Chapter 1 MARKETING AND ITS CORE CONCEPTS: 1. Needs, Wants, Demands, exchange, 2. relationship and network, 3. Competition. 4.

Marketing Tasks, 5. Marketing Concepts and 6. Tools, 7. Different philosophies of marketing management / Company Orientations Toward the Marketplace. 8. How Business and Marketing Are Changing.

What is Marketing?
‡ Marketing is managing profitable customer relationships
± Attracting new customers ± Retaining and ± Growing current customers

‡ Marketing is NOT synonymous with sales or advertising

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

Kotler s social definition:
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.

marketing has often been described as "the art of selling products. and Long-term customer equity 1-3 ‡ . ‡ Create customer value. they in turn capture value from consumers in the form of Sales. ‡ By creating value for consumers. In the final step. and ‡ Build strong customer relationships. For a managerial definition." The Marketing Process A simple 5-step model of the marketing process. ‡ Companies reap the rewards of creating superior customer value. ‡ Companies work to understand consumers. Profits.Marketing A social definition shows the role marketing plays in society. One marketer said that marketing's role is to "deliver a higher standard of living. In the 1st 4 steps.

Marketing The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. wants. and 5. As a first step. needs. 2. marketers need to understand customer needs and wants and the marketplace within which they operate. and demands. 4. markets 1-4 . value and satisfaction . 3. marketing offers (products.Marketing We will examine the steps of this simple model of marketing. We now examine five core customer and marketplace concepts: 1. and experiences]. exchanges and relationships. services.

and demands 2. Value and satisfaction 4. Markets 1-5 . wants. transactions and relationships 5. Needs. Marketing offers: including products.What is Marketing? Core Marketing Concepts 1. services and experiences 3. Exchange.

These needs were not created by marketers.Marketing Customer Needs. they are a basic part of the human makeup. wants. warmth. and Individual needs for knowledge and self-expression. wants become demands. clothing. and demands.When want is backed by buying power. and safety. Outstanding marketing companies go to great lengths to learn about and understand their customers' needs. Wants are shaped by one's society and are described in terms of objects that will satisfy needs. They are the form human needs take as they are shaped by culture and individual personality. Wants is willingness to buy.Human needs are states of felt deprivation. Wants. Social needs for belonging and affection. and Demands Needs . They include basic Physical needs for food. 1-6 . Demand .

information and Experiences Consumers' needs and wants are fulfilled through a marketing offer-some combination of products. These sellers suffer from "marketing myopia. 1-7 . Marketing offers are not limited to physical products. Services. services. They also include services." Smart marketers look beyond the attributes of the products and services they sell experience. or experiences offered to a market to satisfy a need or want. information. Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products.Marketing Marketing Offers-Products. activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything.

1-8 . they may satisfy those who buy but fail to attract enough buyers. If they set expectations too low. Marketers must be careful to set the right level of expectations.Setting expectation Consumers usually face a broad array of products and services that might satisfy a given need. Dissatisfied customers often switch to competitors and disparage the product to others. If they raise expectations too high. How do they choose among these many marketing offers? Customers form expectations about the value and satisfaction that various marketing offers will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences.Marketing. Customer value and customer satisfaction are key building blocks for developing and managing customer relationships. buyers will be disappointed.

‡ Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences involving a product.Marketing Exchange ‡ Marketing occurs when people decide to satisfy needs and wants through exchange relationships. ‡ The concepts of exchange and relationships lead to the concept of a market. service. Exchange is the act of obtaining a desired object from someone by offering something in return. Marketers want to build strong relationships by con-sistently delivering superior customer value. the goal is to retain customers and grow their business with the company. idea. or other object. 1-9 . Beyond simply attracting new customers and creating transactions.

Marketing Market ‡ A market is the set of actual and potential buyers of a product. ‡ Marketing means managing markets to bring about profitable customer relationships.10 . ‡ The new economy and need for Marketing Change in consumer attitude to ‡ Substantial increase in buyers power ‡ Information boom ‡ Competition Change in companies capabilities ‡ Information boom ‡ Economically sound status 1 . These buyers share a particular need or want that can be satisfied through exchange relationships.

