the organization fit with the needs of this group. So, the
company’s strategy should be to invest in them so that the company can attract and satisfy them to make a long-term
relationship with them.

 ‘Barnacles’ are loyal but not that profitable and that’s why they are the most problematic for the company.
Organizations can try to encourage more usage of the products by Barnacles. It will be better for the company to sell
more to this group.

 ‘True Friends’ are the best for the organization as they are both loyal and profitable. Firms should invest aggressively
in them to maintain continuous relations with them.
 Example of True Friend Benefits

Grameenphone’s Star Program has specially been designed for their True Friends.