Principles of Marketing

🛍️Principles of Marketing Unit 1 – Marketing and Customer Value

Marketing and customer value are crucial concepts in business strategy. They focus on understanding and meeting customer needs through targeted products, pricing, distribution, and promotion. This customer-centric approach aims to create and deliver value that satisfies customers and drives business success. The marketing mix, market segmentation, and positioning are key tools for developing effective strategies. Digital marketing, ethical considerations, and performance metrics help businesses adapt to changing markets and measure their success in creating customer value and achieving marketing objectives.

Key Marketing Concepts

  • Marketing focuses on identifying and satisfying customer needs and wants through the creation and exchange of value
  • Customer-centric approach places the customer at the center of all marketing activities and decisions
  • Marketing mix (4 Ps) consists of product, price, place, and promotion strategies used to deliver value to customers
    • Product refers to the goods or services offered to satisfy customer needs
    • Price determines the perceived value and profitability of the product
    • Place involves the distribution channels and availability of the product
    • Promotion includes various communication methods to inform and persuade customers
  • Target market represents the specific group of customers a company aims to serve and satisfy
  • Positioning refers to the unique place a product occupies in the minds of customers relative to competitors
  • Branding involves creating a unique name, symbol, or design that identifies and differentiates a product from competitors
  • Marketing research gathers and analyzes data about customers, competitors, and market trends to inform marketing decisions

Understanding Customer Value

  • Customer value represents the benefits a customer receives from a product minus the costs of obtaining it
    • Benefits can include functional, emotional, and social advantages
    • Costs include monetary, time, energy, and psychological factors
  • Perceived value is the customer's subjective assessment of a product's overall worth or utility
  • Customer satisfaction occurs when a product meets or exceeds customer expectations
    • Satisfied customers are more likely to become loyal and engage in positive word-of-mouth
  • Customer loyalty refers to a customer's commitment to repeatedly purchase a product or brand
  • Customer lifetime value (CLV) estimates the total value a customer will generate for a company over their lifetime
  • Understanding customer needs, wants, and behaviors is essential for creating and delivering superior customer value
  • Gathering customer feedback and insights through surveys, focus groups, and data analysis helps improve customer value

Market Segmentation and Targeting

  • Market segmentation divides a heterogeneous market into smaller, more homogeneous segments based on shared characteristics
    • Demographic segmentation uses age, gender, income, education, and occupation
    • Geographic segmentation considers location, climate, and population density
    • Psychographic segmentation looks at lifestyle, personality, values, and interests
    • Behavioral segmentation examines purchase behavior, usage, and loyalty
  • Target marketing involves selecting one or more specific segments to focus marketing efforts on
  • Differentiated marketing develops distinct marketing mixes for each targeted segment
  • Undifferentiated marketing uses a single marketing mix for the entire market
  • Concentrated marketing focuses on a single segment with a tailored marketing mix
  • Positioning maps visually represent how customers perceive a product relative to competitors based on key attributes
  • Effective targeting requires evaluating segment attractiveness, company resources, and long-term growth potential

Developing a Marketing Strategy

  • Marketing strategy outlines the overall plan for achieving marketing objectives and creating customer value
  • Situation analysis assesses the current market environment, including internal and external factors (SWOT analysis)
  • Marketing objectives define specific, measurable goals the company aims to achieve (increase market share by 5%)
  • Segmentation, targeting, and positioning (STP) decisions guide the development of the marketing mix
  • Differentiation strategies aim to create a unique and superior customer value proposition
    • Product differentiation focuses on unique features, quality, or design
    • Service differentiation offers superior customer service or support
    • Brand differentiation builds a strong, favorable brand image
  • Competitive advantage refers to the unique strengths that allow a company to outperform rivals and create superior customer value
  • Marketing implementation involves executing the marketing strategy and allocating resources effectively
  • Monitoring and control mechanisms ensure the marketing strategy stays on track and adjusts to changing market conditions

The Marketing Mix (4 Ps)

