CHAPTER 1

MARKETING IN A CHANGING WORLD: CREATING CUSTOMERVALUE AND SATISFACTION

Previewing the Concepts—CHAPTER OBJECTIVES

1. Define what marketing is and discuss its core concepts.2. Explain the relationships between customer value, satisfaction, and quality.3. Define marketing management and understand how marketers manage demand and

build profitable customer relationships. 4. Compare the five marketing management philosophies.5. Analyze the major challenges facing marketers heading into the new “connected”

millennium.

CHAPTER OVERVIEW

Marketing is part of all of our lives and touches us in some way every day. To be successful, each company that deals with customers on a daily basis must not only be customer-driven, but customer-obsessed. The best way to achieve this objective is to develop a sound marketing function within the organization. Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Marketing is a key factor in business success. The marketing function not only deals with the production and distribution of products and services, but it also is concerned with the ethical and social responsibility functions found in the domestic and global environment. Marketing and its core concepts, the exchange relationship, a brief description of marketing management, the five major philosophies of marketing thought and practice, marketing challenges in the new “connected” millennium, marketing’s relationship to the information technology boom and the Internet, and connections with the world around us are just a few of the topics presented in this introductory chapter.

CHAPTER OUTLINE

1. Introduction a. Today’s successful, companies at all levels have one thing in common. b. All successful companies are strongly customer focused and heavily committed to marketing. c. To be successful an organization motivates everyone in the organization to produce superior value for their customers, leading to high levels of customer satisfaction.

2. What is Marketing?

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a. Creating customer value and satisfaction are at the very heart of modern marketing thinking and practice.

b. A very simple definition of marketing is that it is the delivery of customer satisfaction at a profit.

c. Sound marketing is critical to the success of every organization. d. You already know a lot about marketing—it’s all around you.

Marketing Defined e. Many people think of marketing only as selling and advertising. 1). Marketing is no longer “telling and selling.” 2). Marketing’s new sense is concerned with satisfying customer needs. f. Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

*****Use Key Term marketing Here; Use Chapter Objective #1 Here; Use Discussing the Issues #1 Here; Use Figure 1-1 Here; Use PowerPoint 1-3, 1-4, and 1-5 Here*****

Needs, Wants, and Demands g. Human needs are the most basic concept underlying marketing. A human need is a state of felt deprivation. 1). Humans have many complex needs. a). Basic, physical needs for food, clothing, warmth, and safety. b). Social needs for belonging and affection. c). Individual needs for knowledge and self-expression. 2). These needs are part of the basic human makeup. h. Another concept in marketing is human wants. A human want is the form that a human need takes as shaped by culture and individual personality. i. Demands are human wants that are backed by buying power. 1). Consumers view products as bundles of benefits and choose products that give them the best bundle for their money. 2). People demand products with the benefits that add up to the most satisfaction. j. Outstanding marketing companies go to great lengths to learn about and understand their customer’s needs, wants, and demands. k. The outstanding company strives to stay close to the customer.

*****Use Key Terms needs, wants, and demands Here; Use PowerPoint 1-4 and 1-6 Here*****

Products, Services, and Experiencesl. A product is anything that can be offered to a market to satisfy a need or want. A

service is an activity or benefit offered for sale that is essentially intangible and does not result in the ownership of anything.1). The concept of product is not limited to physical objects and can include experiences, persons, places, organizations, information, and ideas.

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a). Other terms that could be used for product include satisfier, resource, or marketing offer.

2). Be careful of paying attention to the product and not the benefit being satisfied. 3). “Marketing myopia” is caused by shortsightedness or losing sight of underlying customer needs by only focusing on existing wants.

*****Use Key Terms product and service Here; Use Marketing at Work 1-1 Here; Use PowerPoint 1-4 and 1-7 Here*****

Value, Satisfaction, and Quality m. Customer value is the difference between the values that the customer gains from owning and using a product and the costs of obtaining the product. Customers do

not usually judge product values and costs accurately or objectively—they act on perceived value. n. Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations. If performance exceeds expectations, the buyer is delighted (certainly a worthy goal of the marketing company). 1). Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise. 2). The aim of successful companies today is total customer satisfaction. 3). Customer delight creates an emotional affinity for a product or service, not just a rational preference, and this creates high customer loyalty. 4). Quality has a direct impact on product or service performance. Quality is defined in terms of customer satisfaction. o. The term total quality management (TQM) is an approach in which all the company’s people are involved in constantly improving the quality of products, services, and business processes. An extension of TQM is ROQ (return on quality). Marketers have two major responsibilities in a quality-centered company: 1). They must participate in forming strategies that will help the company win through total quality excellence—they must be the customer’s watchdog. 2). Marketers must deliver marketing quality as well as production quality.

