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1 - Marketing and Its Core Concepts

1 - Marketing and Its Core Concepts

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Chapter 1 1. MARKETING AND ITS CORE CONCEPTS: Needs, Wants, Demands, exchange, relationship and network, Competition 2. 3. 4. 5. 6.

Marketing Tasks, Marketing Concepts and Tools, Different philosophies of marketing management / Company Orientations Toward the Marketplace. 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
1-1

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.
1-2

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

and experiences]. exchanges and relationships. needs. and 5. 4. marketers need to understand customer needs and wants and the marketplace within which they operate. We now examine five core customer and marketplace concepts: 1. marketing offers (products. As a first step. markets 1-4 . 3. and demands. value and satisfaction . services.Marketing We will examine the steps of this simple model of marketing. 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. 2.

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

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

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

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

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

‡ Marketing means managing markets to bring about profitable customer relationships.Marketing Market ‡ A market is the set of actual and potential buyers of a product. 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 .

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

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

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

vasectomies. Farmers may not be interested in a new farming method. lower prices.Marketing Types of demand ‡ Negative demand. No demand Target consumers may be unaware of or uninterested in the product. The marketing task is to analyze why the market dislikes the product and whether a marketing program consisting of product redesign. The marketing task is to find ways to connect the benefits of the product with people's natural needs and interests. 1 . and college students may not be interested in foreign-language courses. Employers have a negative demand for ex-convicts and alcoholics as employees. for instance. and gallbladder operations. dental work. A major part of the market dislikes Latent demand the product and may even pay a price to avoid it-vaccinations. and more positive promotion can change beliefs and attitudes ‡ 2.14 .

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

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

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 .17 .

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

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

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

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

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

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

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

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

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

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

28 . Lower benefits by less than the reduction in costs 1 . Raise benefits by more than the raise in costs 5. Raise benefits 2.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. Reduce costs 3. Raise benefits and reduce costs 4.

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

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

Relationship marketing has the aim of building mutually satisfying long-term relations with key parties--customers. 3. A legal system supports and enforces compliance on the part of the transactors. RELATIONSHIPS AND NETWORKS Transaction marketing is part of a larger idea called relationship marketing. 2. A transaction involves several dimensions: 1.31 . suppliers. a time of agreement. a place of agreement.But transactions do not always require money as one of the traded values. A barter transaction involves trading goods or services for other goods or services. as when lawyer. Agreed-upon conditions. distributors-in order to earn and retain their business. EXCHANGE AND TRANSACTIONS 1 . At least two things of value. and 4.

