MM – Instructor Manual

CHAPTER 1 – WHAT IS MARKETING?

KNOWLEDGE OBJECTIVES

1. Explain Marketing
2. Explain Its Importance
3. Introduce & Provide and Overview of the 5C, STP & 4P Framework
4. Discuss the Science Behind Understanding Customer Behavior

CHAPTER OUTLINE

 Introduction
 Marketing as an Exchange Relationship
 Why Marketing is Important
 The Marketing Framework
 The Marketing Science of Customer Behavior
 Summary

1. Introduction

This section relates to knowledge objective #1

To the average person, the term marketing can have many different meanings. It can
frequently mean advertising or personal selling. However, marketing is about much more
than just advertising and sales.

TEACHING NOTE: Depending upon student composition (whether students have had a
previous marketing course or prior exposure to marketing), one way to begin is by asking
students what comes to mind when thinking of the word marketing. Responses such as
advertising or personal selling may occur which serve as starting point for introducing the
subject.

2. Marketing as an Exchange Relationship

This section relates to knowledge objective #1

Marketing is defined as an exchange relationship between a firm and its customers.

Firms try to understand customers and what they what and then how to provide what
customers want. Marketing is everywhere. Marketing is more than selling physical
goods. Marketing encompasses a wide variety of pursuits.

Figure 1.1: Marketing is an Exchange

This figure applies to knowledge objectives #1 and #2

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 MM – Instructor Manual

Figure shows the interaction between buyers (customers) and sellers (firms), noting that
the firm offers benefits and seeks to profit, while customers seek benefits and are willing
to pay.

TEACHING NOTE: Instructors will likely want to point out that figure 1.1 is typically a
continuous series of interactions between the firm and its customers. Additionally,
acknowledging the point of view expressed in the Box can go a long way towards
assuring that the relationship begins and continues. Marketing is an ongoing process.

Figure 1.2 What can we Market?

Figure applies knowledge objectives #1 and #2

Marketing can be involved in services, nonprofit organizations, events, people (political

campaigns), ideas, companies, and industries.

TEACHING NOTE: Depending upon the level of previous exposure to marketing,

instructors may consider providing an example of marketing’s ubiquity by providing an
example that is readily accessible to students. The job search process is one that most
students can easily relate to. Prospective employees market themselves to prospective
employers through attire, grooming, speaking, and non-verbal communication skills.
The same can be said about approaching prospective romantic partners.

3. Why is Marketing Important?

This section addresses knowledge objective #2

Marketing can be involved with educating the marketplace. Its importance can be
explained through the evolution from the production orientation, through the selling
orientation arriving at the customer orientation. Due to the current customer-oriented
environment, firms understand the importance of their customers and creating and
maintaining relationships with them.

Because of its importance, marketing has evolved from a function to an organization

wide philosophy. Because of its importance, there are an ever increasing number of
metrics to examine marketing’s effectiveness. However, many marketing programs
remain somewhat difficult to quantify.

4. The Marketing Framework: 5Cs, STP and the 4Ps

The section addresses to knowledge objective #3

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 MM – Instructor Manual

Section identifies the 5Cs: customer, company, context, collaborators, and competitors.
It continues by identifying segmentation, targeting, and positioning and follows STP by
addressing the 4Ps: product, price, promotion, and places (distribution).

Building upon figure 1.1 section begins to discuss the external-internal link through the
situation analysis by examining the external environment by considering each of the 5Cs.
Next, strategic marketing planning involves STP and marketing tactics are developed
through a coordinated process involving each of the 4Ps. Section provides key questions
such as asking who potential customers might be, company strengths and weaknesses,
purchase behavior and pricing issues to elucidate key issues with each component of the
framework. It concludes noting that the 5Cs, STP, and 4Ps are interdependent as a
change in any of the 5Cs can affect STP or 4Ps.

Figure 1.3 Marketing Management Framework

Figure applies knowledge objectives #1, #2, and #3

The figure lays out the 5C, STP, 4P framework as a flow from 5C to STP to 4P as
indicated by the arrows. This could be interpreted as mostly an external to internal link.

