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.

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

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

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

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

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

Customer value and customer satisfaction are key building blocks for developing and managing customer relationships. 1-8 . Satisfied customers buy again and tell others about their good experiences.Marketing. buyers will be disappointed. they may satisfy those who buy but fail to attract enough buyers.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. Marketers must be careful to set the right level of expectations. If they set expectations too low. 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. If they raise expectations too high.

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

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. These buyers share a particular need or want that can be satisfied through exchange relationships. ‡ 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 .10 .

and carries on sophisticated marketing research. poring over the latest Nielsen numbers. scanning market research reports.11 . 1 . They spend considerable sums on TV advertising. ‡ Formulated marketing: As small companies achieve success. employs dozens of salespeople. trying to fine-tune dealer relations and advertising messages. These companies lack the creativity and passion of the guerrilla marketers in the entrepreneurial stage. they inevitably move toward more formulated marketing.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. ‡ Intrepreneurial marketing: Many large companies get stuck in formulated marketing.

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

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

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

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

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

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 .

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

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

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

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

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

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

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

and auto sites on the Internet. new car and used car dealers. In purchasing a car.25 . service shops. market space is digital. classified auto ads in newspapers.' 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. insurance companies.Distinguish between a marketplace and market space. mechanics. The marketplace is physical. a buyer 1 . Many observers believe that an increased amount of purchasing will shift into marketspace. as when one goes shopping on the Internet. spare parts dealers. auto magazines. The automobile metamarket consists of automobile manufacturers. financing companies. as when one goes shopping in a store.

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

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

Lower benefits by less than the reduction in costs 1 .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 and reduce costs 4. Reduce costs 3. Raise benefits 2. Raise benefits by more than the raise in costs 5.28 .

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

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

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

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

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

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

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

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

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

38 . the customers.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. 1 . and society? Very often these interests conflict. but what philosophy should guide a company's marketing efforts? What relative weights should be given to the interests of the organization.

39 .Marketing Concepts The production concept The production concept is one of the oldest concepts in business. where consumers are more interested in obtaining the product than in its features. 1 . This orientation makes sense in developing countries. 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. ‡ Low costs. and ‡ Mass-distribution. Managers of production-oriented businesses concentrate on achieving ‡ High production efficiency.

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

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

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

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

not its initial price.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. 1 .46 .

Marketing Concepts Many consumers do not know what they want in a product. Nokia and Ericsson fought to shape consumer perceptions of cellular phones. The customer may appreciate that the salesperson met her 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 salesperson might suggest that tape would provide a better solution. 1 . Responding only to the stated need may shortchange the customer. Companies must help customers learn what they want. not a need. not her stated solution. This customer is stating a solution.47 .

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

Integrated marketing When all the company's departments work together to serve the customer's interests. 1 . Customer retention is thus more impor-tant than customer attraction. ‡ One estimate is that attracting a new customer can cost five times as much as pleasing an existing one. the result is integrated 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. it might cost 16 times as much to bring the new customer to the same level of profitability as the lost customer. not all employees are trained and motivated to work for the customer. Unfortunately.49 ." Also.

" "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 .Marketing Concepts ‡ The marketing vice president of a major European airline wants to increase the airline's traffic share. advertising. marketing must be embraced by the other departments. His strategy is to build up customer satisfaction through providing better food. product management. customer service. the maintenance department uses cleaning services that keep down cleaning costs.50 orientation. The catering department chooses food that keeps down food costs. . marketing researchmust work together. cleaner cabins. ‡ Second. ‡ First. yet he has no authority in these matters. they must also "think customer. ‡ Integrated marketing takes place on two levels. and lower fares. the various marketing functions-sales force. better-trained cabin crews.

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

In the case of private firms. ‡ 1 . A company makes money by satisfying customer needs better than its competitors. the major objective is long-run profitability. but rather to achieve profits as a consequence of creating superior customer value.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.52 . in the case of nonprofit and public organizations. Private firms should not aim for profits as such.

and customer service are yielding poor results. Management then decides it is time to undertake a serious marketing audit to improve its marketing. However. ‡ Slow growth: ‡ Changing buying patterns: ‡ Increasing competition: ‡ Increasing marketing expenditures: Companies may find that their expenditures for adver-tising. most companies do not embrace the marketing concept until driven to it by circumstances.53 . sales promotion. 1 . marketing research.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:.

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

and long-run societal welfare. 1 . and neglected social services. consumer interests. wants. The societal marketing concept holds that the organization's task is to determine the needs. resource shortages. explosive population growth.55 .The societal marketing concept Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration. 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. world hunger and poverty. 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.

‡ 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.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. ‡ 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.56 1 rational and emotional benefits. build sales. and increase press coverage. raise brand awareness. They believe that customers will increasingly look for signs of good corporate citizenship that go beyond supplying rational and emotional benefits. increase customer loyalty.

They can obtain exten-sive product information from the Internet and other sources. which permits them to shop more intelligently. 1 .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. which is resulting in rising promotion costs and shrinking profit margins. They perceive fewer real product differences and show less brand loyalty. ‡ Brand manufacturers are facing intense competition from domestic and foreign brands. They are showing greater price sensitivity in their search for value. 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.57 .

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

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

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

1 . TV channels. and demographics.specialinterest magazines. Companies can then apply data mining techniques to discover new seg-ments and trends hidden in the data.defined target markets. preferences.61 .How business and marketing are changing Company. and profitability. Eg. ‡ 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.) ‡ Target marketing: From selling to everyone to trying to be the best firm serving well. and Internet newsgroups. 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. 1 .62 .How business and marketing are changing Company. Every employee a marketer: From thinking that marketing is done only by marketing. sales. ‡ Channels as partners: From thinking of intermediaries as customers to treating them as partners in delivering value to final customers. responses and adjustments (cont.) ‡ 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. and customer support personnel to recognizing that every employee must be customer-focused.

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

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

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

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

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

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

CRM Key Concepts ‡ Attracting.69 . 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 .

70 . but in a manner that looks to the future. ± Measures a firm s performance. 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. 1 .

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 .71 .CRM Key Concepts ‡ Attracting.

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

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

‡ Direct sales to buyers are growing. ‡ Growing share of customer ± Cross-selling and upselling are helpful.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. 1 .74 .

75 .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 .

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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