What is Marketing?

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives.

Major Marketing Functions

Exchange Functions: all companies – manufacturers, wholesalers and retailers – buy and sell to market their merchandise.

Buying includes obtaining raw materials to make products, knowing how much merchandise to keep on hand and selecting suppliers.

Selling creates possession utility by transferring the title of a product from seller to customer.

Major Marketing Functions. . . (continued)

Physical Distribution Functions: involve the flow of goods from producers to customers. Transportation and storage provide time utility and place utility and require careful management of inventory.

Transporting involves selecting a mode of transport that provides an acceptable delivery schedule at an acceptable price.

Storing goods is often necessary to sell them at the best selling time.

Major Marketing Functions. . . (continued)

Facilitating Functions: help the other functions take place.

Financing helps at all stages of marketing. To buy raw materials, manufacturers often borrow from banks or receive credit from suppliers. Wholesalers may be financed by manufacturers, and retailers may receive financing from the wholesaler or manufacturer. Finally, retailers provide financing to customers.

Standardizing sets uniform specifications for products or

services. Grading classifies products by size and quality, usually through a sorting process. Together they facilitate production, transportation, storage and selling.

Major Marketing Functions. . . (continued)

Facilitating Functions: (continued)

Risk Taking – even though competent management and insurance can minimize risks – is a constant reality of marketing because of such losses as bad-debt expense, obsolescence of products, theft by employees and product-liability lawsuits.

Gathering market information is necessary to make all marketing decisions.

Types of Utility

Utility – the ability of a good or service to satisfy a human need

Form utility – created by productionPlace utility – created by marketingTime utility – created by marketingPossession utility – created by marketing

Types of Utility. . . (continued)

Form utility is created by converting raw materials into finished products.

Place utility is created by making a product available at a location where customers wish to purchase it.

Time utility is created by making a product available when customers wish to purchase it.

Possession utility is created by transferring title (ownership) to the buyer.

The Marketing Concept

The marketing concept is a business philosophy that involves the entire organization in the process of satisfying customers’ needs while achieving the organization’s goals.

Firm talks to potential customers to determine needs for goods or services

Firm develops a good or service to satisfy that need

Firm continues to seek ways to provide customer satisfaction

History of Marketing Concept

Early 20th Century – production orientation emphasized increased output and efficiency. (Marketing limited to taking orders and distributing the finished product)

1920’s – sales orientation stressed advertising, bigger sales forces and high-pressure selling techniques. (Marketing now added promoting products through personal selling)

1950’s – customer orientation emphasized determining customer needs and then designing products and services.

Carrying Out the Marketing Concept

Firm must determine what its present and potential customers want.

Firm must then find out what customers think about its products, the company and its marketing efforts.

Given this information, the firm will decide where to direct its marketing strategy.

Carrying Out the Marketing Concept

Firm must put its marketing resources into action by:

Providing a product that satisfies customers’ needPricing product at acceptable level to buyers and

to make a profitPromoting the products so buyers know it is

available and its ability to satisfy their needsEnsuring product is distributed where and when

customers want itObtaining marketing information about the

effectiveness of its marketing efforts

What is a Market?

A market is a group of individuals or organizations, or both, that need products in a given category and that have the ability, willingness and authority to purchase products.

Market Classifications

Two classifications include: consumer markets and business-to-business markets

Consumer markets – purchasers and/or household members who intend to consume or benefit from the products and do not buy products to make profits

Market Classifications. . . (continued)

Business-to-business marketsProducer markets – individuals and business organizations

that buy certain products to use in the manufacture of other products

Reseller markets – intermediaries such as wholesalers and retailers that buy finished products and sell them for a profit

Governmental markets - state or local governments that buy goods and services to maintain internal operations and to provide citizens with such products as highways, education, water, energy and national defense

Institutional markets – churches, not-for-profit private schools, hospitals, clubs, societies, charitable organizations or foundations

Developing Marketing Strategies

A marketing strategy is a plan that will enable an organization to make the best use of its resources and advantages to meet its objectives. It consists of:

the selection and analysis of a target market the creation and maintenance of an appropriate

marketing mix - a combination of product, price, distribution and promotion developed to satisfy a particular target market

Developing Marketing Strategies. . .(continued)

A target market is a group of individuals, organizations or both for which a firm develops and maintains a marketing mix suitable for specific needs and preferences of that group.

When selecting a target market, marketing managers: examine markets for their possible effects on the firm’s sales,

costs and profits. determine whether the firm has the resources to produce a

marketing mix that meets the needs of a particular target market and if this is consistent with the overall objectives of the firm.

analyze the strength and number of competitors already marketing to this target market.

Developing Marketing Strategies. . .(continued)

When selecting a target market, marketing managers generally take one of three approaches:

Undifferentiated ApproachConcentrated Market Segmentation

ApproachDifferentiated Market Segmentation

Approach

Developing Marketing Strategies. . .(continued)

1. Undifferentiated Approach – directing a single marketing mix at the entire market for a particular product

Approach assumes that individual customers in a target market for a specific kind of product have similar needs and that the organization can satisfy most customers with a single marketing mix

One product with little or no variation, one price, one promotional program aimed at everyone and one distribution system to reach all customers (salt, sugar, certain farm produce, etc.)

Developing Marketing Strategies. . .(continued)

Market segment is a group of individuals or organizations within a market that share one or more common characteristics.

Market segmentation is the process of dividing a market into segments (groups) and directing a marketing mix at a particular segment or segments rather than at a total market.

Developing Marketing Strategies. . .(continued)

Concentrated Market Segmentation – a single marketing mix is directed at a single market segment.

Differentiated Market Segmentation – multiple marketing mixes are focused on multiple marketing segments.

Review Table 13.3, page 377

Creating a Marketing Mix

Four elements (ingredients) of the marketing mix include:

• Product itself

• Price of the product

• Distribution means chosen (Place)

• Promotion of the product

Creating a Marketing Mix. . . (continued)

A firm may use one marketing mix to reach one target market and a second marketing mix to reach another market. (car manufacturers produce economy and luxury cars to reach markets based on age, income and other factors)

Product ingredient – includes decisions about the product design, brand name, packaging, warranties, etc.

Pricing ingredient – concerned with base price and discounts of various kinds. Decisions are intended to maximize profits or make room for new models.

Creating a Marketing Mix. . . (continued)

Distribution ingredient involves not only transportation and storage but also the selection of intermediaries.

Promotion ingredient focuses on providing information to target markets through advertising, personal selling, sales promotion and public relations.

These ingredients of the marketing mix are controllable elements. A firm can vary each of them to suit its organizational goals, marketing goals and target markets.

Review Figure 13.3, page 379

Marketing Mix and Marketing Environment

Economic forces – effects of economic conditions on customers’ ability and willingness to buy

Socio-cultural forces – influences in a society and its culture that result in changes in attitudes, beliefs, norms, customs, and lifestyles

Political forces – influences that arise through the actions of elected and appointed officials

Competitive forces – actions of competitors who are in the process of implementing their own marketing plans

Legal and regulatory forces – laws that protect consumers and competition and government regulations that affect marketing

Technological forces – technological changes can create new marketing opportunities but can also cause products to become obsolete almost overnight. (music industry has to deal with piracy and cd burners)