Marketing Marketing tasks We can distinguish three stages through which marketing practice might pass: ‡ Entrepreneurial marketing: Most companies are started by individuals who live by their wits. and carries on sophisticated marketing research. employs dozens of salespeople. These companies lack the creativity and passion of the guerrilla marketers in the entrepreneurial stage. ‡ Intrepreneurial marketing: Many large companies get stuck in formulated marketing. trying to fine-tune dealer relations and advertising messages. 1 . ‡ Formulated marketing: As small companies achieve success.11 . They spend considerable sums on TV advertising. they inevitably move toward more formulated marketing. poring over the latest Nielsen numbers. scanning market research reports.

‡ The bottom line is that effective marketing can take many forms. There will be a constant tension between the formulated side of marketing and the creative side.Marketing Their brand and product managers need to get out of the office. start living with their customers. 1 .12 . but we will also describe how real creativity and passion operate in many companies. which will occupy most of our attention in this book. It is easier to learn the formulated side. and visualize new ways to add value to their customers' lives.

Marketing The scope of marketing ‡ Marketing is typically seen as the task of creating. and ‡ Composition of demand to meet the organization's objectives. Management.13 . Marketing managers seek to influence the ‡ Level. promoting. 1 . and delivering goods and services to consumers and businesses. marketers are responsible for demand management. ‡ Timing.

lower prices. 1 . Farmers may not be interested in a new farming method. The marketing task is to analyze why the market dislikes the product and whether a marketing program consisting of product redesign. and gallbladder operations. A major part of the market dislikes Latent demand the product and may even pay a price to avoid itvaccinations. The marketing task is to find ways to connect the benefits of the product with people's natural needs and interests. No demand Target consumers may be unaware of or uninterested in the product. for instance. vasectomies. Employers have a negative demand for ex-convicts and alcoholics as employees.14 . dental work. and more positive promotion can change beliefs and attitudes ‡ 2. and college students may not be interested in foreign-language courses.Marketing Types of demand ‡ Negative demand.

and more fuel-efficient cars. There is a strong latent demand for harmless cigarettes. . ‡ 5.Marketing Types of demand ‡ 3. daily.15 organization must maintain or improve its quality and continually measure consumer satisfaction. promotion. The 1 . ‡ 4. Irregular demand Many organizations face demand that varies on a seasonal. The marketing task. Much mass-transit equipment is idle during off-peak hours and insufficient during peak travel hours. or even hourly basis. Organizations face full demand when they are pleased with their volume of business. safer neighborhoods. and other incentives. called synchromarketing is to find ways to alter the pattern of demand through flexible pricing. Latent demand Consumers may share a strong need that cannot be satisfied by any existing product. Full demand. The marketing task is to maintain the current level of demand in the face of changing consumer preferences and increasing competition.

The marketing task. and large families. and reduced 1 . The marketing task is to get people who like something to give it up. X-rated movies. price hikes. hard drugs. ‡ Unwholesome demand.Marketing Types of demand ‡ Overfull demand Some organizations face a demand level that is higher than they can or want to handle. called demarketing requires finding ways to reduce demand temporarily or permanently. Selective demarketing consists of trying to reduce demand from those parts of the market that are less profitable.16 availability. Unwholesome products will attract organized efforts to discourage their consumption. handguns. General demarketing seeks to discourage overall demand and includes such steps as raising prices and reducing promotion and service. alcohol. using such tools as fear messages. ‡ . Unselling campaigns have been conducted against cigarettes.

17 .What is Marketing? Many Things Can Be Marketed! Marketing people are involved in marketing 10 types of entities: ‡ ‡ ‡ ‡ ‡ Goods Services Experiences Events Persons ‡ ‡ ‡ ‡ ‡ Places Properties Organizations Information Ideas 1 .

even individuals can market goods. hotels. and management consultants. a pirate ship. Services include the work of airlines. doctors. lawyers. a growing proportion of their activities is focused on the production of services. but thanks to the Internet.GOODS Physical goods constitute the bulk of most countries production and marketing effort. EXPERIENCES Walt Disney World's Magic Kingdom represents experiential marketing: customers visit a fairy kingdom. software programmers. Not only do companies market their goods. engi-neers. Many market offerings consist of a variable mix of goods and services. etc. such as accountants. -eBay SERVICES As economies advance. as well as professionals working within or for companies.18 . or a haunted house. 1 .

and whole nationsactively to attract tourists.19 . regions. company headquarters. and this requires marketing. and other professionals are also getting help from celebrity marketers. Artists. 1 . ‡PLACES Places-cities. and new residents. physicians. Properties are bought and sold. factories. sports events. states.EVENTS Marketers promote time-based events. ‡PERSONS Celebrity marketing is a major business. ‡PROPERTIES are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). and artistic performances. company anniversaries. such as the Olympics. major trade shows. musicians. high-profile lawyers and financiers. CEOs.

