Chapter 1 Welcome to the World of Marketing: Create and Deliver Value

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-2 The Who and Where of Marketers  Marketers: Get the scoop on marketing salaries! Visit the Occupational Outlook Handbook!marketing salariesOccupational Outlook Handbook At least one of the CEOs of large companies have risen through the marketing ranks. Why?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-3 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.

Marketing Creates Value. How? Current state Desired state NEED Product Need WANT

Marketing Creates Value. How? BUYING POWER WANT FOR PRODUCT DEMAND BENEFITVALUE

The Marketing Concept Identifying and satisfying consumer needs to ensure long- term profitability

Marketing Creates Value – for Whom? customerssocietygovernmentvendorsworkersshareholders

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-8 Marketing Meets Needs  The modern marketplace –Takes many forms, including a mall, eBay auction, e-commerce Web site

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-9 Marketing Is about Creating Utility  Utility: The sum of the benefits we receive from using a product/service –Form utility –Place utility –Time utility –Possession utility

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-10 Marketing Is about Exchange Relationships  An 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 Example: money, barter of services or goods, trade-ins

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-11 The Evolution of Marketing  The Production Era –Production orientation  The Sales Era –Selling orientation  The Relationship Era –Consumer orientation –Total quality management  The Triple Bottom Line Era Stardoll.comStardoll.com lets girls create their own fashions, or dress celebrities in different outfits

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-12 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-13 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-14 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-15 The Triple Bottom Line Era: Make Money and a Contribution  Focuses on building long-term bonds with customers –Triple orientation seeks to maximize the financial, social, and environmental bottom lines This ad focuses on the environmental bottom line

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-16 The Triple Bottom Line Era: Make Money and a Contribution  Marketing 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-17 The Triple Bottom Line Era: Make Money and a Contribution  Sustainability: –Creating products that meet present needs and ensuring that future generations can have their needs met  Greater focus on accountability –ROI (Return on Investment) is the direct financial impact of a firm’s expenditure of resources such as time or money

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-18 What Can Be Marketed?  From “serious” goods/services to fun things –Products mirror changes in popular culture –Marketing messages often communicate myths  Product: any good, service, or idea –Consumer goods/services –Business-to-business goods/services –Not-for-profit marketing –Idea, place, and people marketing

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-19 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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-20 Value from the Customer’s Perspective  Customer 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 Brand image is a critical component

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-21 Value from the Seller’s Perspective  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

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-22 Building Value Through Customers  Customers are now regarded as partners rather than victims  It is more expensive to attract new customers than to retain current ones  Calculating the lifetime value of a customer allows a firm to decide which customers are “worth keeping” vs. which should be “fired”

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-23 Providing Value Through Competitive Advantage  Creating a competitive advantage requires: –Identification of a distinctive competency: The ability of a firm to outperform the competition by providing customers with a benefit the competition cannot provide  Turning distinctive competencies into differential benefits

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-24 Differential Benefit? Does 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?

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-25 Adding Value Through the Value Chain  Value chain: A series of activities involved in designing, producing, marketing, delivering, and supporting any product –Inbound logistics –Operations –Outbound logistics –Marketing final product –Service

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-26 Figure 1.1 A Value Chain for the Apple iPod

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-27 Figure 1.2 Make and Deliver Value

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-28 Consumer-Generated Value: From Audience to Community  Consumer-generated value: –Everyday people functioning in marketing roles such as: Creating ads Providing input into new product development Serving as retailers –Social networking is growing explosively Wisdom of crowds –Open source business models

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-29 Value from Society’s Perspective  Marketing transactions and company activities influence the world and add or subtract value from society  Stressing ethical or socially responsible decisions is often good business in the long run

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-30 The Dark Side of Marketing  Marketing is often criticized  Illegal practices do occur  Some marketing activities have detrimental effects on society  The dark side of marketing: –Terrorism, addictive consumption, exploitation, illegal activities, shrinkage, anticonsumption

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-31 It’s Debatable Class Discussion Question Some people feel that marketers manipulate consumers, while others argue that people should be held responsible for their own choices. This ad is critical of the current trend of lawsuits brought against fast-food companies by people who blame their health problems on the fast food industry. Where do you stand? Visit ConsumerFreedom.comConsumerFreedom.com

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-32 Marketing as a Process  Marketing planning (thinking carefully and strategically about the big picture) –Analyzing the marketing environment –Developing a marketing plan –Deciding on a market segment –Choosing the marketing mix—product, price, promotion, and place

Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall1-33 Figure 1.3 The Marketing Mix