Chapter One Welcome to the World of Marketing: Create and Deliver Value Marketing: Real People, Real Choices, 8e Solomon, Marshall, and Stuart Copyright © 2016 Pearson Education, Inc. 1-1

Chapter Objectives Explain what marketing is, including the marketing mix, what can be marketed, and the value of marketing Explain the evolution of the marketing concept Understand value from the perspectives of customers, producers, and society Explain the basics of market planning Copyright © 2016 Pearson Education, Inc. 1--2

Real People, Real Choices: Decision Time at Pandora Which option should be pursued? – Option 1: Launch an ad campaign on radio stations, in music magazines, and at record stores – Option 2: Build buzz about Pandora through word of mouth – Option 3: Sell the service to a large chain of record stores, a music magazine, or even a record label Copyright © 2016 Pearson Education, Inc. 1-3

Marketing: What is it? As consumers, you all know a lot about it! Marketing is first and foremost about satisfying customer needs in a profitable manner Copyright © 2016 Pearson Education, Inc. 1-4

AMA Definition of Marketing 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. Copyright © 2016 Pearson Education, Inc. 1-5

Marketing Defined: Activities, Institutions, Processes Marketing includes many different activities – More than just sales and advertising – Involves interactions with non-marketers: Finance, HR, MIS, Operations, Accounting, NPD … Marketing is also a decision process Copyright © 2016 Pearson Education, Inc. 1-6

Marketing Defined: Create, Communicate, Deliver Value Copyright © 2016 Pearson Education, Inc. 1-7

Marketing Facilitates Exchange Exchange occurs when one party gives up something and in return for receiving something else Conditions for Exchange – At least two people or organizations must be willing to make a trade. – Have something the other party wants – Agree on value of exchange and terms – Each party free to accept or reject exchange Copyright © 2016 Pearson Education, Inc. 1-8

Marketing Defined: What is Marketed? Product: any good, service, or idea ­Consumer goods/services ­Business-to-business goods/services ­Not-for-profit marketing ­Idea, place, and people marketing Copyright © 2016 Pearson Education, Inc. 1-9

What is Marketing? Anything from “everyday” goods/services to “fun” experiences and “interesting” people to “serious” social issues Copyright © 2016 Pearson Education, Inc. 1-10

Marketing Defined: Meeting Stakeholder Needs Marketing concept – Modern marketers practice the marketing concept: identifying and satisfying the needs of consumers to ensure profitability. Marketing meets the needs of diverse stakeholders ­Stakeholders include consumers, business buyers, sellers, investors, and community residents. Copyright © 2016 Pearson Education, Inc. 1-11

Needs, Wants, and Benefits Needs – Difference between actual and desired state – Can by physiological or psychological Wants – Desire to satisfy a need in a particular way – Influenced by history, past experience, and culture Benefits – Consumer received benefit when need satisfied Demand – Customers’ desires for products coupled with the resources needed to obtain them Copyright © 2016 Pearson Education, Inc. 1-12

Markets and Marketplaces A market consists of all consumers who share a common need that can be satisfied by a specific product, and who have resources, willingness and authority to purchase. A marketplace is any location or medium used to facilitate an exchange. Copyright © 2016 Pearson Education, Inc. 1-13

Collaborative Consumption Consumers increasingly would rather rent than purchase the products they use. – Examples? Traditional marketers are also looking to take advantage of this trend. Copyright © 2016 Pearson Education, Inc. 1-14

Marketing Creates Utility Utility represents the sum of benefits a consumer receives from use of a product – Form utility – Place utility – Time utility – Possession utility Copyright © 2016 Pearson Education, Inc. 1-15

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. Copyright © 2016 Pearson Education, Inc Rent the Runway

Marketing Defined: Value for Society Is it possible to make profits and contribute to society and the planet in a positive way? Corporate responsibility at Target – In 2012, Target set goals for all seafood sold in stores to be sustainable and traceable. – Reusable bag program saves consumers $7 million – 50+% of apparel is labeled “machine wash cold” to help reduce energy consumption. Copyright © 2016 Pearson Education, Inc. 1-17

Summary: Marketing Defined Marketing encompasses activities and process that create, communicate, deliver value-based exchanges. – Benefits to stakeholders beyond just businesses and consumers How does the definition of marketing relate to you as a consumer? To your future career? Copyright © 2016 Pearson Education, Inc. 1-18

Evolution of the Marketing Concept Production era Selling era Relationship era Triple bottom-line era Copyright © 2016 Pearson Education, Inc. 1-19