*****Key Terms customer value and customer satisfaction Here; Use Chapter Objective #2 Here; Use Discussing the Issues #2 Here; Use PowerPoint 1-4 and 1-8 Here*****

Exchanges, Transactions, and Relationships p. Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering some- thing in return. 1). Exchange is only one of many ways to obtain a desired object. 2). Exchange allows a society to produce much more than it would with any alternative system. q. Whereas exchange is a core concept of marketing, a transaction (a trade of values between two parties) is marketing’s unit of measurement. A transaction usually involves at least two things of value, agreed-upon conditions, a time of agreement,

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and a place of agreement. Most involve money, a response, and action. r. Transactions in marketing is part of a larger idea of relationship marketing. Beyond creating short-term transactions, marketers need to build long-term relationships with valued customers, distributors, dealers, and suppliers. Ultimately,

a company wants to build a unique company asset called a marketing network (the company and all its supporting stakeholders). The goal of relationship marketing is to deliver long-term value to the customer, and thereby secure customer satisfaction and retention of patronage. To build this relationship (beyond offering consistently high value and satisfaction), the marketer can:

1). Add financial benefits. 2). Add social benefits. 3). Add structural ties. 4). Seek profitable customers.

*****Use Key Terms exchange, transaction, and relationship marketing Here; Use Discussing the Issues #2 Here; Use PowerPoint 1-4 and 1-9 Here; Use Interactive Student Assignment PowerPoint 1-10 Here*****

Markets s. The concepts of exchange and relationships lead to the concept of a market. A market is the set of actual and potential buyers of a product. 1). Originally, a market was a place where buyers and sellers gathered to exchange goods (such as a village square). 2). Economists use the term to designate a collection of buyers and sellers who transact in a particular product class (as in the housing market). 3). Marketers see buyers as constituting a market; sellers constitute an industry. 4). Modern economies operate on the principle of division of labor, where each person specializes in producing something, receives payment, and buys needed things with this money. Thus, modern economies abound in markets.

*****Use Key Term market Here*****

Marketing t. The concept of markets brings one full circle to the concept of marketing. 1). Sellers must search for buyers, identify their needs, design good products and services, set prices for them, promote them, and store and deliver them. 2). A modern marketing system includes all of the elements necessary to bring buyers and sellers together.

*****Use Figure 1-2 Here; Use PowerPoint 1-11 Here; Discuss Speed Bump Here***** 3. Marketing Management a. Marketing management is defined as the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges

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with target buyers for the purpose of achieving organizational objectives.

*****Use Key Term marketing management Here; Use Chapter Objective #3 Here; Use PowerPoint 1-12 Here*****

Demand Management b. Marketing management is concerned not only with finding and increasing demand, but also with changing or even reducing it. 1). Demarketing’s aim is to reduce demand temporarily or permanently (move traffic away from a popular tourist attraction during peak demand times). 2). In reality, marketing management is really demand management.

*****Use Key Term demarketing Here; Use PowerPoint 1-12 Here*****

Building Profitable Customer Relationships c. Managing demand means managing customers. 1). Demand comes from new customers and repeat customers. 2). Today, besides making efforts to attract new customers, marketers are going all out to retain and build relationships with existing customers. It costs five times as much to attract a new customer as it does to keep a current customer satisfied. d. Because of changing demographics, a slow-growth economy, more sophisticated competitors, and overcapacity in many industries, many markets and market shares are shrinking. e. The key to successful customer retention is superior customer value and satis- faction.

*****Use Marketing at Work 1-2 Here; Use PowerPoint 1-12 Here*****

Marketing Management Practice f. Marketing practice often passes through three stages: 1). Entrepreneurial marketing: most companies are started by individuals who live by their wits. 2). Formulated marketing: As small companies achieve success, they inevitably move toward more formulated marketing. 3). Intrepreneurial marketing: If companies lose their passion and marketing creativity, they must reestablish their companies with interpreneurship at the local level.

*****Use PowerPoint 1-13 Here*****

4. Marketing Management Philosophies a. There are five alternative concepts under which organizations conduct their market- ing activities: the production, product, selling, marketing, and societal marketing concepts.

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*****Use Chapter Objective #4 Here; Use Discussing the Issues #3 Here; Use Power Point 1-14 Here*****

The Production Concept b. The production concept holds that consumers will favor products that are available and highly affordable and that management should, therefore, focus on improving production and distribution efficiency. This is one of the oldest philosophies that guides sellers. c. The production concept is useful when: 1). Demand for a product exceeds the supply. 2). The product’s cost is too high and improved productivity is needed to bring it down. d. The risk with this concept is in focusing too narrowly on company operations. Do not ignore the desires of the market.

*****Use Key Term production concept Here; Use PowerPoint 1-14 Here*****

The Product Concept e. The product concept states that consumers will favor products that offer the most quality, performance, and features, and that the organization should, therefore, devote its energy to making continuous product improvements. 1). Some manufacturers mistakenly believe that if they “build a better mousetrap,” consumers will beat a path to their door just for their product. 2). The product concept can also lead to “marketing myopia,” the failure to see the challenges being presented by other products.

*****Use Key Term product concept Here; Use PowerPoint 1-14 Here*****

The Selling Concept f. Many organizations follow the selling concept. The selling concept is the idea that consumers will not buy enough of the organization’s products unless the organiza- tion undertakes a large-scale selling and promotion effort. 1). This concept is typically practiced with unsought goods (those that buyers do not normally think of buying). 2). To be successful with this concept, the organization must be good at tracking down the interested buyer and selling them on product benefits. 3). Industries that use this concept usually have overcapacity. Their aim is to sell what they make rather than make what will sell in the market. 4). There are not only high risks with this approach, but low satisfaction by customers.

