M A R K E T I N G Real People, Real Choices Fourth Edition CHAPTER 1 Welcome to the World of Marketing: Creating and Delivering Value

Why study Marketing Who pays your salary when you start working? Do you like meeting new people, traveling and seeing the world? Would you like to have the power to make others to do what you want? Would you like to own your own business someday? Or be a President / CEO of a company?

Some marketing careers Marketing departments Marketing Consultancies Brand consultancy Marketing research International marketing Retailing

American Marketing Association What is Marketing Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. American Marketing Association

Marketers do it to satisfy needs… Most successful firms practice the marketing concept first identify consumer needs and then provide products that satisfy those needs A need is the difference between a consumer’s actual state and some ideal or desired state physical needs (e.g. hunger, thirst, etc.) psychological needs (self-esteem, companionship, etc.)

Needs versus Wants A need is the difference between the actual and ideal states of being A want is a desire for a particular product used to satisfy that need wants are culturally and socially influenced (e.g. formal wear for prom; I-Pods and peer pressure, diamond rings and engagement, etc.)

Benefits, Demand, and Markets A product delivers a benefit when it satisfies a want Want coupled with the resources to satisfy it results in demand A market consists of all the consumers with demand E.g. you have a need to move from home to the office; so you want a car; when you have the money to buy you demand a car; all those who demand a car constitute the market for a car.

Marketing Creates Utility Form utility – transforming raw-materials to finished products (e.g. making cars from sheet steel) Place utility – making products available where they are wanted (e.g. selling surf boards at Myrtle Beach) Time utility – making products available when they are wanted (e.g. selling winter clothing in Fall) Possession utility – derived by owning, using and enjoying the product (e.g. self-expression by wearing an i-pod)

Exchange Relationships Exchange - the heart of every marketing act An exchange occurs when something is obtained for something else in return Both parties must willingly make the exchange Each party must be at liberty to reject the exchange

What Can Be Marketed? Consumer Goods and Services Business-to-Business Goods and Services – aircraft, ships, industrial machinery Not-for-Profit Marketing – museums, churches, zoos, etc. Idea, Place, and People Marketing (anti-smoking; Oregon; Paris Hilton, Jessica Simpson, etc.)

The Value Proposition Value: All benefits received from buying a product / service (Rembrandt toothpaste benefits?) Marketing communicates these benefits as the value proposition (Rembrandt: The whitening toothpaste) Costs: All costs incurred (including time and effort) in buying the product / service Value = Benefits / Costs Value is subjective: Think about brands you love and those you don’t love

Providing Value to customers Distinctive Competency – what is it that the firm does better than the competition? (What does Apple do better than competition?) Differential Benefit – How can we leverage the distinctive competency to provide something unique which customers want. (How has Apple done this?) Competitive advantage – Strategy-speak for the ability to provide consumers with something the competition cannot (What is Apple’s competitive advantage?)

Value Chain Activities The series of activities involved in converting business inputs (e.g. raw-materials) into finished products for final sale. Inbound logistics Operations Outbound logistics Marketing and sales Service Competitive advantage occurs when a firm performs one or more of these activities better than the others

Marketing planning – some questions: Marketing as a Process Marketing planning – some questions: What product benefits will our customers be looking for in 3-5 years? What capabilities does our firm have that set it apart from the competition? What additional customer groups might provide important segments for us in the future? What legal issues may affect our business?

Target Markets Mass Market - all possible customers regardless of differences in their specific needs and wants developing a basic product and a single strategy for everyone (e.g. Morton’s salt) Market segments - distinct groups of customers within a larger market (e.g. the various I-pods and Shuffle) A target market - an organization’s chosen segment (what is the target market for the shuffle, Hollister jeans?)

Positioning the Product Plan how the target market should perceive the product in comparison to competitors’ brands - the market position What is the market position of Mercedes? BMW? Toyota? Apple?

The Marketing Mix Product – features, benefits, packaging, brand name, size, weight, color, etc. Place – where is it available Price – list price, discounts, rebates, pricing strategy, etc. Promotion – informing and persuading consumers about our product.

The Evolution of Marketing Production Era – product focus Manufacture at lowest cost Selling Era – sales focus Sell! Sell! Sell! At any price you can get! Consumer Orientation – consumer focus Give what the consumer needs/wants New Era Orientation – relationship focus Build customer loyalty

New Era Orientation Customer relationship management Easier and cheaper selling to an existing customer than finding a new customer E.g. Frequent Flyer programs, etc. Social benefits Pollution control, green marketing, recyclables, etc. Accountability Marketing metrics – each marketing action should have measurable results