58  Marketing Concept, Orientation and Customer Value

58.1 What is Marketing?

Philip Kotler, the “father of modern marketing” (Kellogg School), defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit”. The American Marketing Association (AMA, 2017) definition emphasises value creation for customers, clients, partners and society.

TipWorking definitions of marketing
Author / body Definition
Philip Kotler “The science and art of exploring, creating and delivering value to satisfy the needs of a target market at a profit.”
AMA (2017) “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.”
CIM (UK) “The management process responsible for identifying, anticipating and satisfying customer requirements profitably.”
Peter Drucker “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.”
Theodore Levitt “Marketing is selling goods that don’t come back to people that do.”
NoteMarketing Myopia — Theodore Levitt (1960)

Theodore Levitt, HBR (1960) — Marketing Myopia — firms fail when they define their business in terms of products rather than customer benefits. Railways failed because they thought they were in the “railroad business” not “transportation business”. Famous example: Kodak missed digital photography.

58.2 Core Marketing Concepts

TipKotler’s core concepts of marketing
  • Needs — basic human requirements (food, shelter).
  • Wants — needs shaped by culture and personality.
  • Demands — wants backed by purchasing power.
  • Products / Offerings — tangible goods + services + experiences.
  • Value — customer’s perceived benefits minus costs.
  • Satisfaction — perceived performance vs expectations.
  • Exchange — voluntary transfer of value.
  • Markets — set of actual + potential buyers.
  • Relationships — long-term mutually beneficial bonds.
  • Networks — firm + its stakeholders.

58.3 Evolution of Marketing Orientations

flowchart LR
  PD[Production<br/>1850s-1920s] --> PR[Product<br/>1920s-1930s]
  PR --> SE[Selling<br/>1930s-1950s]
  SE --> MK[Marketing<br/>1950s-1990s]
  MK --> RE[Relationship<br/>1990s-]
  RE --> SO[Societal /<br/>Holistic 2000s]
  SO --> DM[Digital /<br/>Customer-First 2010s+]
    classDef default fill:#003366,color:#ffffff,stroke:#ffcc00,stroke-width:3px,rx:10px,ry:10px;

TipFive Kotler orientations / philosophies
Orientation Focus Belief
Production Concept Mass production, efficiency Consumers prefer cheap, available products
Product Concept Quality, performance Best product wins
Selling Concept Aggressive selling, promotion Customers won’t buy enough unless pushed
Marketing Concept Customer needs Satisfy customer better than competitors
Societal Marketing Concept Customer + society Satisfy customer in a socially responsible way
NoteModern view: Holistic Marketing

Kotler-Keller added Holistic Marketing (4 pillars): Relationship · Integrated · Internal · Performance / Socially Responsible marketing.

58.4 Selling vs Marketing — Levitt’s Classic Distinction

TipSelling vs Marketing (Levitt 1960; Kotler)
Dimension Selling Marketing
Starting point Factory / Product Market / Customer
Focus Existing product Customer needs
Means Promotion, push Integrated mix
End Profit through sales volume Profit through customer satisfaction
Orientation Inside-out Outside-in

58.5 Customer Value

Customer-Perceived Value (CPV) = the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering vs the perceived alternatives.

TipCPV formula

\[\text{CPV} = \frac{\text{Total Customer Benefits}}{\text{Total Customer Costs}}\]

Or as a difference: \[\text{CPV} = \text{Total Benefits} - \text{Total Costs}\]

58.5.1 Components of Customer Benefits

TipTotal customer benefits
  • Product benefits — quality, features, durability.
  • Service benefits — installation, training, maintenance.
  • Personnel benefits — courtesy, competence.
  • Image benefits — brand, reputation.

58.5.2 Components of Customer Costs

TipTotal customer costs
  • Monetary cost — price paid.
  • Time cost.
  • Energy cost — physical effort.
  • Psychic cost — mental effort, risk.
  • Switching cost — cost of changing from current option.

58.6 Customer Satisfaction

\[\text{Satisfaction} = \text{Perceived Performance} - \text{Expectations}\]

TipSatisfaction = Performance − Expectations
  • Performance > Expectations → Delighted customer.
  • Performance = Expectations → Satisfied customer.
  • Performance < Expectations → Dissatisfied customer.