‡ IDEAS Every market offering includes a basic idea. Encyclopedias and most nonfiction books market informa-tion.‡ORGANIZATIONS Organizations actively work to build a strong. and communities. This is essentially what schools and universities produce and distribute at a price to parents. Magazines such as Road and Track and Byte supply information about the car and computer worlds.20 . respectively. ‡ INFORMATION Information can be produced and marketed as a product. students. favorable image in the minds of their target publics. 1 . Companies spend money on corporate identity ads.

how to enter each country (as an exporter. global. but a stronger role is played by sales force. and nonprofit. Advertising plays a role. They must decide which countries to enter. joint venture partner. price.21 1 . licenser. CONSUMER MARKETS Companies selling mass consumer goods and services This requires getting a clear sense of their target customers and what need(s) their product will meet. and communicating brand posi-tioning forcefully and creatively. GLOBAL MARKETS Companies selling goods and services in the global marketplace face additional decisions and challenges. and the company's reputation for reliability and quality.trained and well-informed professional buyers who are skilled in evaluating competi-tive offerings. business.The decisions marketers make Following are four different types of markets: consumer. BUSINESS MARKETS Companies selling business goods and services face well. contract.

how to adapt their product and service features to each country. or gov-ernment agencies need to price carefully because these organizations have limited pur-chasing power.The decisions marketers make manufacturer. NONPROFIT AND GOVERNMENTAL MARKETS Companies selling their goods to nonprofit organizations such as churches. universities. Much government purchasing calls for bids. 1 . in the absence of extenuating factors. with the lowest bid being favored. charitable organizations.22 . and how to adapt their communications to fit the cultural practices of each country. or solo manufacturer). how to price their products in different countries in a narrow enough band to avoid creating a gray market for their goods. Lower prices affect the features and quality that the seller can build into the offering.

Therefore. a "market" was a physical place where buyers and sellers gathered to buy and sell goods.Marketing concepts and tools (core marketing concepts) TARGET MARKETS AND SEGMENTATION A marketer can rarely satisfy everyone in a market. Traditionally. Economists now describe a market as a collection of buyers and sellers who transact over a particular product or product class (the housing market or grain market). The marketer then decides which segments present the greatest opportunity-which are its target markets. marketers start by dividing up the market. Market segments can be identified by examining demographic. 1 . For each cho-sen target market.23 . the firm develops a market offering. but marketers view the sellers as constituting the industry and the buyers as constituting the market. and behavioral differences among buyers. The offering is positioned in the minds of the target buyers as delivering some central benefit(s). psychographic.

They talk about need markets (the diet-seeking market). and donor markets Modern economies abound in markets. and geographic markets (the French market). labor markets.24 . demographic markets (the youth market). Five basic markets 1 . MARKETSPACE. such as voter markets. or they extend the concept to cover other markets. AND METAMARKET Business people often use the term market to cover various groupings of customers. product markets (the shoe market).Marketing concepts and tools (core marketing concepts) MARKETPLACE.

financing companies. a buyer 1 . auto magazines. In purchasing a car. mechanics. The automobile metamarket consists of automobile manufacturers. and auto sites on the Internet.' Metamarket is describe as a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries. new car and used car dealers. as when one goes shopping in a store. as when one goes shopping on the Internet. service shops. classified auto ads in newspapers. Many observers believe that an increased amount of purchasing will shift into marketspace.Distinguish between a marketplace and market space. The marketplace is physical. insurance companies. spare parts dealers.25 . market space is digital.

create the need for social status. People need food. however. a purchase. clothing. People also have strong needs for recreation. They do not. education. air. a vote.MARKETERS AND PROSPECTS A marketer is someone seeking a response (attention. influence wants. a donation} from another party. Marketers. NEEDS. we call them both marketers. Marketers might promote the idea that a Mercedes would satisfy a person's need for social status. Needs pre-exist marketers.26 . called the prospect. These needs become wants when they are directed to specific objects that might satisfy the need. If two parties are seeking to sell something to each other. 1 . water. and shelter to survive. along with other societal factors. AND DEMANDS Needs are the basic human requirements. and entertainment. WANTS.

