Customer Value Proposition Range Rover

Major environmental forces

Arrows represent relationships that must be developed and managed to create customer value and profitable customer relationships.

Although we normally think of marketing as being carried on by sellers, buyers also carry on marketing. Consumers do marketing when they search for products and interact with companies and obtain information and make their purchases. In fact, today's digital technologies, from Web sites and blogs to cell phones and other wireless devices, have empowered consumers and made marketing a truly interactive affair. Marketers are no longer asking only "How can we reach our customers?" but also "How should our customers reach us?" and even "How can our customers reach each other?"

^ Figure 1.2 shows the main elements in a marketing system. Marketing involves serving a market of final consumers in the face of competitors. The company and competitors research the market and interact with consumers to understand their needs. Then they create and send their market offerings and messages to consumers, either directly or through marketing intermediaries. All of the parties in the system are affected by major environmental forces (demographic, economic, physical, technological, political/legal, and social/cultural).

Each party in the system adds value for the next level. All of the arrows represent relationships that must be developed and managed. Thus, a company's success at building profitable relationships depends not only on its own actions but also on how well the entire system serves the needs of final consumers. A retailer like Tesco can't meet its goal of lower prices unless its suppliers provide merchandise at low costs. And a carmaker like Aston Martin can't deliver high quality to car buyers unless its dealers provide outstanding sales and service.

Author I Now that the company Comment | fu||y understands consumers and the marketplace, it must decide which customers it will serve and how it will bring them value.

Marketing management

The art and science of choosing target markets and building profitable relationships with them.

Designing a Customer-Driven

Marketing Strategy (pp 32-36)

Once it fully understands consumers and the marketplace, marketing management can design a customer-driven 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 find, attract, keep, and grow target customers by creating, delivering, and communicating superior customer value.

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)? We will discuss these marketing strategy concepts briefly here, and then look at them in more detail in the next chapter.

Selecting Customers to Serve

The company must first decide who 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). Some people think of marketing management as finding as many customers as possible and increasing demand. But marketing managers know that they cannot serve all customers in every way. By trying to serve all customers, they may not serve any customers well. Instead, the company wants to select only customers that it can serve well and profitably. For example, Fortnum & Mason targets affluent shoppers with upscale product lines; Poundstretcher stores target families with more modest means.

Some marketers may even seek fewer customers and reduced demand. In the United States, for example, Yosemite National Park is overcrowded in the summer and many power companies have trouble meeting demand during peak usage periods. In these and other cases of excess demand, companies may practice demarketing to reduce the number of customers or to shift their demand temporarily or permanently. For instance, many power companies now sponsor programs that help customers reduce their power usage through peak-load control devices, better energy use monitoring, and heating system tune-up incentives. Progress Energy, a privately owned energy company in the southeastern United States, even offers an Energy Manager on Loan program that provides school systems and other public customers with a cost-free on-site energy expert to help them find energy-savings opportunities.

Ultimately, marketing managers must decide which customers they want to target and on the level, timing, and nature of their demand. Simply put, marketing management is customer management and demand management.

Choosing a Value Proposition

The company must also decide how it will serve targeted customers—how it will differentiate and position itself in the marketplace. A company's value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. German automaker BMW promises "the ultimate driving machine," whereas the British-made A Land Rover lets you "Go Beyond"—to "get a taste of adventure, whatever your tastes." And with cell phones, Finland's Nokia is "Connecting People—anyone, anywhere," whereas with the iPhone from Apple, the well-known digital-products marketer, "Touching is believing."

Such value propositions differentiate one brand from another. They answer the customer's question "Why should I buy your brand rather than a competitor's?" Companies must design strong value propositions that give them the greatest advantage in their target markets.

Value propositions: Land Rover lets you "Go Beyond"—to "get a taste of adventure, whatever your tastes."

Production concept

The idea that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency.

Marketing Management Orientations

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? Very often, these interests conflict.

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

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. This concept is one of the oldest orientations that guides sellers.

The production concept is still a useful philosophy in some situations. However, the production concept can lead to marketing myopia. Companies adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objective—satisfying customer needs and building customer relationships.

Value propositions: Land Rover lets you "Go Beyond"—to "get a taste of adventure, whatever your tastes."