TEACHING NOTE: Given the importance of the figure, students could be posed the
question are firms market takers? Do marketers examine the market through the vision of
the 5Cs and make what is indicated that the market wants? Or are they market makers?
Do firms examine the market and determine what is currently not available, provide it
and inform/educate customers that the product is something customers should want?

TEACHING NOTE: Although figure 1.2 appears static, it should be stressed to students
that the model represents a dynamic process as customer preferences can change, the
competition and other external and internal factors will change. Simple examples:
lifestyles change over time, new products enter the market, established products are
modified and sometime withdrawn, inflation can necessitate price increases.

5. The Marketing Science of Customer Behavior

Section addresses knowledge objective #4

Figure 1.4 Types of Shopping

Figure applies to knowledge objective #4

Figure categorizes shopping between level of involvement and customer type (consumer
versus business to business). Categorizes consumer purchases among convenience (low
level involvement), shopping purchases (moderate) and specialty (high involvement).
Categorizes business to business purchases as: straight rebuy (low involvement),

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 MM – Instructor Manual

modified rebuy (moderate) and new task (high involvement). It is noted that it is not the
product, but customer behavior (level of involvement) that is important.

Figure 1.5 Purchase Decision Making

Figure applies to knowledge objective #4

Figure details the five steps involved in the purchase decision-making process: Identify
needs/wants, Search, Evaluation, Purchase, Post-purchase Evaluation. Figure
acknowledges that the process can be followed in either consumer purchase decision-
making or business to business purchase decision-making.

Section on the Marketing Science of Customer Behavior notes that there are other models
depicting how decisions are made, such as lexicographic, averaging, weighting,
compensatory, or non-compensatory models. These models can be used in either
consumer or business settings. A key distinguishing feature of business to business
purchasing as noted is the buying center.

Figure 1.6 Influences of Purchasing

Figure applies to knowledge objective #4

Figure details many of the factors that affect purchases for both consumers and
organizations. These factors include: 1. country, culture, subculture, 2. economic, 3.
Social groups, 4. Product, and 5. customers.

6. Summary and Book Layout

Section addresses knowledge objectives #1 through #4

Reiterates that marketing is about making things that people will want and enjoy, pricing
it properly, making it available to people, and communicating the product’s benefits to
the consuming public. Notes that the book will discuss the subject matter within the
context of a global setting and acknowledging the impact of the Internet. The text is
designed to get students to think like marketers and to understand that great marketing is
based upon sound, logical, and rigorous thinking. The section notes that when
successful, marketing contributes to social welfare.

The Marketing Framework: 5Cs, STP, 4Ps

Section applies to knowledge objectives #1 and #3

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 MM – Instructor Manual

The framework has been developed as a learning tool to help students understand how all
of the marketing pieces fit together. In addition to facilitating learning, the framework
also aids in the practice of marketing.

Figure 1.7 The Marketing Framework

Section applies to knowledge objective #3

Provides an example of how the 5C, STP, 4P framework would look for a given element
and stresses that through repeated exposure to the framework, students will understand
that successful marketing begins by examining the 5Cs, then STP and finally the 4Ps.

Figure 1.7 Chapters Mapped to Marketing Framework

Section applies to knowledge objective #3

Identifies which chapters correspond with each element of the framework. Chapters 1 &
12 = customers, chapters 14 & 15 = company, 13 & 14 = context, 9 & 14 collaborators,
13 & 14 competitors. Chapter 2 corresponds to segmentation, chapter 3 with targeting,
and chapter 4 with positioning. Chapters 5, 6 & 7 with products, chapter 8 with price,
chapter 9 with place, and chapters 10 and 11 with promotion.

Figure 1.9 Chapter Flow

Section applies to knowledge objective #1 and 2

Highlights the three critical questions associated with each topic. WHAT it is, WHY it is
important, and HOW it is done successfully.

