Chapter 01 – Creating Customer Relationships and Value Through Marketing
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CHAPTER CONTENTS
PAGE
POWERPOINT RESOURCES TO USE WITH LECTURES ……………………………………. 1-2
LEARNING OBJECTIVES (LO) …………………………………………………………………………….. 1-3
KEY TERMS …………………………………………………………………………………………………………… 1-3
LECTURE NOTES
• Chapter Opener: Creating Customer Value the Chobani Way ………………………………. 1-4
• What Is Marketing? (LO 1-1) …………………………………………………………………………… 1-5
• How Marketing Discovers and Satisfies Consumer Needs (LO 1-2; LO 1-3) ………… 1-8
• The Marketing Program: How Customer Relationships Are Built (LO 1-4) ………….. 1-12
• How Marketing Became So Important (LO 1-5) ……………………………………………….. 1-16
APPLYING MARKETING KNOWLEDGE ……………………………………………………………. 1-21
BUILDING YOUR MARKETING PLAN ……………………………………………………………….. 1-24
VIDEO CASE (VC)
• VC-1: Chobani®: Making Greek Yogurt a Household Name ……………………………….. 1-26
APPENDIX D CASE (D)
• D-1: 3M’s Post–it® Flag Highlighter: Extending the Concept! ……………………………… 1-31
IN-CLASS ACTIVITIES (ICA)
• ICA 1-1: Designing a Candy Bar ……………………………………………………………………… 1-35
• ICA 1-2: What Makes a Better Mousetrap? ………………………………………………………. 1-40
CONNECT APPLICATION EXERCISES ……………………………………………… 1-46
• Customer Value and Relationship Strategies Click and Drag*
• 4 Ps of Marketing Click and Drag*
• 3M Video Case Video Case
• The Marketing Program: How Customer Relationships Are Built Click and Drag*
• Chobani: Making Greek Yogurt a Household Name Video Case
• iSeeit! Video Case: Value Creation Through the Marketing Mix Video Case
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*Note: An alternate version of each Click and Drag exercise is available in Connect for students with
accessibility needs.
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POWERPOINT RESOURCES TO USE WITH LECTURES
PowerPoint
Textbook Figures Slide
Figure 1-1 The see-if–you’re-really-a-marketing-expert test …………………………………………………… 1-5
Figure 1-2 A marketing department relates to many people, organizations, and environmental
forces …………………………………………………………………………………………………………….. 1-9
Figure 1-3 Marketing seeks to discover and then satisfy consumer needs through research and
a marketing program ………………………………………………………………………………………. 1-16
Figure 1-4 Marketing programs for two 3M Post-it® brand products targeted at two distinct
customer segments: college students and office workers …………………………..…………. 1-22
Figure 1-5 Four different market orientations in the history of American business ………………….. 1-24
Videos
1-1: Chobani Ad ………………………………………………………………………………………………………………… 1-3
1-2: Google Glass Video ……………………………………………………………………………………………………. 1-12
1-3: Pepsi True Ad ……………………………………………………………………………………………………………. 1-13
1-4: 3M Flag Highlighters Ad …………………………………………………………………………………………….. 1-21
1-5: Hermitage Tour Video ………………………………………………………………………………………………… 1-27
1-6: Chobani Video Case ……………………………………………………………………………………………………. 1-29
In-Class Activities (ICA)
ICA 1-1: Designing a Candy Bar ………………………………………………………………………………………… 1-35
ICA 1-2: What Makes a Better Mousetrap? ………………………………………………………………………….. 1-38
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LEARNING OBJECTIVES (LO)
After reading this chapter students should be able to:
LO 1-1: Define marketing and identify the diverse factors that influence marketing actions.
LO 1-2: Explain how marketing discovers and satisfies consumer needs.
LO 1-3: Distinguish between marketing mix factors and environmental forces.
LO 1-4: Explain how organizations build strong customer relationships and customer value
through marketing.
LO 1-5: Describe how today’s customer relationship era differs from prior eras.
KEY TERMS
customer experience
marketing concept
customer relationship management
(CRM)
marketing mix
customer value
marketing program
customer value proposition
organizational buyers
environmental forces
product
exchange
relationship marketing
market
societal marketing concept
market orientation
target market
market segments
ultimate consumers
marketing
utility
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LECTURE NOTES
CREATING CUSTOMER VALUE: THE CHOBANI WAY!
• Consumer food tastes have been changing to more healthful, nutritious, organic
products, such as Chobani Greek-style yogurt.
