Week 01 · Introduction to Marketing
Davood Wadi, PhD
Welcome to Week 1 of Introduction to Marketing.
Today we establish the foundational principles of modern marketing.
We will cover the definition and evolution of marketing, needs, wants, and demands, and the five-step marketing process.
We will also meet a new kind of customer: the AI agent that shops on a consumer's behalf.
Marketing is often misunderstood as merely selling or advertising.
In reality, selling is only the visible tip of the marketing iceberg.
Modern marketing focuses on creating, delivering, and communicating value to customers.
Its ultimate goal is to build strong, profitable customer relationships and capture value in return.
Marketing is the process by which companies engage customers, build strong customer relationships, and create customer value in order to capture value from customers in return.
The dual goal of marketing is to attract new customers by promising superior value and keep current customers by delivering satisfaction.
Sound marketing is essential for the success of every organization, from commercial giants to non-profit entities.
Marketing has a dual goal. Is each move mainly about attracting new customers or keeping current ones?
Tap a card, then tap the group it belongs to.
Organizations have approached the marketplace through five distinct philosophies over time.
The Production Concept holds that consumers favor products that are available and highly affordable; management must focus on improving production and distribution efficiency.
The Product Concept suggests consumers favor products offering the most quality, performance, and innovative features; the focus is on continuous product improvements.
Both orientations carry the danger of focusing too inward on operations rather than outward on customer needs.
Which philosophy is each manager following: the Production Concept or the Product Concept?
Tap a card, then tap the group it belongs to.
The Selling Concept holds that consumers will not buy enough of the firm's products unless it undertakes a large-scale selling and promotion effort.
It takes an inside-out perspective: starting from the factory, focusing on existing products, and aiming for sales volume through heavy selling.
The Marketing Concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors.
It takes an outside-in perspective: starting with a well-defined market, focusing on customer needs, and integrating all marketing activities to generate profits through customer satisfaction.
You have now met four philosophies. Which one is each company following?
It starts from the factory's existing products and aims for volume through heavy selling. That is the inside-out Selling Concept.
It starts with a well-defined market and its needs. That is the outside-in Marketing Concept.
Affordability and availability through production and distribution efficiency is the Production Concept.
Continuous product improvement in performance and features is the Product Concept.
It pushes what it already has through a large-scale selling effort.
It learns the needs of a target market first and delivers satisfaction better than competitors.
Which concept does this case show?
The Societal Marketing Concept questions whether the pure marketing concept overlooks possible conflicts between short-run consumer wants and long-run consumer welfare.
It holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer's and the society's well-being.
It calls for sustainable marketing that balances three core considerations: company profits, consumer wants, and public interest.
Companies adopting this philosophy build shared value for both shareholders and society.
A fast-food chain is planning a new menu the societal way. Which of the three considerations does each point serve?
Tap a card, then tap the group it belongs to.
Marketing myopia occurs when sellers pay more attention to the specific products they offer than to the benefits and experiences produced by these products.
Coined by Theodore Levitt, it warns that companies risk obsolescence if they define their business by products rather than by underlying customer needs.
For example, railroad companies declined because they viewed themselves as being in the railroad business rather than the transportation business.
Smart marketers view their products as problem-solving tools rather than physical ends in themselves.
Discussion: If a leading photographic film manufacturer viewed itself as being in the "chemical film and paper" business rather than the "memory preservation" business, how did this orientation influence its strategic choices when digital cameras emerged?
The most fundamental concept underlying marketing is human needs.
Understanding the relationship between needs, wants, and demands allows marketers to design relevant offerings.
Marketers do not create basic needs, but they heavily influence wants and channel demands.
Human needs are states of felt deprivation, including basic physical needs (food, clothing, warmth), social needs (belonging, affection), and individual needs (knowledge, self-expression).
Wants are the form human needs take as they are shaped by culture and individual personality; a hungry person in one culture wants a hamburger, while in another they want rice and fish.
Demands are human wants that are backed by buying power; when accompanied by purchasing ability, wants become demands.
Marketers conduct extensive research to identify unmet needs and formulate products that translate wants into actual demand.
Is each case a need, a want, or a demand?
Tap a card, then tap the group it belongs to.
Consumers satisfy their needs and wants through market offerings.
A market offering is a combination of products, services, information, or experiences offered to a market to satisfy a need or want.
Market offerings are not limited to physical products; they include services like banking, airlines, and hospitality.
Increasingly, companies orchestrate memorable customer experiences that engage consumers emotionally beyond the physical commodity.
Consumers usually face a broad array of products and services that might satisfy a given need.
Customers form expectations about the value and satisfaction that various market offerings will deliver.
Customer perceived value is the customer's evaluation of the difference between all the benefits and all the costs of a marketing offer relative to competing offers.
Customer satisfaction depends on the product's perceived performance relative to a buyer's expectations; if performance falls short, the customer is dissatisfied, and if performance matches or exceeds expectations, the customer is satisfied or delighted.
