Principles of Marketing, Global 17th Edition Solution Manual

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Chapter 1MARKETING: CREATING CUSTOMER VALUEANDENGAGEMENTMARKETING STARTER: CHAPTER 1Emirates’CustomerValue-Driven Marketing:EngagingCustomers and BuildingBrand CommunitySynopsisFounded in 1985, the EmiratesGroup operates across six continents and 144 cities.It is the largest internationalairline in the world.Emirates set out to be an innovative, modern, and customer-oriented provider of high-quality air travel services.Through the years, it has successfully and continuously created a customer-focused value proposition byoffering a combination of products, services, information, and experiences customized for its market demographicsfor each of its destinations. Examples are the ICE system and the Skywards Program, which have allowed Emiratesto deliver its value proposition to its customers and support its mission statement of committing to high standards.As competitors continued to discount air fares to loss-making levels, Emirates maintained fares while managinghealthy yields supported by excellent load factors.The company was able to do this because of its customer-value driven marketing approach and its serviceproposition, for which customers continue to be willing to pay a premium.Beyond the functional benefit of air travel, Emirates marketed its services as “The Emirates Experience,” agenuine passion for comfort and attention to detail. Customers didn’t just fly Emirates; they experienced it.In these digital times, Emirates is forging a new kind of customer relationship, a deeper, more personal, moreengaging one. Emirates uses online, mobile, and social media to connect with its customers and creates brand“tribes”—large groups of highly engaged users—with the help of social media platforms such as Facebook, Twitter,Instagram, YouTube, and Pinterest.The company’s “Hello Tomorrow” campaign, launched in 2012 in over 80 markets, presented Emirates’ newmindset, which celebrates global travel, conveying its commitment to connect with people and help them realizetheir potential through travel.The “Hello Tomorrow” campaign reached 43 million viewers across 85 countries. Emirates’ considerationjumped from 38 percent to 69 percent among viewers and an impressive 84 percent of themreportedly believeEmirates was a brand that sought to connect the world and “create a brighter future.”Emirates has become the world’s most valuable airline brand with an estimated value of $6.6 billion, accordingto the 2015 Brand Finance Global 500 report. Through its campaigns, Emirates has demonstrated commitment,authenticity, relevance, and differentiation, and has successfully changed the way it reaches out to its customers bymoving away from the product and creating a discourse of global customer engagement.Discussion ObjectiveAn active 10-minute discussion of theEmiratesstory will help link students to key foundational marketing concepts.Emiratesprovides an excellent vehicle for introducing the overall marketing framework presented in Chapter 1 andthroughout the text: Good marketing is all about creating value for customers and building strong customerrelationships in order to capture value from customers in return.