• Hamdi Ulukaya, a Turkish immigrant, created Chobani with less sugar and more
protein. Today, Chobani has more than $1.5 billion in sales.
A. Creating an Exceptional Product
• Chobani’s website proclaims, “A cup of yogurt won’t change the world but how
we make it might.”
a. Starts with milk from local sources.
b. Uses an authentic straining process to make yogurt extra thick.
c. Uses only real fruit and natural sweeteners.
• Uses sustainability as a theme to reflect a focus on environment and community.
B. Connecting with Customers
• Little money for traditional advertising.
a. Relied on positive word-of-mouth.
b. Used social media such as Twitter and Facebook.
[Video1-1: Chobani New Campaign Ad]
C. Chobani Today
• Continues to monitor changing consumer tastes and offers new products.
a. Yogurt drinks (Drink Chobani) and yogurt-based dips (Chobani Meze).
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• Yogurt cafes continually test menus and gain feedback. Chobani Food Incubator
designed to invest in and cultivate ideas from emerging food entrepreneurs.
• Chobani has 40% market share in Greek yogurt segment; this segment is nearly
half of the $8 billion yogurt market.
D. Chobani, Marketing, and You
• Hamdi Ulukaya faces competition in Greek yogurts from Yoplait, Dannon,
Annies, Noosa, and Fage.
• Like Chobani, understanding marketing will help your career.
I. WHAT IS MARKETING? [LO1]
• You’re already a marketing expert because you do many marketing activities every
day, such as shopping for products.
• However, you may not have much experience developing products to reach different
groups of people or segments.
• Marketing isn’t always easy to do—thousands of new offerings fail each year.
[ICA 1-1: Designing a Candy Bar]
[Figure 1-1]: The See-If–You’re-Really-A-Marketing-Expert Test
Test your marketing expertise by answering the following questions:
1. What is the name of Pepsi’s most recent entry into the mid-calorie market for cola
flavored soft drinks? (a) Pepsi XL, (b) Pepsi Edge, (c) Pepsi Next, (d) Pepsi True.
2. True or False: The 60-year lifetime value of a loyal Kleenex customer is $994.
3. To be socially responsible, 3M put what recycled material into its very successful
ScotchBrite® Never Rust™ soap pads? (a) aluminum cans, (b) plastic bottles, (c)
Agave plant leaves.
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A. Marketing and Your Career
• Marketing affects all individuals, corporations, industries, and countries.
• You will learn and “do” marketing:
a. How it affects our lives through its many applications.
b. How it will make you a better consumer and a more informed citizen.
• Hopefully, you will find marketing exciting and maybe find a career in the field!
a. Doing sales and marketing can be satisfying and rewarding.
b. Small businesses are the source of most new jobs, including marketing.
c. Being an entrepreneur can be exciting and profitable!
• Elon Mush started and sold Zip2 software company, then started another business
that became PayPal. When PayPal was purchased by eBay, Musk founded Space
X, which develops and manufacturers space launch vehicles.
a. Today, Musk runs Tesla and SolarCity, a solar power company.
b. Musk also started a high-speed transportation system called Hyperloop and a
not-for-profit AI company called OpenAI.
• However, over half of new businesses fail within the first five years!
B. Marketing: Delivering Value to Customers [LO 1-1]
• The American Marketing Association (AMA) represents those involved in the
development and practice of marketing worldwide. It 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.”
• To serve both buyers and sellers, marketing seeks to:
a. Discover the needs and wants of prospective customers.
b. Satisfy these needs and wants.
• Prospective customers include:
a. Individuals buying for themselves and their households.
b. Organizations that buy for their own use or for resale.
• Exchange:
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a. Is the trade of things of value between a buyer and a seller so that each is
better off after the trade.
b. Is the key to discovering and satisfying consumer needs and wants.
C. The Diverse Factors Influencing Marketing Actions
• [Figure 1-2] A variety of other people, groups, and forces interact with marketing
to shape the nature of its actions. These include:
a. The organization itself, whose mission and objectives determine:
• What business it is in and…
• What goals it seeks.
b. Management, which is responsible for establishing these goals.
c. The marketing department:
• Works with a network of other departments.
• Develops customer-satisfying products so the organization can survive and
prosper.
• Facilitates relationships, partnerships, and alliances with customers,
shareholders, suppliers, and other organizations.
• Environmental forces:
a. Shape an organization’s marketing actions.
b. Include social, economic, technological, competitive, and regulatory forces.
• Marketing is affected by and impacts society.
• The organization must strike a balance among competing interests of:
a. Customers (low price; high quality; value).
