What is Marketing?Marketing in a

Changing WorldChapter 1

Marketing DefinedO A social and managerial process

whereby individuals and groups obtain what they need and want through creating and exchanging products and values with others

Needs, Wants, Demands

O Need—states of felt deprivationO Physical—food, clothing, shelter, safetyO Social—belonging and affectionO Individual—knowledge and self-expressionO Part of the human make-up

O Want—the form taken by a human need as shaped by culture and individual personalityO Need food, want a hamburgerO Need transportation, want a cool carO unlimited

O Demand—human wants that are backed by buying power

Products, Services, and Experiences

O Product—anything that can be offered to a market to satisfy a need or wantO Includes:

O Service—activities or benefits offered for sale that are essentially intangible and do not result in ownership of anything

O Experiences—travel, destinations, websitesO Ideas, information, organizations, people

O More than just the physical property of a goodO Brand’s meaning to a customerO Benefits to customer—providing a solution to a

need

Value, Satisfaction, and Quality

O Customer Value—the difference between the values the customer gains from owning and using a product and the costs of obtaining the productO Often customers act on perceived

value—not objective or accurate information

O Companies work to change value perceptions

Value, Satisfaction, and Quality

O Customer Satisfaction—the extent to which a product’s perceived performance in delivering value matches a buyer’s expectationsO If a product falls short of customer expectations,

the buyer is dissatisfiedO If performance matches expectations, the buyer

is satisfiedO If performance exceeds expectations, the buyer

is delightedO Based on past buying experiences, opinions of

friends, and marketer and competitor information a promises

Value, Satisfaction, and Quality

O Quality—”freedom from defects”—satisfying stated or implied customer needsO Closely linked to customer value and

satisfactionO Total Quality Management—all company

employees are involved in constantly improving quality of products, services, and business processes

O Customers will not tolerate average qualityO Should be a top priority

Exchange, Transaction, and Relationships

O Exchange—the act of obtaining a desired object from someone by offering something in return

O Transaction—a trade between two parties that involves at least 2 things of value, agreed upon conditions, a time of agreement, and a place of agreementO MonetaryO Barter

Exchange, Transaction, and Relationships

O Relationship Marketing—building long term relationships with valued customers, distributors, dealers, and suppliers—80% of business comes from 20% of customersO Builds strong economic and social connections by

promising and delivering high quality products, good service, and fair prices

O Creates marketing network oriented for the long-term

O Creates social benefits by personalizing products and services to meet customer needs and wants

O Creates structural ties with special equipment or computer links

MarketsO Market—the set of all actual and

potential buyers of a product or serviceO Share a particular need or wantO Size depends on the number of

people who exhibit the need, have resources to exchange, and are willing to offer the resources in exchange for what they want

Markets

Resource

Markets—raw

materials, labor, money

Producers

Goods and

services

Intermediaries

Consumers

LaborIncome

Market Economy

Government

Markets

Government

Resource

Markets—raw

materials, labor, money

Producers

Intermediaries

Taxes

Public Services—schools,

law enforceme

nt, highway

maintenance

Consumers

Government Market

MarketingO Managing markets to bring about

exchanges and relationships for the purpose of creating value and satisfying needs and wants

O Activities:O Product developmentO ResearchO CommunicationO DistributionO PricingO Service

Marketing ManagementO The analysis, planning, implementation, and control

of programs designed to create, build, and maintain beneficial exchanges with target market buyers for the purpose of achieving organizational objectives

O Demand ManagementO Organization has a desired level of demand for its

productO At any point in time there might be not enough

demand, no demand, adequate demand, irregular demand, or too much demand for a product

O Concerned with finding and increasing demand and/or changing and reducing demand

O Demarketing—reducing demand temporarily or permanently

Building Profitable Customer Relationships

O Managing demand means managing customers

O Demand comes from two places:O New customersO Repeat customers

O New marketing realities:O Changing demographicsO Slow-growth economyO More sophisticated competitorsO Overcapacity

Fewer new customers to go around

Building Profitable Customer Relationships

O Costs of attracting new customers is rising

O Losing a customer means:O Losing a single saleO Losing a lifetime worth of purchases and

referralsO Customer lifetime value—how much a

customer is worth for a lifetime of purchases:O Taco Bell--$12,000O Lexus--$600,000