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Starting the DiscussionTo start the discussion, ask the classwho has flown Emirates before.Based on the show of hands, ask for students toshare their experiencewith the brand.What attractedthem toEmirates? Whatis it about the customer experiencethat is so enticing?Next, pull upEmirates’Facebook pages. Working with students, search for a fewspecific sports pagesthat interestthem. Click onarticles and links to further explore. Together, notethe variety of approachesEmiratestakes and thefocus on customers.InvestigateEmirates’other social media feeds, including the company’s Web site, Twitter,Snapchat, and YouTube.In what ways doesEmirates’obsession with customer service show through in everyway?You should be familiar with theseWeb sitesin advanceso that you can move purposefully to keep the discussionmoving. But let the class discussioninteractivelyguide the sitesthat you explore, taking you deeper intoeach page.Start with the first question below, and then ask other questions as the discussion allows. Throughout the discussion,keep your objective firmly in mind: to emphasize that good marketing is all about creating value for customers andmanaging customer relationships in order to capture value from customers in return. The final question leads theclass into Chapter 1 and the discussion for the day. Have fun with this one!Discussion Questions1.The first marketing story in the text is aboutEmirates. Let’s take a quick look at the “AboutEmirates” linkat the bottom of theEmirateshome pageandsee what we canlearnabout the company and how it operates.Just looking at this Web page, what stands out aboutEmirates?Go toEmirates’other social media outletsto reinforce theidea that everything points toEmirates’obsession with its customers—it’sall aboutconnecting the company and the customers.2.How has what we are seeing onthesesitescontributed toEmirates’performance?How hasEmiratesbeensuccessful? (Asindicatedin theEmiratesstory, the company has grown astronomicallyin market share andstrength of customer relationships, due largelyto its obsession with customer satisfaction and customerexperience.Thus, by creating value for customers,Emirateshas captured value from customers in return.)3.Why did the authors chooseEmiratesas the very first company to highlight inthe first chapter of thetext?How does this opening story relate to the major points made in the rest of the chapter? (This questionshould lead naturally into major Chapter 1 concepts: What is marketing and what is the marketing process?What is customer-driven marketing? Why are customer value,customersatisfaction, andcustomerrelationships so important?)CHAPTER OVERVIEWUse Power Point Slide 1-1 HereIn this chapter, we introduce the basic concepts of marketing. It starts with the question, “What ismarketing?”Simply put, marketing is managing profitable customer relationships. The aim ofmarketing is to create valueforcustomers and to capture valuefromcustomers in return. Next,the five steps in the marketing process are discussed—from understanding customer needs, todesigning customer-driven marketing strategies and integrated marketing programs, to buildingcustomer relationships and capturing value for the firm. Finally, there is a discussion of themajor trends and forces affecting marketing in this age of customer relationships.CHAPTEROBJECTIVESUse Power Point Slides1-2here1.Define marketing and outline the steps in the marketing process.2.Explain the importance of understandingthe marketplace and customersand identify thefive core marketplace concepts.

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3.Identify the key elements of a customervalue-drivenmarketing strategy and discuss themarketing management orientations that guide marketing strategy.4.Discuss customer relationship management and identify strategies for creating valueforcustomers and capturing valuefromcustomers in return.5.Describe the major trends and forces that are changing the marketing landscape in thisage of relationships.CHAPTER OUTLINEp.26INTRODUCTIONWhen you think ofair travel in the Middle East, chances aregood that you think first ofEmirates. Theflight experiencefeaturesan array of product offerings such as its onboardICEsystem as well as exclusive lounges for its clientele.From the start,Emirateshas grownsteadily and strongly.As competitors continued to discount air fares closeto losslevels, Emirates maintained fares while managinghealthyyields.To its core, the company is relentlessly customer driven, forwhich customers continue to bewilling to pay a premium.Emirates’socialmediamarketingmakesthebrandexperience specialby focusing on building relationships andconnections.Emirates’successfullyconcentrateson delivering customervaluethroughitseffortstodevelopspecialanddeepexperiences.p.27Photo:Emiratesaircraft➢Opening Vignette Questions1.Manycompaniesclaimtobeobsessedwithcustomer service. What setsEmiratesapart fromthe others?2.In your opinion, is itpossibleto spendheavilyonmediaadvertisingandalsosuccessfullymarketthroughdigitalandsocialmedia?Explain.3.Do you believe that customers really want long-term relationships with a companyand othercustomers?If so, how doesEmiratesbuild theserelationships?4.What if a closeonlinecompetitor came along,offering comparable items andservice? Do youthink mostEmiratescustomers would remain

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loyal toEmirates? Defend your answer.PPT 1-3PPT 1-4p.28p.29Define marketing and outline the steps in themarketingprocess.WHAT IS MARKETING?A simple definition of marketing isengaging customers andmanaging profitable customer relationships.Marketingmustbothattractnewcustomersandgrowcurrent customers.Every organization must perform marketing functions, notonlyfor-profit companies.Nonprofits (colleges, hospitals, churches, etc.) also mustperform marketing.Marketing DefinedMostpeoplethinkofmarketingonlyassellingandadvertising or “telling and selling.”Marketing must focus onsatisfying customer needs.We definemarketingas the process by which companiesengage customers,build strong customer relationships, andcreatecustomervalueinordertocapturevaluefromcustomers in return.LearningObjective1p.29KeyTerm:Marketingp.29Photo:Social mediamarketing onmobile devices➢Assignments, ResourcesUseDiscussion Question1-1here➢Troubleshooting TipFor most students, this will be their first introductionto marketing and all its ramifications. To most ofthem, marketing is nothing more than selling and/oradvertising, and this gets reinforced daily when theysee“marketing”jobadsthatarereallysalespositions. It helps to get students talking about whatmarketing is, and to give examples of what theyconsidergoodmarketing.Trytobringincontemporary examples that the students can relateto.

