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CHAPTER 1CHAPTER 1

Marketing: The Art and Marketing: The Art and Science of Satisfying Science of Satisfying

CustomersCustomers

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ObjectivesObjectives

1.1. Define marketing, explain how it creates utility, and describe its Define marketing, explain how it creates utility, and describe its role in the global marketplacerole in the global marketplace

2.2. Contrast marketing activities during the four eras in the history of Contrast marketing activities during the four eras in the history of mktg.mktg.

3.3. Explain the importance of avoiding marketing myopia.Explain the importance of avoiding marketing myopia.

4.4. Describe the characteristics of not-for-profit marketing.Describe the characteristics of not-for-profit marketing.

5.5. Identify and briefly explain each of the five types of non-traditional Identify and briefly explain each of the five types of non-traditional marketingmarketing

6.6. Explain the shift from transaction based marketing to relationship Explain the shift from transaction based marketing to relationship marketingmarketing

7.7. Identify the universal functions of mktgIdentify the universal functions of mktg

8.8. Demonstrates the relationship between ethical business practices, Demonstrates the relationship between ethical business practices, social responsibility, and marketplace successsocial responsibility, and marketplace success

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Scope of MarketingScope of Marketing

Marketing is typically seen as the task of Marketing is typically seen as the task of creating, promoting, and delivering goods creating, promoting, and delivering goods and services to final consumers and and services to final consumers and business buyers. Marketer are skilled in business buyers. Marketer are skilled in stimulating demand for a company’s stimulating demand for a company’s products and responsible for demand products and responsible for demand management. management.

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What is Marketing?What is Marketing?

MarketingMarketing has been defined by the AMA has been defined by the AMA as an organizational function and as an organizational function and a set a set of processes for creating, of processes for creating, communicating and delivering value communicating and delivering value to customersto customers and and for managing for managing customer relationshipscustomer relationships in ways that in ways that benefit the organization and its benefit the organization and its stakeholders.stakeholders.

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Defining MarketingDefining Marketing

Marketing is a societal process by Marketing is a societal process by which individuals and groups obtain which individuals and groups obtain what they need and want through what they need and want through creating, offering, and freely creating, offering, and freely exchanging products and services of exchanging products and services of value with others. value with others.

- Philip Kotler (p. 7)- Philip Kotler (p. 7)

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MarketingMarketing

Marketing is the process of planning Marketing is the process of planning and executing the conception of, and executing the conception of, pricing, promotion, and distribution of pricing, promotion, and distribution of ideas, goods, services, organizations, ideas, goods, services, organizations, and events to create and maintain and events to create and maintain relationships that will relationships that will satisfy individual satisfy individual and organizational objectivesand organizational objectives..

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What is Marketing?

What is Marketing?

Process by which individuals and groups Process by which individuals and groups obtain what they obtain what they needneed and and wantwant through through creating and creating and exchanging products exchanging products and and value value with others.with others.

More simply: Marketing is the delivery More simply: Marketing is the delivery of customer satisfaction at a profit.of customer satisfaction at a profit.

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What is the Marketing Concept?

What is the Marketing Concept?

TheThe Marketing Concept Marketing Concept is a business is a business philosophy that holds that philosophy that holds that the key to the key to achieving organizational goals achieving organizational goals consists of the consists of the company’s being company’s being more effective than competitors more effective than competitors in in creating, delivering, and creating, delivering, and communicating customer value to its communicating customer value to its chosen markets. chosen markets.

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Music to a Marketer’s EarsMusic to a Marketer’s Ears

““They’re the best.”They’re the best.” ““I always eat there.”I always eat there.” ““I only fly with that airline.”I only fly with that airline.” ““I buy my electronics at I buy my electronics at

that store.”that store.”

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Four Types of Utility Created by MarketersFour Types of Utility Created by MarketersTYPE DESCRIPTION EXAMPLES ORGANIZAITONAL

FUNCTION

RESPONSIBLE

Form Conversion of raw materials and components into finished goods and services

Skippy Peanut Butter; State Farm automobile insurance policy; Boeing 767 aircraft

Productiona

Time Availability of goods and services when consumers want them

One-hour dry cleaning; LensCrafters eyeglass guarantee; Federal Express’ guarantee of package delivery by 10:30 a.m. the next day

Marketing

Place Availability of goods and services at convenient locations

Soda machines in school lobbies; coffee and snacks in Barnes & Noble bookstores; day cares in office complexes; ATM machines in gas stations; mailboxes outside convenience stores

Marketing

Ownership (possession)

Ability to transfer title to goods or services from marketer to buyer

Retail sales (in exchange for currency or credit-card payment); swap meets

Marketing

aMarketing provides inputs related to consumer preferences, but the actual creation of form utility is the responsibility of the production function.

