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Welcome to the World of Marketing: Create and Deliver ValueChapter One
Chapter Objectives Understand who marketers are, where they work, and marketing’s role in the firm Explain what marketing is and how it provides value to everyone involved in the marketing process Explain the evolution of the marketing concept Understand the range of services and goods that organizations market Understand value from the perspectives of customers, producers, and society Explain the basics of market planning and the marketing mix tools we use in the marketing process LECTURE NOTES: After finishing this chapter, you should be able to: Understand who marketers are, where they work, and marketing’s role in the firm Explain what marketing is and how it provides value to everyone involved in the marketing process Explain the evolution of the marketing concept Understand the range of services and goods that organizations market Understand value from the perspectives of customers, producers, and society Explain the basics of market planning and the marketing mix tools we use in the marketing process © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Welcome to “Brand You” You are a product and have “market value” as a person You “position” yourself for a job interview in a number of ways LECTURE NOTES: Marketing is all around us; indeed it’s hard to escape it. Branding is part of marketing, as is advertising. You buy what you do for a reason – the value that the product or service provides. VALUE refers to the benefits of a customer receives from buying a good or service – this a key term that we’ll be using throughout the semester. The market value that you bring to potential employers are the qualities that set you a part from others, and the abilities you have that potential employers need. For example, Are you an outstanding communicator? Do you know how to use Adobe Indesign? You’ve probably heard the term “positioning” before. Positioning is a key strategic decision in which marketers determine the type of image and associations they want to create for a brand. When you begin job hunting, you will also position yourself to future employers and in doing so, you don’t want to “sell yourself short” Some individuals go so far as to hire personal image consultants to help them devise a “marketing strategy” for themselves; others resort to makeovers or even plastic surgery to improve their images. Your choice of goods and services allows you to package and promote yourself – the brands of clothes you buy, cosmetics that might be used, resume specialists who might consulted, etc. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Who and Where of MarketingMarketers: Come from many different backgrounds Work in many locations Maintain cross-functional relationships within the firm Enjoy exciting, diverse careers Get the scoop on marketing salaries! Visit the Occupational Outlook Handbook! LECTURE NOTES: Marketers come from many different backgrounds most of which are business, retailing or communications related. However, English majors often end up in copywriting positions, while art majors may opt for graphic design or commercial art skills of use in advertising. Marketers work in a variety of locations ranging from consumer goods firms such as Proctor & Gamble (soaps, detergents, many other products) to business-to-business marketers such as Sysco (food products, food related supplies). Marketers also work for service organizations such charities, hospitals, universities, and professional sports teams to name just a few. The scope of an individual’s responsibilities often varies with the size of the firm, as well as the nature of the position. Someone working for a major casino may be specifically in charge of special events or promotions, while the marketing position at a small or medium business may be expected to do everything – advertising, PR, special events, sales or sales management, and promotions. The role played by marketers within the firm varies; sometimes it is very important, while other times marketing takes a back seat to sales or even public relations and publicity. Marketing cannot operate in a vacuum. Marketing’s impact on the firm and its operations can be quite strong. Before launching a coupon program, the Promotions or Marketing manager needs to meet with Accounting and Production to discuss sales projections, and their potential impact on revenues, profits, and products. Thus the trend is towards integrating marketing with other business functions. There are a number of exciting and diverse careers available in marketing. Two separate links are provided to help students learn more. The first pulls up a list of marketing related positions at Clicking any profession name provides information about the average salary range and pay scale. Students can learn more about careers in marketing by visiting the current edition of the Occupational Outlook Handbook at The Occupational Outlook Handbook is an essential reference tool for students, regardless of major, and provides information on the following subjects for a variety of different professional positions: Nature of the Work Training, Other Qualifications, and Advancement Employment Job Outlook Projections Data Earnings OES Data Related Occupations Sources of Additional Information Information can be viewed online or downloaded in PDF format. The Web site is well-organized and provides links to related professions. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Value of Marketing Definition of Marketing (AMA, 2007)Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large. LECTURE NOTES: In a nutshell, this complicated definition simply means that marketing seeks to deliver value to everyone who is affected by a transaction. The following slides discuss some of the key concepts incorporated within the definition of marketing in more detail. As the ad example demonstrates, marketing creates value for society when they help to promote worthy causes. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Marketing Meets Needs Marketing meets the needs of diverse stakeholders Stakeholders are buyers, sellers, investors, community residents, citizens, consumers Marketing concept Identifying and satisfying consumer needs to ensure long-term profitability LECTURE NOTES: STAKEHOLDERS are buyers, sellers, investors, community residents, citizens and consumers CONSUMERS are defined as the ultimate user of a good or service Products and services are sold to satisfy both consumers’ and marketers’ needs – thus consumers need items that provide value while marketers need to earn profits. While the “customer is king” mentality is a good way to train your employees to think, it must be implemented successfully and in a manner that allows the business can earn a profit. The MARKETING CONCEPT is defined on the slide above. Firm’s that embrace the marketing concept constantly seek information about current or changing needs from current and potential customers using company initiated research efforts such as focus groups and survey research. Many firms also employ individuals who review BLOGS, newsgroup postings, and Internet-based complaint websites, in addition to analyzing feedback from consumers received via , mail or phone. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Needs, Wants, and BenefitsCan be physical or psychological Benefits Outcome sought by consumer that satisfies need or want and motivates buying behavior Want Desire to satisfy needs in specific ways Demand Customers’ desires for products coupled with the resources needed to obtain them LECTURE NOTES: NEEDS are defined here as the difference between a consumers’ actual state and some sort of ideal or desired state. So right now, some of you may be hungry, which is not ideal. After class, you may buy a snack or meal – actions designed to move you to your desired state. Marketers try to motivate action – purchases for example – that satisfy needs by providing consumers with products that offer the BENEFITS (need satisfying characteristics) they seek. Is a need the same as a want? Not really. There are many ways you can satisfy your hunger, but you want a Snickers candy bar. WANTS relate to specific brands or types of products, and are often socially or culturally influenced. Wants aren’t always affordable or realistic. For example, America is a highly mobile society; many people need a car. However, at least some of the people driving a practical, four door sedan like the Toyota Camary WANTED to buy a two-door, fun to drive sports car, like a Porsche Wants are typically influenced by both social (family, peers, etc.) and cultural factors. This is why the concept of DEMAND is so important. Demand includes only those consumers who have both the buying power and desire (want) for a particular brand. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Marketing Meets Needs The modern marketplaceTakes many forms, including a mall, eBay auction, e-commerce Web site LECTURE NOTES: A MARKET consists of all the consumers who share a common need that can be satisfied by a specific product, and who have the resources, willingness and authority to make the purchase. A MARKETPLACE used mean a location where buying and selling occurred face-to-face. Times have changed though, and technology has altered how many people now choose to shop. Thus the modern marketplace may include F2F locations such as malls, farmer’s markets, or retail stores, but it is also now includes auction sites such as eBay, mail-order, TV shopping networks, or any of a host of B2C e-commerce websites. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Marketing Creates UtilityUtility: The sum of the benefits we receive from using a product/service Form utility Place utility Time utility Possession utility LECTURE NOTES: UTILITY is defined on the slide as the sum of the benefits we receive from using a product or service. Marketing can create several different kinds of utility of interest to consumers: FORM UTILITY: benefit provided by marketing when raw materials are transformed into finished goods; e.g., oats transformed into oatmeal; rubber into tires. (Relates to PRODUCT portion of marketing mix.) PLACE UTILITY: benefit provided when marketing makes goods available where customers want them; e.g., many things can be purchased over the Internet. (Relates to DISTIBUTION/PLACE portion of marketing mix.) TIME UTILITY: benefit provided by marketing when products are stored (or inventoried) until they are needed. Stores inventory products, as do wholesalers/distributors, and the manufacturers themselves. (Relates again to DISTRIBUTION/PLACE portion of marketing mix.) POSSESSION UTILITY: benefit marketing provides by allowing the consumer to own, use, and enjoy the product. Promotional plans that offered deferred payment or even those which feature a sale may be exactly what the consumer needs to own a product. Retail stores and websites offer access to a bewildering array of products. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Place Utility Rent the Runway is a new service that rents high-end dresses from fashion designers and rents them at a one-tenth of the cost of buying the same garment in the store. LECTURE NOTES: Recall that Place utility is the benefit marketing provides by making products available where customers want them. Dresses are delivered directly to the renter’s address, and the customer returns the dress in a prepaid envelope, providing great place utility! To further entice consumers, women are able to rent the dress for four nights, and the rental cost includes the cost of dry cleaning enhancing the customer’s convenience. Rent the Runway © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Marketing and ExchangeAn exchange occurs when something is obtained for something else in return, like cash for goods or services Buyer receives an object, service, or idea that satisfies a need Seller receives something of equivalent value LECTURE NOTES: An EXCHANGE RELATIONSHIP is at the heart of every marketing act. Exchanges occur when something is obtained for something else in return, like cash for goods or services. Exchanges require a minimum of least two willing parties, each of whom has something the other wants. A PRODUCT is a good, service, an idea, a place, a person – whatever is offered for sale in the exchange. DISCUSSION NOTE: It may be helpful to discuss the exchange process in detail for one or more products/services. Examples: New car purchase: Consumers exchange money, and possibly an older vehicle (trade-in) Dealership returns a physical auto, with warranty, and perhaps other add-ons (such as an introductory On*Star or XM radio subscription) Vacation resort: Consumers exchange money and their precious/limited vacation time Resort exchanges lodging, and potentially other services (depending upon whether it is an all inclusive), such as food, beverages, access to recreational facilities (pool, tennis courts, beach, wind surfers, etc.) Politicians: Consumers exchange their vote (voters), time and effort (campaign staff), and potentially money (political campaign contributors) Politicians exchange promises in terms of how they intend to govern in the future if elected © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Evolution of MarketingThe Production Era Production orientation The Sales Era Selling orientation The Relationship Era Consumer orientation Total quality management The Triple Bottom Line Era LECTURE NOTES: Each of these eras varies with respect to the manner in which customer needs are researched and met, and the types of marketing efforts undertaken. The following information was taken from “What is Stardoll.com about? STARDOLL SAYS: Stardoll is a virtual paperdoll community site for everyone who enjoys fashion, design, and making friends. At Stardoll you can create your own MeDoll or choose from our ever growing collection of celebrity dolls and dress them up in our wide selection of fashions. Every celebrity doll has a wardrobe full of unique clothes and there are new dolls released every week. The membership is completely FREE and most of our members are girls between the ages of 7 and 17. Stardoll is one of few places on the Internet developed with an emphasis on girls' self-expression through fantasy and fashion play. Stardoll is a great place to spend time with friends and to meet other kids from all over the world. We are committed to Stardoll as an inspiring, safe, and creative environment.” © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Production Era Dominated by production orientation:A management philosophy that emphasizes the most efficient ways to produce and distribute products Marketing played an insignificant role Henry Ford’s Model T and Ivory soap are examples of products that were created under a production orientation LECTURE NOTES: Production orientation: The production orientation was most popular during the beginning of the industrial revolution, when demand for products outstripped supply. Firms that engaged in this orientation paid little attention to the desires of consumers, and instead marketed products that they wanted to make, the way they wanted make them. Because there are typically few alternatives available to consumers, consumers must buy whatever is available or go without. However, because this orientation views consumer needs as homogeneous, as new competitors enter the market and develop variations that better satisfy customer needs, firms that maintain a production orientation lose business. Marketing efforts were minimal due to the nature of demand and supply. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Selling Era When product availability exceeds demand, businesses may focus on a one-time sales of goods rather than repeat business Dominated by selling orientation: Managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory LECTURE NOTES: Selling orientation: Some firms still embrace a selling orientation, which focuses on spending large sums of money to attract new customers. The selling orientation became popularized after World War II, when production shifted from weaponry back to consumer goods, and the supply of desired goods finally caught up with demand. Sales promotions were heavily used to stimulate demand for goods, though advertising and personal selling were used as well to attempt to make a sale. The selling orientation pays little attention to retaining customers, and poor customer service often leads to lost customers, which the firm must later replace. For example, loyal customers often become disgruntled at having to pay higher prices than those paid by new customers as part of an introductory or ongoing deal. Marketing’s image was damaged during this time, as customers don’t like to be pushed or aggressively sold to. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Relationship Era Focused on a customer orientation:A management philosophy that emphasizes satisfying customers’ needs and wants Marketing becomes more important in the firm Total Quality Management (TQM) is widely followed in the marketing community LECTURE NOTES: The relationship era resulted in a large number of firms becoming more customer-oriented. While firms that adopted the marketing concept were doing well initially, inflation during the 1970s and the recession in the 1980s hurt company profits. The total quality management philosophy was implemented by a number of firms through the 1990s as a way of not only meeting consumer needs, but doing so better than the competition on a regular basis. Total quality management is defined as a philosophy that involves all employees from the assembly line onward in continuous product quality improvement efforts. Today many firms are manufacturing products on-demand (visit to demonstrate how, for a substantial price, consumers can customize their own MM messages) and technological advances such as the Internet have also given birth to the instapreneur (a business person who only produces a product once it is ordered). © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Triple Bottom Line Era: Make Money and a ContributionFocuses on building long-term bonds with customers Triple orientation seeks to maximize the financial, social, and environmental bottom lines LECTURE NOTES: Firms embracing this mentality believe that their commitment to quality extends beyond satisfying customer needs during a single transaction. The triple bottom line orientation focuses on: building long-term bonds with customers which emphasize financial profits to stakeholders (financial bottom line), contributing to the communities in which the firm operates (social bottom line), and creating sustainable business practices that minimize damage to the environment or that even improve it (environmental bottom line). This ad focuses on the environmental bottom line © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Triple Bottom Line Era: Make Money and a ContributionMarketing uses customer relationship management (CRM) CRM involves systematically tracking consumers’ needs in ways that also benefit society and delivers profit to the firm Social marketing concept: Management philosophy that marketers must satisfy customers’ needs in ways that also benefit society and deliver value to the firm LECTURE NOTES: The triple bottom line era reflects a new way of long-term thinking in which customer retention is paramount. At the heart of customer retention is CRM, or customer relationship management, which is defined on the slide. CRM is easier to implement now because of the Internet, especially as more firms rely on the web to contact customers. Many argue that the Internet has created a paradigm shift for business and that we are moving towards an attention economy, one in which a firm’s success if measured more by share of mind than share of market. The implication for marketers is that they must find new and innovative ways to stand out from the competition, and actually become part of customer’s lives. A second result of the long-term thinking inherent in the triple bottom line era is the social marketing concept, which is defined on the slide. Firms that practice the social marketing concept engage in satisfying environmental concerns, practicing recycling, add extra safety features, or practice sustainability. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
The Triple Bottom Line Era: Make Money and a ContributionSustainability: Creating products that meet present needs and ensuring that future generations can have their needs met Green marketing is one type of sustainable business practice ROI measures value LECTURE NOTES: Sustainability is sometimes referred to as a “Cradle to Cradle” philosophy, as it describes the idea condition where a product is made from nature materials and is full reusable, recyclable, or biodegradable, leading to net resource depletion rate of zero. Sustainability applies to main aspects of business, including social and economic practices (such as humane working conditions). Another crucial aspect of sustainability examines the environmental impact of the product. Green marketing deals with the development of marketing strategies that support environmental stewardship by creating an environmentally-founded differential benefit in the minds of consumers. Finally, the last part of the triple bottom line triad requires measuring how much value marketing activities create. This enhanced focus on accountability that typically centers around the calculation off ROI. The accountability aspect means that marketers must do a better job of proving that marketing activities align to the firm’s overall business objectives, especially since many marketing goals have traditionally been phrased in terms of communication aspects (increase awareness). While creating awareness and changing attitudes remains an important part task for marketers, marketing’s efforts must also demonstrate tangible benefits in terms of consumer actions – web site visits, product trial, and of course purchases, to name just a few. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Green Marketing in ActionGreen marketing is practiced by many forward-thinking firms today. Visit Ads of the World to see examples of Volkswagen’s green marketing and sustainable business practices LECTURE NOTES: Green marketing is one aspect of a firm’s overall commitment to sustainability. A recent study on the impact of green marketing uncovered some interesting results: • About half the companies reported that they are consciously taking steps to become more green. • More than 80 percent of respondents indicated they expect to spend more on green marketing in the future. • Companies with smaller marketing budgets tend to spend more on green marketing and also think green marketing is more effective than larger companies do. • By far the most popular medium for green marketing was the Internet, with 74.2 percent of respondents having spent money online. • Marketers that track marketing spending and its relation to sales believe people will pay more for green products. • Marketers tend to lead green initiatives; 50 percent of firm managers surveyed agree that control of the green (sustainability) program is in the hands of marketers. © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 19
What Can Be Marketed? From “serious” goods and services to fun thingsProducts mirror changes in popular culture Marketing messages often communicate myths LECTURE NOTES: The relationship between marketing and popular culture (music, movies, sports, books celebrities consumed by mass market) is a two-way street. Products and services mirror changes in larger society, while marketing messages often communicate myths containing symbolic elements that express the shared emotions and ideals of a culture, such as the Little Red Riding Hood story as shown in this ad. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
What Can Be Marketed? Product: any good, service, or ideaConsumer goods/services Business-to-business goods/services Not-for-profit marketing Idea, place, and people marketing LECTURE NOTES: Any good, service or idea that can be marketers is a product. Examples include the following: Consumer goods/services: Services are intangible products that we pay for and use but never own. Items that are purchased for personal or family use. Diet Dr. Pepper, hotels for leisure travelers, clothing, washing machines, copy services. Services are intangible products that we pay for and use but never own. Business-to-business (B2B) goods: Involves industrial goods such as raw materials, which are converted into goods for sale or component parts that are integrated into manufactured goods. May also include finished goods that are distributed for resale, or finished goods/supplies that are used in operating a business. While the most visible aspect of e-commerce to you are those firms which sell o over the internet to consumers, the truth is that the majority of e-commerce occurs in the B2B arena. Not-for-profit marketing: Even though many charge admission fees, museums, zoos, churches and organizations such as the YMCA are considered not-for-profit entities, as the fees charged are used to offset costs rather than to make a profit. Idea, Place, and People Marketing: Anti-smoking and anti-drinking and driving campaigns promote ideas; ads for Walt Disney World or the Bahamas market places, and ads for people may promote political candidates, celebrities or microcelebrities (someone who is known by hundreds or thousands of Facebook, Twitter, or MySpace followers). The ad on this slide is an example of services marketing, though it also promotes a specific realtor (people marketing). Linked in is another example of a marketing venue that people can use to market themselves. For that matter, you can market yourself via your own blog or YouTube video. In fact, you need to be very, very careful what information appears on your Facebook or MySpace page; many potential employers search these venues to learn more applicants, and less than professional photos or musing can cost you an interview or even a job. Linked in © 2012 Pearson Education, Inc. publishing as Prentice-Hall. 21
The Marketing of Value Value:The benefits a customer receives from buying a good or service Marketing communicates the value proposition: A marketplace offering that fairly and accurately sums up the value that the customer will realize if he/she purchases product/service LECTURE NOTES: Value is in the eye of the beholder because it’s not just about price, and its not just about quality. Value is really a combination of factors, such as price, quality, convenience, delivery/credit, before and after the sale service, etc. Different buyers weight the importance of each element differently, so while some consumers find price more important the before or after the sale service for certain items, other consumers may feel just the opposite. Marketers need to understand which factors are important to the majority of their customers, so that they can present a strong value