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p.30PPT 1-5TheMarketing ProcessFigure 1.1 shows the five-step marketing process.1.Understand the marketplace and customer needs andwants.2.Design a customervalue-driven marketing strategy.3.Constructanintegratedmarketingprogramthatdelivers superior value.4.Engagecustomers,buildprofitablerelationships,and create customer delight.5.Capture value from customers to create profits andcustomerequity.Inthefirstfoursteps,companiesworktounderstandconsumers,createcustomervalue,andbuildstrongcustomer relationships.In the final step, companies reap the rewards of creatingsuperior customer value. By creating valueforconsumers,they in turn capture valuefromconsumers in the form ofsales, profits, and long-term customer equity.ReviewLearningObjective1:Definemarketingandoutline the steps in the marketing process.p.30Figure 1.1:TheMarketing Process:Creating andCapturing CustomerValue➢Assignments, ResourcesUseThink-Pair-Share 1herep.30PPT 1-6PPT 1-7Explain the importance of understanding themarketplace and customers and identify the five coremarketplace concepts.UNDERSTANDING THEMARKETPLACE ANDCUSTOMER NEEDSFive core customer and marketplace concepts are critical:(1)needs,wants,anddemands;(2)marketofferings(products,services,andexperiences);(3)valueandsatisfaction;(4)exchangesandrelationships;and(5)markets.Customer Needs, Wants, and DemandsAs the first step in the marketing process, the company mustfully understand consumers and the marketplace in which itoperates.The most basic concept underlying marketing is that ofLearningObjective2p.30Key Terms: Needs,Wants, Demandsp.30Photo:Target

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human needs.Humanneedsare states of felt deprivation. They includephysical, social,andindividualneeds. These needs were notcreated by marketers; they are a basic part of the humanmakeup.Wantsare the form human needs take as they are shaped bycultureandindividualpersonality.AtypicalAmericanneedsfood butwantsa Big Mac.When backed by buying power, wants becomedemands.The best marketing companies go to great lengths to learnand understand their customers’ needs, wants, and demands.➢Assignments, ResourcesUseAdditional Project 1hereUseThink-Pair-Share 2herep.31PPT 1-8Market Offerings—Products, Services, and ExperiencesNeeds and wants are fulfilled throughmarket offerings—some combination of products, services, information, orexperiences offered to a market to satisfy a need or want.Market offerings includeproductsandservices—activitiesor benefits offered for sale that are essentially intangibleand do not result in the ownership of anything.Marketing myopiaoccurs when a company becomes sotakenwiththeirownproductsthattheylosesightofunderlying customer needs.p.31Key Term: Marketofferingsp.31Photo:AmericanGirlp.31Key Term:Marketingmyopiap.31p.32Customer Value and SatisfactionCustomersformexpectationsaboutthevalueandsatisfaction that various market offerings will deliver andbuy accordingly.Satisfied customers buy again and tell others about theirgood experiences.Dissatisfied customers switch to competitors and disparagethe product to others.Customer value and customer satisfaction are key buildingblocks for developing and managing customer relationships.

