CHAPTER ONE

Chapter Objectives
By the end of the chapter students should be in position to:
1. Define marketing management and other related terms
2. Explain the marketing concepts
3. List and explain the marketing mix elements
4. Describe how the various institutions and entities that engage in marketing use
marketing to deliver value.
5. Explain the role marketing plays in individual firms and society as a whole

UNDERSTANDING THE CRITICAL ROLE OF MARKETING IN ORGANISATIONS

AND SOCIETY
1.1 The Core Concept of Marketing
1.2 Marketing Management
1.3 Company Orientations Towards Market Place
1.4 Marketing Mix Elements
1.5 E-marketing
1.6 Ethical Marketing
1.7 Prayers in the Marketing
1.8 Marketing Benefits
1.9 The Changing Marketing Environment

More top executives have come out of marketing than out of any other field.

Heidrick and Shruggles.

1.1. The Core concept of marketing

Definition: Marketing is a social and managerial process by which individuals and groups
obtain what they need and want through creating, offering and freely exchanging products and
services of value with others.

Or
Marketing is the activity, set of institutions, and processes for creating, communicating,
delivering and exchanging offerings that have value for customers, clients, partners and society
at large.

If you read the definition closely, you see that there are four activities, or components, of
marketing:

1. Creating. The process of collaborating with suppliers and customers to create offerings
that have value.
2. Communicating. Broadly, describing those offerings, as well as learning from
customers.
 3. Delivering. Getting those offerings to the consumer in a way that optimizes value.
4. Exchanging. Trading value for those offerings.

The definition rests on the following core marketing concepts: needs, wants and demands;
products; value, cost, and satisfaction; exchange, transactions, and relationships; markets; and
marketing and marketers.

NEEDS, WANTS AND DEMANDS

The starting point for the discipline of marketing lies in human needs and wants for example
food, air, water, clothing, and shelter; recreation, education, etc
A need is a human state of felt withdrawal of some basic satisfaction for example: food,
clothing, shelter, safety, belonging, esteem and a few other things for survival. The needs do
exist naturally due to human biology and condition.
Wants are desires for specific satisfiers of these deeper needs. A Makerere University student
needs food and wants chips and chicken. A Ugandan that needs esteem will want to drive a
Benz car. While needs are very few, wants are very many and normally shaped and reshaped
by social forces and institutions such as churches, families and business corporations.
Demands are wants for specific products that are backed by an ability and willingness to buy
them. Wants become demands when backed up by purchasing power. Many Ugandans want a
Benz, only a few are able to buy it. Therefore companies should measure the market of their
products or services based on how many consumers would actually be willing and able to buy.

PRODUCTS

A product: This is a good or service that can be offered to satisfy a need or want. Products
refer to physical objects such as cars, televisions, drinks, etc. Services are intangible objects.
However products are vehicles that deliver services to humans. Other vehicles, such as
persons, places, activities, organizations, and ideas, supply services. Thus marketers should
always sell the benefits or services built into the physical products rather than just describe
their physical features.

VALUE, COST AND SATISFACTION

Value: Value is at the center of everything marketing does.

When we use the term value, we mean the benefits buyers receive that meet their needs. In
other words, value is what the customer gets by purchasing and consuming a company’s
offering. So, although the offering is created by the company, the value is determined by the
customer.

Furthermore, our goal as marketers is to create a profitable exchange for consumers. By

profitable, we mean that the consumer’s personal value equation is positive. The personal
value equation is:

Value = benefits received – [price + hassle]

Hassle is the time and effort the consumer puts into the shopping process. The equation is a
personal one because how each consumer judges the benefits of a product will vary, as will the
time and effort he or she puts into shopping. Value, then, varies for each consumer.

One way to think of value is to think of a meal in a restaurant. If you and three friends go to a
restaurant and order the same dish, each of you will like it more or less depending on your own
personal tastes. Yet the dish was exactly the same, priced the same, and served exactly the
same way. Because your tastes varied, the benefits you received varied. Therefore the value
varied for each of you. That’s why we call it a personal value equation.