*****Use Key Term selling concept Here; Use PowerPoint 1-14 and 1-15 Here*****

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The Marketing Concept g. The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. h. The marketing and selling concepts are often confused. The primary differences are: 1). The selling concept takes an “inside-out” perspective (focuses on existing products and uses heavy promotion and selling efforts). 2). The marketing concept takes an “outside-in” perspective (focuses on customer needs, values, and satisfactions). i. Many companies claim to adopt the marketing concept but really do not unless they commit to market-focused and customer-driven philosophies.

*****Use Key Term marketing concept Here; Use Figure 1-3 Here; Use PowerPoint 1-14 and 1-15 Here*****

The Societal Marketing Concept j. The societal marketing concept holds that the organization should determine the needs, wants, and interests of target markets. It should then deliver the desired satisfactions more effectively and efficiently than competitors in a way that

maintains or improves the consumer’s and the society’s well-being. 1). The societal marketing concept is the newest of the marketing philosophies. 2). It questions whether the pure marketing concept is adequate given the wide variety of societal problems and ills. 3). According to the societal marketing concept, the pure marketing concept overlooks possible conflicts between short-run consumer wants and long- run consumer welfare. 4). The societal concept calls upon marketers to balance three considerations in setting their marketing policies: a). Company profits. b). Customer wants. c). Society’s interests. 5). It has become good business to consider and think of society’s interests when the organization makes marketing decisions.

*****Use Key Term societal marketing concept Here; Use Discussing the Issues #4 Here; Use Figure 1-4 Here; Use PowerPoint 1-14 and 1-16 Here; Discuss Speed Bump Here; Use Discussion Question PowerPoint 1-17 Here*****

5. Marketing Challenges into the New “Connected” Millennium a. Marketing operates within a dynamic changing environment. 1). The major marketing developments as we enter the new millennium can be summed up in a single theme: connectedness. 2). Now more than ever, we are connected to one another.

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*****Use Discussing the Issues #5 Here; Use Chapter Objective #5 Here; Use Figure 1-5 Here; Use PowerPoint 1-18 Here*****

Technologies for Connecting b. The major force behind the new connectedness is technology. c. The boom in computer, telecommunications, and information technology, as well as the merging of these technologies, has had a major impact on the way businesses bring value to their customers. 1). Using today’s powerful computers, marketers create detailed databases and use them to target individual customers with offers designed to meet their specific needs and buying patterns. 2). Cell phones, fax machines, and CD-ROM to interactive TV are just a few of the tools being used to make connections. a). Electronic commerce allows consumers to shop and buy without ever leaving home. b). Virtual reality displays, virtual shopping, and virtual salespeople are just a few of the changes that consumers seem to be embracing.

*****Use PowerPoint 1-19 Here*****

d. The Information Superhighway (and its backbone—the Internet) will link customers to companies in ways that were unimagined only a few years ago. The Internet is a vast and burgeoning global web of computer networks, with no central management or ownership. The user-friendly World Wide Web has changed us all. 1). The Internet has been hailed as the technology behind a new model for doing business. 2). Marketplaces have now become marketspaces. e. The U.S. Internet penetration is approaching 60 percent, with some 160 million people accessing the Web in any given month. 1). Worldwide usage is expected to approach 1 billion by 2004. 2). Many companies have now become “click and mortar” companies. 3). Though there was a meltdown in 2000, .com companies still abound on the Internet. 4). Business-to-business transactions online are expected to reach $3.6 trillion in 2003. By 2005, more than 500,000 businesses will engage in business online.

*****Use Key Term Internet Here; Use Figure 1-5 Here; Use PowerPoint 1-20 Here*****

Connections with Customers f. Today, most marketers are realizing that they don’t want to connect with just any customers. Instead, most are targeting fewer, potentially more profitable customers. 1). Greater diversity and new consumer connections have meant greater market

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fragmentation. a). Marketers have responded by moving to more segmented marketing where they target carefully chosen submarkets or even individual buyers. b). One-to-one marketing has become the order of the day. c). Extensive databases allows this procedure to go forward. 2). At the same time, companies are analyzing the value of the customer to the firm. What value does the customer bring to the organization? Are they worth pursuing? a). Connect with those that will be bring in profits.

*****Use Marketing at Work 1-3 Here; Use PowerPoint 1-21 Here*****

g. Connect for a customer’s lifetime. 1). Rather than always looking for new customers, the focus has now shifted to keeping current customers and building lasting relationships based on superior satisfaction and value. 2). Long-term profits have superseded short-term gain. 3). Companies are spending more time considering “share of customer” and less time worrying about “share of market.” a). Employees are being trained in cross-selling. b). Up-selling is now a common practice. h. Today, beyond connecting more deeply, many companies are also taking advantage of new technologies that let them connect more directly with their customers. 1). Products are now available via telephone, mail-order catalogs, kiosks, and electronic commerce. 2). Business-to-business purchasing over the Internet has increased even faster than online consumer buying. 3). Some firms sell only via direct channels (Example: Dell Computer, Amazon.com). 4). Other firms use a combination of traditional selling and direct selling methods. i. Direct marketing is redefining the buyer’s role in connecting with sellers. 1). Buyers are now active participants in shaping the marketing offer and process. 2). Some companies allow buyers to design their own products online. 3). Some marketers have hailed direct marketing as the “marketing model of the next millennium.”