OFFERING. fast food. Value increases with quality and service and decreases with price.PRODUCT. and price (QSP). a set of benefits they offer to customers to satisfy their needs. Value can be seen as primarily a combination of quality. children. VALUE AND SATISFACTION The offering will be successful if it delivers value and satisfaction to the target buyer. services. A brand is an offering from a known source. and experiences. A brand name such as McDonald's car-ries many associations in the minds of people: hamburgers. Which can be a combination of products. information.27 . service. AND BRAND Companies address needs by putting forth a value proposition. called the customer value triad. 1 . fun.

Value = Benefits = Costs Functional benefits + Emotional benefits___ Monetary costs+Time costs+Energy costs+Psychic costs The marketer can increase the value of the customer offering in several ways: 1. Raise benefits by more than the raise in costs 5. Lower benefits by less than the reduction in costs 1 . Raise benefits and reduce costs 4.28 . Reduce costs 3. Raise benefits 2.

29 .hunts. Beg. is the process of obtaining a desired product from someone by offering something in return. eg. Use force to get a product. or money in exchange for something he or she desires. 1 . a service. or gathers fruit. which is the core concept of marketing. Product can be obtain by Self-producing.EXCHANGE AND TRANSACTIONS Exchange is only one of four ways in which a person can obtain a product. one can offer a product. fishes. Exchange. as in a holdup or burglary.

Each party is free to accept or reject the exchange offer. Each party believes it is appropriate or desirable to deal with the other party. five conditions must be satisfied: 1. Each party has something that might be of value to the other party. Two parties are engaged in exchange if they are negotiatingtrying to arrive at mutually agreeable terms. 4. There are at least two parties.30 . When an agreement is reached. 3.EXCHANGE AND TRANSACTIONS For exchange potential to exist. 2. we say that a transaction takes place. Exchange is a value-creating process because it normally leaves both parties better off. . 1 . 5. Each party is capable of communication and delivery.

and 4. A legal system supports and enforces compliance on the part of the transactors. 2. 3. a time of agreement. 1 . RELATIONSHIPS AND NETWORKS Transaction marketing is part of a larger idea called relationship marketing. as when lawyer. A barter transaction involves trading goods or services for other goods or services. A transaction involves several dimensions: 1. Relationship marketing has the aim of building mutually satisfying long-term relations with key parties--customers. suppliers. At least two things of value. Agreed-upon conditions. distributors-in order to earn and retain their business.31 EXCHANGE AND TRANSACTIONS . a place of agreement.But transactions do not always require money as one of the traded values.

EXCHANGE AND TRANSACTIONS 1 . In the most successful cases. It cuts down on transaction costs and time. and others) with whom it has built mutually profitable business relationships. transactions move from being negotiated each time to being a matter of routine. distributors. and social ties among the parties. ad agencies. technical.The ultimate outcome of relationship marketing is the building of a unique company asset called a marketing network. university scientists.32 .Relationship marketing builds strong economic. employees. retail-ers. Marketing network . suppliers. A marketing network consists of the company and its supporting stakeholders (customers.

and insurance companies that facilitate transactions. telephone. Communication channels deliver and receive messages from target buyers. transportation companies. Service channels include warehouses. distribution. magazines. banks. and service channels for their offerings. sell. or deliver the physical prod-uct or service(s) to the buyer or user. radio. mail. the supply chain describes a longer channel stretching from raw materials to components to final products that 1 .33 are carried to final buyers. retailers.MARKETING CHANNELS To reach a target market. They include distributors. the marketer uses three kinds of marketing channels. EXCHANGE AND TRANSACTIONS Distribution channels to display. . and agents. Marketers clearly face a design problem in choosing the best mix of cdmmunication. Service channels to carry out transactions with potential buyers. and include newspapers. television. wholesalers. SUPPLY CHAIN Whereas marketing channels connect the marketer to the target buyers.