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

the marketer uses three kinds of marketing channels. wholesalers. ‡ ‡McCarthy classified these tools into four broad groups that he called the four Ps of mar-keting: ‡product. focused on its soft-drink business. telephone.MARKETING CHANNELS To reach a target market. and ‡Mass-distribution. ‡Low costs. transportation. missed seeing the market for coffee bars and fresh-fruit juice bars that eventually impinged on its soft-drink business. Distribution channels to display. ‡The broad environment consists of six components: ‡demographic environment. advertising agen-cies. A company sees its competitors as all companies manufacturing products that supply the same service. The marketing mix is the set of mar-keting tools the firm uses to pursue its marketing objectives in the target market. retailers. manufacturer repre-sentatives. ‡Prformance. pizza. and service channels for their offerings. ‡Product-oriented companies often trust that their engineers can design excep-tional products. and insurance companies that facilitate transactions. The production con-cept holds that consumers will prefer products that are widely available and inexpen-sive. However. ‡technological environment. trucks. these managers are sometimes caught up in a love affair with their products. and the target customers. EXCHANGE AND TRANSACTIONS ‡COMPETITION includes all the actual and potential rival offerings and substitutes that a buyer might consider ‡There are four levels of competition. The marketing program consists of numer-ous decisions on the mix of marketing tools to use. transportation companies. radio. Communication channels deliver and receive messages from target buyers. and promoting the offering. ‡economic environment. ‡The product concept can lead to "marketing myopia. They assume that buyers admire well-made products and can evaluate quality and performance. dis-tributing. brokers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies. tacos. buses. ‡price. ‡The production concept ‡The production concept is one of the oldest concepts in business. ‡ ‡MARKETING PROGRAM The marketer's task is to build a marketing program or plan to achieve the company's desired objectives. foreign vacations. dis-tributors. A company sees its competitors as all companies that compete for the same consumer dollars. mail. or deliver the physical prod-uct or service(s) to the buyer or user. Service channels to carry out transactions with potential buyers. suppliers. Brand competetion ‡Industry competition. sell. and other fast foods. Volkswagen would see itself competing with companies that sell major con-sumer durables. and new homes ‡ ‡MARKETING ENVIRONMENT Competition represents only one force in the environ-ment in which the marketer operates. Included with distributors and dealers are agents." Railroad management thought that travelers wanted trains and overlooked the growing competition for transportation from airlines. and automobiles. ‡political-legal environment. Coca-Cola. but what philosophy should guide a com-pany's marketing efforts? What relative weights should be given to the interests of the organization. They get little or no customer input. ‡The marketing environment consists of the ‡Task environment and ‡Broad environment ‡The task environment includes the immediate actors involved in producing. or ‡Innovative features. and agents. magazines. McDonald's is in danger of overfocusing on its hamburger business while many diners are turning to sandwiches. ‡ place. and include newspapers. the customers. which holds that consumers will favor those products that offer the ‡Most quality. This orientation makes sense in developing countries. and ‡social-cultural environment. distribution. Marketers clearly face a design problem in choosing the best mix of cdmmunication. ‡The product concept ‡Other businesses are guided by the product concept. . banking and insurance companies. ‡natural environment. and ‡promotion ‡Diagram ‡ ‡ ‡ ‡ ‡ ‡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 main actors are the company. and society? Very often these interests conflict. television. where consumers are more interested in obtaining the product than in its features. ‡1.33 . They include distributors. the supply chain describes a longer channel stretching from raw materials to components to final products that are carried to final buyers. and very often they will not even examine competitors' products. ‡Generic competition. Service channels include warehouses. dealers. ‡They assume that consumers are primarily interested in product availability and low prices. 1 . A company sees its competitors as all companies making the same prod-uct or class of products ‡Form competition. and telecommunications com-panies. Managers of production-oriented businesses concentrate on achieving ‡High pro-duction efficiency. banks. and others who facilitate finding and selling to customers. SUPPLY CHAIN Whereas marketing channels connect the marketer to the target buyers. ‡ ‡Managers in these organizations focus on making superior products and improving them over time.

4. Industry competition.COMPETITION COMPETITION includes all the actual and potential rival offerings and substitutes that a buyer might consider There are four levels of competition. A company sees its competitors as all companies making the same prod-uct or class of products 3. Volkswagen would see itself competing with companies that sell major con-sumer durables. A company sees its competitors as all companies that compete for the same consumer dollars. Form competition. Brand competetion 2. Generic competition. and new homes 1 . 1.34 . A company sees its competitors as all companies manufacturing products that supply the same service. foreign vacations.

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

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

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 mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market.37 . ‡ ‡ McCarthy classified these tools into four broad groups that he called the four Ps of mar-keting: ‡ product. ‡ price. The marketing program consists of numerous decisions on the mix of marketing tools to use. and ‡ promotion 1 . ‡ place.

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

1 . the customers.39 . but what philosophy should guide a company's marketing efforts? What relative weights should be given to the interests of the organization.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. and society? Very often these interests conflict.

This orientation makes sense in developing countries. ‡ Low costs. ‡ They assume that consumers are primarily interested in product availability and low prices.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. Managers of production-oriented businesses concentrate on achieving ‡ High production efficiency. 1 . The production concept holds that consumers will prefer products that are widely available and inexpensive. and ‡ Mass-distribution.40 .

and very often they will not even examine competitors' products 1 . ‡ Performance. or ‡ Innovative features. However.41 . Product-oriented companies often trust that their engineers can design exceptional products.Marketing Concepts The product concept Other businesses are guided by the product concept. Managers in these organizations focus on making superior products and improving them over time. these managers are sometimes caught up in a love affair with their products. They get little or no customer input. which holds that consumers will favor those products that offer the ‡ Most quality. They assume that buyers admire well-made products and can evaluate quality and performance.