Value varies from customer to customer based on each customer’s needs. The marketing
concept, a philosophy underlying all that marketers do, requires that marketers seek to satisfy
customer wants and needs. Firms operating with that philosophy are said to be market oriented.
At the same time, market-oriented firms recognize that exchange must be profitable for the
company to be successful. A marketing orientation is not an excuse to fail to make profit.

Therefore, value is the relationship between customer expectations (benefits) and the sacrifice
(payment and effort) needed to obtain those benefits. Or, value is the consumer’s estimate of
the products or service overall capacity to satisfy his or her needs or wants. The consumer will
always go for a product that will produce the most value per dollar or shilling (cost). Value is a
set of benefits (quality, service and price) that satisfy customer’s needs or wants. The offer
will be successful if it delivers more value and satisfaction to the target market.

Elements of customer value include the following:

1. Companies should offer products or services that perform to the customer's satisfaction.
2. Company must earn trust from their customers.
3. Companies must not price their product or service unrealistically.
4. Company must give the buyers the complete set of facts and information about the
product or service.
5. Company must offer significant overall corporate commitment to the marketing
strategy.
6. Companies should involve their customers in the creation or editing of their product or
service.

OFFERING

An offer or offering is a product or service a company sends to the market to satisfy a need or
want. Marketing creates those goods and services that the company offers at a price to its
customers or clients. That entire bundle consisting of the tangible good, the intangible service,
and the price is the company’s offering. When you compare one car to another, for example,
you can evaluate each of these dimensions: the tangible, the intangible, and the price
separately. However, you can’t buy one manufacturer’s car, another manufacturer’s service,
and a third manufacturer’s price when you actually make a choice. Together, the three make up
a single firm’s offer.

DELIVERING OFFERINGS

Marketing can’t just promise value, it also has to deliver value. Delivering an offering that has
value is much more than simply getting the product into the hands of the user; it is also making
sure that the user understands how to get the most out of the product and is taken care of if he
or she requires service later. Value is delivered in part through a company’s supply
chain. The supply chain includes a number of organizations and functions that mine, make,
assemble, or deliver materials and products from a manufacturer to consumers. The actual
group of organizations can vary greatly from industry to industry, and include wholesalers,
transportation companies, and retailers. Logistics, or the actual transportation and storage of
materials and products, is the primary component of supply chain management.

EXCHANGE, TRANSACTIONS, RELATIONSHIPS

Exchange: This is one of the four ways people can obtain products they want; and includes the
following:
- Self- production; for example hunting, fishing, and fruit gathering. The people do not
interact with others and thus there is no market and no marketing.
- Coercion; for example thieves. No benefit is offered to other party except that of being not
harmed.
- Begging; the beggars have nothing tangible to offer except appreciation.
- Exchange; this is the way of obtaining a desired product from someone by offering
something in return such as money, service, and a good and sometimes using accumulated
 credit points. Marketing arises from this version of exchange since both parties leave better
off than before the exchange. Exchange continues to take place throughout the product life
cycle till disposal. Helping customers to properly dispose their old items, companies in
doing so add value to their offerings.

For exchange to take place, five conditions must be satisfied:

1. There are at least two parties.
2. Each party has something of value to offer.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the offer.
5. Each party believes it’s appropriate or desirable to deal with the other party.

Transaction: Consists of a trade of values (money, goods, services) between two parties, and
the process of trying to arrive at mutually agreeable term is called negotiation. Also included
in the transaction are the terms of payment, time and place of agreement. Transaction differs
from transfer since the other party does not receive anything tangible in return.

To make successful exchanges, marketers analyze what each party expects from the
transaction.

Relationships: This is the outcome of transaction marketing. Relationship marketing is a

strategy that focuses on keeping and improving relationships with current customers.
Relationship marketing comes hand in hand with the following; staff training, empowering,
and creating an environment that promotes team work within the company.