Volkswagen would see itself competing with companies that sell major con-sumer durables. and new homes 1 .34 . Form competition. foreign vacations.COMPETITION COMPETITION includes all the actual and potential rival offerings and substitutes that a buyer might consider There are four levels of competition. 4. Brand competetion 2. 1. A company sees its competitors as all companies making the same prod-uct or class of products 3. Industry competition. A company sees its competitors as all companies manufacturing products that supply the same service. Generic competition. A company sees its competitors as all companies that compete for the same consumer dollars.

transportation. and others who facilitate finding and selling to customers. advertising agencies. suppliers. dealers. and telecommunications companies. manufacturer repre-sentatives. The main actors are the company. and the target customers.MARKETING ENVIRONMENT MARKETING ENVIRONMENT Competition represents only one force in the environment in which the marketer operates. brokers. and promoting the offering. Included with distributors and dealers are agents. banking and insurance companies.35 . 1 . distributing. distributors. The marketing environment consists of the Task environment and Broad environment The task environment includes the immediate actors involved in producing. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies.

and ‡ social-cultural environment.36 . ‡ political-legal environment. ‡ economic environment. ‡ natural environment. ‡ 1 . ‡ technological environment.MARKETING ENVIRONMENT The broad environment consists of six components: ‡ demographic environment.

‡ ‡ McCarthy classified these tools into four broad groups that he called the four Ps of mar-keting: ‡ product.MARKETING PROGRAM MARKETING PROGRAM The marketer's task is to build a marketing program or plan to achieve the company's desired objectives. The marketing program consists of numerous decisions on the mix of marketing tools to use. and ‡ promotion 1 . ‡ place. The marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. ‡ price.37 .

1 .Marketing Concepts ‡ ‡ ‡ ‡ ‡ The production concept The product concept The selling concept The marketing concept The societal marketing concept ‡ We have defined marketing management as the conscious effort to achieve desired exchange outcomes with target markets. the customers. and society? Very often these interests conflict.38 . but what philosophy should guide a company's marketing efforts? What relative weights should be given to the interests of the organization.

39 . This orientation makes sense in developing countries. Managers of production-oriented businesses concentrate on achieving ‡ High production efficiency. 1 . ‡ Low costs. where consumers are more interested in obtaining the product than in its features. and ‡ Mass-distribution.Marketing Concepts The production concept The production concept is one of the oldest concepts in business. The production concept holds that consumers will prefer products that are widely available and inexpensive. ‡ They assume that consumers are primarily interested in product availability and low prices.

Marketing Concepts
The product concept
Other businesses are guided by the product concept, which holds that consumers will favor those products that offer the ‡ Most quality, ‡ Performance, or ‡ Innovative features. Managers in these organizations focus on making superior products and improving them over time. They assume that buyers admire well-made products and can evaluate quality and performance. However, these managers are sometimes caught up in a love affair with their products. Product-oriented companies often trust that their engineers can design exceptional products. They get little or no customer input, and very often they will not even examine competitors' products 1 - 40

Marketing Concepts
The product concept
The product concept can lead to "marketing myopia." Railroad management thought that travelers wanted trains and overlooked the growing competition for transportation from airlines, buses, trucks, and automobiles. Coca-Cola, focused on its soft-drink business, missed seeing the market for coffee bars and fresh-fruit juice bars that eventually impinged on its soft-drink business. McDonald's is in danger of overfocusing on its hamburger business while many diners are turning to sandwiches, pizza, tacos, and other fast foods.

1 - 41

Marketing Concepts The selling concept
The selling concept is another common business orientation. The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization's products. The organization must, therefore, undertake an aggres-sive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance. The company has to effectively sell and promotion.The selling concept is practiced most aggressively with unsought goods, goods that buyers normally do not think of buying, such as insurance, encyclopedias, and funeral plots. These industries have perfected various sales techniques to locate propspects and hard sell them on their products' benefits. Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants. However, marketing based on hard selling 1 - 42 carries high risks

and calls for heavy selling and promoting to produce profitable sales. The marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating. 1 . The job is not to find the right customers for your product. but the right products for your customers. It starts with the factory.43 . "sense-and-respond " philosophy. The selling concept takes an inside-out perspective. delivering. and communicating superior customer value to its chosen target markets. we shift to a customer -centered. "make-and-sell" philosophy.Marketing Concepts The marketing concept Instead of a product-centered. focuses on existing products.

Marketing Concepts The marketing concept The marketing concept rests on four pillars: ‡ Target market. ‡ Integrated marketing.44 . ‡ Customer needs. and ‡ Profitability. 1 . Target market. ‡ Companies do best when they choose their target market(s) carefully and prepare tailored marketing programs.