Marketing Management Practices

O Three stages of marketing practice:O Entrepreneurial Marketing

O involves visualizing an opportunity and constructing and implementing flexible strategies

O Formulated MarketingO involves developing formal marketing

strategies and following them closelyO Intrepreneurial Marketing

O involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches

Marketing Management Philosophies

O There are five alternative concepts under which organizations conduct their marketing activities:O ProductionO ProductO SellingO MarketingO Societal marketing concepts

Production ConceptO Idea that customers will favor products that

are available and highly affordableO Management should focus on improving

productions and distribution efficiencyO Useful in two situations:

O When demand exceeds supplyO When product cost is too high and improved

productivity is needed to bring it downO Companies who use this run the risk of

focusing too narrowly on their own operations—lose sight of competition and of customer needs

Product ConceptO Idea that consumers will favor products

that offer the most in quality, performance, and innovative featuresO Organizations devote energy to making

continuous product improvementsO Leads to marketing myopia—buyers may

not be looking for the specific product, but alternative solutions to a problem

O Example:O Transportation vs. train, bus, car, airplane

Selling ConceptO Idea that consumers will not buy enough

of an organization’s products unless it undertakes a large-scale selling and promotion effortO Typically practiced with unsought goods

such as insuranceO Practiced when companies have

overcapacityO Sell what they make vs. what market wants

O Focuses on creating sales transactions versus building long term relationships

Marketing ConceptO Idea 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 doO Outside-in perspective

O Customer focus and value are the paths to sales and profits

O Builds customer satisfaction into the fabric of the company

O Customer drivenO Research is done on current customers to learn about

their desires, gather new product and service ideas, and test proposed product improvement

Societal Marketing Concept

O Idea that the organization should determine the needs, wants, and interests of target markets. It should then deliver superior value to customers in a way that maintains or improves the consumer’s and society’s well being.O Newest conceptO Questions whether the pure marketing concept is

adequate in an age of environmental problems, resource shortages, rapid population growth, world-wide economic problems, and neglected social services

O Looks at the long run impacts of decisions

Marketing ChallengesO Connecting with More Carefully Selected

CustomersO Most companies are targeting fewer, more

profitable customersO Diversity and new customer connections mean

greater market fragmentationO “ono-to-one” marketing

O Value to customersO Value of the customers to the company

O Profitable customersO earn their loyalty

Marketing ChallengesO Connecting for a Customer’s Lifetime

O Companies choosing what customers to serve and serving them in deeper, more lasting waysO Building relationships

O Goal shifting—making a profit to making long-term profits by managing the lifetime value of a customer

O Goal--keeping old customers and offering greater variety

Marketing ChallengesO Connecting Directly

O Most products are available without going to a storeO Online availability of products,

shopping consultants, paymentO Customers are active participants in

shaping the marketing offer and process

Marketing ChallengesO Connecting with Marketing Partners

O Connecting within the companyO Every functional area can interact with

customersO Marketing no longer has sole ownership

of customer interactionsO Every employee must be customer

focusedO Cross-functional customer teams are

created to increase success

Marketing ChallengesO Connecting with Marketing Partners

O Connecting with Outside PartnersO Supply Chain Management

O Stretches from raw materials to components to final products that are carried to final buyers

O Success depend on how well the chain works together versus competitors supply chains

Marketing ChallengesO Connections with the world around

usO Global Connections

O Marketers are connected globally with customers

O Companies have expanded market coverage

O Challenges from skillful European market and Asian multinationals

O Selling more in international marketsO Buying from international supplies and

components

Marketing ChallengesO Connections with the world around

usO Values and Social Responsibility

O Social and environmental impacts of corporate actions

O Ethics and social responsibility place strict demands on companies

O Forward looking companies deal with these issues before legislation is enacted

O “Do well by doing good”

Marketing ChallengesO Connections with the world around us

O Broadening ConnectionsO Marketing becoming important to non

profit organizations as wellO Hospitals, museums, colleges, symphony

orchestras, even churchesO Competing for fundsO Improving communication and promotion to

respond to needs and wantsO Government agencies also market

O U.S. ArmyO U. S. Post Office

Marketing Challenges