CHAPTER 1
Customer-Driven Strategic Marketing
TEACHING RESOURCES QUICK REFERENCE GUIDE
Resource
Location
Purpose and Perspective
IRM, p. 1
Lecture Outline
IRM, p. 2
Discussion Starters
IRM, p. 9
Class Exercise
IRM, p. 11
Chapter Quiz
IRM, p. 13
Answers to Issues for Discussion and Review
IRM, p. 14
Answers to Developing Your Marketing Plan
IRM, p. 17
Comments on Video Case 1
IRM, p. 18
PowerPoint Slides
Instructor’s website
Note: Additional resources may be found on the accompanying student and instructor websites at
www.cengagebrain.com.
PURPOSE AND PERSPECTIVE
The purpose of this chapter is to give students an overview of customer-driven strategic marketing and
provide a general framework for studying the field of marketing. First, the chapter presents a definition of
marketing and explores each element of the definition in detail. This exploration defines key marketing
concepts including customers, target market, the marketing mix, the exchange process, value-driven
marketing, relationship marketing, and the marketing environment. Since an understanding of the
marketing concept and market orientation is fundamental, several pages have been devoted to this area,
including its basic components, evolution, and implementation. The chapter also takes a look at the
important concept of managing customer relationships, which customers are demanding more than ever.
Finally, it examines the importance of marketing in our increasingly global society.
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LECTURE OUTLINE
I. Defining Marketing
A. Marketing is the process of creating, pricing, distributing, and promoting goods, services, and
ideas to facilitate satisfying exchange relationships with customers and to develop and maintain
favorable relationships with stakeholders in a dynamic environment.
B. This definition is consistent with that of the American Marketing Association which defines
marketing as “the activity, set of institutions, and processes for creating, communicating,
delivering, and exchanging offerings that have value for customers, clients, partners, and society at
large.”
C. The marketing mix variables are often viewed as controllable because they can be modified.
1. However, economic conditions, competitive structure, and government regulations may
prevent a manager from adjusting prices frequently or significantly.
D. Marketing Focuses on Customers
1. As the purchasers of the products that organizations develop, price, distribute, and promote,
customers are the focal point of all marketing activities.
2. Organizations have to define their products not as what the companies make or produce but
as what they do to satisfy customers.
3. The essence of marketing is to develop satisfying exchanges from which both customers and
marketers benefit.
a. The customer expects to gain a reward or benefit greater than the costs incurred in a
marketing transaction.
b. The marketer expects to gain something of value in return, generally the price charged
for the product.
4. Organizations generally focus their marketing efforts on a specific group of customers,
called a target market.
a. Marketing managers may define a target market as a vast number of people or a
relatively small group.
II. Marketing Deals with Products, Price, Distribution, and Promotion
A. Marketing is more than simply advertising or selling a product; it involves developing and
managing a product that will satisfy customer needs.
B. Marketing focuses on making the product available in the right place and at a price acceptable to
buyers, and communicating information to help customers determine if the product will satisfy their
needs.
C. Marketers refer to these activities—product, pricing, distribution, and promotion—as the
marketing mix.
1. A primary goal of a marketing manager is to create and maintain the right mix of these
elements to satisfy customers’ needs for a general product type.
2. Marketing managers strive to develop a marketing mix that matches the needs of customers
in the target market.
a. Marketing managers must constantly monitor the competition and adapt their product,
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Chapter 1: Customer-Driven Strategic Marketing
pricing, distribution, and promotion decisions to create long-term success.
3. Before marketers can develop a marketing mix, they must collect in-depth, up–to-date
information about customer needs.
a. Such information might include data about the age, income, ethnicity, gender, and
educational level of people in the target market, their preferences for product features,
their attitudes toward competitors’ products, and the frequency with which they use
the product.
D. The Product Variable
1. The product variable of the marketing mix deals with researching customers’ needs and
wants and designing a product that satisfies them.
2. A product can be a good, a service, or an idea.
a. Good—a physical entity that customers can touch
b. Service—the application of human and mechanical efforts to people or objects to
provide intangible benefits to customers
c. Idea—concept, philosophy, image, or issue
3. The product variable also involves creating or modifying brand names and packaging and
may include decisions regarding warranty and repair services.