proposition (defined on the slide). A major task faced by marketers is convincing consumers that their brand’s value proposition is superior to that of the competition. Perspectives of value differ between customers, sellers, and society © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Value from the Customer’s PerspectiveCustomer perspective: Value is the ratio of costs (price) to benefits (utilities) Value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself Discussion LECTURE NOTES: Customer perspective: Value is the ratio of costs (price) to benefits (utilities). In reality though, the value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself. In fact, many homogenous products (Coke, Pepsi) are marketed more on the basis of their image than they are on the practical, functional benefits provided. Let’s think about the importance of brand image as part of the value proposition in more detail. Name a brand of a product or service that is very important to you – one you’ve bonded with to such an extent that you probably wouldn’t buy a competing brand, even if it was put on sale. DISCUSSION NOTE: (Suggest Apple or iPod, iTouch, iPad if no one volunteers). What is it about that brand that so intrigues you? What efforts have marketers made to build a relationship between you and the brand? © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Value from the Seller’s PerspectiveValue for the seller takes many forms Seller’s should build value by marketing with customers, not to them Partnering with customers via brandfests Customers have value – it is more expensive to attract new customers than to retain current ones LECTURE NOTES: Value for the seller takes many forms: Making a profitable exchange Earning prestige among rivals Taking pride in doing what a company does well Nonprofits: motivating, educating, or delighting the public Customers should be regarded by marketers as partners, rather than as victims. This mentality has led firms to host events, sometimes called brandfests, to thank customers for their loyalty. For example, Triton Boats hosted a fishing contest and invited all bass boat owners to attend free of charge. It’s important that marketers recognize the value of customers – it is much more costly to replace a customer than it is take the actions necessary to retain them. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Value from the Seller’s PerspectiveLifetime value of a customer Calculating the projected profit from a particular customer allows a firm Creating a competitive advantage Identification of a distinctive competency Turning distinctive competencies into differential benefits Examples?? LECTURE NOTES: Still, not all customers are created equal. Calculating the lifetime value of a customer allows a firm to decide which customers are “worth keeping” vs. which should be “fired”. This is done by estimating the amount a consumer will spend with the firm less the cost to maintain the relationship. Competitive advantage provides value, so creating a competitive advantage is highly desirable. Distinctive competencies – firm capabilities that are superior to the competition – must be identified as the first step in this process. The next step requires that marketers turn this competency into a differential benefit – value that competitors do not offer. The best differential advantages provide reasons for consumers to pay a premium for the firm’s product. Unfortunately, many firms have distinctive competencies that don’t translate well into meaningful consumer benefits. For example, the Burj Al Arab (literally, Tower of the Arabs) is a luxury hotel located in Dubai, United Arab Emirates that is often referred to as the world’s tallest hotel. DISCUSSION NOTE: Ask your students if this distinctive competency makes for a strong differential benefit (e.g., does this set the hotel apart from the competition, and also provide unique customer benefits by virtue of the fact that it is tall?). If anything, those that are afraid of heights may mention that this feature is actually NOT desired. However, the Burj Al Arab is also reknown for its exceptional customer service. This WOULD be a meaningful differential advantage, particularly given the expectations of those who can afford to stay at the hotel. PANDORA: Reviews Pandora’s key benefit and competitive advantage Pandora Video © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
It’s Debatable Class Discussion QuestionDoes this product provide a differential benefit that is important to consumers? Are the benefits provided to consumers unique and superior to those offered by the competition, and if so, is this competitive advantage sustainable? LECTURE NOTES: The waterproof feature of the camera is likely to be a differential advantage only to those who would use a camera near water – fishermen, beach goers, people who have pools, etc. Unfortunately, this benefit is not unique to this brand – Olympus, Bell & Howell, GE, and Kodak also manufacture waterproof digital cameras, which demonstrates that this benefit is not truly a sustainable competitive advantage. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Figure 1.1 A Value Chain for the Apple iPodLECTURE NOTES: Value chain: A series of activities involved in designing, producing, marketing, delivering, and supporting any product. These activities include: Inbound logistics: bringing in materials to make the product Operations: converting the materials into the final product Outbound logistics: shipping out the final product Marketing: promoting and selling the final product Service: meeting the customer’s needs by providing any additional support required © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Figure 1.2 Steps in the Value ChainLECTURE NOTES: Steps in the value chain that outline the process of creating and delivering value The authors use this figure to introduce the manner in which the textbook is organized. Part 1 encompasses chapters 13; Part 2 covers chapters 4–7; Part 3 encompasses chapters 8–11; Part 4 is addressed in chapters 12–14: and part 5 is covered in chapters 15–16. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Table 1.3 An Example of a Customer Service ScorecardLECTURE NOTES: Marketing scorecards report how a company or brand is doing in achieving its various goals, usually in quantifiable terms. They are being used increasingly as a method of measuring value. The particular items (e.g., “Employee responsiveness”) measured are usually referred to as metrics. Graphs and charts summarize information in an easy-to-read format. Sometimes “grades” are assigned based on the data. Table 1.3 presents a simple marketing scorecard example. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Consumer-Generated Value: From Audience to CommunityEveryday people are generating value instead of just buying it Social networking continues to grow and leverages Web 2.0 Open source business models are on the rise. LECTURE NOTES: Consumer-generated value: Occurs when everyday people generate value instead of buying it. Often, they do so by performing marketing roles such as: Creating ads for marketer sponsored contests (www.crashthesuperbowl.com) or on their own, and posting them YouTube. Providing input into new product development Buy and sell product on eBay Marketers need to stop treating consumers as a passive audience, and instead think of consumers as communities. Some of these consumers are not being called Amafessionals, individuals who contribute ideas for fun and challenge to gain physic income. The growth of social networking presents opportunities for marketers to reach specialized groups of users, and is an integral part of Web Web 2.0 offers greater interactivity among users, and actually improves as more users participate, due to the “wisdom of crowds” phenomena, which suggests that under the right circumstances, groups are smarter than the smartest people in them. If true, it means that large numbers of nonexpert consumers can predict successful products. Open source business models are also on the rise. For example, Moodle is an open source learning management system (similar to Blackboard). It’s free to use, and anyone can access the necessary code if interested in adding new features to Moodle. FREE may sound counterintuitive, but we’ll discuss how you can make money from something you give away for free in Ch. 11. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Value from Society’s PerspectiveMarketing transactions add or subtract value from society Stressing socially responsible and ethical decisions is good business Marketing is often criticized Marketing’s dark side LECTURE NOTES: Marketing transactions and company activities influence the world and add or subtract value from society. Consumers trust marketers to sell products that perform as expected, and price and distribute them fairly. Unfortunately, the failures of firms such as AIG illustrate the conflicts which arise when pressure to succeed provokes dishonest business practices. Stressing ethical or socially responsible decisions is often good business in the long run, though some find out the hard way. BPs handling of the massive Gulf oil spill in 2010 eroded its image in the marketplace, and consumers boycotted the firm’s gas stations. Marketing is often criticized: Marketing corrupts society because it encourages pursuit of hedonistic pleasures. Others claim that marketers . What do you think? How would you answer this allegation? (RESPONSE: Needs exist; marketers simply recommend ways of satisfying the needs.) Marketing and advertising are unnecessary, as they foster materialism among consumers. (RESPONSE: Products are designed to meet existing needs; marketing and advertising communicates availability and how these products meet needs. Marketing promises miracles and manipulates consumers. (RESPONSE: Laws are in place to punish deceptive advertising; advertisers don’t know enough about people to manipulate them. People have free choice – no one is forced to buy.) Still, marketing does have its darkside a some actions do have detrimental effects on society. Illegal actions occur – such as bait and switch (luring consumers with the promise of a sale or inexpensive item that is out of stock, only to sell them something more expensive.) Other detrimental practices include the marketing practices of “sin” products such as tobacco or alcohol in neighborhoods where known problems with substance abuse or smoking exists. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Marketing Is a Process Marketing planning is a major portion of the process and involves: Analyzing the marketing environment Developing a marketing plan Deciding on a market segment Choosing the marketing mix—product, price, promotion, and place LECTURE NOTES: Marketing is a decision process in which managers determine the strategies that will help the firm meet its long-term objectives, then execute those strategies. A major portion of the marketing process is marketing planning, in which the big picture and how the firm’s products fit into that picture are considered. First, the marketing environment must be analyzed to determine firm strengths and weaknesses, as well as opportunities or threats stemming from competitors or changes in the legal-political, socio-cultural demographic, technological, or economic environments. The marketing plan describes the marketing environment, objectives, strategies, and who has responsibility for strategy implementation. The selection of who should be targeted (target market) with what product or service is critical, as the era of mass marketing (selling to all possible consumers) is vastly inefficient. Instead, firms seek to ID market segments, distinct groups of consumers who are similar in some way but whose needs differ. Positioning is another major strategic decision. A firm’s position is how the target market perceives the product in comparison to competitors brand (discussed in chapter 7. The promotional mix is also called marketing communications by many scholars, and refers to the unique combination of advertising (including direct response), personal selling, consumer-oriented sales promotion, trade-oriented sales promotion, and brand-oriented publicity and sponsorship efforts that are undertaken on behalf of a particular brand. The final step of marketing planning involves determination of the marketing mix, discussed in greater detail on the next slide. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Figure 1.3 The Marketing MixLECTURE NOTES: The marketing mix consists of the tools used by the organization to create a desired response among its target market, and is commonly referred to as the 4 Ps. Each of the four Ps represents a piece of the puzzle which must be solved to successfully market the product. The product, price, place and promotion decisions are entirely interdependent, as symbolized by the fact that the puzzle pieces lock together. Product – product aspects includes all aspects of the product design, its packaging, and any associated aspects (such as warranty, free delivery, etc.) Determining the specific combination of benefits sought by consumers is a key marketing task. Promotion – includes all activities marketers undertake to inform consumers about their product. Many marketers now refer to promotion as marketing communications, and includes advertising, personal selling, publicity and sales promotion activities directed at both consumers and the trade (retailers and wholesalers who aid in the distribution of the product. Price – the amount the consumer must exchange in order to receive the product or service offering. Higher prices can communicate higher quality for some goods. Marketers often lower price via sales promotions in order to increase demand. Place – this “P” is key to making the product available to consumers at the desired time and location. Place decisions are closely tied to the supply chain – the set of firms that work together to get a product from a producer to a consumer. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Real People, Real Choices: Decision Made at PandoraJoe chose option 2 Implementation: Pandora chose personal communication to build awareness. Town halls were led by the firm’s founder; , blogs, tweets, and Facebook were also instrumental. Listeners wore branded merchandise. Service was made available on as many devices as possible Measuring Success: As of mid-2010, Pandora boasted 50 million listeners LECTURE NOTES: Today more than 100 consumer electronic devices stream Pandora. Through its relationship with Ford and other auto firms Pandora will soon be incorporated into car dashboards, which is very important, as more than 50% of all radio listening occurs in the car. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
Meet Jay of First Flavor Keeping It Real: Fast-Forward to Next Class Decision Time at First Flavor Meet Jay of First Flavor First Flavor markets edible film strips that allow users to taste flavors. Other potential uses of film strips beyond sampling are being investigated The decision to be made: Whether or not to diversify into new product categories LECTURE NOTES: In chapter two, you’ll learn more about First Flavor, a firm that markets edible taste strips called the Peel ‘n Taste® marketing system. The company’s technology allows it to infuse virtually any taste onto an edible flavor strip (ala popular breath strips). The consumer can “sample” the product – whether it’s fruit juice, toothpaste, frozen desserts or any beverage - simply by plucking a strip from a dispenser in a grocery aisle or peeling one off of a magazine ad. The strip completely dissolves on the tongue and provides a realistic approximation of what the item will taste like. As First Flavor started to see its first sales of Peel ‘n Taste® from consumer product manufacturers (Arm & Hammer toothpaste, Old Orchard fruit juice, Welch’s grape juice, Sunny Delight Elations®, etc.) the startup became aware of other uses for its capability to produce great tasting edible film strips. Whether or not to diversify into new product categories is a major decision facing the young firm. © 2012 Pearson Education, Inc. publishing as Prentice-Hall.
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