The Importance of Marketing Chapter 1, Section 1.2

Key Term Utility

Think Critically… Take 2-3 minutes to brainstorm why prices drop when products become more popular… We will discuss shortly!

Why Marketing is Important… 1.Micro-level: It can positively affect your life 2.Macro-level: It provides the means for competition to take place in the marketplace, thus helping the economy as a whole

Economic Benefits of Marketing New and Improved Products: In a competitive marketplace, businesses try to create new or improved products at lower prices than their competition. Example: Pepsi vs. Coke

Economic Benefits of Marketing, cont. Lower Prices: Marketing activities increase demand and this helps to lower prices When demand is high, manufacturers can produce products in larger quantities Unit costs are reduced

Economic Benefits of Marketing, cont. Added Value and Utility: Competition forces companies to be efficient and responsive to consumers Competition also forces companies to TRY TO ADD VALUE to a consumer’s shopping experience Example: U.S. Bank offers online banking, a 24- hour customer service hotline, and free check cards

Economic Benefits of Marketing, cont. Utility Definition: Added value in economic terms Utilities are the attributes of a product or service that make it capable of satisfying a consumers’ wants and needs Five economic utilities involved with all products Form Place Time Possession Information

Form Utility Example: zipper spool of thread three yards of cloth Some Value Example: creating a jacket from these materials MORE Value! Changing raw materials or putting parts together to make them more useful. (i.e., making or producing things)

Place Utility Involves having a product where customers can buy it. Businesses study consumer shopping habits to determine the most convenient and efficient locations to buy products. Examples: Catalogs Retail Stores (Brick & Mortar) Internet (Click & Order) Blockbuster Case Study Example: Blockbuster They have retail stores and now Blockbuster online!!

Time Utility Having a product available at a certain time of year or a convenient time of day Examples: Gold’s Gym staying open 24 hours Starbucks offering the pumpkin spice latte from September thru February

Possession Utility The exchange of a product for money There are many variations today: Cash Personal checks Credit and Debit cards Layaway and Installment Plans (delayed possession for gradual payment) Each option adds value, as it gives the customer greater flexibility (i.e., greater opportunity to BUY)

Information Utility Involves communication with the consumer Examples: Salespeople provide info by offering features and benefits of products Advertising communicates messages about specials, how much a product costs, and sometimes where to buy it Packaging and labeling inform consumers about qualities and uses of a product Websites provide detailed information about their companies and their products

Review Questions… Which utility is added by drive-through windows at Starbucks? How does marketing help to lower prices?

Five economic utilities involved with all products Form Place Time Possession Information