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By creating Time, Place, and Ownership Utility, FedEx is adding value.

Creating Utility

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How to Create Customers

Identifying customer needsIdentifying customer needs Designing goods and services that meet those Designing goods and services that meet those

needsneeds Communicating information about those goods Communicating information about those goods

and services to prospective buyersand services to prospective buyers Making the goods or services available at times Making the goods or services available at times

and places that meet customers’ needsand places that meet customers’ needs Pricing goods and services to reflect costs, Pricing goods and services to reflect costs,

competition, and customers’ ability to buycompetition, and customers’ ability to buy Providing for the necessary service and follow-Providing for the necessary service and follow-

up to ensure customer satisfaction after the up to ensure customer satisfaction after the purchasepurchase

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Creating Customers

Creating customers that want to stay with Creating customers that want to stay with you is all about identifying needs, providing you is all about identifying needs, providing goods and services that meet those needs, goods and services that meet those needs, pricing, and follow-up service.pricing, and follow-up service.

AOLAOL prides itself in making it easy to stay in prides itself in making it easy to stay in touch with your loved ones and friends or to touch with your loved ones and friends or to get information. You can do all of this get information. You can do all of this through a very easy system to use. They through a very easy system to use. They also stress their customer service number also stress their customer service number for any problems customers might have.for any problems customers might have.

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Four Eras of Marketing History

“A good product will sell itself.”

Creative advertising and selling will overcome consumers’ resistance and convince them to buy.”

The consumer rules! Find a need and fill it.”

“Long term relationships with customers and other partners lead to success.”

In the United States and other highly industrialized economies

Prior to 1950’s Since 1950’s

Production RelationshipERA

Prior to 1920’s

Sales Marketing

Since 1990’s

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Production ConceptProduction Concept

Product ConceptProduct Concept

Selling ConceptSelling Concept

Marketing ConceptMarketing Concept

Consumers prefer products that are widely available and inexpensive

Consumers favor products that offer the most quality, performance,

or innovative features

Consumers will buy products only ifthe company aggressively

promotes/sells these products

Focuses on needs/ wants of target markets & delivering value

better than competitors

Company Orientations Towards the Marketplace

Company Orientations Towards the Marketplace

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MarketIntegratedmarketing

Profits throughcustomer

satisfactionCustomer

needs

(b) The marketing concept

FactoryExistingproducts

Selling andpromotion

Profits throughsales volume

Startingpoint Focus Means Ends

(a) The selling concept

Customer Delivered ValueCustomer Delivered Value

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Netpulse, LLC uses a monitoring system to help in diagnosing problems from a remote location. They also provide innovative ways to help their customers, Health Club Owners, attract members. Netpulse, LLC has the ability to provide cardiovascular equipment with a flat LCD screen enabling exercisers to surf the web, listen to CDs, watch personal TV, and still use the equipment.

This is a good example of providing for a “win, win situation” leading to Relationship Marketing, the building of long term relationships.

Relationship Marketing

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Emergence of the Marketing Concept

Seller’s Market. Market in which there are more buyers for fewer goods and services.

Buyer’s Market. Market in which there are more goods and services than people willing to buy them.

Consumer Orientation. Emphasizes first determining unmet consumer needs and then designing a system for satisfying them.

Marketing Concept . Company-wide consumer orientation with the objective of achieving long-run success.

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Converting Needs to Wants

By focusing on the benefits resulting from these goods and services, effective marketing converts needs and wants.

Ex: A need for a pair of pants may be converted to a desire for jeans – and further, a desire for jeans from Levis.

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Avoiding Marketing Myopia

Management’s failure to recognize Management’s failure to recognize the scope of its business.the scope of its business.

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Avoiding Marketing Myopia by Focusing on Benefits

CompanyCompany Myopic Myopic DescriptionDescription

Company Motto-Company Motto-Avoiding MyopiaAvoiding Myopia

MCI WorldcomMCI Worldcom ““We are a telephone We are a telephone company.”company.”

““We are a We are a communications communications company.”company.”

Northwest AirlinesNorthwest Airlines ““We are in the airline We are in the airline business.”business.”

““We are in the We are in the transportation business.”transportation business.”

Prudential Prudential SecuritiesSecurities

““We are in the stock We are in the stock brokerage business.”brokerage business.”

““We are in the financial We are in the financial services business.”services business.”

SonySony ““We are in the video We are in the video game business.”game business.”

““We are in the We are in the entertainment business.”entertainment business.”