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PPT 1-9Exchanges and RelationshipsExchangeis the act of obtaining a desired object fromsomeone by offering something in return.Marketing consists of actions taken to build and maintaindesirable exchangerelationshipswith target audiences.p.33Key Term:Exchangep.33PPT 1-10PPT 1-11MarketsAmarketis the set of actual and potential buyers of aproduct.Marketingmeansmanagingmarketstobringaboutprofitable customer relationships.Figure 1.2 shows the main elements in a modern marketingsystem.ReviewLearning Objective 2:Explain theimportance ofunderstanding the marketplace and customers and identifythe five core marketplace concepts.p.33Key Term: Marketp.34Figure 1.2: AModern MarketingSystem➢Assignments, ResourcesUseDiscussion Question 1-2hereUseOutside Example 1and2herep.34PPT 1-12PPT 1-13Identify the key elements of a customervalue-drivenmarketingstrategyanddiscussthemarketingmanagement orientations that guide marketing strategy.DESIGNING A CUSTOMERVALUE-DRIVENMARKETING STRATEGYAND PLANMarketing managementis defined as the art and scienceofchoosingtargetmarketsandbuildingprofitablerelationships with them.Themarketingmanagermustanswertwoimportantquestions:1.What customers will we serve (what’s our targetmarket)?2.How can we serve these customers best (what’s ourvalue proposition)?LearningObjective3p.34Key Term:Marketingmanagementp.34Selecting Customers to ServeA company mustfirstdecidewhomit will serve.Itdoesthisbydividingthemarketintosegmentsof

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customers(marketsegmentation)andselectingwhichsegments it will go after (target marketing).Marketing managers know they cannot serve all customers.By trying to do so, they end up not serving any well.Marketing managers must decide which customers theywant to target and onthelevel, timing, and nature of theirdemand.➢Assignments, ResourcesUseDiscussion Question 1-3hereUseCritical Thinking Exercise1-6here➢Troubleshooting TipThe concept of not serving all customers may beconfusing to students. Most of them have not yetencountered anything like it.However, the light bulbseemstogoonwithadiscussionofcrowdednational parksand the efforts made to have peoplevisitthemduringoff-peaktraveltimes.Havingstudents come up with their own examples willincrease the level of understanding.p.35PPT 1-14p.35PPT 1-15Marketingmanagementiscustomermanagementanddemand management.Choosing a Value PropositionA company’svalue propositionis the set of benefits orvalues it promises to deliver to consumers to satisfy theirneeds. (BMW promises “the ultimate driving machine.”)Suchvaluepropositionsdifferentiateonebrandfromanother.Marketing Management OrientationsMarketing management wants to design strategies that willbuild profitable relationships with target consumers. Butwhatphilosophyshould guide these marketing strategies?Therearefivealternativeconceptsunderwhichorganizationsdesignandcarryouttheirmarketingstrategies.The Production Conceptp.35Photo:HyattRegencyp.35

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p.35Theproduction conceptholds that consumers will favorproducts that are available and highly affordable.Management should focus on improving production andefficiency.The Product ConceptTheproductconceptholdsthatconsumerswillfavorproducts that offer the most in quality, performance, andinnovative features.Under this concept, marketing strategy focuses on makingcontinuous product improvements.The SellingConceptTheselling conceptholds that consumers will not buyenough of the firm’s products unlessthe firmundertakes alarge-scale selling and promotion effort.The concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such asinsurance or blood donations.These industries must be good at tracking down prospectsand selling them on product benefits.The Marketing ConceptThemarketing conceptholds that achieving organizationalgoals depends on knowing the needs and wants of targetmarkets and delivering the desired satisfactions better thancompetitors.Under the marketing concept, customer focus and value arethepathsto sales and profits.Rather than a “make and sell” philosophy, it 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.Customer-drivencompaniesresearchcurrentcustomersdeeply to learn about their desires, gather new product andKey Terms:Productionconcept,Productconceptp.36Key Term: Sellingconceptp.36Key Term:Marketingconcept