4. Product variable decisions and activities are important because they are directly involved
with creating products that meet customers’ needs and wants.
5. To maintain an assortment of products that helps an organization achieve its goals, marketers
must develop new products, modify existing ones, and eliminate those that no longer satisfy
enough buyers or that yield unacceptable profits.
E. The Price Variable
1. The price variable relates to decisions and actions associated with establishing pricing
objectives and policies and determining product prices.
2. Price is a critical component of the marketing mix because customers are concerned about
the value obtained in an exchange.
3. Price is often used as a competitive tool.
4. Pricing is the most flexible marketing-mix variable and can be changed very quickly.
F. The Distribution Variable
1. In dealing with the distribution variable, a marketing manager makes products available in
the quantities desired to as many target-market customers as possible, keeping total
inventory, transportation, and storage costs as low as possible.
2. A marketing manager may select and motivate intermediaries, establish and maintain
inventory control procedures, and develop and manage transportation and storage.
3. The advent of the Internet and electronic commerce has dramatically influenced the
distribution variable.
G. The Promotion Variable
1. The promotion variable relates to activities used to inform individuals or groups about an
organization and its products.
2. Promotion aims to increase public awareness of the organization and of new or existing
products.
3. Promotional activities also can educate customers about product features or urge people to
take a particular stance on a political or social issue.
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4. Promotion can help to sustain interest in established products that have been available for
decades.
5. Many companies are using the Internet to communicate information about themselves and
their products.
III. Marketing Creates Value
A. Value is a customer’s subjective assessment of benefits relative to costs in determining the worth of
a product (customer value = customer benefits – customer costs).
1. Customer benefits include anything a buyer receives in an exchange.
2. Customer costs include anything a buyer must give up to obtain the benefits the product
provides.
a. The most obvious cost is the monetary price of the product, but nonmonetary costs can
be equally important in a customer’s determination of value.
b. Two nonmonetary costs are the time and effort customers expend to find and purchase
desired products.
3. The process people use to determine value may vary widely.
4. In developing marketing activities, it is important to recognize that customers receive
benefits based on their experiences.
5. The marketing mix can be used to enhance perceptions of value.
6. A product that demonstrates value usually has a feature or an enhancement that provides
benefits.
B. Marketing Builds Relationships with Customers and Other Stakeholders
1. Individuals and organizations engage in marketing to facilitate exchanges, the provision or
transfer of goods, services, or ideas in return for something of value.
2. Any product (good, service, or even idea) may be involved in a marketing exchange.
3. For an exchange to take place, four conditions must exist:
a. Two or more individuals, groups, or organizations must participate, and each must
possess something of value desired by the other party.
b. The exchange should provide a benefit or satisfaction to both parties involved in the
transaction.
c. Each party must have confidence in the promise of the “something of value” held by
the other.
d. To build trust, the parties to the exchange must meet expectations.
4. Figure 1.2 depicts the exchange process.
5. An exchange will not necessarily take place just because these conditions exist; marketing
activities can occur even without an actual transaction or sale.
6. Marketing activities should attempt to create and maintain satisfying exchange relationships.
7. To maintain an exchange relationship, buyers must be satisfied with the good, service, or
idea obtained, and sellers must be satisfied with the financial reward or something else of
value received.
8. Marketers are also concerned with building relationships with relevant stakeholders.
a. Stakeholders include those constituents who have a “stake,” or claim, in some aspect
of a company’s products, operations, markets, industry, and outcomes; these may
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Chapter 1: Customer-Driven Strategic Marketing
include customers, employees, shareholders, suppliers, governments, communities,
competitors, and many others.
IV. Marketing Occurs in a Dynamic Environment
A. The marketing environment, which includes competitive, economic, political, legal and
regulatory, technological, and sociocultural forces, surrounds the customer and affects the
marketing mix.