*****Use PowerPoint 1-22 (Advertisement) and 1-23 Here*****

Connections with Marketing’s Partners j. Connecting inside the company—traditionally, marketers have played the role of intermediary, charged with understanding customer needs and representing the customer to different company departments, which then acted upon these needs. 1). Marketing no longer has sole ownership of customer interactions. a). Now, every employee must be customer-focused. b). Companies are reorganizing their operations to align them better with customer needs.

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c). Teams coordinate efforts toward the customer. k. Connecting with outside partners—most companies today are networked

companies, relying heavily on partnerships with other firms. 1). Supply chain management—the supply chain describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers. Each member of the supply chain creates and captures only a portion of the total value generated by the supply chain. 2). Supply chain management allows all partners to strengthen relationships. 3). Strategic alliances—companies need strategic partners. a). Companies need to give careful thought to finding partners who might complement their strengths and offset their weaknesses.

*****Use PowerPoint 1-24 Here*****

Connections with the World Around Us l. Marketers are taking a fresh look at how they connect with the broader world around them. 1). Global connections—geographical and cultural differences and distances have shrunk dramatically in the last decade. 2). Today, almost every company, large or small, is touched in some way by global competition. a). American firms are challenged by international competitors in their once safe domestic market. b). Companies are not only exporting, but buying more components and supplies from abroad. c). Domestically purchased goods and services are hybrids (with components coming from many international sources). d). The secret for business success in the next century will be to build good global networks. 3). Connections with our values and social responsibilities—as the worldwide consumerism and environmentalism movements mature, today’s marketers are being called upon to take greater responsibility for the social and environmental impact of their actions. a). The social responsibility and environmental movements will place even stricter demands on companies in the future. Those that resist will be forced into compliance by legislation or consumer outcries. b). Several companies are beginning to practice “caring capitalism” (Example: Ben & Jerry’s and Saturn). 1]. These companies are building social responsibility and action into their company value and mission statements. 4). Broadening connections—marketing can be used to connect with customers and other important constituencies. a). Marketing has become a major component in not-for-profit businesses. b). Even government agencies have shown an increased interest in marketing.

*****Use Discussing the Issues #5 Here; Use PowerPoint 1-25 Here*****

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The New Connected World of Marketing m. Smart marketers of all kinds are taking advantage of new opportunities for connecting with their customers, marketing partners, and the world around them. 1). The old marketing thinking saw marketing as little more than selling or advertising. It emphasized: a). Customer acquisition. b). Short-term profit. c). Goal—sell products. 2). The new marketing thinking believes that improving customer knowledge and customer connections is a corporate goal. a). Target profitable customers. b). Find innovative ways to capture and keep these customers. c). Form direct connections and build lasting customer relationships. 1]. Use targeted media. 2]. Integrate communications. 3]. Use technologies to provide connections. 4]. View suppliers and distributors as partners, not adversaries. 5]. Deliver superior value.

*****Use Table 1-1 Here; Use Discussing the Issues #5 Here; Use Reviewing the Concepts (PowerPoint 1-26) Here*****

BARRIERS TO EFFECTIVE LEARNING

1. The first major barrier to student understanding is the inability to distinguish between marketing and selling. As explained in several passages in the text, most people perceive of marketing and selling as being the same thing. To begin a discussion that will aid the student in distinguishing between the two terms, refer to Figure 1-1 in the text (show PowerPoint). Ask the students to give examples of marketing (or marketing functions) and selling. Based on the examples, have the students point out the differences between the examples. Be sure to bring in the new concepts of satisfying customer needs as a goal. Another way to draw a difference is to focus on the marketing and selling concepts shown in Figure 1-3 (see PowerPoint). Once the difference has been established in the mind of the student, future discussions about the role of marketing in society will become more focused (see Figure 1-4 and Power Point).2. The second area of concern is in understanding the full impact of relationship marketing. On the surface, building long-term relationships with valued customers, distributors, dealers, and suppliers seems to be simple and easily attained. This is generally not true. To be effective in relationship marketing, the marketer must forego short-term profit maximization on individual transactions to build mutually beneficial relationships. Ask students to explain what type of benefits might accrue from successful networks. Lastly, ask students how marketers manage their customers. Does this “management of the customer” give the students any problems

