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Mktg

Mktg

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What Is Marketing?
What does the term
marketing
mean to you?
Many people think it means thesame as personal selling.Othersthink marketing is the same as per-sonal selling and advertising.Stillothers believe marketing hassomething to do with making prod-ucts available in stores,arrangingdisplays,and maintaining invento-ries of products for future sales.Actually,marketing includes all of these activities and more.Marketing has two facets.First,it is a philosophy,an attitude,a perspective,or amanagement orientation that stresses customer satisfaction.Second,marketing is anorganization function and a set of processes used to implement this philosophy.This isthe marketing process.The American Marketing Association’s definition encompassesboth perspectives: “
Marketing
is the activity,set of institutions,and processes for creat-ing,communicating,delivering,and exchanging offerings that have value for cus-tomers,clients,partners,and society at large.1Marketing involves more than justactivities performed byagroup of people in a defined area or department.In the often-quoted words of David Packard,co-founder of Hewlett-Packard,“marketing is tooimportant to be left only to the marketing department.”Marketing is a process that focuses on delivering value and benefits to customers,not just selling goods,services,and/or ideas.Marketing uses communication,distri-bution,and pricing strategies to provide customers and other stakeholders with thegoods,services,ideas,values,and benefits they desire when and where they wantthem.It involves building long-term,mutually rewarding relationships when thesebenefit all parties concerned.Marketing also entails an understanding that organiza-tions have many connected stakeholder “partners,”includingemployees,suppliers,stockholders,distributors,and others.When an organization creates a high level of employee satis-faction,this leads to greater effort,which leads to higher-qualitygoods and services,whichlead to more repeat business,whichleads to higher growth and profits,which lead to higher stock-holder satisfaction,which leads to more investment,and so on.2The motto of Wegmans Food Markets,the Rochester-based grocerychain ranked by
Fortune
magazine as one of the best companies towork for in America,states,“Employees first,customers second.”The rationale is that if employees are happy,customers will be too.3One desired outcome of marketing is an
exchange
—people giv-ing up something to receive something they would rather have.
CHAPTER 1
An Overview of Marketing
3
Marketing is too important to be left only to the marketing department.
—David Packard 
1
C H A P T E R
AnOverview
Marketing
of 
Learning Outcomes
LO
1
Define the term marketing
LO
2
Describe four marketing managementphilosophies
LO
3
Discuss the differences between salesand market orientations
LO
4
Describe several reasons for studyingmarketing
LO
1
Marketing is only for really creative people.
Strongly DisagreeStrongly Agree
1 2 3 4 5 6 7
What doyouthink?
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marketing
the activity, set of institu-tions, and processes forcreating, communicating,delivering, and exchang-ing offerings that havevalue for customers,clients, partners, andsociety at large
exchange
people giving upsomething to receivesomething they wouldrather have
 
identified.In other situations,as when competition isweak or demand exceeds supply,a production-oriented firm can survive and even prosper.Moreoften,however,firms that succeed in competitive mar-kets have a clear understanding that they must firstdetermine what customers want and then produce it,rather than focusing on what company managementthinks should be produced.
Sales Orientation
A
sales orientation
is based on the ideas that peoplewill buy more goods and services if aggressive salestechniques are used and that high sales result inhigh profits.Not only are sales to the final buyeremphasized but intermediaries are also encouragedto push manufacturers’ products more aggressively.To sales-oriented firms,marketing means sellingthings and collecting money.The fundamental problem with a sales orienta-tion,as with a production orientation,is a lack of understanding of the needs and wants of the mar-ketplace.Sales-oriented companies often find that,despite the quality of their sales force,they cannotconvince people to buy goods or services that areneither wanted nor needed.