Chapter concludes by contending that by considering the three questions identified in

figure 1.9 within the context of the marketing framework, students upon completing the
reading of the text will clearly understand marketing at both the strategic and tactical
levels and better facilitate a successful career.

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

1. What did you expect marketing to be before reading this chapter or beginning
your class? Ask a family member, a classmate, or coworker what they think
marketing is. See if you can persuade them that marketing enhances a mutually
beneficial exchange between a customer and a company.

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 MM – Instructor Manual

The response to this question will likely depend upon prior exposure to the
subject matter. Students may first be asked if they have previously taken a
marketing course. In trying to persuade another person that marketing enhances
beneficial exchange, have students ask the other party (or ask students to think
about) the last purchase they made. What did they buy? Why did they make the
purchase? Where they better off having made the purchase? Was the firm better
off from making the sale? How about society? The answer should be yes to all
three questions and demonstrates – consumer welfare, firm welfare, and social
welfare. Through mutually beneficial exchange everyone can benefit.

2. What are examples of brands and companies you like? Why do you think you
like them? What is a brand you can’t stand? Why not?

Brands and companies that are likely to be mentioned are companies that offer
innovative/interesting/stimulating products, and/or excellent service. Although
no longer a recent introduction, the Apple ipod represents such a product. Cell
phones that offer multiple features and are sleek in design are also typically
mentioned – examples touch screen phones such as the PALM Centro smart
phone. Any product or company that creates what consumers see as a benefit
will be identified. Companies that do not will be disliked. Examples may be
firms that use high pressure sales tactics or are seen as behaving in ethically
questionable ways.

3. Think about a recent time when you bought or tried to buy something but were
treated poorly as a customer. What happened? What was the problem? If you
ran the brand’s company, what would you do to ensure happier and more loyal
customers?

While students will supply various responses ranging from being ignored to
suffering through high pressure tactics to not being taken seriously (possibly
being directed to another product) the key is to have students recognize that this
bad experience has long term ramifications for the firm. It is highly unlikely that
the student will likely ever do business with them again. Students should consider
figure 1.1 and that marketing is about relationships. This relationship is
necessary to have loyalty. In order to accomplish this, employees need to make
each and every customer feel special by treating each customer as an individual
and not as a sales transaction.

4. List three brands to which you’re loyal. List three things you tend to buy on sale.
How are the product categories on these two lists different for you?

What should distinguish the two categories is level of involvement. Brands that
instill loyalty are likely to be seen as different from competing products. Students
are likely to list various reasons, attributes, and or benefits that distinguish these
products from competing products. For price sensitive products, students are
likely not able to elaborate about the product.

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 MM – Instructor Manual

5. What do you consider to be the world’s biggest social problem? Wars? Global
warming? Resource imbalances? How could marketing help solve such a large
social problem?

Marketing can help by creating public awareness by informing the public about
the problem. Marketing can increase the level of involvement on the part of the
public by making the issue personally relevant, by stressing its importance. They
same level of awareness and involvement also holds for policy-makers.
Marketing can also help through such efforts as campaign slogans, or through
such activities as charitable events or cause related marketing such as “Product
Red” (supports the Global Fund in its fight against AIDS). The point is that
marketing can be used to stimulate a call to action by increasing awareness.

SUGGESTED ANSWERS TO MARKETING PLAN QUESTIONS

For illustrative purposes, the product will be an energy drink targeting women.
Background: while there are in excess of 100 energy on the market, few specifically
target women. TAB is the only such drink regularly found in mainstream stores. Given
the limited number of energy drinks targeting women and the fragmented nature of the
market, such a product was deemed reasonable. General market information can easily
be obtained through publicly available sources.

Marketing Plan for 2010 for Energy Drink for Women

Customer

General customer description: young (under 40), middle income, single or with children,
urban or suburban
Psychographic: Women with active lifestyles and busy schedules

Usage: may or may not currently drink energy drinks on an occasional basis, but may
also drink coffee drinks (Starbucks iced caramel macchiato), if currently an
energy drink consumer, may use energy drinks as a mixer with vodka.