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PPT 1-16p.37PPT 1-17service ideas, and test proposed product improvements.Customer-drivenmarketingrequiresunderstandingcustomer needs even better than customers themselves doand creating products and services that meet existing andlatent needs.Designing a Customer Value-Driven Marketing StrategyFigure 1.3 contrasts the selling concept and the marketingconcept.Thesellingconcepttakesaninside-outperspective.Itstartswiththefactory,focusesonthecompany’s existing products, and calls for heavy selling andpromotion to obtain profitable sales. It focuses primarily oncustomerconquest—gettingshort-termsaleswithlittleconcern about who buys or why.Incontrast,themarketingconcepttakesanoutside-inperspective.Themarketingconceptstartswithawell-defined market, focuses on customer needs, and integratesall the marketing activities that affect customers. In turn, ityieldsprofitsbycreatingrelationshipswiththerightcustomers based on customer value and satisfaction.The Societal Marketing ConceptThesocietal marketing conceptquestions whether the puremarketingconceptoverlookspossibleconflictsbetweenconsumershort-run wantsand consumerlong-run welfare.Thesocietalmarketingconceptholdsthatmarketingstrategy should deliver value to customers in a way thatmaintains or improves both the consumer’s andsociety’swell-being.AsFigure1.4shows,companiesshouldbalancethreeconsiderationsinsettingtheirmarketingstrategies:company profits, consumer wants,andsociety’s interests.p.36Figure 1.3: Sellingand MarketingConceptsContrastedp.37Key Term: Societalmarketingconceptp.37Figure 1.4: ThreeConsiderationsUnderlying theSocietal MarketingConceptp.37Photo: Door toDoor Organics➢Assignments, ResourcesUseThink-Pair-Share 3hereUseAdditional Project 2hereUseMarketingEthicshere➢Troubleshooting TipSocietal marketing is also something that can be a

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littleuncleartostudents.Whyshouldfastfoodchains, for instance, be responsible for the nation’sobesity (justone verytopicaldiscussion point)?Understanding how one should balance the need forprofits with what some might consider “soft” issuescan be difficult at times.That can beeven moredifficult among the politicallyastute students, asthey can easily lead the class into a left versus rightdiscussiononindividualversuscorporateversusgovernmentalresponsibility.Trynottoletthathappenbyfocusing on how companies can increaserevenuesand profits by showing that they care aboutcustomers and communities. Newman’s Own is apotentialbrandtodiscussbecausethecompanydonatesmost profitsto charities andstrives to ensureasustainable environment.p.38PPT 1-18PREPARING AN INTEGRATED MARKETING PLANAND PROGRAMThecompany’smarketingstrategyoutlineswhichcustomers the company will serve and how it will createvalue for these customers.Next,themarketerdevelopsanintegratedmarketingprogramthatwilldelivertheintendedvaluetotargetcustomers.The marketing program consists of the firm’smarketingmix, the set of marketing tools the firm uses to implementits marketing strategy.The marketing mix tools are classified into thefour Psofmarketing: product, price, place, and promotion.Thefirmblendsthesemarketingmixtoolsintoacomprehensiveintegratedmarketingprogramthatcommunicates and delivers the intended value to chosencustomers.Review Learning Objective 3: Identify the key elementsofacustomervalue-drivenmarketingstrategyanddiscussthemarketingmanagementorientationsthatguide marketing strategy.

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p.38PPT 1-19PPT 1-20PPT 1-21p.39Discuss customer relationship management and identifystrategies for creating valueforcustomers and capturingvaluefromcustomers in return.ENGAGING CUSTOMERS AND MANAGINGCUSTOMER RELATIONSHIPSCustomer Relationship ManagementCustomer relationship managementis perhaps the mostimportant concept of modern marketing.Customer relationship managementis the overall processof building and maintaining profitable customer relation-ships by delivering superior customer value and satisfaction.It deals with all aspects of acquiring, keeping, and growingcustomers.Relationship Building Blocks: Customer Value andSatisfactionThe key to building lasting customer relationships is tocreate superior customer value and satisfaction.Customer-perceived valueisthe customer’s evaluation ofthe difference between all the benefits and all the costs of amarket offering relative to those of competing offers.Customers often do not judge values and costs “accurately”or “objectively.”Instead, customers act on perceived value.Customer satisfactiondepends on the product’s perceivedperformance relative to a buyer’s expectations.If the product’s performance falls short of expectations, thecustomerisdissatisfied.Ifperformancematchesexpectations,thecustomerissatisfied.Ifperformanceexceeds expectations, the customer is highly satisfied ordelighted.Although the customer-centered firm seeks to deliver highcustomer satisfaction relative to competitors, it does notattempt tomaximizecustomer satisfaction.LearningObjective4p.38Key Term:Customerrelationshipmanagementp.38Key Term:Customer-perceivedvaluep.39Key Term:Customersatisfactionp.39Photo:Steinwaypiano