Marketing Concepts The product concept The product concept can lead to "marketing myopia. McDonald's is in danger of overfocusing on its hamburger business while many diners are turning to sandwiches. and automobiles. tacos. buses. 1 . pizza.42 . and other fast foods. missed seeing the market for coffee bars and fresh-fruit juice bars that eventually impinged on its soft-drink business." Railroad management thought that travelers wanted trains and overlooked the growing competition for transportation from airlines. trucks. focused on its soft-drink business. Coca-Cola.

if left alone.The selling concept is practiced most aggressively with unsought goods. and funeral plots. These industries have perfected various sales techniques to locate prospects and hard sell them on their products' benefits.43 carries high risks . goods that buyers normally do not think of buying. However. marketing based on hard selling 1 . The organization must. Most firms practice the selling concept when they have overcapacity. will ordinarily not buy enough of the organization's products.Marketing Concepts The selling concept The selling concept is another common business orientation. The selling concept holds that consumers and businesses. The company has to effectively sell and promotion. such as insurance. This concept assumes that consumers typically show buying inertia or resistance. undertake an aggres-sive selling and promotion effort. Their aim is to sell what they make rather than make what the market wants. therefore. encyclopedias.

The job is not to find the right customers for your product. It starts with the factory.44 . "sense-and-respond " philosophy. and communicating superior customer value to its chosen target markets. but the right products for your customers. 1 . we shift to a customer -centered. "make-and-sell" philosophy. The marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating. focuses on existing products. and calls for heavy selling and promoting to produce profitable sales.Marketing Concepts The marketing concept Instead of a product-centered. delivering. The selling concept takes an inside-out perspective.

and ‡ Profitability. ‡ Companies do best when they choose their target market(s) carefully and prepare tailored marketing programs. 1 . Target market.45 . ‡ Customer needs.Marketing Concepts The marketing concept The marketing concept rests on four pillars: ‡ Target market. ‡ Integrated marketing.

1 . a "fast" lathe.46 . or a "restful" hotel? Consider the customer who says he wants an inexpensive car. The marketer must probe further.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. or they cannot articulate these needs. a "powerful" lawnmover. an "attractive" bathing suit. What does it mean when the customer asks for an "inexpensive" car. Some customers have needs of which they are not fully conscious. or they use words that require some interpretation.

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. not its initial price. 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 .47 .

not a need. The salesperson might suggest that tape would provide a better solution. The customer may appreciate that the salesperson met her need.48 . Companies must help customers learn what they want. 1 . not her stated solution. Consider a woman who enters a hardware store and asks for a sealant to seal glass window panes. Consumers did not know much about cellular phones when they were first introduced. Responding only to the stated need may shortchange the customer. This customer is stating a solution.Marketing Concepts Many consumers do not know what they want in a product. Nokia and Ericsson fought to shape consumer perceptions of cellular phones.

‡ Responsive marketing marketer finds a stated need and fills it. ‡ 1 . ‡ Anticipative marketing marketer looks ahead into what needs customers may have in the near future. and Creative marketing. ‡ Creative marketing marketer discovers and produces solutions customers did not ask for but to which they enthusiastically respond.49 .Marketing Concepts A distinction needs to be drawn between Responsive marketing. Anticipative marketing.