D. What Is Needed for Marketing to Occur
Four factors are required for marketing to occur:
• Two or more parties with unsatisfied needs. A consumer who wants something,
and a seller who wants to sell something.
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• A desire and ability to satisfy these needs.
a. A consumer that can afford the time and money to purchase an offering.
b. A seller that has the offering available for purchase.
• A way for the parties to communicate. The consumer learns about the product
(that it exists) and where to get it.
• Something to exchange. For a transaction to occur between a buyer and a seller:
a. Money or something else of value must be exchanged.
b. Each has satisfied each other’s unmet needs:
• The consumer—hunger.
• The seller—money, so it can remain in business.
LEARNING REVIEW
1-1. What is marketing?
1-2. Marketing focuses on _________ and _________ consumer needs.
1-3. What four factors are needed for marketing to occur?
II. HOW MARKETING DISCOVERS AND
SATISFIES CONSUMER NEEDS [LO 1-2]
Discovering and satisfying consumer needs is critical to marketing.
A. Discovering Consumer Needs
• Marketing’s first objective: discover the needs of prospective consumers.
Marketers use surveys, concept tests, crowdsourcing, and other tactics to better
understand consumer ideas.
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• Consumers may not always know or be able to describe what they need or want.
(Ex: Personal computers, smartphones, electric cars, etc.) Effective marketing
research can help.
B. The Challenge: Meeting Consumer Needs with New Products
• Experts estimate that it takes 3,000 raw ideas to generate one commercial success.
Of the estimated 33,000 new products introduced worldwide each month, roughly
40% will fail.
• Key principles for new product launches:
a. Focus on the consumer benefit.
b. Learn from past mistakes.
• Solutions to preventing product failures:
a. Find out what consumers need and want.
b. Produce what they need and want.
c. Don’t produce what they don’t need or want.
• What are the potential benefits and “showstoppers” (factors that might doom the
offering) for the following products?
a. Google Glass (wearable computer)
[Video 1-2: Google Glass Video]
b. Pepsi True
• Benefits: Reduced calories, same flavor of Pepsi.
[Video 1-3: Pepsi True Ad]
c. YoYo (pay-per-mile car subscription model)
• Benefits: Access to any type of vehicle at any time, cost less than the
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• Firms spend billions of dollars on marketing and technical research to reduce
new-product failures.
1. Consumer Needs and Consumer Wants.
a. Should marketers try to satisfy consumer needs or consumer wants? Both!
• Debates center around:
– Definitions of needs and wants.
– The amount of freedom of choice given to prospective customers to
make their own buying decisions.
• A need occurs when a person feels physiologically deprived of basic
necessities, such as food, clothing, and shelter.
• A want is a felt need that is shaped by a person’s knowledge, culture, and
personality.
• Marketing:
– Does not create the need for a product but…
– Does shape a person’s wants by creating an awareness of good
products at convenient locations.
b. Does marketing persuade consumers to buy the “wrong” products?
• Marketing does try to influence what consumers buy.
• When should the government and society step in to protect consumers?
– There are no clear-cut answers, which is why legal and ethical issues
are central to marketing.
– Psychologists and economists debate the exact meanings of need and
want.
c. [Figure 1-3] Marketers carefully study prospective customers to understand:
• What they need and want.
• The forces that shape these needs and wants.
2. What a Market Is.
a. Potential consumers make up a market, which is people with both the desire
and the ability to buy a specific offering.
b. All markets are ultimately people.
c. People who are aware of their unmet needs may have a desire for a product.
d. People must also have the ability—the authority, time, and money—to buy.
e. People can “buy” an idea that leads to an action.
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C. Satisfying Consumer Needs
• An organization does not have the resources to satisfy the needs of all consumers.
[ICA 1-2: What Makes a Better Mousetrap?]
1. The Four Ps: Controllable Marketing Mix Factors. [LO 1-3]
After selecting its target market consumers, the firm must take steps to satisfy
their needs.
a. A marketing department must develop a complete marketing program to reach
its target market.
b. To do this, it uses “the four Ps”—a shorthand reference for:
• Product. A good, service, or idea (offering) to satisfy consumers’ needs.
c. These are the elements of the marketing mix, which are:
• The marketing manager’s controllable factors—product, price, promotion,
and place that…
• Can be used to solve a marketing problem.
d. An effective marketing mix conveys to potential buyers a customer value
proposition, which is the cluster of benefits that an organization promises
customers to satisfy their needs.
2. The Uncontrollable, Environmental Forces.
a. Environmental forces are the uncontrollable forces that affect a marketing
decision, which consist of:
• Social forces. What consumers themselves want and need.
