Designing a Customer Value–Driven Marketing Strategy and Plan

Customer Value–Driven Marketing Strategy

Once it fully understands consumers and the marketplace, marketing management can design a customer value–driven marketing strategy. We define marketing management as the art and science of choosing target markets and building profitable relationships with them. The marketing manager’s aim is to engage, keep, and grow target customers by creating, delivering, and communicating superior customer value.

To design a winning marketing strategy, the marketing manager must answer two important questions: What customers will we serve (what’s our target market)? and How can we serve these customers best (what’s our value proposition)? We will discuss these marketing strategy concepts briefly here and then look at them in more detail in Chapters 2 and 7.

Selecting Customers to Serve

The company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). Some people think of marketing management as finding as many customers as possible and increasing demand. But marketing managers know that they cannot serve all customers in every way. By trying to serve all customers, they may not serve any customers well. Instead, the company wants to select only customers that it can serve well and profitably. For example, Nordstrom profitably targets affluent professionals; Dollar General profitably targets families with more modest means.

Ultimately, marketing managers must decide which customers they want to target and on the level, timing, and nature of their demand. Simply put, marketing management is customer management and demand management.

Choosing a Value Proposition

The company must also decide how it will serve targeted customers—how it will differentiate and position itself in the marketplace. A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. JetBlue promises to put “You Above All” by bringing “humanity back to travel.” By contrast, Spirit Airlines gives you “Bare Fare” pricing: “Less Money. More Go.” Homewood Suites by Hilton wants you to "Make yourself at home." A blue circle icon. Manwhile, the Hyatt Regency brand declares that sometimes “It’s good not to be home.” Its ads highlight the joys of traveling and the fun things that people do when they are traveling on business.

A photo shows an advertisement for Hyatt Regency that shows a man lying on a bed and talking on the phone. The caption reads, “Sleep sideways. It's good not to be home.”

Photo shows a man dressed in formal wear lying on a bed and happily talking over a phone. Value propositions: The Hyatt Regency brand declares that sometimes “It’s good not to be home.” Its ads highlight the joys of business travel and staying at a Hyatt Regency hotel.

Courtesy Hyatt Corporation. Photograph ©Richard Schultz-2015. Talent: Dean West.

Such value propositions differentiate one brand from another. They answer the customer’s question: “Why should I buy your brand rather than a competitor’s?” Companies must design strong value propositions that give them the greatest advantage in their target markets.

Marketing Management Orientations

Marketing management wants to design strategies that will engage target customers and build profitable relationships with them. But what philosophy should guide these marketing strategies? What weight should be given to the interests of customers, the organization, and society? Very often, these interests conflict.

There are five alternative concepts under which organizations design and carry out their marketing strategies: the production, product, selling, marketing, and societal marketing concepts.

The Production Concept

The production concept holds that consumers will favor products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. This concept is one of the oldest orientations that guides sellers.

The production concept is still a useful philosophy in some situations. For example, both personal computer maker Lenovo and home appliance maker Haier dominate the highly competitive, price-sensitive Chinese market through low labor costs, high production efficiency, and mass distribution. However, although useful in some situations, the production concept can lead to marketing myopia. Companies adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objective—satisfying customer needs and building customer relationships.

The Product Concept

The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements.

Product quality and improvement are important parts of most marketing strategies. However, focusing only on the company’s products can also lead to marketing myopia. For example, some manufacturers believe that if they can “build a better mousetrap, the world will beat a path to their doors.” But they are often rudely shocked. Buyers may be looking for a better solution to a mouse problem but not necessarily for a better mousetrap. The better solution might be a chemical spray, an exterminating service, a house cat, or something else that suits their needs even better than a mousetrap. Furthermore, a better mousetrap will not sell unless the manufacturer designs, packages, and prices it attractively; places it in convenient distribution channels; brings it to the attention of people who need it; and convinces buyers that it is a better product.

The Selling Concept

Many companies follow the selling concept, which holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion ­effort. The selling concept is typically practiced with unsought goods—those that buyers do not normally think of buying, such as life insurance or blood donations. These industries must be good at tracking down prospects and selling them on a product’s benefits.

Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on building long-term, profitable customer relationships. The aim often is to sell what the company makes rather than to make what the market wants. It assumes that customers who are coaxed into buying the product will like it. Or, if they don’t like it, they will possibly forget their disappointment and buy it again later. These are usually poor assumptions.

The Marketing Concept

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 do. Under the marketing concept, customer focus and value are the paths to sales and profits. Instead of a product-centered make-and-sell philosophy, the marketing concept 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.

A green circle icon. Figure 1.3 contrasts the selling concept and the marketing concept. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses primarily on customer conquest—getting short-term sales with little concern about who buys or why.

A green circle icon. Figure 1.3

Selling and Marketing Concepts Contrasted

Chart contrasts Selling and Marketing concepts.