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Marketing in not-for-profit organizations Marketing in not-for-profit organizations

a. Over 15 million people are employed by not-for-profit organizations.

b. Not for profit organizations operate in both the public and private sectors

c. Some not-for-profit organization adopt a marketing concept by forming a partnership with a for-profit company that benefits both.

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Characteristics of not-for-profit marketing Characteristics of not-for-profit marketing

1. The bottom line (the overall profitability and financial performance of the organization) is not the major objective of not-for-profit organizations.

2. However, not-for-profit organizations still need to generate sufficient revenues, often from donors, to accomplish their objectives. Marketing can help.

3. Like profit-seeking firms, not-for-profit organizations may market tangible goods and services.

4. A customer or service user of a not-for-profit organization often has less control over the organization’s destiny than they would in the case of a profit-seeking firm.

5. Resource contributors to not-for-profit organizations may try to interfere with the marketing program in order to promote a message that the donor feels is more important.

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Categories of Nontraditional Marketing

TypeType Brief DescriptionBrief Description ExamplesExamples

Person marketingPerson marketing Marketing efforts designed to cultivate the Marketing efforts designed to cultivate the attention and preference of a target market attention and preference of a target market toward a persontoward a person

Celebrity Britney Spears; Celebrity Britney Spears; athlete Tiger Woods; political athlete Tiger Woods; political candidatescandidates

Place marketingPlace marketing Marketing efforts designed to attract visitors to Marketing efforts designed to attract visitors to a particular area; improve consumer images of a particular area; improve consumer images of a city, state, or nation; and/or attract new a city, state, or nation; and/or attract new businessbusiness

Georgia: Experience the Georgia: Experience the Soul of Georgia; Belize: Soul of Georgia; Belize: Catch the Adventure; Catch the Adventure; Tennessee: Sounds Good to Tennessee: Sounds Good to MeMe

Cause marketingCause marketing Identification and marketing of a social issue, Identification and marketing of a social issue, cause, or idea to selected target marketscause, or idea to selected target markets

““Welfare to Work. It works.” Welfare to Work. It works.” “Friends don’t let friends “Friends don’t let friends drive drunk.”drive drunk.”

Event marketingEvent marketing Marketing of sporting, cultural, and charitable Marketing of sporting, cultural, and charitable activities to selected target marketsactivities to selected target markets

NASCAR Pepsi 400; Beijing NASCAR Pepsi 400; Beijing OlympicsOlympics

Organization Organization marketingmarketing

Marketing efforts of mutual-benefit Marketing efforts of mutual-benefit organizations, service organizations, and organizations, service organizations, and government organizations that seek to influence government organizations that seek to influence others to accept their goals, receive their others to accept their goals, receive their service, or contribute to them in some wayservice, or contribute to them in some way

U.S. Army: An Army of One. U.S. Army: An Army of One. American Red Cross: American Red Cross: “Together we can save a life”“Together we can save a life”

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Place Marketing,Form of Nontraditional Marketing

Place Marketing,Form of Nontraditional Marketing

What has this type of advertising done What has this type of advertising done for Louisiana tourism? for Louisiana tourism? Increased visitor inquiries from Increased visitor inquiries from

525,000 to over 2.8 million. 525,000 to over 2.8 million. Increased visits to the state by 28% Increased visits to the state by 28%

from 1993 to 2001. from 1993 to 2001. Source: Source: Peter A. Mayer Advertising Peter A. Mayer Advertising

AgencyAgency

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The shift from transaction-based marketing to relationship marketing

The shift from transaction-based marketing to relationship marketing

The development, The development, growth, and growth, and maintenance of long-maintenance of long-term, cost-effective term, cost-effective exchange exchange relationships with relationships with individual customers, individual customers, suppliers, suppliers, employees, and employees, and other partners for other partners for mutual benefit.mutual benefit.

Advocate

LoyalSupporter

RegularPurchaser

NewCustomer

Converting New Customers to Advocates

Emphasize on “Customer Lifetime Value”

Developing partnership and strategic alliances

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Eight Universal Marketing Functions

Eight Universal Marketing Functions

1. Buying

2. Selling

3. Transporting

4. Storing

5. Standardizing and grading

6. Financing

7. Risk Taking

8. Securing Marketing Information

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Increased Employee Loyalty

Better Public Image

Market Place Success

Improved Financial Performance

Programs that Promote Ethical Behavior and Social Responsibility Produce

Programs that Promote Ethical Behavior and Social Responsibility Produce

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Core Marketing ConceptsCore Marketing Concepts

Products and

Services

Value, satisfaction,and quality

Needs, wants,and demands

Exchange, transactions,and relationships

Markets

CoreMarketingConcepts

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What Motivates a Consumerto Take Action?