Production Era Marketing dominated by a production orientation – A management philosophy that emphasizes the most efficient ways to produce and distribute products Marketing promotions played a minor role Henry Ford’s Model T and Ivory soap are examples of products that were created under a production orientation Copyright © 2016 Pearson Education, Inc. 1-20

Sales Era Dominated by selling orientation – A managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory – Emphasis on aggressive promotional activities Post WWII, production capacity exceeded demand – Led businesses to focus on one-time sales of goods rather than repeat business Copyright © 2016 Pearson Education, Inc. 1-21

Relationship Era Focused upon a consumer orientation – A management philosophy that emphasizes satisfying customers’ needs and wants Marketing plays a more central role – Emergence of the marketing concept – Total Quality Management (TQM) and other quality initiatives gains wide acceptance Copyright © 2016 Pearson Education, Inc. 1-22

Triple Bottom-Line Era Management seeks to maximize financial, environmental, and social bottom lines. – Emergence of societal marketing concept – Emphasis on ROI measurement across all three areas Copyright © 2016 Pearson Education, Inc This ad focuses on the environmental bottom line

Sustainability Sustainability is about creating products that meet present needs while ensuring future generations can have their needs met – Green marketing is one type of sustainable business practice Copyright © 2016 Pearson Education, Inc Visit adsoftheworld.com/ to see examples of Volkswagen’s green marketing and sustainable business practicesadsoftheworld.com/

What’s Next in the Evolution of Marketing? The Attention Economy – In the Internet Era, success measured by share of mind rather than simply share of market. Big Data – Ford employs 200+ data scientists to generate insights leading to valuable auto innovations Copyright © 2016 Pearson Education, Inc. 1-25

The Changing World of Marketing Marketing has experienced many changes – Production  Selling  Relationship  Triple Bottom Line Marketing in the midst of an exciting period of rapid change right now! What skills will marketers need to succeed in a “Big Data” era? Copyright © 2016 Pearson Education, Inc. 1-26

Ethical/Sustainable Decisions in the Real World “Vaping” is the process of inhaling vapors from an electronic cigarette or a similar device – Thanks to clever (and unregulated) marketing, many young people don’t believe vaping is dangerous – However, many flavors still contain nicotine Should e-Cigarettes be marketed like any other widely available consumer product, such as milk or music? Copyright © 2016 Pearson Education, Inc. 1-27

The Value of Marketing and the Marketing of Value Value is benefits received by the consumer from a product relative to total costs Marketing activities lead to value creation through innovations that enhance customer benefits and reduce costs Marketing promotional activities communicate the value proposition Copyright © 2016 Pearson Education, Inc. 1-28

Value from the Customer’s Perspective Customer perspective: – Value is the ratio of perceived benefits to perceived costs – Value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself Copyright © 2016 Pearson Education, Inc. 1-29

Value from the Seller’s Perspective Value for the seller can take many forms What is the economic value of a single customer? – Typically more costly to acquire than to retain Marketers should look to increase value through co-creation Copyright © 2016 Pearson Education, Inc. 1-30

Table 1.2: An Example of a Customer Service Scorecard Copyright © 2016 Pearson Education, Inc.1-31

Table 1.3: How Some Firms Achieve a Competitive Advantage with a Distinctive Competency Copyright © 2016 Pearson Education, Inc.1-32

Figure 1.2 A Value Chain for the Apple iPod Copyright © 2016 Pearson Education, Inc.1-33

Figure 1.3 Steps in the Value Chain Copyright © 2016 Pearson Education, Inc.1-34

Consumer Generated Value: From Audience to Community Everyday 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. Copyright © 2016 Pearson Education, Inc. 1-35

Value from Society’s Perspective Marketing transactions may add or subtract value from society – Stressing socially responsible and ethical decisions is good for business Marketing often faces criticisms – “Dark side” marketing and consumption issues Copyright © 2016 Pearson Education, Inc. 1-36

Value of Marketing Marketing activities facilitate exchanges that create, communicate, and deliver value to customers. Sellers and society at large also derive value from these exchanges. ­But marketing is sometimes misused Are criticisms of marketing justified? Copyright © 2016 Pearson Education, Inc. 1-37

Marketing is a Process Marketing planning is a major portion of the process and involves: – Analyzing the marketing environment – Developing the marketing plan – Deciding on a market segment – Choosing the marketing mix – product, price, promotion place Copyright © 2016 Pearson Education, Inc. 1-38

Real People, Real Choices Decision Made at Pandora Joe 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 Copyright © 2016 Pearson Education, Inc. 1-39

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