In contrast, the marketing concept takes an outside-in perspective. As Herb Kelleher, the colorful founder of Southwest Airlines, once put it, “We don’t have a marketing department; we have a customer department.” The marketing concept starts with a well-defined market, focuses on customer needs, and integrates all the marketing activities that affect customers. In turn, it yields profits by creating relationships with the right customers based on customer value and satisfaction.

Implementing the marketing concept often means more than simply responding to customers’ stated desires and obvious needs. Customer-driven companies research customers deeply to learn about their desires, gather new product ideas, and test product improvements. Such customer-driven marketing usually works well when a clear need exists and when customers know what they want.

In many cases, however, customers don’t know what they want or even what is possible. As Henry Ford once remarked, “If I’d asked people what they wanted, they would have said faster horses.”9 For example, even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as tablet computers, smartphones, digital cameras, 24-hour online buying, digital video and music streaming, and GPS systems in their cars and phones? Such situations call for customer-driving ­marketing—understanding customer needs even better than customers themselves do and creating products and services that meet both existing and latent needs, now and in the future. As an executive at 3M put it, “Our goal is to lead customers where they want to go before they know where they want to go.”

The Societal Marketing Concept

The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the immediate needs and wants of target markets always doing what’s best for its consumers in the long run? The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well-being. It calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.

Even more broadly, many leading business and marketing thinkers are now preaching the concept of shared value, which recognizes that societal needs, not just economic needs, define markets.10 The concept of shared value focuses on creating economic value in a way that also creates value for society. A growing number of companies known for their hard-nosed approaches to business—such as GE, Dow, Google, IBM, Intel, Johnson & Johnson, Nestlé, Unilever, and Walmart—are rethinking the interactions between society and corporate performance. They are concerned not just with short-term economic gains but with the well-being of their customers, the depletion of natural resources vital to their businesses, the viability of key suppliers, and the economic well-being of the communities in which they operate.

One prominent marketer calls this Marketing 3.0. “Marketing 3.0 organizations are values-driven,” he says. “I’m not talking about being value-driven. I’m talking about ‘values’ plural, where values amount to caring about the state of the world.” Another marketer calls it purpose-driven marketing. “The future of profit is purpose,” he says.11

As A green circle icon. Figure 1.4 shows, companies should balance three considerations in setting their marketing strategies: company profits, consumer wants, and society’s interests. Online grocer Door to Door Organics operates this way:12

A green circle icon. Figure 1.4

Three Considerations Underlying the Societal Marketing Concept

Chart explains the three considerations underlying the Societal Marketing Concept.
A photo shows a variety of fruits and vegetables from Door to Door Organics store.

Photo shows an assortment of fruits and vegetables packed by Door to Door Organics. The societal marketing concept: Door to Door Organics does more than just sell natural and organic groceries online for profit. Its deep-felt mission is “to bring more Good Food—food that positively impacts health, communities, and the environment—to more people in a sustainable way.”

Door to Door Organics

A blue circle icon. Door to Door Organics delivers fresh, high-quality, organic, natural, and local meat, dairy, produce, and groceries directly to homes, offices, and schools in 16 states across the country. Customers order online and receive weekly deliveries to their doorsteps year-round. But Door to Door Organics does much more than just sell groceries online for profit. It also dedicates itself to a deeply felt mission “to bring more Good Food—food that positively impacts health, communities, and the environment—to more people in a sustainable way.” It wants to “make a positive impact on our food system, make people healthier, connect communities, grow local economies, and inspire people to eat Good Food.”

To meet its ambitious Good Food mission, Door to Door sources most of what it sells from local family farms and businesses who are “dedicated stewards of the land and use USDA-certified organic practices that are healthier for both animals and people, better for the soil, and reduce carbon emissions.” Door to Door delivers to specified areas on specific days of the week, maintaining a tight delivery radius that reduces both costs and carbon emissions. And through careful food management, the company puts 44 percent less wasted food in landfills than the average grocery store. Door to Door Organics also treats customers responsibly. All deliveries carry a #JoyDelivered guarantee—if a customer isn’t “absolutely delighted,” the company will make it right. Thanks to its societal mission, Door to Door Organics is thriving, suggesting that doing good can benefit both the planet and the company.

Preparing an Integrated Marketing Plan and Program

The company’s marketing strategy outlines which customers it will serve and how it will create value for these customers. Next, the marketer develops an integrated marketing program that will actually deliver the intended value to target customers. The marketing program builds customer relationships by transforming the marketing strategy into action. It consists of the firm’s marketing mix, the set of marketing tools the firm uses to implement its marketing strategy.

The major marketing mix tools are classified into four broad groups, called the four Ps of marketing: product, price, place, and promotion. To deliver on its value proposition, the firm must first create a need-satisfying market offering (product). It must then decide how much it will charge for the offering (price) and how it will make the offering available to target consumers (place). Finally, it must engage target consumers, communicate about the offering, and persuade consumers of the offer’s merits (promotion). The firm must blend each marketing mix tool into a comprehensive integrated marketing program that communicates and delivers the intended value to chosen customers. We will explore marketing programs and the marketing mix in much more detail in later chapters.

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