Marketing Concepts Customer needs company can define its target market but fail to correctly understand the customers' needs. Some customers have needs of which they are not fully conscious. a "powerful" lawnmover. a "fast" lathe. 1 . or they use words that require some interpretation. The marketer must probe further. an "attractive" bathing suit. or they cannot articulate these needs. or a "restful" hotel? Consider the customer who says he wants an inexpensive car.45 . What does it mean when the customer asks for an "inexpensive" car. Consider the following example: Understanding customer needs and wants is not always simple.

not its initial price. 1 .Marketing Concepts We can distinguish among five types of needs: Stated needs (the customer wants an inexpensive car) Real needs (the customer wants a car whose operating cost. is low) Unstated needs (the customer expects good service from the dealer) Delight needs (the customer would like the dealer to include an onboard navigation system) Secret needs (the customer wants to be seen by friends as a savvy consumer) Even the idea of meeting or responding to people's needs is too limited a view of a company's role in the marketplace.46 .

not her stated solution. not a need. Consumers did not know much about cellular phones when they were first introduced. Consider a woman who enters a hardware store and asks for a sealant to seal glass window panes. The customer may appreciate that the salesperson met her need. Companies must help customers learn what they want. Responding only to the stated need may shortchange the customer.Marketing Concepts Many consumers do not know what they want in a product. The salesperson might suggest that tape would provide a better solution.47 . This customer is stating a solution. Nokia and Ericsson fought to shape consumer perceptions of cellular phones. 1 .

‡ Responsive marketing marketer finds a stated need and fills it.48 . ‡ Anticipative marketing marketer looks ahead into what needs customers may have in the near future. ‡ 1 . Anticipative marketing. ‡ Creative marketing marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond. and Creative marketing.Marketing Concepts A distinction needs to be drawn between Responsive marketing.

Marketing Concepts ‡ Why is it supremely important to satisfy target customers? Because a company's sales each period come from two groups: ‡ New customers and ‡ Repeat customers. 1 . the result is integrated marketing. not all employees are trained and motivated to work for the customer." Also.49 . Integrated marketing When all the company's departments work together to serve the customer's interests. it might cost 16 times as much to bring the new customer to the same level of profitability as the lost customer. ‡ One estimate is that attracting a new customer can cost five times as much as pleasing an existing one. Unfortunately. Customer retention is thus more impor-tant than customer attraction.

marketing researchmust work together. cleaner cabins. customer service. they must also "think customer." "Marketing is far too important to be left only to the marketing department!" Marketing is not a depart-ment so much as a company 1 . and lower fares. the various marketing functions-sales force.50 orientation. ‡ First. ‡ Integrated marketing takes place on two levels. product management. ‡ Second. The catering department chooses food that keeps down food costs.Marketing Concepts ‡ The marketing vice president of a major European airline wants to increase the airline's traffic share. yet he has no authority in these matters. . His strategy is to build up customer satisfaction through providing better food. the maintenance department uses cleaning services that keep down cleaning costs. marketing must be embraced by the other departments. better-trained cabin crews. advertising.

] ‡ Master marketing companies invert the chart. internal marketing must precede external marketing. under them are the middle managers. and at the base is top management. In fact. next in importance are the front-line people who meet. ‡ External marketing is marketing directed at people outside the company. serve. training. whose job is to support the front-line people so they can serve the customers well. and satisfy the customers. . At the top are the customers. It makes no sense to promise excellent service before the company's staff is ready to provide it.Marketing Concepts To foster teamwork among all departments. the company carries out internal mar-keting as well as external marketing. ‡ Internal marketing is the task of hiring.51 . and motivating able employees who want to serve customers well. whose job is to hire and support good middle1 man.

A company makes money by satisfying customer needs better than its competitors. in the case of nonprofit and public organizations. ‡ 1 .52 . Private firms should not aim for profits as such.Marketing Concepts Profitability The ultimate purpose of the marketing concept is to help organization achieve their objectives. it is surviving and attracting enough funds to perform useful work. In the case of private firms. the major objective is long-run profitability. but rather to achieve profits as a consequence of creating superior customer value.

sales promotion. Management then decides it is time to undertake a serious marketing audit to improve its marketing. 1 . However.Marketing Concepts Several scholars have found that companies who embrace the marketing concept achieve superior performance. Various developments problem forces them to take the marketing concept to heart: ‡ Sales decline:. most companies do not embrace the marketing concept until driven to it by circumstances.53 . and customer service are yielding poor results. ‡ Slow growth: ‡ Changing buying patterns: ‡ Increasing competition: ‡ Increasing marketing expenditures: Companies may find that their expenditures for adver-tising. marketing research.