" Also. Unfortunately.Marketing Concepts ‡ Why is it supremely important to satisfy target customers? Because a company's sales 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. ‡ One estimate is that attracting a new customer can cost five times as much as pleasing an existing one. Integrated marketing When all the company's departments work together to serve the customer's interests. the result is integrated marketing. Customer retention is thus more impor-tant than customer attraction. not all employees are trained and motivated to work for the customer.50 . 1 .

better-trained cabin crews. ‡ Integrated marketing takes place on two levels. product management. marketing researchmust work together. and lower fares. The catering department chooses food that keeps down food costs. the maintenance department uses cleaning services that keep down cleaning costs. advertising.51 orientation. ‡ First. 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 . His strategy is to build up customer satisfaction through providing better food. the various marketing functions-sales force. marketing must be embraced by the other departments. yet he has no authority in these matters. cleaner cabins.Marketing Concepts ‡ The marketing vice president of a major European airline wants to increase the airline's traffic share. customer service. . ‡ Second.

and motivating able employees who want to serve customers well.Marketing Concepts To foster teamwork among all departments. and at the base is top management. next in importance are the front-line people who meet. whose job is to support the front-line people so they can serve the customers well. At the top are the customers. serve. the company carries out internal mar-keting as well as external marketing.52 .] ‡ Master marketing companies invert the chart. training. and satisfy the customers. whose job is to hire and support good middle1 man. . ‡ Internal marketing is the task of hiring. In fact. under them are the middle managers. It makes no sense to promise excellent service before the company's staff is ready to provide it. internal marketing must precede external marketing. ‡ External marketing is marketing directed at people outside the company.

the major objective is long-run profitability. In the case of private firms. it is surviving and attracting enough funds to perform useful work. 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. A company makes money by satisfying customer needs better than its competitors. ‡ 1 . in the case of nonprofit and public organizations.53 . Private firms should not aim for profits as such.

and customer service are yielding poor results. most companies do not embrace the marketing concept until driven to it by circumstances.54 .Marketing Concepts Several scholars have found that companies who embrace the marketing concept achieve superior performance. sales promotion. However. marketing research. Management then decides it is time to undertake a serious marketing audit to improve its marketing. ‡ Slow growth: ‡ Changing buying patterns: ‡ Increasing competition: ‡ Increasing marketing expenditures: Companies may find that their expenditures for adver-tising. Various developments problem forces them to take the marketing concept to heart: ‡ Sales decline:. 1 .

. ‡ Initially. ‡ Slow learning. a company faces three hurdles: ‡ Organized resistance. They argue for a customer orientation in which all 1 functions work together to respond to. finance. 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.Marketing Concepts In the course of converting to a marketing orientation. Some company departments (often manufacturing. and ‡ Fast forgetting. Customer rather than marketing at the center of the company. and satisfy the. serve.55 customer. and R&D) believe a stronger marketing function threatens their power in the organization. for without customers there would be no company.

resource shortages. and neglected social services. 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. consumer interests. explosive population growth. 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. world hunger and poverty. The societal marketing concept holds that the organization's task is to determine the needs.The societal marketing concept Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration. and long-run societal welfare. wants.56 . 1 .

and increase press coverage.57 1 rational and emotional benefits. and increase press coverage. They believe that customers will increasingly look for signs of good corporate citizenship that go beyond supplying. 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. ‡ Companies see cause-related marketing as an opportunity to enhance their corporate reputation. . ‡ 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. build sales. increase customer loyalty. 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.

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. which permits them to shop more intelligently. ‡ Brand manufacturers are facing intense competition from domestic and foreign brands. 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. They are showing greater price sensitivity in their search for value. They perceive fewer real product differences and show less brand loyalty.58 . 1 . which is resulting in rising promotion costs and shrinking profit margins.

" Store-based retailers are facing growing competition from catalog houses. direct-mail firms. and performances. entrepreneurial retailers are building enter-tainment into stores with coffee bars. and e-commerce on the Intemet. home shopping TV. Small retailers are succumbing to the growing power of giant retailers and "category killers. demonstrations. lectures. newspaper.How business and marketing are changing ‡ Store-based retailers are suffering. magazine. They are marketing an "experience" rather than a product assortment. they are experiencing shrinking margins. and TV direct-to -customer ads. 1 . In response. As a result.59 .

responses and adjustments Companies are doing a lot of soul-searching. Model-based decision 7. Global and local: 14. Market-centered: communications: 5. Reengineering: 17. Partner-suppliers: 12. Decentralized: 15. Alliances: 11. Benchmarking: 10. Customer lifetime value 16. Target marketing: 2.60 . Customization: 3. Outsourcing: 9. and many highly respected companies are changing in a number of ways. Customer relationship marketing: making: 8. E-commerce 1 . Channels as partners: 6. Customer database: 13. Integrated marketing 4.Company. Here are some current trends: 1. Customer share: 18.