Current levels/measures of customer satisfaction: unknown

Loyalty: if currently use energy drinks, typically have a preferred brand – but are open to
possible new alternatives.

Why don’t nonbuyers buy: Various reasons, lack of awareness, lack of interest, health
concerns

Where do most users buy: multiple outlets-grocery stores, convenience stores,

warehouse clubs

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Price-sensitivity: energy drinks in general are not heavily discounting although

discounting does exist (two for $)

What changes have we seen over buyers: main change in the market is increased variety,
introduction of sugar-free varieties and
continued erosion of market leader’s market
share.

SUGGESTED ANSWERS TO MINI-CASE: INSIGHT INTO CONSUMER

DECISION MAKING

1. Answers will vary as some students will look for the status of European luxury
brand (BMW) or an aggressive off road vehicle (H2) or a smaller SUV (Honda
CRV).
2. Acceleration or accident avoidance might be dropped. Acceleration due to all
SUVs scoring the same and the same being said for accident avoidance (except
for BMW) and that people may subconsciously want to avoid thinking about
accidents (and their ability to avoid).
3. Answers could vary depending upon the heuristic used. IF one looks at the Chevy
it scores neutral or worse on all categories. That could be perceived as risky.
However, it is one of the cheapest. Does its low price compensate for its other
poor scores? It is worth noting that the most expensive SUV (H2) has only one
reported score. How do students perceive all of the na’s?
4. It would seem that based upon price alone, the H2 is the most expensive and
would most likely be dropped. It depends on if $51,000+ is seen as a lot of cash.
Volvo and BMW would also likely be candidates for being dropped although do
their relatively high scores on other attributes compensate for their high price?
5. Supposing that accident avoidance was initially dropped. Acceleration would
now be dropped. Conversely, if acceleration were dropped in question #2 and the
BMW and H2 were dropped due to price, then accident would now be dropped.
6. Risk avoidant could be interpreted multiple ways: but given that accident
avoidance was eliminated as one of the criteria, then ownership satisfaction could
serve and either the Volvo if not eliminated due to cost would be eliminated and if
the Volvo had already been dropped, then the Chevy would be dropped as it does
not have a rating on that attribute.
7. Based upon the above steps possible student responses may be logical, rational or
thorough. Other responses could be “aspirational”.

The decision rule addressed in question 2 is a possible candidate for being dropped.

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 MM – Instructor Manual

Many people would hone in on brand and use brand as the single determining criteria
which would demonstrate loyalty and the importance of the exchange relationship in
figure 1.1. Asking customers about their decision-making process, or asking them about
brands considered or what attributes are important would help in determining what the
decision-making process was like.

VIDEO OVERVIEW & DISCUSSION QUESTIONS

BP Oil Co. (8:12)

At the basis of marketing is the notion of exchange. In order for a successful exchange to
occur, firms must meet customers’ needs and do so in a profitable manner. BP Connect
is a retail enterprise that demonstrates the importance of understanding both sides of the
marketing exchange. From the firm’s side, gasoline is low profit margin product, and it
is typically purchased on a weekly basis. From the customer’s side, customers may have
to visit multiple stores to meet their fuel, food and convenience needs. BP has been able
to not only increase its margins but also increase the potential number of exchanges it has
with its customers by expanding its product offering to include higher margin product
lines, such as car washes, convenience goods and fresh food that are typically purchased
on a daily rather than weekly basis. Consumers’ needs have been met by providing these
services in convenient, well-stocked locations. By altering its strategy and product lines,
BP Connect has been able to leverage its convenient locations to better meet the needs of
its consumers in a more profitable manner.
Discussion Questions
1. Discuss BP Connect’s revenue stream prior to and after the introduction of BP
Connect.

2. What needs is BP Connect meeting for the customer?

3. Why do you think BP changed its product offering?

4. Location is an important variable for retailers. Discuss how BP Connect’s

location increased or decreased the likelihood of an exchange.

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