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p.40A company can always increase customer satisfaction bylowering its price or increasing its services. But this mayresult in lower profits.The purpose of marketing is to generate customer valueprofitably.Customer Relationship Levels and ToolsCompanies can build customer relationships at many levels.Atoneextreme,acompanywithmanylow-margincustomers may seek to developbasic relationshipswiththem.At the other extreme, in markets with few customers andhigh margins, sellers want to createfull partnershipswithcustomers.Many companies offerfrequency marketing programsthatreward customers who buyoftenor in largequantities.Companies sponsorclubmarketing programsthat offermembers special benefits and create member communities.(Forexample,Harley-DavidsonsponsorstheHarleyOwners Group [H.O.G.].)p.39Photo:L.L.Beanp.39Photo:JetBluep.41PPT 1-22CustomerEngagement and Today’s Digital and SocialMediaYesterday’s big companies focused on mass marketing toall customers at arm’s length.Today’s companies are building deeper, more direct, andmore lasting relationships withcarefully selected customers.The new marketing iscustomer-engagement marketing,fostering direct and continuous customer involvement inshaping brand conversations, brand experiences, and brandcommunity.It involves using a rich mix of online, mobile,and social media marketing that promotes engagement andconversation.Customer-engagement marketing goes beyond just selling abrand to consumers. Its goal is to make the brand ap.41Photo:Customerengagementmarketing

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p.42PPT 1-23meaningful part of consumers’ conversations and lives.The burgeoning Internet and social media have given a hugeboost to customer-engagement marketing.Today’s consumers are better informed, more connected,and more empowered than ever before. Newly empoweredconsumers have more information about brands, and theyhave a wealth of digital platforms for airing and sharingtheir brand views with others.The marketing world is now embracingcustomer-managedrelationships.Companies can no longer rely on marketing byintrusion.Companies must practice marketing byattraction—creatingmarketofferingsandmessagesthatinvolveconsumersrather than interrupt them.Consumer-generated marketinghas become a significantmarketing force. Here, consumers themselves are playing abigger role in shaping their own brand experiences andthose of others.As consumers become more connected and empowered, andastheboomindigitalandsocialmediatechnologiescontinues, consumer brand engagement, whether invited ornot, will be an important marketing force.Brands mustembrace this trend or risk being left behind.p.41Key Term:Customer-engagementmarketingp.42Key Term:Consumer-generatedmarketingp.43Photo:MountainDew➢Resources, ApplicationsUseReal Marketing 1.1and1.2hereUseVideo CasehereUseSmall Group Assignment 1and2hereUseAdditional Project 3hereUseThink-Pair-Share 4herep.43PPT 1-24PartnerRelationship ManagementToday’s marketers know they must work closely with othersinside and outside the company to jointly bring more valueto customers.Today, firms are linking all departments in the cause ofcreating customer value.In today’s connected world, everyfunctionalareaintheorganizationcaninteractwithp.43Key Term: Partnerrelationshipmanagement

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customers.Rather than assigning only sales and marketing people tocustomers,firmsareformingcross-functionalcustomerteams.Marketing channels consist of distributors, retailers, andothers who connect the company to its buyers.Thesupply chaindescribes a longer channel, stretchingfrom raw materials to components to final products that arecarried to final buyers.Throughsupply chain management, many companies todayare strengthening their connections with partners all alongthe supply chain.p.44p.44PPT 1-25CAPTURING VALUE FROM CUSTOMERSThefirstfourstepsinthemarketingprocessinvolvebuilding customer relationships. The final step involvescapturing value in return.By creating superior customer value, the firm creates highlysatisfied customers who stay loyal and buy more.Creating Customer Loyalty and RetentionThe aim of customer relationship management (CRM) is tocreatebothcustomer satisfactionandcustomer delight.Thismeans that companies mustaimhighin buildingcustomer relationships.Customer delight creates an emotional relationship with aproduct or service, not just a rational preference.Companiesarerealizingthatlosingacustomermeanslosing more than a single sale. It means losingcustomerlifetime value.p.44Photo: StewLeonardp.44Key Term:Customerlifetimevalue➢Resources, ApplicationsUseMarketing by the NumbershereUseIndividual Assignment 1here

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