1. The effects of these forces on buyers and sellers can be dramatic and difficult to predict.
2. The forces of the marketing environment affect a marketers’ ability to facilitate value-driven
marketing exchanges in three general ways:
a. They influence customers by affecting their lifestyles, standards of living, and
preferences and needs for products.
b. Marketing environment forces help to determine whether and how a marketing
manager can perform certain marketing activities.
c. Environmental forces may affect a marketing manager’s decisions and actions by
influencing buyers’ reactions to the firm’s marketing mix.
3. Marketing environment forces can fluctuate quickly and dramatically.
4. Changes in the marketing environment produce uncertainty for marketers and at times hurt
marketing efforts, but they also create opportunities.
5. Marketers who are alert to changes in environmental forces not only can adjust to and
influence these changes but can also capitalize on the opportunities such changes provide.
6. Marketing mix variables—product, price, distribution, and promotion—are factors over
which an organization has control; the forces of the environment, however, are subject to far
less control.
V. Understanding the Marketing Concept
A. According to the marketing concept, an organization should try to provide products that satisfy
customers’ needs through a coordinated set of activities that also allows the organization to achieve
its goals.
B. Customer satisfaction is the major focus of the marketing concept.
C. To implement the marketing concept, an organization focuses on customer analysis, competitor
analysis, and integration of the firm’s resources to provide customer value and satisfaction, as well
as to generate long-term profits.
1. The firm also must continue to alter, adapt, and develop products to keep pace with
customers’ changing desires and preferences.
D. The marketing concept emphasizes that marketing begins and ends with customers.
1. Research has found a positive association between customer satisfaction and shareholder
value, and high levels of customer satisfaction also tend to attract and retain high-quality
employees and managers.
E. The marketing concept is not a second definition of marketing.
1. It is a management philosophy guiding an organization’s overall activities.
F. The marketing concept is a strategic approach to achieve objectives.
1. A firm that adopts the marketing concept must satisfy not only its customers’ objectives but
also its own, or it will not stay in business long.
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G. It is important for marketers to consider not only their current buyers’ needs but also the long-term
needs of society.
1. Striving to satisfy customers’ desires by sacrificing society’s long-term welfare is
unacceptable.
H. Evolution of the Marketing Concept
1. There have always been companies that embraced the marketing concept.
2. However, businesspeople have not always believed that the best way to make sales and
profits is to satisfy customers.
I. The Production Orientation
1. During the second half of the nineteenth century, the Industrial Revolution was in full swing
in the United States.
2. With new technology and new ways of using labor, products poured into the marketplace,
where demand for manufactured goods was strong.
J. The Sales Orientation
1. During the first half of the twentieth century, competition increased and businesses realized
that they would have to focus more on selling products to buyers.
2. Businesses viewed sales as the major means of increasing profits, and this period came to
have a sales orientation.
3. Businesspeople believed that the most important marketing activities were personal selling,
advertising, and distribution.
K. The Market Orientation
1. By the early 1950s, some businesspeople began to recognize that they must first determine
what customers want and then produce those products rather than making the products first
and then trying to persuade customers that they need them.
2. A market orientation requires the “organization-wide generation of market intelligence
pertaining to current and future customer needs, dissemination of the intelligence across
departments, and organization-wide responsiveness to it.”
3. Today, businesses want to satisfy customers and build meaningful, long-term buyer-seller
relationships.
L. Implementing the Marketing Concept
1. To implement the marketing concept, a market-oriented organization must accept some
general conditions and recognize and deal with several problems.
2. Management must establish an information system to discover customers’ real needs, and
then use the information to create satisfying products.
3. An information system is usually expensive.
4. To satisfy customers’ objectives as well as its own, a company also must coordinate all its
activities.
a. This may require restructuring its internal operations, including production, marketing,
and other business functions.
b. This requires the firm to adapt to a changing external environment and predict major
changes.
VI. Customer Relationship Management
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Chapter 1: Customer-Driven Strategic Marketing
A. Customer relationship management (CRM) focuses on using information about customers to
create marketing strategies that develop and sustain desirable customer relationships.
B. Achieving the full profit potential of each customer relationship should be the fundamental goal of
every marketing strategy.