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philosophically? Discuss.3. The third area of concern is with the concept of demarketing. Most students do not understand how it could possibly be a sound idea to not try to stimulate the sales of the company’s product or service. The example in the text is a good one (the Golden Gate bridge and Yosemite National Park) to start with, but true understanding will come from having the students generate their own examples. Each example should be critiqued by the class. How does demand management relate to Barrier #2 above?4. The fourth major barrier to understanding comes from sincerely understanding the societal marketing concept. Use Figure 1-4 (see PowerPoint) to demon strate the primary considerations. How does being environmentally and socially conscious translate into profit? Use Discussing the Issues #4 here to begin a dis- cussion. It is also useful to divide the class and have opposite sides of the social responsibility issue debated. Ask what would be the costs of being socially responsible?5. The last major barrier to understanding comes from relating to the full implications of connectedness. Making connections is a major theme of this text. A good way to get

students thinking about connections is to ask them how their university or college attempts to form connections with them. After the students provide examples, ask for more connections that would increase their satisfaction and likelihood of alumni involvement after graduation. How could a marketing plan be devised to focus on these desired connections? This discussion should provide a good discussion beginning for material found in Chapter 2.

TRAVEL LOG—DISCUSSING THE ISSUES

1. Answer the question “What is marketing?” Marketing, more than any other business function, deals with customers. Creating customer value and satisfaction are at the very heart of modern marketing thinking and practice. The simplest definition of marketing is that it is the delivery of customer satisfaction at a profit. The goal of marketing is to attract new customers by promising superior value, and to keep current customers by delivering satisfaction. Marketing is much more than selling and advertising. Today, marketing must be understood beyond the old “telling and selling.” The new direction is that of satisfying customer needs. Therefore, the definition used in the text is that marketing is a societal and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. For additional information see Figure 1-1.

2. Discuss the concept of customer value and its importance to successful marketing. How are the concepts of customer value and relationship marketing linked? Customers usually face a broad array of products and services that might satisfy a given need. Customers make their buying choices based on their perceptions of the value that various products and services deliver. Customer value is the difference between the values the customer gains from owning and using a product and the costs of obtaining the product. Since customers often

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do not judge product values and costs accurately or objectively, marketers must gear efforts toward perceived value on the part of the consumer. Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations. If performance matches expectations, the buyer is satisfied. If performance exceeds expectations, the buyer is delighted. Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise. In the broadest sense, the marketer tries to bring about a response to some offer. This transaction relationship is part of the larger idea of relationship marketing. Beyond creating short-term transactions, marketers need to build long-term relationships with valued customers, distributors, dealers, and suppliers. Strong customer value appreciation helps to solidify the relationship between the marketer and various concerned publics. The idea is to build a strong relationship and network with key stakeholders and profits will follow.

3. Identify the single biggest difference between the marketing concept and the production, product, and selling concepts. Discuss which concepts are easier to apply in the short-run. Which concept offers the best long-run success potential? Why?

The purpose of this question is to get students to understand the marketing concept better, and to see how it is different from other philosophies. The key difference between the marketing concept and the production, product, and selling concepts is its basic focus. The marketing concept begins with the needs and wants of the consumer. A true marketing company achieves its success by fulfilling its customers’ desires. See Figure 1-3 for illustration.

The production, product, and selling concepts all focus on the needs of the seller. The production and product concepts begin with the product, and assume it will generate demand because of price, availability, or quality. The selling concept begins with the product to be sold, and tries to generate demand for it.

The production, product, and seller-based concepts are the easiest to apply in the short-run. The company does not need to redefine its business, it just works harder: more efficiency, a better product, harder selling. But these measures are only successful if consumer needs are met.

The marketing concept is more difficult to apply. It requires careful study and flexibility to meet the needs of sometimes fickle consumers. This may require a business to rethink its entire mission. But if consumer needs and wants are not met, the business will eventually fail.

4. According to economist Milton Friedman, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.” Do you agree or disagree with Friedman’s statement? What are some drawbacks of the societal marketing concept?

The quote is from Dr. Friedman's Capitalism and Freedom (The University of Chicago Press, 1962). Friedman supports his argument with several questions (also see John F. Gaski, “Dangerous Territory: The Societal Marketing Concept Revisited,” Business Horizons, July-August 1985, pp. 42-47): If businesses do have a social

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responsibility other than maximizing profits, how are they to know what that responsibility is? Should unelected private individuals decide what the social interest is? How great a burden are they justified in placing on their stockholders (in lost profits) in serving that social interest?

Dr. Friedman is referring to profit maximization “within the rules of the game”—that is, open competition without deception or fraud. This qualification eliminates many of the abuses resulting from attempts to maximize profits that are described in Chapter 16. It does not address the concerns discussed under “The Societal Marketing Concept,” environmental pollution, world hunger, and so on. Should packaged-goods manufacturers, for example, act to reduce pollution by spending millions of dollars to develop a biodegradable alternative to plastic containers if they cannot get their investment back through lower costs or higher prices? Who should pay for the costs of this research, the companies’ stockholders or customers?

A good way of discussing this question is to take both sides of the issue to extremes. Total social responsibility might prevent people from being able to buy the products they want—bicycles, presweetened breakfast cereals, fatty luncheon meats, and so on. Total profit maximization might increase prices or pollution, cause safety risks, and reduce the services offered to disadvantaged and less profitable market segments. Either extreme would be unacceptable to most consumers.