  • Product strategies involve decisions about product design, features, quality, packaging, and branding
    • Product life cycle (introduction, growth, maturity, decline) guides product strategies over time
    • New product development process identifies and develops innovative products to meet evolving customer needs
  • Pricing strategies determine the amount customers pay for a product and impact perceived value and profitability
    • Cost-based pricing sets prices based on production and marketing costs plus a desired profit margin
    • Value-based pricing sets prices based on the perceived value to customers
    • Competition-based pricing sets prices relative to competitors' prices
  • Place (distribution) strategies manage the channels and intermediaries that make the product available to customers
    • Distribution intensity (intensive, selective, exclusive) determines the number and type of intermediaries
    • Supply chain management coordinates the flow of goods, information, and finances from raw materials to final customers
  • Promotion strategies communicate the value proposition to the target audience and encourage purchase
    • Advertising uses paid, non-personal messages to build brand awareness and persuade customers (TV, print, online)
    • Personal selling involves direct interaction between salespeople and customers to build relationships and close sales
    • Sales promotions offer short-term incentives to stimulate immediate purchases (coupons, discounts, contests)
    • Public relations manages the company's reputation and relationships with stakeholders through earned media and events

Digital Marketing and Technology

  • Digital marketing uses digital channels and technologies to reach and engage customers (websites, social media, email, mobile)
  • Search engine optimization (SEO) improves a website's visibility and ranking on search engine results pages
  • Content marketing creates and distributes valuable, relevant content to attract and retain a clearly defined audience
  • Social media marketing uses social networks to build brand awareness, engage customers, and drive website traffic
    • Platforms include Facebook, Instagram, Twitter, LinkedIn, and TikTok
    • Influencer marketing partners with individuals who have a strong social media following to promote products
  • Email marketing sends targeted, personalized messages to a subscriber list to nurture leads and drive conversions
  • Mobile marketing reaches customers through mobile devices using SMS, MMS, mobile apps, and location-based services
  • Marketing automation uses software to automate repetitive tasks and personalize customer interactions at scale
  • Customer relationship management (CRM) systems manage and analyze customer interactions and data throughout the customer lifecycle

Measuring Marketing Success

  • Marketing metrics track and measure the performance and effectiveness of marketing activities
  • Return on marketing investment (ROMI) calculates the financial return generated by marketing expenditures
  • Customer acquisition cost (CAC) measures the cost of acquiring a new customer through marketing efforts
  • Conversion rate represents the percentage of potential customers who take a desired action (purchase, sign-up)
  • Customer retention rate measures the percentage of customers who continue to purchase from a company over time
  • Net Promoter Score (NPS) assesses customer loyalty and likelihood to recommend a product or brand
  • Brand awareness measures the extent to which customers recognize and recall a brand
  • Market share represents a company's sales relative to total market sales in its industry
  • Marketing dashboards visually display key performance indicators (KPIs) to monitor marketing performance in real-time

Ethical Considerations in Marketing

  • Marketing ethics involves making morally sound decisions that balance the interests of the company, customers, and society
  • Truth in advertising requires marketing communications to be honest, accurate, and not misleading
  • Privacy and data protection ensure the responsible collection, use, and storage of customer data
    • General Data Protection Regulation (GDPR) sets strict rules for processing personal data in the European Union
    • California Consumer Privacy Act (CCPA) grants California residents rights regarding their personal information
  • Social responsibility considers the impact of marketing activities on society and the environment
    • Cause-related marketing aligns a company's marketing efforts with a social or charitable cause
    • Green marketing promotes environmentally friendly products and practices
  • Ethical pricing avoids deceptive or discriminatory pricing practices (price fixing, price gouging)
  • Responsible targeting ensures marketing efforts do not exploit vulnerable populations (children, elderly)
  • Transparency and disclosure provide clear, complete information about products, terms, and conditions
  • Ethical considerations help build trust, protect brand reputation, and contribute to long-term business success


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© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.