Compare what each customer expected with how the offering performed. Is the customer dissatisfied, satisfied or delighted?
Tap a card, then tap the group it belongs to.
Consumers are beginning to delegate part of their buying to AI agents: software that can search for, compare, and purchase products on a person's behalf.
The consumer states a want, such as "a rain jacket under $150," and the AI agent turns that want into a search, a comparison, and sometimes a purchase.
The need, the want, and the buying power still belong to the consumer; the AI agent acts on them.
The AI agent judges an offer only from the information it can read, such as prices, specifications, and reviews.
The consumer still uses the product and decides after the purchase whether it met their expectations.
Marketers therefore communicate value to two audiences: the consumer who uses the offering and the AI agent that evaluates it.
In each case a shopper uses an AI agent. Who is doing this part of the buying: the consumer or the AI agent?
Tap a card, then tap the group it belongs to.
Discussion: Do modern smartphone and social media companies create entirely new human needs, or do they simply offer novel, highly engaging ways to fulfill ancient human needs for communication and social belonging?
To translate marketing theory into practice, organizations follow a structured marketing process.
The process consists of five distinct steps that guide decisions from research to value capture.
The first four steps create value for customers, while the final step captures value in return.
Step 1: Understand the marketplace and customer needs and wants.
Step 2: Design a customer-value-driven marketing strategy.
Step 3: Construct an integrated marketing program that delivers superior value.
Step 4: Engage customers, build profitable relationships, and create customer delight.
Step 5: Capture value from customers to create profits and customer equity.
Two graduates open a café beside campus. Put their moves in the order of the five-step marketing process.
Tap a step, then the number where it belongs.
Marketing managers cannot serve all customers in every way; they must select which customers to serve and how.
Selecting target customers involves market segmentation (dividing the market) and targeting (selecting segments to enter).
Choosing a value proposition defines the set of benefits or values a company promises to deliver to satisfy consumer needs.
A strong value proposition differentiates the brand and gives customers a compelling reason to choose it over competitors.
A new sneaker brand is designing its strategy. Which decision is each move: segmentation, targeting or the value proposition?
Dividing the market into groups is market segmentation.
Selecting which segment to enter is targeting.
The set of benefits the brand promises to deliver is its value proposition.
Splitting the market into groups is still segmentation.
Deciding which segments to enter, and which to leave, is targeting.
A value proposition differentiates the brand and gives customers a compelling reason to choose it.
Which concept does this case show?
The company's marketing strategy outlines which customers to serve and how to create value.
The marketing program then transforms the strategy into action by blending the marketing mix tools (the 4 Ps).
Product: creating a need-satisfying market offering.
Price: deciding how much to charge for the offering.
Place: determining how to make the offering accessible to target consumers.
Promotion: engaging target consumers, communicating the offering, and persuading them of its merits.
Customer Relationship Management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.
CRM involves acquiring, engaging, keeping, and growing customers across all company touchpoints.
Customer engagement marketing goes beyond selling to foster direct and continuous customer involvement in shaping brand conversations and community.
Customer-managed relationships empower consumers to connect with brands and each other using social and mobile technologies.
CRM involves acquiring, engaging, keeping and growing customers. Match each part to what a streaming service does.
Part of CRM
What the service does
Tap a term, then the example it goes with.
By creating superior value for customers, the firm captures value from customers in return in the form of sales, profits, and long-term customer equity.
Customer Lifetime Value (CLV) is the value of the entire stream of purchases a customer makes over a lifetime of patronage.
Losing a customer means losing more than a single sale; it means losing the entire future income stream that customer represents.
Share of customer is the portion of the customer's purchasing that a company gets in its product categories.
A shopper who has bought groceries at the same store every week for years switches to a rival. According to the lecture, what has the store lost?
The ultimate aim of customer relationship management is to produce high customer equity.
Customer equity is the total combined customer lifetime values of all of the company's current and potential customers.
While sales and market share reflect the past, customer equity suggests the future value of the firm.
Managing customer equity requires classifying customers by potential profitability and projected loyalty into strangers, butterflies, true friends, and barnacles.
Place each customer by potential profitability and projected loyalty. Which group are they?
High potential profitability, low projected loyalty: a butterfly.
Low potential profitability and low projected loyalty: a stranger.
High potential profitability and high projected loyalty: a true friend.
High projected loyalty but low potential profitability: a barnacle.
Profitable and loyal: a true friend.
Little profit and little loyalty: a stranger.
Which concept does this case show?
Discussion: Why is it often reported to be five times more expensive to acquire a new customer than to retain an existing one, and how should a startup balance its marketing budget between the two?
Marketing is fundamentally about creating value for customers in order to capture value in return.
Success requires moving beyond outdated production and selling mindsets to a customer-centric marketing philosophy.
Understanding needs, wants, and demands forms the bedrock for designing compelling market offerings.
Following the five-step marketing process allows firms to build lasting customer relationships and maximize customer equity.
As consumers delegate search and purchase to AI agents, marketers must create value that both the consumer and the consumer's AI agent can recognize.