5. The major marketing developments as we enter the new millennium can be summed up in a single theme: connectedness. Explain what “connectedness” is and how marketers can apply it to customers, marketing partners, and the world around us. Now, more than ever before, we are all connected to each other and to things near and far in the world around us. In addition, we are constantly connecting in new and different ways. Marketers are redefining how they connect with the marketplace—with their customers, with marketing partners inside and outside the company, and with the world around them. As summarized in Figure 1-5, important connections made possible by the connecting technologies are connections with customers, connections with marketing partners, and connections with the World around us. Connections with customers: These connections occur by (a) connecting more selectively, (b) connecting for life, and (c) connecting directly. Marketing companies are becoming more selective in choosing target markets, are seeking life-long relationships with consumers, and are using technology (such as the Internet) to reach consumers in more personal ways. Detailed databases, videoconferencing, and interactive media are just a few of the ways marketers are exploring to ensure that a “closeness” to consumers is developed. Connecting with marketing partners: These connections occur by (a) connecting with other marketing departments, (b) connecting with suppliers and distributors, and (c) connecting through strategic alliances. Marketing companies do not operate in a vacuum. Intermediaries have information to share, ideas to explore, and experiences that are invaluable. New technologies can bring this information to the decision maker in new rapid ways. Many companies are now “partnering” with respect to many business functions. One of the most profitable of these shared functions is marketing. Care must be used in selecting partners so profitable relationships can be fostered.

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Connections with the World around us: These connections occur by encouraging (a) global connections, (b) connections with values and responsibilities, and (c) broadened connections. The world has shrunk because of new technologies. World customers are an important source of revenues. International marketing is now a concentrated effort in most dynamic organizations. As products and services cross international borders a certain amount of cultural baggage goes along for the ride. This often causes conflict and regionalism. New technologies (by increasing understanding and information) reduces this effect. Lastly, organizations are looking at making connections that would have at one time been avoided. This is especially true in the nonprofit sector. New technologies have given us new ideas on how to expand business efforts in the new millennium. Students are encouraged to think creatively about companies that are making new connections. As a springboard for this discussion, try using the companies mentioned in this section of the chapter. Web-based companies, automobile firms, hotels, airlines, computer companies, and nonprofit organizations (such as a theater, hospital, or zoo) might be used to begin the discussion. See Marketing at Work 1-3 for additional information on how several companies deal with relationships, profitability, and connections.

MASTERING MARKETING

Beyond creating short-term transactions, marketers need to build long-term relationships with valued customers, distributors, dealers, and suppliers. Cite three examples from the marketing module that the marketers are attempting to conduct relationship marketing with customers, distributors, dealers, or suppliers. Be specific in your comments.

Solution Suggestion

One of the problems encountered by the marketing professionals at CanGo was an initial failure to plan for the long-term. The CanGo marketers just assumed that “everyone” would want the new products that the company had just developed. However, Elizabeth sees the need to form relationships with consumers (and suppliers) even if her employees do not. Consider the types of relationships or pre-steps to relationships the company may have formed (even without their knowledge): a) the online gaming enthusiasts, b) commitment to develop and market products the market actually wants, and c) the application of the 4Ps to primitive business plans. Andrew now sees that all of his employees should begin to think like the consumer thinks. Students may find other examples. Stress to students how planning in these initial stages will help the company with focus later on.

See Marketing Concept/Strategy episode for details.

TRAVEL LOG— CONCEPT CHECKS ANSWERS

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The following are answers to the Concept Checks questions found at the end of the chapter. These answers appear in the text for the convenience of the students.

1. Marketing

2. Satisfying customer needs

3. Product; product

4. Customer value

5. Delight

6. Return on Quality (ROQ)

7. Relationship marketing

8. Market

9. Entrepreneurial

10. Production; product; selling; marketing; and Societal Marketing

11. Marketing Concept

12. Technology

STUDENT PROJECTS

1. Clip or photocopy three (3) current print advertisements and identify the marketing goals that, in your opinion, the companies appear to be emphasizing.2. Go online and explore customer needs, wants, and values. Pick a Web site. Examine how the company uses its customers’ needs, wants, and values to successfully market

to its customers. How does the company try to create a relationship with its customers? Based on what you see, rate their success? If you were to design a Web site for a company how would you stress customer needs, wants, values, and relationships? See Marketing at Work 1-2 for some hints.3. As a personal list, develop a list (try for 10 of each) of your needs and wants. How are they different? What appeals on the part of companies seem to get your interest and attention? What do you think would be the most successful way for a company to appeal to you if you were considering the purchase of (1) a computer, (2) a car, (3) a college education, and (4) a soft drink? What primary need and/or want would the appeal be directed toward? How could the company form a relationship with you

based on your needs or wants? Give an example. 4. Find an article from a contemporary business publication that describes a company’s

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commitment to relationship marketing or connecting with consumers. Abstract the article and share your findings with the class.5. The world economy has undergone radical change in the last two decades. Acts of terrorism have impacted all of our lives. Our economy and those of other countries are tied closely together. List three (3) of the most significant changes that, in your opinion, will have the most impact on business and industry in the next five to ten years. What should a company do to respond to these changes with respect to connections with consumers and publics. Use specific examples.