Some sales-oriented firms fail to understand whatis important to their customers.Many so-called dot-com businesses that came into existence in the late1990s are no longer around because they focused onthe technology rather than the customer.Online grocerStreamline.com installed a refrigerator in its clients’garages to make deliveries when they weren’t home.When something went wrong,Streamline instantlycredited customers’ accounts and customer servicereps were always available on the phone.As the com-pany expanded its customer base,however,the deliver-
Normally,we think of moneyas the medium of exchange.We “give up”money to “get”the goods and services wewant.Exchange does notrequire money,however.Twopeople may barter or tradesuch items as baseball cards oroil paintings.An exchange can take place only if thefollowing five conditions exist:Exchange will not necessarily take place even if allthese conditions exist.They are,however,necessaryfor exchange to be possible.For example,you mayplace an advertisement in your local newspaper stat-ing that your used automobile is for sale at a certainprice.Several people may call you to ask about the car,some may test-drive it,and one or more may evenmake you an offer.All five conditions are necessaryfor an exchange to exist.But unless you reach anagreement with a buyer and actually sell the car,anexchange will not take place.Notice that marketing canoccur even if an exchangedoes not occur.In the example just discussed,you would haveengaged in marketing even if no one bought your used car.
MarketingManagement Philosophies
Four competing philosophies strongly influencean organization’s marketing processes.
Thesephilosophies are commonly referred to as production,sales,market,and societal marketing orientations.
Production Orientation
A
production orientation
is a philosophy thatfocuses on the internal capabilities of the firmrather than on the desires and needs of the market-place.A production orientation means that man-agement assesses its resources and asks thesequestions: “What can we do best?”“What can ourengineers design?”“What iseasy to produce,given ourequipment?”In the case of aservice organization,man-agers ask,“What servicesare most convenient for thefirm to offer?”and “Wheredo our talents lie?”Somehave referred to this orien-tation as a
Field of Dreams
orientation,from thewell-known movie line,“If we build it,they willcome.”The furniture industryis infamous for its disregard of customersand for its slow cycle times.This has always been aproduction-oriented industry.There is nothing wrongwith assessing a firm’s capabil-ities; in fact,such assessmentsare major considerations instrategic marketing planning(see Chapter 2).A production orientation falls shortbecause it does not consider whether the goods andservices that the firm produces most efficiently alsomeet the needs of the marketplace.Sometimes what afirm can best produce is exactly what the marketwants.For example,the research and developmentdepartment of 3M’s commercial tape division devel-oped and patented the adhesive component of Post-ItNotes a year before a commercial application was
ies became inconsistent,telephone reps put customerson hold more often,andcustomers were frequentlyovercharged.Streamline thenrevamped its Web site andswitched to a new system thatchecked inventory in real time,slowing down the interfacetremendously and makingordering very cumbersome andtime-consuming.Streamline’sfancy technology (sales orien-tation) caused management to lose sight of howStreamline made its customers’ lives easier (marketorientation).5
Market Orientation
The
marketing concept
is a simple and intuitivelyappealing philosophy that articulates a market ori-entation.It states that the social and economic jus-tification for an organization’s existence is thesatisfaction of customer wants and needs whilemeeting organizational objectives.It is based on anunderstanding that a sale does not depend on anaggressive sales force,but rather on a customer’sdecision to purchase a product.What a businessthinks it produces is not of primary importance toits success.Instead,what customers think they arebuying—the perceived value—defines a business.The marketing concept includes the following:
• Focusing on customer wants and needs so that the organiza-tion can distinguish its product(s) from competitors’ offerings• Integrating all the organization’s activities, including production,to satisfy these wants
CHAPTER 1
An Overview of Marketing
54
PART 1
The World of Marketing
Conditions of Exchange
1.
There must be at least two parties.
2.
Each party has something that might be of value to the other party.
3.
Each party is capable of communication anddelivery.
4.
Each party is free to accept or reject theexchange offer.
5.
Each party believes it is appropriate or desir-able to deal with the other party.4
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LO
2
Marketing can occur even ifan exchange does not occur.