58.6.1 Measuring Satisfaction

TipTools to measure customer satisfaction
  • CSAT (Customer Satisfaction Score).
  • NPS (Net Promoter Score) — Fred Reichheld (2003).
  • CES (Customer Effort Score) — Dixon, Toman, DeLisi (2010).
  • VOC (Voice of Customer) programmes.
  • Mystery shopping.
  • Complaint and feedback systems.
NoteNet Promoter Score (NPS)

Fred Reichheld at Bain & Co (HBR 2003) — “the one number you need to grow”. NPS = % Promoters (9-10) − % Detractors (0-6). Passives (7-8) excluded. Range −100 to +100.

58.7 Customer Lifetime Value (CLV / LTV)

Customer Lifetime Value (CLV) = the present value of all future profits a customer is expected to generate during the relationship. Conceptualised by Don Peppers and Martha Rogers (The One-to-One Future, 1993).

TipSimple CLV formula

\[\text{CLV} = \sum_{t=0}^{n} \frac{(p_t - c_t) \times r^t}{(1+i)^t}\]

Where p = price, c = cost, r = retention rate, i = discount rate, n = horizon.

Simplified: \(\text{CLV} = \frac{\text{Margin per customer per year}}{1 - r + i}\)

58.8 Customer Relationship Management (CRM)

TipCRM evolution
  • Transactional Marketing (one-time sale focus).
  • Relationship Marketing — Berry (1983); Christopher, Payne, Ballantyne (1991).
  • CRM — technology-supported customer management; Siebel, Salesforce, HubSpot.
  • Customer Experience Management (CEM).
  • Customer Centricity — Peter Fader (Wharton).
TipCRM goals — IDIC framework (Peppers-Rogers)
  • Identify — who are your most valuable customers?
  • Differentiate — by needs and value.
  • Interact — engage personally.
  • Customise — tailor offerings.

58.9 The Marketing Process — Kotler

TipFive-step marketing process — Kotler
  1. Understand the marketplace and customer needs and wants.
  2. Design a customer-driven marketing strategy — STP (Topic 58).
  3. Construct an integrated marketing programme — 4 Ps (Topics 59-60).
  4. Build profitable relationships and customer delight.
  5. Capture value from customers in return — sales, profits, equity.

58.10 Marketing Environment

TipMarketing environment — Kotler
Layer Components
Internal Top mgmt, finance, R&D, purchasing, manufacturing, accounting
Microenvironment Customers, competitors, suppliers, intermediaries, publics
Macroenvironment Demographic, Economic, Natural, Technological, Political-legal, Cultural (DEPEST)

58.11 The Marketing Mix — 4 Ps

The Marketing Mix — 4 Ps was coined by E. Jerome McCarthy (Michigan State, 1960) in Basic Marketing: A Managerial Approach and popularised by Kotler: Product · Price · Place · Promotion.

TipOriginal 4 Ps — McCarthy (1960)
P What
Product The offering — features, quality, design, branding, packaging, services
Price Cost to the customer — list price, discounts, terms
Place Distribution — channels, coverage, logistics
Promotion Communication — advertising, sales promotion, PR, personal selling, direct marketing, digital

58.11.1 Extended Marketing Mix — 7 Ps (Booms & Bitner, 1981)

For services:

TipAdditional 3 Ps for services
  • People — employees, customers, service providers.
  • Process — service delivery procedures.
  • Physical Evidence — tangible cues (uniforms, premises).

58.11.2 Modern Mix — 4 Cs (Robert Lauterborn, 1990)

Tip4 Cs (customer view)
4 Cs Corresponding P
Consumer / Customer Value Product
Cost Price
Convenience Place
Communication Promotion

58.11.3 Other Mix Variants

TipOther marketing mix variants
  • SAVE (Ettenson, Conrado & Knowles 2013) — Solution · Access · Value · Education.
  • 4 As (Sheth & Sisodia) — Affordability · Acceptability · Accessibility · Awareness — for emerging markets.
  • 8 Ps for services — adds Productivity & Quality.
  • Digital Mix — Permission · Personalisation · Privacy.