What Motivates a Consumerto Take Action?

Needs Needs - states of felt deprivation including - states of felt deprivation including physicalphysical needs for food, needs for food, socialsocial needs for needs for belonging and belonging and individualindividual needs for self- needs for self-expression. i.e. I am thirsty.expression. i.e. I am thirsty.

Wants Wants - form that a human need takes as - form that a human need takes as shaped by culture and individual personality. shaped by culture and individual personality. i.e. I want a Coca-Cola. i.e. I want a Coca-Cola.

DemandsDemands - human wants backed by buying - human wants backed by buying power. i.e. I have money to buy a Coca-power. i.e. I have money to buy a Coca-Cola.Cola.

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What Will Satisfy Consumer’sNeeds and Wants?

What Will Satisfy Consumer’sNeeds and Wants?

ProductsProducts - anything - anything that can be offered to that can be offered to a market to satisfy a a market to satisfy a need or want. need or want.

Products also Products also include: Persons, include: Persons, Places, Places, Organizations, Organizations, Activities, and Ideas.Activities, and Ideas.

ServicesServices - activities - activities or benefits offered for or benefits offered for sale that are sale that are essentially intangible essentially intangible and don’t result in the and don’t result in the ownership of ownership of anything. anything.

Examples: banking, Examples: banking, airlines, haircuts, and airlines, haircuts, and hotels.hotels.

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How Do Consumers Choose Among Many Products and Services?

How Do Consumers Choose Among Many Products and Services?

Customer Value - difference between the value the customer gains from owning and using a product and the cost of obtaining the product.

Customer Satisfaction - depends on the product’s perceived performance in delivering value relative to a buyer’s expectations.

Both are closely linked to Quality and Total Quality Management (TQM).

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How do Consumers ObtainProducts and Services?

How do Consumers ObtainProducts and Services?

Exchanges - act of obtaining a desired object from someone by offering something, such as money, another good, or a service, in return.

Transactions - trade of values between parties: one party gives X to another party and gets Y in return.

Relationship Marketing - building long-term relationships with valued consumers, distributors, dealers, and suppliers.

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Who Purchases Products

and Services?

Who Purchases Products

and Services?

Market - buyers who share a

particular need or want that can

be satisfied through exchanges and

relationships

Market - buyers who share a

particular need or want that can

be satisfied through exchanges and

relationships

Actual BuyersActual Buyers

PotentialBuyers

PotentialBuyers

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Modern Marketing SystemModern Marketing SystemSuppliersSuppliers

End UserMarket

End UserMarket

MarketingIntermediaries

MarketingIntermediaries

CompetitorsCompetitors Company(Marketer)

Company(Marketer)

En

vir

on

men

t En

viro

nm

ent

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Customers

Front-line people

Middle Management

TopManagement

Traditional Organization ChartTraditional Organization Chart

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Customer-Oriented Organization ChartCustomer-Oriented Organization Chart

Customers

Front-line people

Middle management

Topmanage-

ment

Customers Cus

tom

ers

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How Business and Marketing ChangingHow Business and Marketing Changing

Customers increasingly expect higher quality and Customers increasingly expect higher quality and service and some customization service and some customization

Customers are more sensitive to price changesCustomers are more sensitive to price changes Customers can get more information easilyCustomers can get more information easily Brand manufacturers are facing intense competition Brand manufacturers are facing intense competition

from domestic and foreign brandsfrom domestic and foreign brands Increasing promotion costs and shrinking profit Increasing promotion costs and shrinking profit

marginmargin Store-based retailers are suffering due to the growing Store-based retailers are suffering due to the growing

power of giant retailers and category killerspower of giant retailers and category killers Over saturation of store-based retailersOver saturation of store-based retailers New techniques in marketing productsNew techniques in marketing products

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Marketers responses and adjustmentsMarketers responses and adjustments

Customers relationship marketingCustomers relationship marketing Customer lifetime valueCustomer lifetime value Target marketingTarget marketing CustomizationCustomization Customer databaseCustomer database Integrated marketing communicationsIntegrated marketing communications Channels as partnersChannels as partners Every employee a marketerEvery employee a marketer Model-based decision makingModel-based decision making

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ReviewReview

Course OrganizationCourse Organization Tasks of MarketingTasks of Marketing Major Concepts & Tools of MarketingMajor Concepts & Tools of Marketing Marketplace OrientationsMarketplace Orientations Marketing’s Responses to New Marketing’s Responses to New

ChallengesChallenges