TRAVELING THE NET

Point of Interest: The Marketing Concept

For Discussion

1. What is the most important customer benefit stressed on this site?2. What new products did you find?3. To what extent does this site employ the marketing concept? Support your answer.4. How does Dell attempt to build relationships with its customers? What evidence of enhanced customer value do you see? 5. Is there anything missing from the site? How could Dell improve the site to enhance the marketing of its products?

This exercise asks students to go to Dell Computer’s Web site and explore the company’s efforts in adhering to the marketing concept. This exercise will help students to “look between the lines” to see how this company attempts to focus on needs, wants, and values of its consumers. We know the company must be doing a good job because most research shows that (like Saturn automobile customers) Dell Computer has some of the most loyal customers around. Students will answer this question differently (especially since they will see different things on the site).

For an excellent article on how Dell is getting out of the PC business and exploring broader horizons see Andrew Park and Peter Burrows “Dell, the Conqueror,” Business Week, September 24, 2001, pp. 92-102. Application Thinking

1. Go to www.compaq.com, www.apple.com, and www.ibm.com and compare these sites to the www.dell.com site in terms of how well they apply the marketing concept. Develop a list of important site characteristics and construct a grid in which you compare the sites on these characteristics. Present your findings in class.

To begin their lists, students should look at features, color, ease of use, ease of movement within the site, download times (or difficulties), language, ties to other sites, product

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information, “help” features, e-commerce feature, and information about warranties and sales service. There are many other possibilities. This would be a good point to open a class discussion on how to evaluate sites and probe how students actually do this themselves. A grid can be built in class. By expressing their opinions, active learning will be enhanced.

MAP—Marketing Applications

MAP Stop 1—Thinking Like a Marketing Manager

1. What elements of the marketing concept does Vans appear to be applying with its strategies?2. Go to a retail outlet that carries the Vans, or go on-line to www.vans.com, and review its product lines. What seem to be the advantages and the disadvantages of products Vans carries? After considering Vans target market and its outlaw image, what do you think would be the best way to reach this target market? What “connections” is Vans attempting to make with its current promotions? 3. It has been reported that Vans is now attempting to reach the female market with its clothing line. Present three relationship- or value-oriented strategies that you believe might help them to accomplish this goal. 4. Keeping in mind the marketing concept, relationship marketing, and customer value, design a strategy to help Vans enter the snowboard market with its new line of snowboard boots. How will industry leader Burton Snowboards (www.burton.com) likely react to your entry and strategy? How would you deal with this reaction? Present your strategy and ideas to the class.

This MAP Stop asks students to consider the marketing practices and products of one of Gen Y’s most famous brands. After the students read the short description of Vans products, they should be encouraged to list the marketing concept features (or advantages) the company is trying to construct. See the Vans Web site for details. For example, their new product entry into the snowboard market has industry analysts wondering if Vans has a hit or not. The company’s research showed that skateboarders and snowboarders are from the same mold. However, inline skating is a different story. Which consumers will most likely appreciate this new product? To do well with this question, students should project themselves into the minds of the Vans’ target market. Is Vans using a marketing concept? You bet they are. Ask students to review how.

SUGGESTED MAP REFERENCES

The following references will be useful for MAP Stop 1 found at the end of Chapter 1. It is suggested that these references be given to the student in advance of the assignment found in MAP Stop 1.

1. Weintraub, Arlene and Gerry Khermouch, “Chairman of the Board.” Business Week,

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May 28, 2001, p. 96.

INTERACTIVE ASSIGNMENTS

Small Group Assignment

1. Form groups of three to five (3-5) students. Each group should read the opening vignette to the chapter on Amazon.com. Each group should answer the following questions: a. What appears to be Amazon.com’s strategy? b. How does Amazon.com promote its message? c. How is Amazon.com moving away from a “Web only” strategy? What problems might it encounter? d. What relationships is Amazon.com attempting to make? e. What does “collaborative technology” do for Amazon.com? f. What suggestion could you offer Amazon.com in the next two years to expand and strengthen their brand?

Each group should then share its findings with the class.

Individual Assignment

1. Read the opening vignette to the chapter. Think about answers to the following questions: a. How is Amazon.com attempting to connect with consumers? b. How is Amazon.com meeting competitive challenges? c. What suggestion could you offer Amazon.com in the next two years to expand and strengthen their brand?

Share your findings with the class.

Think-Pair-Share

Consider the following thought questions, formulate an answer, pair with the student on your right, share your thoughts with one another, and respond to questions from the instructor.

1. What is the difference between marketing and selling?2. What was the chief “want” you had when you came to college? Has that “want” changed? How? Of what value would this knowledge be to a college recruiter?3. When was the last time you were completely satisfied with something you purchased? What was it? Why were you satisfied? What did a marketer have to do with this?4. What company or product do you have a relationship with? Describe it.5. Sell your paired partner on the societal marketing concept.6. What is the biggest challenge facing marketing today? What should be done about it?