Relationship marketing has got the following benefits:

1. Cuts down on transaction costs and time; moves from being negotiated each time to
being routinized.
2. Leads to the building of a unique company asset called a marketing network (the
company and her supporting stakeholders).
The principle is to build an effective network of relationships with key stakeholders and profits
will follow.

MARKETS

Markets: These are collection of buyers that might be willing and able to engage in an
exchange to satisfy their needs or wants. The marketers see sellers as constituting the industry
and the buyers as constituting the market. The sellers send goods and services and
communication to the market; in return they receive money and information.

The other concepts are marketplace (physical), marketspace (digital) and metamarket
(describes a cluster of complementary products and services that are closely related in the
minds of the consumer but are spread across a diverse set of industries).

MARKETING AND MARKETERS

Marketing means working with markets to actualize potential exchanges for the purpose of
satisfying human needs and wants. The marketer can be either a seller or buyer. A marketer is
a party more actively seeking an exchange; the other party is called a prospect.

1.2. Marketing Management

Definition: This is the process of planning and executing the conception, pricing, promotion,
and distribution of goods, services, and ideas to create exchanges with target groups that satisfy
customer and organizational objectives.

This definition recognizes that marketing management is a process involving analysis,

planning, implementation, and control; that it covers ideas, goods, and services; that it rests on
the notion of exchange; and that the goal is to produce satisfaction for the parties involved.

Sales managers, salespeople, ads and promotion managers, marketing researchers, customer
service managers, product managers, market managers, and the marketing vice president
formally carry out marketing work in the customer market. Each job requires well-defined
tasks and responsibilities for example product managers, market managers and vice president
manage programs while the others manage particular marketing resources.

1.3. Company Orientations towards the Market place

There are five (six) concepts under which organizations conduct their marketing activities. The
parties involved in the market place are the organization, the customers and the society at large.
However companies give different weights to these players in the market place; thus marketing
activities should be carried out under some well-thought-out philosophy of efficient, effective
and responsible marketing. The following are some of the concepts under which organizations
conduct their marketing activity.

a) The production concept (inside-out perspective): Holds that customers will favor products
that are widely available and low in cost. Thus the management concentrates on achieving
high production efficiency and wide distribution coverage. Production orientation is a
philosophy that focuses on the internal capabilities of the firm rather than on the desires
and needs of the marketplace. The one problem with this type of philosophy is that it does
not take into consideration whether their product or service actually meets the needs of the
consumer and market.
Cases: - Demand exceeds supply.
- Cost of production is high.

b) The product concept (inside-out perspective): The concept holds that customers will favor
products that offer the most quality, performance, or innovation features. The company
assumes that buyers admire well made products and can evaluate quality and performance.
Managers concentrate their energy on making good products and improving them over
time.
Case: - Customer input (wants) are little or not there at all.
- Competition is not monitored at all.
c) The Selling Concept (inside-out perspective): Sales orientation is when a company
believes that they will sell more product or services if very aggressive sales methods are
used to gain higher sales. The central theme of sales orientation is about making items and
making money. Sales oriented companies rely heavily on promotion and a highly trained
aggressive sales force. Hence, selling concept holds that customers will not buy enough if
left alone. Thus the company must undertake aggressive selling and promotion effort. The
concept is practiced most with unsought goods, e.g. Colleges, funeral plots, etc.

The problem with this type of philosophy is that it again does not focus on what the
customer and market requires. It is too caught up in pushing their product or service with a
polished sales technique.
A sales-oriented company is very internally focused and looks to sell products that the
company is successful at making.

Selling Concept Model (inside-out perspective)

Start Focus Means End

Factory Product Selling and Profit Through Volume
Promotion

Case: - Overcapacity presence in the company.