‡ Market-centered: From organizing by products to organizing by market segment.61 . responses and adjustments (cont. ‡ Global and local: From being local to being both global and local. ‡ Partner-suppliers: From using many suppliers to using fewer but more reliable suppliers who work closely in a "partnership" relationship with the company." ‡ Alliances: From trying to win alone to forming networks of partner firms. called "glocal.) ‡ Benchmarking: From relying on self-improvement to studying "world-class performers" and adopting "best practices.How business and marketing are changing ‡ Company. 1 ." ‡ Decentralized: From being managed from the top to encouraging more initiative from bottom level.

concepts. A bank aims to increase its share of the customer's wallet. Companies focus on their most profitable customers. and tools. Here are the major marketing themes in the new economy: ‡ Customer relationship marketing: From focusing on transactions to building long-term. 1 . ‡ Customer share: From a focus on gaining market share to a focus on building customer share.How business and marketing are changing Company. profitable customer relationships. ‡ Customer lifetime value: From making a profit on each sale to making profits by managing life-time sales. products.) Marketers also are rethinking their philosophies. responses and adjustments (cont.62 . and channels.

and demographics. TV channels. preferences. Eg.defined target markets. Companies can then apply data mining techniques to discover new seg-ments and trends hidden in the data. 1 . responses and adjustments (cont. and Internet newsgroups.How business and marketing are changing Company. ‡ 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.63 .specialinterest magazines. and profitability.

) ‡ 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. responses and adjustments (cont. and customer support personnel to recognizing that every employee must be customer-focused. 1 . ‡ Model-based decision making: From basing decisions on intuition to basing decisions on models and facts on how the marketplace works. sales.How business and marketing are changing Company. Every employee a marketer: From thinking that marketing is done only by marketing. ‡ Channels as partners: From thinking of intermediaries as customers to treating them as partners in delivering value to final customers.64 .

each managed by a multidiscipline team. read the specs. shop among on-line vendors for the best prices and terms. and click to order and pay.65 . ‡ Outsourcing: From making everything inside the company to buying more goods and services from outside if they are cheaper and better.How business and marketing are changing ‡ Company. Business-tobusiness purchasing is growing fast on the Internet. Consumers can access pictures of products. ‡ E-commerce: From attracting customers to stores and having salespeople call on offices to making virtually all products available on the Internet.) ‡ Here are some current trends: ‡ Reengineering: From focusing on functional departments to reorganizing by key processes. responses and adjustments (cont. 1 .

1 .Marketing Management ‡ Marketing management is the art and science of choosing target markets and building profitable relationships with them. ± Creating. delivering and communicating superior customer value is key.66 .

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

is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.68 . 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. 1 .69 . ‡ Marketers must be concerned with the lifetime value of the customer.

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 .CRM Key Concepts ‡ Attracting.

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.71 .CRM Key Concepts ‡ Attracting. 1 . ± Measures a firm s performance.

CRM
Key Concepts
‡ Attracting, 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

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Marketing Challenges
‡ Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. ‡ Major marketing developments can be grouped under the theme of Connecting.
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Marketing Challenges
Connecting
‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world
‡ Advances in computers, telecommunications, video-conferencing, etc. are major forces.
± Databases allow for customization of products, messages and analysis of needs.

‡ The Internet
± Facilitates anytime, anywhere connections ± Facilitates CRM ± Creates marketspaces
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1 . ± Customer profitability analysis separates winners from losers. ‡ Direct sales to buyers are growing.75 .Marketing Challenges Connecting ‡ Via technology ‡ With customers ‡ With marketing partners ‡ With the world ‡ Selective relationship management is key. ‡ Growing share of customer ± Cross-selling and upselling are helpful.

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 .76 .

77 .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 .

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