1. At the most basic level, profits can be obtained through relationships in the following ways:
a. By acquiring new customers
b. By enhancing the profitability of existing customers
c. By extending the duration of customer relationships
2. Implementing the marketing concept means optimizing the exchange relationship, otherwise
known as the relationship between a company’s financial investment in customer
relationships and the return generated by customers’ loyalty and retention.
C. The term relationship marketing refers to “long-term, mutually beneficial arrangements in which
both the buyer and seller focus on value enhancement through the creation of more satisfying
exchanges.”
1. It continually deepens the buyer’s trust in the company, and as the customer’s confidence
grows, this, in turn increases the firm’s understanding of the customer’s needs.
2. It strives to build satisfying exchange relationships between buyers and sellers by gathering
useful data at all customer contact points and analyzing that data to better understand
customers’ needs, desires, and habits.
3. It focuses on building and using databases and leveraging technologies to identify strategies
and methods that will maximize the lifetime value of each desirable customer to the
company.
4. To build the long-term customer relationships, marketers are increasingly turning to
marketing research and information technology.
5. By increasing customer value over time, organizations try to retain and increase long-term
profitability through customer loyalty, which results from increasing customer value.
6. Through the use of Internet-based marketing strategies (e-marketing), companies can
personalize customer relationships on a nearly one-on-one basis.
7. Customer relationship management provides a strategic bridge between information
technology and marketing strategies aimed at long-term relationships.
VII. The Importance of Marketing in Our Global Economy
A. Marketing Costs Consume a Sizable Portion of Buyers’ Dollars
1. Marketing activities are necessary to provide satisfying goods and services.
a. These activities cost money.
B. Marketing Is Used in Nonprofit Organizations
1. Marketing is also important in organizations working to achieve goals other than ordinary
business objectives such as profit.
2. Government agencies at the federal, state, and local levels engage in marketing activities to
fulfill missions and goals.
3. In the private sector, nonprofit organizations also employ marketing activities to create,
price, distribute, and promote programs that benefit particular segments of society.
C. Marketing Is Important to Businesses and the Economy
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1. Businesses must engage in marketing to survive and grow, and marketing activities are
needed to reach customers and provide products.
a. Financial resources generated from sales are necessary for the operations of a firm and
to provide financial returns to investors.
2. Marketing activities help produce the profits that are essential to the survival of individual
businesses.
3. Marketing helps create a successful economy and contribute to the well-being of society.
D. Marketing Fuels Our Global Economy
1. Marketing is necessary to advance a global economy.
2. Advances in technology, falling political and economic barriers, and the universal desire for
a higher standard of living have made marketing across national borders commonplace while
stimulating global economic growth.
E. Marketing Knowledge Enhances Consumer Awareness
1. Marketing activities help improve the quality of customers’ lives.
2. Understanding how marketing activities work helps us to be better consumers and increases
our ability to maximize value from our purchases.
F. Marketing Connects People through Technology
1. Technology, especially computers and telecommunications, helps marketers to understand
and satisfy more customers than ever before.
2. The Internet allows companies to provide tremendous amounts of information about their
products to consumers and to interact with them through e-mails and websites.
G. Socially Responsible Marketing: Promoting the Welfare of Customers and Stakeholders
1. The success of our economic system depends on marketers whose values promote trust and
cooperative relationships in which customers are proactively engaged.
2. The public is increasingly insisting that social responsibility and ethical concerns be
considered in planning and implementing marketing activities.
3. In the area of the natural environment, companies are increasingly embracing the notion of
green marketing, which is a strategic process involving stakeholder assessment to create
meaningful long-term relationships with customers while maintaining, supporting, and
enhancing the natural environment.
4. By addressing concerns about the impact of marketing on society, a firm can contribute to
society through socially responsible activities as well as increase its financial performance.
H. Marketing Offers Many Exciting Career Prospects
1. Marketing positions are among the most secure positions because of the need to manage
customer relationships.