• Economic forces. Whether the economy is expanding or contracting.
• Technological forces. Changing technology.
• Competitive forces. Actions competitors take.
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• Regulatory forces. Government restrictions.
b. These five forces may expand or restrict an organization’s marketing
opportunities.
c. Marketers can affect some of these forces, such as technology or competition,
and achieve breakthroughs.
III. THE MARKETING PROGRAM:
HOW CUSTOMER RELATIONSHIPS ARE BUILT [LO 1-4]
A marketing program connects the organization with its customers.
A. Relationship Marketing: Easy to Understand, Hard to Do
• Intense competition in global markets has caused many U.S. firms to focus on
customer value.
• The essence of successful marketing is to provide unique value to gain loyal
customers.
a. What is new is a more careful attempt at understanding how a firm’s
customers perceive value.
b. The firm must then actually create and deliver that value to them.
• Customer value:
a. Is the unique combination of benefits received by targeted buyers.
b. Includes, at a specific price:
• Quality. • On-time delivery.
• Convenience. • Before-sale & after-sale service.
• Firms calculate the dollar value of a loyal, satisfied customer. Example:
Kleenex = $994 [Figure 1-1, question 2].
• Firms cannot succeed by being all things to all people. Instead, they:
a. Must build long-term relationships with customers to…
b. Provide unique value to them.
• Three strategies used to deliver customer value include:
a. Best price: Target—its brand promise is to “Expect More. Pay Less.”
b. Best product: Starbucks—stresses quality coffee that is ethically delivered.
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c. Best service: Nordstrom—works to “deliver the best possible shopping
experience.”
• Relationship marketing:
a. Links the organization to its individual customers, employees, suppliers, and
other partners for their mutual long-term benefits.
b. Involves a personal, ongoing relationship between the organization and its
individual customers that begins before and continues after the sale.
• Information technology, along with other cutting-edge processes, better enables
companies to form relationships with customers.
a. Done through:
• “Internet of everything” helps create detailed databases about product
usage.
• “Data analytics” offers insights into how products create value for
customers.
B. The Marketing Program and Market Segments
• Product concepts are converted into a tangible marketing program—a plan that:
a. Integrates the marketing mix to…
b. Provide a good, service, or idea to prospective buyers.
• These products can then be targeted at market segments, which are the relatively
homogeneous groups of prospective buyers that:
a. Have common needs and…
b. Will respond similarly to a marketing action.
• Figure 1-3 shows that organizations must continually and effectively develop new
offerings that satisfy consumer needs, which can further stimulate this process.
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LEARNING REVIEW
1-4. An organization can’t satisfy the needs of all consumers, so it must focus on one or
more subgroups, which are its __________.
1-5. What are the four marketing mix elements that make up the organization’s
marketing program?
1-6. What are environmental forces?
C. 3M’s Strategy and Marketing Program to Help Students Study
• 3M’s David Windorski:
a. Conducted research to understand how college students really study.
b. Invented several 3M Post-it® brand products and wanted to add a new item.
• Windorski worked with a team of college students to:
a. Observe and question college students about their studying, such as how they:
• Used their textbooks. • Wrote term papers.
b. They often observed students highlight a passage and mark a page in their
textbooks with a Post-it® Note or Post-it® Flag.
c. Windorski realized he could help students study by:
1. Moving from Ideas to a Marketable Highlighter Product.
a. After many models, Windorski concluded he had to:
• Build a highlighter that would dispense 3M Post-it® Flags because…
• The Post-it® Notes were too large to put inside the barrel of a highlighter.
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b. The initial highlighter product with Post-it® Flags inside was produced and
given to students—and also office workers—to get their reactions.
c. A suggestion from users quickly emerged:
2. Adding the Post-it® Flag Pen.
a. Windorski considered other related products.
[Video 1-4: 3M Flag Highlighters Ad]
3. A Marketing Program for the Post-it® Flag Highlighter and Pen.
a. [Figure 1-4] shows the strategies for each marketing mix element in 3M’s
marketing program to college students and office workers for the Post–it®
Flag Highlighter and the Post-it® Flag Pen.
b. Comparing the marketing program for each product:
• Post-it® Flag Highlighter (shown in the orange column).
– The target market is mainly college students.
– To build student awareness, 3M:
* Used a mix of print ads in college newspapers and a TV ad.
* Relied on student word-of-mouth advertising.
– Gaining distribution in college bookstores was critical and would:
• Post-it® Flag Pen (shown in the green column).
– The primary target market consists of office workers.
– The secondary target market consists of students.