The Real Deal
Reed Hastings used the mar-keting concept when hefounded Netflix, the onlinemovie rental service. Netflixsubscribers chose from multi-ple subscription plans, buildlists of movies they want to see, andreceive DVDs in the mail. Plus,Netflix’s proprietary Cinematch software gives suggestions formovies customers might like based on over half a billion customer-supplied ratings. Less than a decade after being started, Netflix hassome impressive stats:
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{ }
productionorientation
a philosophy thatfocuses on the internalcapabilities of the firmrather than on thedesires and needsof the marketplace
sales orientation
the idea that people willbuy more goods and ser-vices if aggressive salestechniques are used andthat high sales result inhigh profits
marketing concept
the idea that the socialand economic justifica-tion for an organization’sexistence is the satisfac-tion of customer wantsand needs while meetingorganizational objectives
4 million+ subscribers$700 million in annual revenue60,000 titles34 distribution centers92% of movies delivered within one day ofbeing ordered50 customer service reps support the entiresubscriber base1,000,000 customer movie ratings sent toNetflix each day
   ©   A   P   P   H   O   T   O   /   P   A   U   L   S   A   K   U   M   A
   .aa  ,    a a.
 
assessing what existing or potential competitorsmight be intending to do tomorrow as well as whatthey are doing today.
Societal Marketing Orientation
One reason a market-oriented organization maychoose not to deliver the benefits sought by cus-tomers is that these benefits may not be good forindividuals or society.This philosophy,called a
societal marketing orientation
,states that an orga-nization exists not only to satisfy customer wantsand needs and to meet organizational objectives butalso to preserve or enhance individuals’ and society’slong-term best interests.Marketing products andcontainers that are less toxic than normal,are moredurable,contain reusable materials,or are made of recyclable materials is consistent with a societalmarketing orientation.For example,Duracell andEveready battery companies have reduced the levelsof mercury in their batteries and will eventually mar-ket mercury-free products.
Differences betweenSales and Market Orientations
The differences between sales and market ori-entations are substantial.
The two orientations canbe compared in terms of five characteristics: the orga-nization’s focus,the firm’s business,those to whomthe product is directed,the firm’s primary goal,andthe tools used to achieve those goals.
The Organization’s Focus
Personnel in sales-oriented firms tend to be “inwardlooking,focusing on selling what the organizationmakes rather than making what the market wants.Many of the historic sources of competitive advan-tage—technology,innovation,economies of scale—allowed companies to focus their efforts internallyand prosper.Today,many successful firms derive theircompetitive advantage from an external,market-oriented focus.A market orientation has helped com-panies such as Dell,Wegmans,and Southwest Airlinesoutperform their competitors.These companies putcustomers at the center of their business in ways mostcompanies do poorly or not at all.7As with Streamline,a sales orientation has led tothe demise of many dot-com firms,including theDigital Entertainment Network and Urban Box Office.As one technology industry analyst put it,“no onehas ever gone to a Web site because they heard therewas great Java running.”8
• Achieving long-term goals for theorganization by satisfying customerwants and needs legally and responsibly
Firms that adopt andimplement the marketingconcept are said to be marketoriented.Achieving a
marketorientation
involves obtain-ing information about cus-tomers,competitors,andmarkets; examining theinformation from a total busi-ness perspective; determin-ing how to deliver superiorcustomer value; and imple-menting actions to providevalue to customers.Forexample,Coach interviews atleast 10,000 customers each year to keep track of perceptions of the brand.It also tests products in alimited number of stores six months before theproduct actually comes out.This helps the companyassess the final design and forecast demand.Coachalso works to establish and maintain rewarding rela-tionships with its customers.You can bring in yourCoach bag any time and have it repaired free for thenatural life of the bag.The company fixes 100,000each year.6Understanding your competitive arena andcompetitors’ strengths andweaknesses is a criticalcomponent of a market ori-entation.This includes
Customer Value
Customer value
is the relationship between benefitsand the sacrifice necessary to obtain those benefits.Customer value is not simply a matter of high qual-ity.A high-quality product that is available only at ahigh price will not be perceived as a good value,norwill bare-bones service or low-quality goods sellingfor a low price.Instead,customers value goods andservices that are of the quality they expect and thatare sold at prices they are willing to pay.Value can beused to sell a Mercedes Benz as well as a $3 Tysonfrozen chicken dinner.The automobile industry illustrates the impor-tance of creating customer value.To penetrate thefiercely competitive luxury automobile market,Lexusadopted a customer-driven approach,with particularemphasis on service.Lexus stresses product qualitywith a standard of zero defects in manufacturing.Theservice quality goal is to treat each customer as onewould treat a guest in one’s home,to pursue the per-fect person-to-person relationship,and to strive toimprove continually.This pursuit has enabled Lexusto establish a clear quality image and capture a signif-icant share of the luxury car market.Marketers inter-ested in customer value:
Offer products that perform:
Thisis the bare minimum requirement.Consumers have lost patience withshoddy merchandise.