2. Marketing knowledge and skills are valuable assets no matter what the field.
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Chapter 1: Customer-Driven Strategic Marketing
DISCUSSION STARTERS
Discussion Starter 1: Customer Service
ASK: How many of you have ever experienced rejection or disappointment in a customer service
experience?
Discussion Starter 2: The Marketing Mix
(This discussion starter refers to the Entrepreneurship in Marketing box: Protein Bar Excels at the Right
Target Market and Marketing Mix, located in the text.)
ASK: Who is the target market for the Protein Bar?
ASK: Describe how the Protein Bar developed an effective marketing mix for its target market.
Discussion Starter 3: The Exchange
10 Chapter 1: Customer–Driven Strategic Marketing
ASK: Why is the exchange at the core of all marketing transactions? Why is it crucial to think marketing
is applicable to exchanges beyond buyers and sellers?
Students should understand that marketing is about the exchange of values between two parties to arrive
Discussion Starter 4: Socially Responsible Marketing
ASK: How do you feel marketing benefits society?
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Chapter 1: Customer-Driven Strategic Marketing
CLASS EXERCISES
Class Exercise 1: Great and poor customer service experiences (from your students’
perspectives)
The marketing concept, a firm’s market orientation, and customer relationship management all
revolve around putting the customer at the center of strategic marketing. The illustrations on pages 1
and 4 depict this customer-centric viewpoint. With the customer at the center, the heart of strategic
marketing revolves around providing outstanding customer service. Every beginning student in
marketing will have experience with both superior and inferior customer service.
Ask each student to take 5-10 minutes to write about two recent customer service experiences, one
highlighting excellent customer service and one highlighting poor customer service.
To conclude this exercise, the instructor may want to ask for volunteers to read their tales of
customer service Joy (positive) and tales of Woe (negative). If there is no time, simply ask the
students to hand them in. For the second option, the instructor may want to tabulate the information
before the next class in order to better discuss the results with students. Instructors may want to read
a selection of the particularly vivid experiences.
Addendum: To underscore the logic behind the power of negative customer testimonials, you can
introduce the Rule of 66. On average, when a customer has a particularly bad experience, they will
tell on average 11 people, and those 11 people will tell an additional 5 people each. Thus 11 times 5
equals 55, and adding those 11 people who were told the original bad experience makes 66 people.
Class Exercise 2: Taste Test
Conduct a blind taste test using Coke, Diet Coke, Coke Zero, and Mexican Coke. Disguise the brands
by pouring the beverages into unmarked cups, and have all the students guess which is which. Keep
track of everyone’s guesses and then report back the results.
Special note: Some students will not be able to accurately distinguish between the soft drinks. This
underscores the importance of branding and promotion, in which image can trump taste.
Class Exercise 3: Bottled Water
In 2014, bottled water consumption within the U.S. was around 34 gallons per person. As a beverage
category, bottled water represents more than $150 billion in global annual sales. This beverage category
has grown at an impressive rate. The success of this product represents a success for marketing. In this
exercise we will examine the reasons for its success.
1. Describe the target market for bottled water. How does bottled water create value for target market
consumers?
2. Examine the marketing mix elements. Discuss the product, price, distribution, and promotion for
this product category. How did each element contribute to the success of this product category?
3. Bottled water has come under attack from environmental groups for the amount of waste created by
the bottles. How do you feel this concern about packaging waste will impact sales? How could the
12 Chapter 1: Customer–Driven Strategic Marketing
marketing mix elements be used to address this concern?
Class Exercise 4: The Target Market is You
This group exercise examines the vast array of products for which college students represent the
primary target market.
Step 1: Brainstorm with the group a list of products that specifically target college students.
Step 2: Next to each product list any other applicable target markets.
Step 3: Evaluate each product and discuss whether college students will continue to use this
good/service after college.
Step 4: Choose one good/service and define its marketing mix.
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Chapter 1: Customer-Driven Strategic Marketing
CHAPTER QUIZ
1. Coca-Cola is aiming its Diet Coke Plus (with vitamins and minerals) at health-conscious customers.
These health-conscious customers represent Coke’s
a. audience.
b. sales alternative.
c. business group.
d. target market.
e. focus group.