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7. What is the biggest challenge e-commerce today? What should be done about it?

eLABorate (minicase)

For almost 50 years Pez (an abbreviation of “pfefferminz”—the German word for peppermint) has been part of most of our childhoods. How many times did you beg your mom for the little Pez candy in its unique toy dispenser as you stood in line at a checkout counter? Probably more than you would like to admit! These popular candies (and their even more popular dispensers) sell at a rate of 3 billion per year. Collectors were after those hard to find Pez dispensers long before Beanie Babies were ever conceived. (See eBay for auctions of Pez dispensers) Recently, Pez signed a licensing agreement with a Florida perfume company which will allow the candy’s fans to eat their Pez and wear it too. Parlux Fragrances plans to introduce a Pez fragrance, and if successful, and a line of Pez cosmetics. You won’t be able to eat the fragrance, but as you lift the head of the Pez dispenser, you will certainly be able to smell it. Spraying Pez—now that is something to think about!

Go to the Pez Web site at www.pez.com, consider material from your chapter, and answer the following questions:

1. What seems to be Pez’s strategies for dispensing their existing candy products?2. Will Pez be able to apply candy dispensing strategies to their new product? Why or why not?3. Devise a strategy for introducing the new product.4. What will be the advantages and disadvantages of the proposed new product?5. How will Pez be able to determine its target market? Will the target market for the new product be the same or similar to that of the old product? Explain. 6. How can Pez’s Web site help with introducing the new product?7. What connections is Pez trying to achieve? 8. Pez recently signed another partnering deal with Applause (the maker of Dakin plush toys) to produce a line of Pez products called the Furry Friends line. These “furry” bear Pez dispensers are a direct thrust toward Beanie Babies and their dominance in

the plush toy market. Does this sound like a good strategy for Pez? Explain.

CLASSROOM MANAGEMENT STRATEGIES

Unlike many introductory marketing texts, Armstrong and Kotler’s text has a very useful Chapter 1. This chapter sets the stage for concepts to come in the future. Each instructor should be very careful to mention each of the vocabulary terms found in the back of the chapter (see Navigating the Key Terms) since vocabulary building is one of the main objectives of a course an introductory marketing course.

It is recommended that the instructor break the fifty-five (55) minute to one hour and twenty minute (1:20) class into specific time blocks for the maximum learning and explanation experience. For example:

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1). 10 minutes—Discussion of what marketing is and what it is not. Stimulate discussion by asking students to define marketing in their own terms and relate these definitions

to the core concepts presented in the text.2). 10 minutes—Discussion of needs, wants, and values. These three terms are essential to an understanding of the modern marketing function. Stimulate discussion by asking students to relate their own needs, wants, and values in the marketplace. How are these terms treated differently (if they are) in the retail environment versus the eCommerce environment?3). 10 minutes—Discussion of customer satisfaction and how it can become a

competitive weapon. Ask for examples of customer satisfaction relationship marketing.

4). 5 minutes—Discussion of marketing management and how the concept will relate to other disciplines in business.5). 10 minutes—Discussion of Marketing Management Philosophies. Examples from the text, Traveling the Net, MAP Stop, and other discussion questions supplied by the text can be used to carry the student through the evolution of concepts associated with the field of marketing. Be sure to save time to adequately explain the marketing concept because of its significance to material in future chapters. Students should also be encouraged to develop their own examples of companies that are following the various philosophies. If time permits, students might wish to discuss how these philosophies carry over to Web sites and marketing via the Internet (see suggested exercises listed previously).6). Lastly, 10 minutes should be spent discussing where the future might be headed with respect to connections in the areas of the Internet, social responsibility (the case of tobacco is useful to discuss at this point), ethics, and globalization.

*****Instructor’s Note: If time permits (which is always difficult with a first class), a video case may be used here.*****

For those classes that go beyond the basic one hour format, the additional time can be spent covering the discussion questions, application questions, and/or the mini-case example provided in the Instructor’s Resource Manual. Additionally, more time will be available for work on the Internet or student discussion.

For those classes that are limited to the basic one-hour format, the instructor should pre-plan how best to use the available time. In-class discussion can be supplemented with pre-assigned discussion or application questions from the end of the chapter and written comments on the mini-case tends to speed up discussion. Using the PowerPoint slides provided by Armstrong and Kotler will speed up discussion and enhance note taking, since the slides are simple and consistent with concepts and visuals from the chapter itself. Lastly, the “time” variable will be easier to deal with once the first three chapters have been finished and the instructor has established a method for presenting material in an efficient manner.

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POWERPOINT NOTES

See the Instructor’s Resource Manual for the exact positioning within the chapter of each slide (reference Chapter Outline).

KEY TERMS AND APPLICATIONS

All of the Key Terms found in this chapter appear on the Prentice Hall Web page at www.prenhall.com (reference this text). At the Web site, the instructor will find all Key Terms listed, an identification of what the Key Term means, and why it’s important. This information will be especially helpful to students who are having difficulty with the Key Terms or if Key Terms are to be stressed on examinations.

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