Customer rather than marketing at the center of the company.54 customer. and ‡ Fast forgetting. ‡ Slow learning. the marketing function is seen as one of several equally important functions in a check-and-balance relationship. A few enthusiasts go further and say marketing is the major function of the enterprise. They argue for a customer orientation in which all 1 functions work together to respond to. and satisfy the. and R&D) believe a stronger marketing function threatens their power in the organization.Marketing Concepts In the course of converting to a marketing orientation. a company faces three hurdles: ‡ Organized resistance. Some company departments (often manufacturing. finance. for without customers there would be no company. serve. ‡ Initially. .

explosive population growth. The societal marketing concept holds that the organization's task is to determine the needs. resource shortages. 1 .The societal marketing concept Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration. world hunger and poverty.55 . and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer's and the society's well-being. wants. Are companies that do an excellent job of satisfying consumer wants necessarily acting in the best long-run interests of consumers and society? The marketing concept sidesteps the potential conflicts among consumer wants. and neglected social services. and long-run societal welfare. consumer interests.

‡ Companies see cause-related marketing as an opportunity to enhance their corporate reputation. They believe that customers will increasingly look for signs of good corporate citizenship that go beyond supplying. They believe that customers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits. ‡ The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices ‡ Companies see cause-related marketing as an opportunity to enhance their corporate reputation. and increase press coverage.56 1 rational and emotional benefits. increase customer loyalty. raise brand awareness. build sales. .The societal marketing ‡ The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. raise brand awareness. build sales. increase customer loyalty. and increase press coverage.

How business and marketing are changing ‡ These major forces have created new behaviors and challenges: ‡ Customers increasingly expect higher quality and service and some customization. They can obtain exten-sive product information from the Internet and other sources.57 . They perceive fewer real product differences and show less brand loyalty. 1 . They are being further buffeted by powerful retailers who command limited shelf space and are putting out their own store brands in competition with national brands. which is resulting in rising promotion costs and shrinking profit margins. They are showing greater price sensitivity in their search for value. ‡ Brand manufacturers are facing intense competition from domestic and foreign brands. which permits them to shop more intelligently.

home shopping TV.58 . responses and adjustments ‡ Companies are doing a lot of soul-searching. ‡ Company. they are experiencing shrinking margins. entrepreneurial retailers are building enter-tainment into stores with coffee bars. In response. and e-commerce on the Intemet. demonstrations. direct-mail firms. and many highly respected companies are changing in a number of ways. As a result. Small retailers are succumbing to the growing power of giant retailers and "category killers. and TV direct-to -customer ads. magazine.How business and marketing are changing ‡ Store-based retailers are suffering. and performances. They are marketing an "experience" rather than a product assortment. newspaper. lectures. Here are some current trends: 1 ." Store-based retailers are facing growing competition from catalog houses.

1 .) ‡ Benchmarking: From relying on self-improvement to studying "world-class performers" and adopting "best practices. ‡ Global and local: From being local to being both global and local." ‡ Alliances: From trying to win alone to forming networks of partner firms." ‡ Decentralized: From being managed from the top to encouraging more initiative from bottom level.59 .How business and marketing are changing ‡ Company. responses and adjustments (cont. called "glocal. ‡ Market-centered: From organizing by products to organizing by market segment. ‡ Partner-suppliers: From using many suppliers to using fewer but more reliable suppliers who work closely in a "partnership" relationship with the company.

products. ‡ Customer share: From a focus on gaining market share to a focus on building customer share. concepts.) Marketers also are rethinking their philosophies. Companies focus on their most profitable customers.60 . Here are the major marketing themes in the new economy: ‡ Customer relationship marketing: From focusing on transactions to building long-term. and channels. 1 . profitable customer relationships. ‡ Customer lifetime value: From making a profit on each sale to making profits by managing life-time sales. responses and adjustments (cont.How business and marketing are changing Company. A bank aims to increase its share of the customer's wallet. and tools.

and demographics. 1 .) ‡ Target marketing: From selling to everyone to trying to be the best firm serving well.How business and marketing are changing Company. preferences. Eg.defined target markets. responses and adjustments (cont. ‡ Customization: From selling the same offer in the same way to everyone in the target mar-ket to individualizing and customizing messages and offerings. ‡ Customer database: From collecting sales data to building a rich data warehouse of infor-mation about individual customers' purchases.61 . Companies can then apply data mining techniques to discover new seg-ments and trends hidden in the data. and profitability. and Internet newsgroups. TV channels.specialinterest magazines.