Product concept

The idea that consumers will favor products that offer the most quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements.

Selling concept

The idea that that consumers will not buy enough of the firm's products unless It undertakes a large-scale selling and promotion effort.

Marketing concept

The marketing management philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.

The Selling and Marketing

Concepts Contrasted

The selling concept takes ari inside-out view that focuses on existing products and heavy selling. The aim is to sell what the company makes rather than making what the customer wants.

The Product Concept

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.

Product quality and improvement are important parts of most marketing strategies. However, focusing only on the company's products can also lead to marketing myopia. For example, some manufacturers believe that if they can "build a better mousetrap, the world will beat a path to their door." But they are often rudely shocked. Buyers may be looking for a better solution to a mouse problem, but not necessarily for a better mousetrap. The better solution might be a chemical spray, an exterminating service, or something else that works even better than a mousetrap. Furthermore, a better mousetrap will not sell unless the manufacturer designs, packages, and prices it attractively; places it in convenient distribution channels; brings it to the attention of people who need it; and convinces buyers that it is a better product.

The Selling Concept

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 insurance. These industries must be good at tracking down prospects and selling them on product benefits.

Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships. The aim often is to sell what the company makes rather than making what the market wants. It assumes that customers who are coaxed into buying the product will like it. Or, if they don't like it, they will possibly forget their disappointment and buy it again later. These are usually poor assumptions.

The Marketing Concept

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.

Figure 1.3 contrasts the selling concept and the marketing concept. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company's existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquest—getting short-term sales with little concern about who buys or why.

In contrast, the marketing concept takes an outside-in perspective. As Herb Kelleher, Southwest Airlines' colorful CEO, puts it, "We don't have a marketing department; we have a customer department." The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers. In turn, it yields profits by creating lasting relationships with the right customers based on customer value and satisfaction.

Starting point

Focus

Means

Ends

The selling concept

The marketing concept

Factory

Existing products

Selling and promoting

Profits through sales volume

Profits through sales volume

Market

Customer needs

Integrated marketing

Profits through customer satisfaction

The marketing concept takes an outside-in view that focuses on satisfying customer needs as a path to profits. As Southwest Airlines' CEO puts it, "We don't have a marketing department, we have a customer department."

Customer-driving marketing: Even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as cell phones, personal digital assistants, notebook computers, ¡Pods, and digital cameras. Marketers must often understand customer needs even better than the customers themselves do.

Societal marketing concept

The Idea that a company's marketing decisions should consider consumers' wants, the company's requirements, consumers' long-run Interests, and society's iong-run Interests.

Implementing the marketing concept often means more than simply responding to customers' stated desires and obvious needs. Customer-driven companies research current customers deeply to learn about their desires, gather new product and service ideas, and test proposed product improvements. Such customer-driven marketing usually works well when a clear need exists and when customers know what they want.

In many cases, however, customers don't know what they want or even what is possible. For example, even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as cell phones, notebook computers, iPods, digital cameras, 24-hour online buying, and satellite navigation systems in their cars? Such situations call for A customer-driving marketing— understanding customer needs even better than customers themselves do and creating products and services that meet existing and latent needs, now and in the future. As an executive at 3M, a maker of consumer and industrial products, puts it, "Our goal is to lead customers where they want to go before they know where they want to go."

The Societal Marketing Concept

The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the immediate needs and wants of target markets always doing what's best for consumers in the long run? The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer's and society's well-being.

Consider today's flourishing bottled water industry. You may view bottled water companies as offering a convenient, tasty, and healthy product. Its packaging suggests "green" images of pristine lakes and snow-capped mountains. Yet making, filling, and shipping billions of plastic bottles generates huge amounts of carbon dioxide emissions that contribute substantially to global warming. Further, the plastic bottles pose a substantial recycling and solid waste disposal problem. Thus, in satisfying short-term consumer wants, the highly successful bottled water industry may be causing environmental problems that run against society's long-run interests.10

As Figure 1.4 shows, companies should balance three considerations in setting their marketing strategies: company profits, consumer wants, and society's interests.

The Considerations Underlying the Societal Marketing Concept

Society

(Human welfare)

Johnson & Johnson's Credo stresses honesty, integrity, and putting people before profits. Doing what's right benefits both consumers and the company.

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