58.12 Holistic Marketing — Kotler-Keller (2006)

TipFour pillars of holistic marketing
Pillar Description
Relationship Marketing Long-term mutually beneficial relationships
Integrated Marketing Coordinated mix, single voice
Internal Marketing Marketing within the firm — employees as customers
Performance / Socially Responsible Marketing Financial + ESG outcomes

58.13 Modern Marketing Concepts

TipTwelve modern marketing concepts
Concept Author / Year
Relationship Marketing Leonard Berry (1983)
One-to-One Marketing Peppers-Rogers (1993)
Permission Marketing Seth Godin (1999)
Experience Marketing Pine & Gilmore (1998)
Co-creation Prahalad & Ramaswamy (2004)
Service-Dominant Logic Vargo & Lusch (2004)
Marketing 3.0 (values-driven) Kotler-Kartajaya-Setiawan (2010)
Marketing 4.0 (digital-traditional fusion) Kotler (2017)
Marketing 5.0 (technology for humanity) Kotler (2021)
Inbound Marketing HubSpot (Brian Halligan)
Content Marketing Joe Pulizzi
Customer-Centricity Peter Fader (Wharton)

58.14 Marketing in India

TipIndian marketing context
  • Pre-1991 — sellers’ market; controlled economy; limited brands.
  • Post-1991 — buyer’s market; FMCG and MNC entry.
  • Indian marketing scholars — R. Srivatsa Rao, Jagdish Sheth (Emory), Rajan Saxena, S. Ramaswamy & Namakumari, Philip Kotler & Kevin Lane Keller (Indian editions).
  • Indian marketing milestones: HUL’s deep distribution; ITC’s Aashirvaad atta; Tata Salt brand-building; Amul cooperative model.
  • Bharat (rural) marketing: 65 % population; HUL Project Shakti; ITC E-Choupal.
  • Frugal marketing: Tata Nano; Nirma; Vicco; LG India.
  • Digital India — UPI · ONDC · Open Network for Digital Commerce.
  • Government regulators: ASCI (Advertising Standards Council of India, 1985); CCI; SEBI for FSP marketing.

58.16 Practice Questions

Q 01 Kotler Easy

The "father of modern marketing" is:

  • APhilip Kotler
  • BTheodore Levitt
  • CJerome McCarthy
  • DPeter Drucker
View solution
Correct Option: A
Philip Kotler, Kellogg School.
Q 02 Myopia Medium

"Marketing Myopia" (1960) was written by:

  • AKotler
  • BTheodore Levitt
  • CMcCarthy
  • DDrucker
View solution
Correct Option: B
Theodore Levitt, HBR (1960). Defined the customer-centric view.
Q 03 4 Ps Easy

The 4 Ps of marketing were coined in 1960 by:

  • AKotler
  • BLevitt
  • CMcCarthy
  • DDrucker
View solution
Correct Option: C
E. Jerome McCarthy, *Basic Marketing* (1960).
Q 04 7 Ps Medium

The extended 7 Ps marketing mix for services was proposed by:

  • AMcCarthy
  • BBooms & Bitner (1981)
  • CLauterborn
  • DKotler-Keller
View solution
Correct Option: B
Booms & Bitner (1981) — added People, Process, Physical Evidence for services.
Q 05 4 Cs Medium

The "4 Cs" of marketing (customer perspective) were proposed in 1990 by:

  • ARobert Lauterborn
  • BBooms & Bitner
  • CSheth & Sisodia
  • DKotler
View solution
Correct Option: A
Robert Lauterborn (1990) — Consumer Value · Cost · Convenience · Communication.
Q 06 Marketing concept Easy

The Marketing Concept (vs Production / Selling) puts emphasis on:

  • AMass production
  • BAggressive promotion
  • CCustomer needs
  • DBest product features
View solution
Correct Option: C
Marketing concept = satisfy customer needs better than competitors.
Q 07 Selling vs Marketing Medium

Selling differs from Marketing in starting from:

  • ACustomer
  • BProduct / Factory
  • CCompetitor
  • DDistribution
View solution
Correct Option: B
Selling: inside-out, starts from product. Marketing: outside-in, starts from customer.
Q 08 NPS Medium

Net Promoter Score (NPS) was popularised in 2003 by:

  • AFred Reichheld
  • BKotler
  • CPeppers-Rogers
  • DDrucker
View solution
Correct Option: A
Fred Reichheld at Bain — HBR 2003.
Q 09 NPS calc Hard

NPS = % Promoters − % Detractors. Promoters are those who rate:

  • A5-10
  • B7-10
  • C9-10
  • D10 only
View solution
Correct Option: C
Promoters 9-10; Passives 7-8; Detractors 0-6.
Q 10 CLV Medium

Customer Lifetime Value (CLV) is:

  • ACost of acquiring a customer
  • BPresent value of all future profits from a customer
  • CCustomer's age
  • DLoyalty rewards points
View solution
Correct Option: B
PV of future profit stream over the relationship.
Q 11 Holistic Hard

Kotler-Keller's "Holistic Marketing" has four pillars. Which is NOT one?

  • ARelationship Marketing
  • BIntegrated Marketing
  • CDirect Marketing
  • DInternal Marketing
View solution
Correct Option: C
Four: Relationship · Integrated · Internal · Performance/Socially Responsible.
Q 12 Societal Medium

The Societal Marketing Concept extends the Marketing Concept by adding consideration for:

  • ASociety's welfare
  • BCost reduction
  • CAggressive promotion
  • DForeign markets
View solution
Correct Option: A
Satisfy customer needs in a way that preserves long-term societal welfare.
Q 13 Permission Hard

"Permission Marketing" (1999) is associated with:

  • ASeth Godin
  • BJoe Pulizzi
  • CBrian Halligan
  • DReichheld
View solution
Correct Option: A
Seth Godin, *Permission Marketing* (1999).
Q 14 SDL Hard

"Service-Dominant Logic" of marketing (2004) was proposed by:

  • AVargo & Lusch
  • BPine & Gilmore
  • CPrahalad & Ramaswamy
  • DBerry
View solution
Correct Option: A
Stephen Vargo and Robert Lusch, *Journal of Marketing* (2004).
Q 15 Co-creation Hard

"Co-creation of value" (2004) is associated with:

  • APrahalad & Ramaswamy
  • BVargo & Lusch
  • CKotler
  • DReichheld
View solution
Correct Option: A
C.K. Prahalad and Venkat Ramaswamy, *The Future of Competition* (2004).
Q 16 Marketing 5.0 Hard

"Marketing 5.0 — Technology for Humanity" (2021) was by:

  • AKotler-Kartajaya-Setiawan
  • BDrucker
  • CLevitt
  • DSheth
View solution
Correct Option: A
Kotler, Kartajaya & Setiawan; Marketing 3.0 (2010), 4.0 (2017), 5.0 (2021).
Q 17 Drucker Medium

"The aim of marketing is to make selling superfluous" was said by:

  • APeter Drucker
  • BPhilip Kotler
  • CTheodore Levitt
  • DJerome McCarthy
View solution
Correct Option: A
Peter Drucker — *Management* (1973).
Q 18 4 As Hard

"4 As" framework for emerging markets — Affordability, Acceptability, Accessibility, Awareness — was proposed by:

  • ASheth & Sisodia
  • BKotler-Keller
  • CGovindarajan
  • DPrahalad
View solution
Correct Option: A
Jagdish Sheth and Rajendra Sisodia — emerging-market 4 As.
Q 19 ASCI Medium

India's self-regulatory body for advertising is:

  • AASCI (1985)
  • BSEBI
  • CCCI
  • DMIB
View solution
Correct Option: A
ASCI — Advertising Standards Council of India, 1985.
Q 20 Match concepts Hard

Match the marketing concept with its author:

(i) 4 Ps (a) Lauterborn
(ii) 4 Cs (b) Booms & Bitner
(iii) 7 Ps (c) McCarthy
(iv) Marketing Myopia (d) Levitt
  • A(i)-(c), (ii)-(a), (iii)-(b), (iv)-(d)
  • B(i)-(a), (ii)-(b), (iii)-(c), (iv)-(d)
  • C(i)-(d), (ii)-(c), (iii)-(a), (iv)-(b)
  • D(i)-(b), (ii)-(d), (iii)-(a), (iv)-(c)
View solution
Correct Option: A
4 Ps — McCarthy; 4 Cs — Lauterborn; 7 Ps — Booms & Bitner; Myopia — Levitt.