Earn trust:
Diane Hessan, CEO ofCommunispace in Watertown,Massachusetts, says that “selling is all aboutthe right to do business with someone. Putyourself in their shoes, and understand whatthe issues are. In today’s business environ-ment, the most critical element of any sale istrust. Ultimately, when someone says yes toyou, they are saying,‘I’m betting on whatthis person is telling me.’”9
 Avoid unrealistic pricing:
E-mar-keters are leveraging Internet technology to redefine how prices areset and negotiated. With lower costs, e-marketers can often offerlower prices than their brick-and-mortar counterparts. The enormouspopularity of auction sites such as eBay and Amazon.com and thecustomer-bid model used by Priceline and uBid illustrates that onlinecustomers are interested in bargain prices. Many are not willing topay a premium for the convenience of examining the merchandiseand taking it home with them.
Give the buyer facts:
Today’s sophisticated consumerwants informative advertising and knowledgeable salespeople.Web sites that don’t provide enough information are among thetop ten things that irk Internet shoppers most.
Offer organization-wide commitment in serviceand after-sales support:
People fly Southwest Airlinesbecause the airline offers superiorvalue. Although passengers do notget assigned seats or meals (justpeanuts or crackers) when theyuse the airline, its service is reli-able and friendly and costs lessthan most major airlines. AllSouthwest employees are involvedin the effort to satisfy customers.Pilots tend to the boarding gatewhen their help is needed, andticket agents help move luggage.
Customer Satisfaction
Customer satisfaction
is the customer’s evaluationof a good or service in terms of whether that good orservice has met the customer’s needs and expecta-tions.Failure to meet needs and expectations resultsin dissatisfaction with the good or service.10Keeping current customers satisfied is just as impor-tant as attracting new ones and a lot less expensive.One study showed that reducing customer attritionby just 5 to 10 percent could increase annual profitsby as much as 75 percent.11Firms that have a repu-tation for delivering high levels of customer satisfac-tion do things differently from their competitors.Top management is obsessedwith customer satisfaction,and employees throughout theorganization understand thelink between their job and sat-isfied customers.The culture of the organization is to focus ondelighting customers ratherthan on selling products.Nordstrom’s impeccable rep-utation for customer servicecomes not from its executives orits marketing team,but fromthe customers themselves.Theretail giant is willing to takerisks,do unusual and often expensive favors for shop-pers,and reportedly even accept returns on items noteven purchased there.But big risks often yield biggains.People tell their friends that a company is doingcrazy things for its customers,and the words spreads.Pretty soon this word of mouth,or viral marketing,lures new people to the store—even people who haveno idea what’s inside want to experience what it’s liketo shop there.12
Building Relationships
Attracting new customers to a business is only thebeginning.The best companies view new-customerattraction as the launching point for developing and
CHAPTER 1
An Overview of Marketing
76
PART 1
The World of Marketing
Marketers interestedin customer value:
Offer products that performEarn trustAvoid unrealistic pricingGive the buyer factsOffer organization-wide commitmentin service and after-sales support
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LO
3
market orientation
a philosophy thatassumes that a saledoes not depend on anaggressive sales forcebut rather on a cus-tomer’s decision to pur-chase product. It issynonymous with themarketing concept
societal marketingorientation
the idea that an organi-zation exists not only tosatisfy customer wantsand needs and to meetorganizational objec-tives but also to pre-serve or enhanceindividuals’ and soci-ety’s long-term bestinterests
customer value
the relationship betweenbenefits and the sacrificenecessary to obtain thosebenefits
customersatisfaction
customer’s evaluation ofa good or service interms of whether it hasmet their needs andexpectations
   C   O   U   R   T   E   S   Y   O   F   T   H   E   A   D   V   E   R   T   I   S   I   N   G   A   R   C   H   I   V   E   S
Keeping current customers satisfied is just as importantas attracting new onesand a lot less expensive.

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