- Less demand; thus the need to coax customers into buying.

d) The Marketing concept (outside-in perspective): Marketing orientation is the philosophy

and the first one that takes into account the importance of the customer's needs. Marketing
orientation is the philosophy that a firm exists to satisfy consumer's wants and needs and
also provides shareholder and corporate benefit. Marketing orientation also incorporates the
belief of long term customer relationship building, the process of a combined business
effort to satisfy customers and genuinely researching customer needs and wants.
Businesses that are known for following this philosophy are Apple, Disney and Coca-Cola.
They keep their eye on their consumer at all times.

The concept holds on determining the customer needs and wants of target markets and
delivers the desired satisfaction effectively and efficiently than competitors. A marketing-
oriented company is externally focused on the consumer's wants and needs. A marketing-
oriented firm looks to create customer value.

Marketing Concept Model (outside-in perspective)

Start Focus Means End

Target Customer Coordinated Profit through
Market needs / wants marketing customer satisfactory

It is important to satisfy customers basically because company’s sales come from two
groups namely repeat customers and new customers. Customer attraction is more costly
than customer retention. The key to customer retention is customer satisfaction.
 Companies are forced to embrace the marketing concept when faced with the following:
sales decline, slow growth, changing buying patterns, increasing competition and
increasing market expenditure.

The end result of an effective marketing orientation strategy is customer satisfaction.

Customer satisfaction occurs when the good or service has met the customer's needs and
expectations. Customer delight occurs when the good or service has met and exceeded
customer’s needs and expectations.

A satisfied customer:

1) Stays loyal longer.

2) Buys additional products.
3) Spreads good word of mouth.
4) Pays less attention to competitors.
5) Offers ideas to the company.
6) Costs less to serve.

To achieve customer satisfaction, various company functions and departments must be well
coordinated. Hence requires a company to carry out internal marketing as well as external
marketing. Internal marketing is the task of successfully hiring, training, and motivating
able employees to serve the customers well.

e) The Customer Concept (outside-in perspective): Today many companies are moving
beyond the marketing concept to customer concept. That is today’s companies are shaping
separate offers, services, and messages to individual customers; by collecting detailed
information about every individual. Cake business is the excellent example.

Customer Concept Model (outside-in perspective)

Start Focus Means End

Individual Customer One-to-one Profitable growth through
customer needs / marketing integration capturing customer share,
values and value chain loyalty and life time value.

f) The Societal Marketing concept (outside-in perspective): This concept takes the idea of
providing customer value to the next level. The concept follows the marketing orientation;
plus, the belief that the company product or service protects or enhances society's interests.
In addition to the marketing concept, it has to preserve and enhance the consumers and the
society’s well being. Thus there is need to balance three items namely: Company profits,
Customer wants and Society’s interests.

The societal marketing concept now days referred to as Corporate Social Responsibility
is a business's concern for society's welfare. This means that marketing managers are
interested in long-term corporate interests and also society's health.
1.4 Marketing Mix Elements

The marketing mix consists of Product, Place, Promotion and Price; normally referred to as the
4P’s. The correct mix must be created in order to communicate effectively with the target
market and result into a valuable sale.

A product consists of anything (good or service) that is of value to a consumer and can be
offered through a voluntary marketing exchange. A product consists of the physical product,
packaging, brand name, etc. Examples of intangible products include lawn maintenance
services, haircuts, airplane travel, etc.

Place (Physical Distribution) is the location of where the product or service is available for
purchase. It can consist of a physical location (brick and mortar) or a virtual location, such as a
website. Marketing managers must decide on the correct location from which to offer their
product or service. The product needs to be available when the consumer wants it.

Promotion is all about the use of communication tools in order to reach targeted customers.
The promotion mix includes: advertising, direct marketing, public relations, sales promotion
and personal selling.

Price is the overall sacrifice a consumer is willing to make to acquire a specific product or
service. Price includes not just the financial amount, but also the time and effort a consumer
must sacrifice for the product or service.

1.5 e-Marketing

e-marketing is referred to all those strategies and internet technologies that are used to reach
target market. e-marketing examples include email, social networks, web banners and mobile
advertising.

