What is Marketing? Marketing in a Changing World Chapter 1

Marketing Defined 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 Need—states of felt deprivation Physical—food, clothing, shelter, safety Social—belonging and affection Individual—knowledge and self-expression Part of the human make-up Want—the form taken by a human need as shaped by culture and individual personality Need food, want a hamburger Need transportation, want a cool car unlimited Demand—human wants that are backed by buying power

Products, Services, and Experiences Product—anything that can be offered to a market to satisfy a need or want Includes: Service—activities or benefits offered for sale that are essentially intangible and do not result in ownership of anything Experiences—travel, destinations, websites Ideas, information, organizations, people More than just the physical property of a good Brand’s meaning to a customer Benefits to customer—providing a solution to a need

Value, Satisfaction, and Quality Customer Value—the difference between the values the customer gains from owning and using a product and the costs of obtaining the product Often customers act on perceived value—not objective or accurate information Companies work to change value perceptions

Value, Satisfaction, and Quality Customer Satisfaction—the extent to which a product’s perceived performance in delivering value matches a buyer’s expectations If a product falls short of customer expectations, the buyer is dissatisfied If performance matches expectations, the buyer is satisfied If performance exceeds expectations, the buyer is delighted Based on past buying experiences, opinions of friends, and marketer and competitor information a promises

Value, Satisfaction, and Quality Quality—”freedom from defects”—satisfying stated or implied customer needs Closely linked to customer value and satisfaction Total Quality Management—all company employees are involved in constantly improving quality of products, services, and business processes Customers will not tolerate average quality Should be a top priority

Exchange, Transaction, and Relationships Exchange—the act of obtaining a desired object from someone by offering something in return 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 agreement Monetary Barter

Exchange, Transaction, and Relationships Relationship Marketing—building long term relationships with valued customers, distributors, dealers, and suppliers—80% of business comes from 20% of customers Builds strong economic and social connections by promising and delivering high quality products, good service, and fair prices Creates marketing network oriented for the long-term Creates social benefits by personalizing products and services to meet customer needs and wants Creates structural ties with special equipment or computer links

Markets Market—the set of all actual and potential buyers of a product or service Share a particular need or want 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

Resource Markets—raw materials, labor, money Market Economy Government Resource Markets—raw materials, labor, money Producers Goods and services Intermediaries Consumers Income Labor

Resource Markets—raw materials, labor, money Government Market Government Taxes Public Services— schools, law enforcement, highway maintenance Intermediaries Producers Consumers

Marketing Managing markets to bring about exchanges and relationships for the purpose of creating value and satisfying needs and wants Activities: Product development Research Communication Distribution Pricing Service

Marketing Management 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 Demand Management Organization has a desired level of demand for its product At any point in time there might be not enough demand, no demand, adequate demand, irregular demand, or too much demand for a product Concerned with finding and increasing demand and/or changing and reducing demand Demarketing—reducing demand temporarily or permanently

Building Profitable Customer Relationships Managing demand means managing customers Demand comes from two places: New customers Repeat customers New marketing realities: Changing demographics Slow-growth economy More sophisticated competitors Overcapacity Fewer new customers to go around

Building Profitable Customer Relationships Costs of attracting new customers is rising Losing a customer means: Losing a single sale Losing a lifetime worth of purchases and referrals Customer lifetime value—how much a customer is worth for a lifetime of purchases: Taco Bell--$12,000 Lexus--$600,000

Marketing Management Practices Three stages of marketing practice: Entrepreneurial Marketing involves visualizing an opportunity and constructing and implementing flexible strategies Formulated Marketing involves developing formal marketing strategies and following them closely Intrepreneurial Marketing involves the attempt to reestablish an internal entrepreneurial spirit and refresh marketing strategies and approaches

Marketing Management Philosophies There are five alternative concepts under which organizations conduct their marketing activities: Production Product Selling Marketing Societal marketing concepts

Production Concept Idea that customers will favor products that are available and highly affordable Management should focus on improving productions and distribution efficiency Useful in two situations: When demand exceeds supply When product cost is too high and improved productivity is needed to bring it down Companies who use this run the risk of focusing too narrowly on their own operations—lose sight of competition and of customer needs

Product Concept Idea that consumers will favor products that offer the most in quality, performance, and innovative features Organizations devote energy to making continuous product improvements Leads to marketing myopia—buyers may not be looking for the specific product, but alternative solutions to a problem Example: Transportation vs. train, bus, car, airplane

Selling Concept Idea that consumers will not buy enough of an organization’s products unless it undertakes a large-scale selling and promotion effort Typically practiced with unsought goods such as insurance Practiced when companies have overcapacity Sell what they make vs. what market wants Focuses on creating sales transactions versus building long term relationships

Marketing Concept 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 do Outside-in perspective Customer focus and value are the paths to sales and profits Builds customer satisfaction into the fabric of the company Customer driven 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 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. Newest concept 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 Looks at the long run impacts of decisions

Marketing Challenges Connecting with More Carefully Selected Customers Most companies are targeting fewer, more profitable customers Diversity and new customer connections mean greater market fragmentation “ono-to-one” marketing Value to customers Value of the customers to the company Profitable customers earn their loyalty

Marketing Challenges Connecting for a Customer’s Lifetime Companies choosing what customers to serve and serving them in deeper, more lasting ways Building relationships Goal shifting—making a profit to making long-term profits by managing the lifetime value of a customer Goal--keeping old customers and offering greater variety

Marketing Challenges Connecting Directly Most products are available without going to a store Online availability of products, shopping consultants, payment Customers are active participants in shaping the marketing offer and process

Marketing Challenges Connecting with Marketing Partners Connecting within the company Every functional area can interact with customers Marketing no longer has sole ownership of customer interactions Every employee must be customer focused Cross-functional customer teams are created to increase success

Marketing Challenges Connecting with Marketing Partners Connecting with Outside Partners Supply Chain Management Stretches from raw materials to components to final products that are carried to final buyers Success depend on how well the chain works together versus competitors supply chains

Marketing Challenges Connections with the world around us Global Connections Marketers are connected globally with customers Companies have expanded market coverage Challenges from skillful European market and Asian multinationals Selling more in international markets Buying from international supplies and components

Marketing Challenges Connections with the world around us Values and Social Responsibility Social and environmental impacts of corporate actions Ethics and social responsibility place strict demands on companies Forward looking companies deal with these issues before legislation is enacted “Do well by doing good”

Marketing Challenges Connections with the world around us Broadening Connections Marketing becoming important to non profit organizations as well Hospitals, museums, colleges, symphony orchestras, even churches Competing for funds Improving communication and promotion to respond to needs and wants Government agencies also market U.S. Army U. S. Post Office

Marketing Challenges