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– Post-it® Flag Pens:
• The marketing program for Post-it® Flag Pens emphasized gaining
distribution in outlets used by purchasing department managers.
c. The Post-it® Flag Highlighters and Post-it® Flag Pens were so successful that
Windorski and his team received a prestigious award from 3M.
d. In 2008, Windorski was invited to appear on The Oprah Winfrey Show:
• She personally thanked him for the Post-it® Flag Highlighter because…
• The product changed the way she read and evaluated books that she
recommended for her book club.
4. Extending the Product Line.
a. The success of the Post-it® Flag Highlighter and Post-it® Flag Pen:
b. The success of the second generation of products has led to a family of related
products (i.e., product line extensions).
IV. HOW MARKETING BECAME SO IMPORTANT [LO 1-5]
Marketing has become a driving force in the modern global economy.
A. Evolution of the Market Orientation
[Figure 1-5] Many manufacturing organizations have experienced four distinct stages
in the life of their firms:
1. Production Era (until the 1920s).
a. Goods were scarce and buyers would accept virtually any goods that were
produced.
2. Sales Era (from the 1920s to the 1960s).
a. Firms could produce more goods than their buyers could consume and
competition grew. Firms hired salespeople to find new buyers for their
products.
3. Marketing Concept Era (from the late 1950s).
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a. The marketing concept is the idea that an organization should:
• Strive to satisfy the needs of consumers while also trying to achieve the
organization’s goals.
b. General Electric:
4. Customer Relationship Era (from the 1980s to today).
a. An organization that has a market orientation focuses its efforts on:
• Continuously collecting information about customers’ needs.
B. Focusing on Customer Relationship Management
• Digital marketing is a recent focus of the customer relationship era.
• Develop relationships through apps and social media sites.
a. The focus on customers has led to customer relationship management
(CRM), which is the process of:
• Identifying prospective buyers.
• Understanding them intimately.
• Developing favorable long-term perceptions of the organization and its
offerings so that buyers will choose them in the marketplace.
b. This process requires:
• The commitment of managers and employees throughout the organization.
• A growing application of information, communication, and Internet
technologies.
c. The foundation of CRM is customer experience, which is:
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• The internal response that customers have to all aspects of an organization
and its offering.
• This internal response includes:
– Direct customer contacts (buying, obtaining, and using the offering).
– Indirect contacts (word-of-mouth and news reports).
d. Trader Joe’s:
• Ranked America’s favorite supermarket chain for three consecutive years.
• Has 461 stores in 40 states.
• Has unique customer experience and customer loyalty.
• Offers its own brands at low prices.
i. Sometimes there is a “disconnect” between what firms think they provide vs.
what customers say they receive.
C. Ethics and Social Responsibility in Marketing: Balancing the Interests of
Different Groups
Today, the standards of marketing practice have shifted from an emphasis on
producers’ interests to consumers’ interests.
1. Ethics.
a. Existing laws and regulations don’t address many marketing issues.
b. Organizations have developed codes of ethics to guide marketers.
2. Social Responsibility.
a. Is the idea that organizations are accountable to a larger society.
b. The societal marketing concept:
• Is the view that organizations should satisfy the needs of consumers in a
way that provides for society’s well-being.
• Example: Patagonia
– Manufactures products with polyester made from recycled plastic
bottles.
– Common Threads Initiative encourage customers to repair, trade, and
recycle all its products.
D. The Breadth and Depth of Marketing
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Marketing affects every person and organization.
1. Who Markets?
2. What is Marketed?
a. Goods. Physical objects, such as toothpaste, smartphones, or automobiles.
c. Ideas. Thoughts about concepts, actions, or causes.
d. All three of the above are considered products, which:
• Consist of a bundle of tangible and intangible attributes that…
• Satisfy consumers’ needs and…
• Are received in exchange for money or something else of value.
[Video 1-5: Hermitage Tour Video]
e. Services like art museums rely more on effective marketing.
f. Ideas are often marketed by nonprofit organizations or government agencies.
3. Who Buys and Uses What Is Marketed? Two groups do:
a. Ultimate consumers are the people who use the products and services
purchased for a household.
b. Organizational buyers are those manufacturers, wholesalers, retailers, and
government agencies that buy products and services for their own use or for
resale.
4. Who Benefits? Three specific groups benefit:
a. Consumers who buy.
• Competition ensures that consumers can find value from the best products,
the lowest prices, or exceptional service in the marketplace.
• Provides jobs to raise the standard of living for a country’s citizens.
b. Organizations that sell. Effective marketing actions reward organizations that
serve consumers.