58.16.1 Advanced Format Questions

AR 1Assertion-ReasonHard

A: Marketing concept starts with customer needs.
R: The selling concept assumes products won't sell without aggressive selling.

  • ABoth true; R explains A
  • BBoth true; R does not explain A
  • CA true, R false
  • DA false, R true
View solution
Correct Option: B
S 1Statement-basedMedium

Marketing orientations: (i) Production. (ii) Product. (iii) Selling. (iv) Marketing. (v) Societal.

  • AAll five
  • B(i), (ii), (iii) only
  • C(iv) only
  • D(iv) and (v) only
View solution
Correct Option: A
S 2Statement-basedHard

Customer value: (i) Total benefit − Total cost. (ii) CLV (lifetime). (iii) NPS. (iv) Holistic marketing.

  • AAll four are valid concepts
  • B(i) and (ii) only
  • C(iii) and (iv) only
  • D(iii) only
View solution
Correct Option: A

58.17 Quick Recall

ImportantQuick recall
  • Kotler — father of modern marketing.
  • Definitions: Kotler · AMA · CIM · Drucker · Levitt (Marketing Myopia 1960).
  • 10 core concepts: Needs · Wants · Demands · Products · Value · Satisfaction · Exchange · Markets · Relationships · Networks.
  • 5 orientations (Kotler): Production · Product · Selling · Marketing · Societal.
  • Selling vs Marketing: inside-out (product) vs outside-in (customer).
  • Customer-Perceived Value (CPV): Benefits / Costs (or Benefits − Costs).
  • Benefits: Product · Service · Personnel · Image.
  • Costs: Monetary · Time · Energy · Psychic · Switching.
  • Satisfaction = Performance − Expectations.
  • Measurement: CSAT · NPS (Reichheld 2003) · CES · VOC · mystery shop.
  • CLV — Peppers-Rogers (1993): PV of future profits.
  • CRM evolution: Transactional → Relationship (Berry 1983) → CRM → CEM → Customer Centricity (Fader).
  • IDIC (Peppers-Rogers): Identify · Differentiate · Interact · Customise.
  • Kotler 5-step process: Understand · Design strategy (STP) · Programme (4 Ps) · Build relationships · Capture value.
  • Marketing environment: Internal · Microenvironment · Macroenvironment (DEPEST).
  • 4 Ps — McCarthy (1960): Product · Price · Place · Promotion.
  • 7 Ps — Booms & Bitner (1981): + People · Process · Physical Evidence (for services).
  • 4 Cs — Lauterborn (1990): Consumer · Cost · Convenience · Communication.
  • Other variants: SAVE (Ettenson 2013) · 4 As — Sheth-Sisodia (emerging markets) · 8 Ps · Digital Mix.
  • Holistic Marketing — Kotler-Keller (2006) 4 pillars: Relationship · Integrated · Internal · Performance/Socially Responsible.
  • Modern concepts: Relationship (Berry 1983) · One-to-One (Peppers-Rogers 1993) · Permission (Godin 1999) · Experience (Pine-Gilmore 1998) · Co-creation (Prahalad-Ramaswamy 2004) · SDL (Vargo-Lusch 2004) · Marketing 3.0/4.0/5.0 (Kotler 2010/2017/2021) · Inbound (HubSpot) · Content (Pulizzi) · Customer-Centricity (Fader).
  • India: Pre/Post 1991 · Sheth · Saxena · Ramaswamy-Namakumari · Bharat marketing · frugal · Digital India (UPI, ONDC) · ASCI 1985.
  • Modern trends: customer-centricity · personalisation · omnichannel · influencer · content · marketing automation · voice/conversational · privacy-first (GDPR, DPDP 2023) · purpose-driven · Web3/Metaverse · community-led · generative AI.