There are millions of internet users that daily access different websites using a variety of tools
like computers, laptops, tablets, smart or android phone devices; and number of internet users
is increasing rapidly.

Every business company is jumping on to the internet marketing bandwagon. The internet is
the most powerful tool that can put any business on solid footing with market leader
companies. e-marketing comes with advantages and disadvantages.

Advantages of e-Marketing
Following are some of the advantages of e-Marketing:
 Extremely low risk
 Reduction in costs through automation and use of electronic media
 Faster response to both marketers and the end user
 Increased ability to measure and collect data
 Opens the possibility to a market, of one, through personalization.
 Increased interactivity
 Increased exposure of products and services
  Boundless universal accessibility

Disadvantages of e-Marketing
Following are some disadvantages of e-Marketing:
 Dependability on technology
 Security, privacy issues
 Maintenance costs due to a constantly evolving environment
 Higher transparency of pricing and increased price competition
 Worldwide competition through globalization

1.6 Marketing Ethics

Marketing Ethics: this is the systematic study of how moral standards are applied to marketing
decisions, behaviors and institutions. Therefore Marketers must not knowingly do harm in
carrying out their selling responsibilities. They should embrace basic marketplace values,
including truth telling, genuine service to customers, avoidance of practices acclaimed to be
unfair, and an adherence to honest and open communications with clients.

Types of Unethical Marketing - Advertising

 Surrogate Advertising: In certain places there are laws against advertising products
like cigarettes or alcohol. Surrogate advertising finds ways to remind consumers of
these products without referencing to them directly.
 Exaggeration: Some advertisers use false claims about a product's quality or
popularity. A Slogan like “get coverage everywhere on earth” advertises features that
cannot be delivered.
 Puffery: When an advertiser relies on subjective rather than objective claims, they are
puffing up their products. Statements like “the best tasting coffee” cannot be confirmed
objectively.
 Unverified Claims: Many products promise to deliver results without providing any
scientific evidence. Shampoo commercials that promise stronger, shinier hair do so
without telling consumers why or how.
 Stereotyping Women: Women in advertising have often been portrayed as sex objects
or domestic servants. This type of advertising traffics in negative stereotypes and
contributes to a sexist culture.
 False brand comparisons: Any time a company makes false or misleading claims
about their competitors they are spreading misinformation.
 Children in advertising: Children consume huge amounts of advertising without being
able to evaluate it objectively. Exploiting this innocence is one of the most common
unethical marketing practices.

1.7 Players in Marketing

Everybody is involved in marketing

1.7.1 Profit Companies

This includes all individual companies involved in the value chain (producer, wholesaler and
retailing) engaged in creating, communicating, delivering and exchanging of the market offer.

Profit companies can be defined by the nature of their customers. A B2C (business-to-
consumer) company like P&G sells products to be used by consumers like you, while a B2B
(business-to-business) company sells products to be used within another company’s operations,
as well as by government agencies and entities; but the end user is an individual person.

Another way to categorize profit companies include: manufacturers, wholesalers, retailers,

transportation with different roles to perform.

1.7.2 Nonprofit Companies

Nonprofit companies also engage in marketing. When the American Heart Association (AHA)
created a heart-healthy diet for people with high blood pressure, it bound the diet into a small
book, along with access to a special Web site that people can use to plan their meals and record
their health-related activities. The AHA then sent copies of the diet to doctors to give to
patients. When does an exchange take place, you might be wondering? And what does the
AHA get out of the transaction?

From a monetary standpoint, the AHA does not directly benefit. Nonetheless, the organization
is meeting its mission, or purpose, of getting people to live heart-healthy lives and considers
the campaign a success when doctors give the books to their patients. The point is that the
AHA is engaged in the marketing activities of creating, communicating, delivering, and
exchanging. When a nonprofit organization engages in marketing activities, this is called
nonprofit marketing.