responses and adjustments (cont. ‡ Model-based decision making: From basing decisions on intuition to basing decisions on models and facts on how the marketplace works.How business and marketing are changing Company.) ‡ Integrated marketing communications: From heavy reliance on one communication tool such as advertising or sales force to blending several tools to deliver a consistent brand image to customers at every brand contact. Every employee a marketer: From thinking that marketing is done only by marketing. sales. 1 .62 . and customer support personnel to recognizing that every employee must be customer-focused. ‡ Channels as partners: From thinking of intermediaries as customers to treating them as partners in delivering value to final customers.

How business and marketing are changing ‡ Company. ‡ Outsourcing: From making everything inside the company to buying more goods and services from outside if they are cheaper and better. ‡ E-commerce: From attracting customers to stores and having salespeople call on offices to making virtually all products available on the Internet. Business-tobusiness purchasing is growing fast on the Internet.) ‡ Here are some current trends: ‡ Reengineering: From focusing on functional departments to reorganizing by key processes. and click to order and pay.63 . responses and adjustments (cont. Consumers can access pictures of products. 1 . each managed by a multidiscipline team. shop among on-line vendors for the best prices and terms. read the specs.

64 . delivering and communicating superior customer value is key. ± Creating.Marketing Management ‡ Marketing management is the art and science of choosing target markets and building profitable relationships with them. 1 .

1 .Marketing Management ‡ Customer Management: ± Marketers select customers that can be served well and profitably. ‡ Demand Management: ± Marketers must deal with different demand states ranging from no demand to too much demand.65 .

66 .Marketing Management Marketing Management Management Orientations ‡ Production concept ‡ Product concept ‡ Selling concept ‡ Marketing concept ‡ Societal marketing concept 1 .

67 . . . is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. 1 .CRM ‡ CRM Customer relationship management .

CRM ‡ It costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied.68 . 1 . ‡ Marketers must be concerned with the lifetime value of the customer.

69 .CRM Key Concepts ‡ Attracting. retaining and growing customers ‡ Building customer relationships and customer equity ‡ Customer value/satisfaction ± Perceptions are key ± Meeting/exceeding expectations creates satisfaction ‡ Loyalty and retention ± Benefits of loyalty ± Loyalty increases as satisfaction levels increase ± Delighting consumers should be the goal ‡ Growing share of customer ± Cross-selling 1 .

but in a manner that looks to the future. retaining and growing customers ‡ Building customer relationships and customer equity ‡ Customer equity ± The total combined customer lifetime values of all customers.CRM Key Concepts ‡ Attracting.70 . 1 . ± Measures a firm s performance.

CRM Key Concepts ‡ Attracting.71 . retaining and growing customers ‡ Building customer relationships and customer equity ‡ Customer relationship levels and tools ± Target market typically dictates type of relationship ‡ Basic relationships ‡ Full relationships ± Customer loyalty and retention programs ‡ Adding financial benefits ‡ Adding social benefits ‡ Adding structural ties 1 .

Marketing Challenges ‡ Technological advances. rapid globalization. ‡ Major marketing developments can be grouped under the theme of Connecting. 1 .72 . and continuing social and economic shifts are causing marketplace changes.

telecommunications. video-conferencing.73 .Marketing Challenges Connecting ‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world ‡ Advances in computers. messages and analysis of needs. etc. ‡ The Internet ± Facilitates anytime. anywhere connections ± Facilitates CRM ± Creates marketspaces 1 . ± Databases allow for customization of products. are major forces.

‡ Direct sales to buyers are growing.Marketing Challenges Connecting ‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world ‡ Selective relationship management is key. ± Customer profitability analysis separates winners from losers.74 . ‡ Growing share of customer ± Cross-selling and upselling are helpful. 1 .

Marketing Challenges Connecting ‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world ‡ Partner relationship management involves: ± Connecting inside the company ± Connecting with outside partners ‡ Supply chain management ‡ Strategic alliances 1 .75 .

Marketing Challenges Connecting ‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world ‡ Globalization ± Competition ± New opportunities ‡ Greater concern for environmental and social responsibility ‡ Increased marketing by nonprofit and publicsector entities ± Social marketing campaigns 1 .76 .

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