2. Customer relationship management (CRM) focuses on using __________ about customers to create
marketing strategies that develop and sustain desirable customer relationships.
a. internal communication
b. information
c. purchasing power insights
d. marketing mix knowledge
e. implementation knowledge
3. Marketers use the term __________ to describe establishing long-term, mutually satisfying buyer-
seller relationships.
a. relationship marketing
b. customer service
c. marketing management
d. exchange
e. utility
4. _______________ is an organizationwide commitment to researching and responding to customer
needs.
a. Marketing concept
b. Relationship marketing
c. Marketing orientation
d. Sales orientation
e. Production orientation
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ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW
1. What is marketing? How did you define the term before you read this chapter?
2. What is the focus of all marketing activities? Why?
3. What are the four variables of the marketing mix? Why are these elements known as
variables?
4. What is value? How can marketers use the marketing mix to enhance the perception of value?
5. What conditions must exist before a marketing exchange can occur? Describe a recent
exchange in which you participated.
6. What are the forces in the marketing environment? How much control does a marketing
manager have over these forces?
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Chapter 1: Customer-Driven Strategic Marketing
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The marketing environment, which involves uncontrollable factors that exist outside of the
marketing mix, includes competitive, economic, political, legal and regulatory, technological, and
sociocultural forces. These forces can have a swift and strong effect on an organization, but
marketers have little control over them. Marketers must be aware of environmental forces, adapt to
them, and capitalize on the opportunities they provide.
7. Discuss the basic elements of the marketing concept. Which businesses in your area use this
philosophy? Explain why.
8. How can an organization implement the marketing concept?
9. What is customer relationship management? Why is it so important to “manage” this
relationship?
10. Why is marketing important in our society? Why should you study marketing?
Marketing is important in our society because it provides employment for many people and helps sell
16 Chapter 1: Customer–Driven Strategic Marketing
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
guidelines intended to stop unfair, misleading, and unethical marketing practices.
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Chapter 1: Customer-Driven Strategic Marketing
ANSWERS TO DEVELOPING YOUR MARKETING PLAN
The information obtained from the following questions should assist you in developing various aspects of
your marketing plan. Develop your marketing plan online using the Interactive Marketing Plan at
www.cengagebrain.com.
1. Discuss how the marketing concept contributes to a company’s long-term success.
The marketing concept is a managerial philosophy that states that an organization should try to
satisfy customers’ needs through a coordinated set of activities that also allows the organization to
2. Describe the level of market orientation that currently exists in your company. How will a
market orientation contribute to the success of you new product?
3. What benefits will your product provide to the customer? How will these benefits play a role in
determining the customer value of your product?
18 Chapter 1: Customer–Driven Strategic Marketing
COMMENTS ON VIDEO CASE 1: CRUISING TO SUCCESS: THE TALE
OF NEW BELGIUM BREWING
Summary
This case illustrates how New Belgium Brewing’s market orientation has helped the company grow from
a small business to one of America’s largest breweries. Since its founding, New Belgium has emphasized
the importance of meeting the needs of its many stakeholder groups, and that philosophy continues to
guide the company’s marketing activities. While students may be familiar with the company’s corporate
social responsibility activities, it is important for them to realize that those activities are part of the
company’s marketing strategy and thus its profitability.
Questions for Discussion
1. How has New Belgium implemented the marketing concept?
According to the marketing concept, an organization should try to provide products that satisfy
2. What has Kim Jordan done to create success at New Belgium?
Kim Jordan created a unique marketing mix for New Belgium. Under her direction, the company
3. How does New Belgium’s focus on sustainability as a core value contribute to its corporate
culture and success?
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Chapter 1: Customer-Driven Strategic Marketing
©2017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Sustainability is important to several of New Belgium’s stakeholder groups, which increases
customer and employee loyalty. Because of this, the company’s environmental philosophy
creates a competitive advantage. Environmentally conscious consumers are more likely to do
business with a company that incorporates green practices into its business activities.
Sustainable practices also increase consumers’ perceptions of the value of New Belgium’s
prices, which results in higher prices and better financial returns for the company.