Similarly, the Environmental Protection Agency (EPA) runs a number of advertising

campaigns designed to promote environmentally friendly activities. One such campaign
promoted the responsible disposal of motor oil instead of simply pouring it on the ground or
into a storm sewer. EPA hopes to change people’s attitudes and behaviors so that social change
occurs. Marketing conducted in an effort to achieve certain social objectives can be done by
government agencies, nonprofit institutions, religious organizations, and others and is called
social marketing.

1.7.3 Individuals

These are in most cases the end users of the products or services; highly involved in the
exchange phase however they are also directly involved in the activities of creating,
communicating and delivering the market offer.

1.8 Marketing Benefits and Criticism

a. Marketing Enables Profitable Transactions to Occur: Products don’t, contrary to

popular belief, sell themselves. Generally, the “build it and they will come” philosophy
doesn’t work. Good marketing educates customers so that they can find the products they
want, make better choices about those products, and extract the most value from them. In
this way, marketing helps facilitate exchanges between buyers and sellers for the mutual
 benefit of both parties. Likewise, good social marketing provides people with information
and helps them make healthier decisions for themselves and for others.
b. Marketing Delivers Value: Not only does marketing deliver value to customers, but also
that value translates into the value of the firm as it develops a reliable customer base and
increases its sales and profitability. So when we say that marketing delivers value,
marketing delivers value to both the customer and the company.
c. Marketing Benefits Society: Marketing benefits society in general by improving people’s
lives in two ways. First, it facilitates trade and being able to trade makes people’s lives
better. Otherwise people wouldn’t do it. In addition, because better marketing means more
successful companies, jobs are created. This generates wealth for people, who are then able
to make purchases, which, in turn, creates more jobs.

The second way in which marketing improves the quality of life is based on the value
delivery function of marketing, but in a broader sense. When you add all the marketers
together who are trying to deliver offerings of greater value to consumers and are
effectively communicating that value, consumers are able to make more informed decisions
about a wider array of choices. More choices and smarter consumers are indicative of a
higher quality of life.

d. Marketing Costs Money: Marketing can sometimes be the largest expense associated with
producing a product. In the soft drink business, marketing expenses account for about one-
third of a product’s price about the same as the ingredients used to make the soft drink
itself. At the bottling and retailing level, the expenses involved in marketing a drink to
consumers like you and me make up the largest cost of the product.

Some people argue that society does not benefit from marketing when it represents such a
huge chunk of a product’s final price. In some cases, that argument is justified. Yet when
marketing results in more informed consumers receiving a greater amount of value, then
the cost is justified.

e. Marketing Offers People Career Opportunities: Marketing is the interface between

producers and consumers. In other words, it is the one function in the organization in which
the entire business comes together. Being responsible for both making money for your
company and delivering satisfaction to your customers makes marketing a great career. In
addition, because marketing can be such an expensive part of a business and is so critical to
its success, companies actively seek good marketing people. There’s a great variety of jobs
available in the marketing profession. These positions represent only a few of the
opportunities available in marketing.

 Marketing research. Personnel in marketing research are responsible for studying

markets and customers in order to understand what strategies or tactics might work best
for firms.
 Merchandising. In retailing, merchandisers are responsible for developing strategies
regarding what products wholesalers should carry to sell to retailers.
 Sales. Salespeople meet with customers, determine their needs, propose offerings, and
make sure that the customer is satisfied. Sales departments can also include sales
support teams who work on creating the offering.
  Advertising. Whether it’s for an advertising agency or inside a company, some
marketing personnel work on advertising. Television commercials and print ads are
only part of the advertising mix. Many people who work in advertising spend all their
time creating advertising for electronic media, such as Web sites and their pop-up ads,
podcasts, and the like.
 Product development. People in product development are responsible for identifying
and creating features that meet the needs of a firm’s customers. They often work with
engineers or other technical personnel to ensure that value is created.
 Direct marketing. Professionals in direct marketing communicate directly with
customers about a company’s product offerings via channels such as e-mail, chat lines,
telephone, or direct mail.
 Digital media. Digital media professionals combine advertising, direct marketing, and
other areas of marketing to communicate directly with customers via social media, the
Web, and mobile media (including texts). They also work with statisticians in order to
determine which consumers receive which message and with IT professionals to create
the right look and feel of digital media.
 Event marketing. Some marketing personnel plan special events, orchestrating face-
to-face conversations with potential and current customers in a special setting.
 Nonprofit marketing. Nonprofit marketers often don’t get to do everything listed
previously as nonprofits typically have smaller budgets. But their work is always very
important as they try to change behaviors without having a product to sell.

A career in marketing can begin in a number of different ways. Entry-level positions for new
college graduates are available in many of the positions previously mentioned. A growing
number of CEOs are people with marketing backgrounds.

Marketing Criticisms

Marketing is not without its critics. We already mentioned that one reason to study marketing
is because it is costly, and business leaders need to understand the cost to benefit ratio of
marketing in order to make wise investments. Yet that cost is precisely why some criticize
marketing. If that money could be put into research and development of new products, perhaps
the consumers would be better satisfied. Or, some critics argue, prices could be lowered.
Marketing executives, though, are always on the lookout for less expensive ways to have the
same performance, and do not intentionally waste money on marketing.

Another criticism is that marketing creates wants among consumers for products and services
that aren’t really needed. For example, fashion marketing creates demand for high-dollar jeans
when much less expensive jeans can fulfill the same basic function. Taken to the extreme,
consumers may take on significant credit card debt to satisfy wants created by marketing, with
serious negative consequences. When marketers target their messages carefully so an audience
that can afford such products is the only group reached, such extreme consequences can be
avoided.

1.9 The Changing Marketing Environment

The view of marketing has changed from a static set of four Ps to a dynamic set of processes
that involve marketing professionals as well as many other employees in an organization. The
way business is being conducted today is changing, too, and marketing is changing along with
it. There are several themes, or important trends, that you will notice.
 Ethics and social responsibility. Businesses exist only because society allows them to.
When businesses begin to fail society, society will punish them or revoke their license.
However, whereas ethics require that you only do no harm, the concept of social
responsibility requires that you must actively seek to improve the life of others. Today,
people are demanding businesses take a proactive stance in terms of social
responsibility, and they are being held to ever-higher standards of conduct.
 Sustainability. Sustainability is an example of social responsibility and involves
engaging in practices that do not diminish the earth’s resources. Coca-Cola, for
example, is working with governments in Africa to ensure clean water availability, not
just for manufacturing.
 Service-dominant logic. You might have noticed that we use the word offering a lot
instead of the term product. That’s because of service-dominant logic, the approach to
business that recognizes that consumers want value no matter how it is delivered -
whether through a tangible product or through intangible services. That emphasis on
value is what drives the functional approach to value that we’ve taken - that is, creating,
communicating, delivering, and exchanging value.
 Metrics. Technology has increased the amount of information available to decision
makers. As such, the amount and quality of data for evaluating a firm’s performance is
increasing. Better information technology has given a much more complete picture of
each exchange. Using data from many sources, we can build more effective metrics that
can then be used to create better offerings, better communication plans, and so forth.
 A global environment. Every business is influenced by global issues. The price of oil,
for example, is a global concern that affects everyone’s prices and even the availability
of some offerings. We already mentioned Coke’s concern for clean water. But Coke
also has to be concerned with distribution systems in areas with poor or nonexistent
roads, myriads of government policies and regulations, workforce availability, and so
many different issues in trying to sell and deliver Coke around the world. Even
companies with smaller markets source some or all their offerings from companies in
other countries or else face some sort of direct competition from companies based in
other countries. Every business professional, whether marketing or otherwise, has to
have some understanding of the global environment in which companies operate.

1.10 The Marketing Plan

The marketing plan is the strategy for implementing the components of marketing: creating,
communicating, delivering, and exchanging value. Once a company has decided what business
it is in and expressed that in a mission statement, the firm then develops a corporate strategy.
Marketing strategists subsequently use the corporate strategy and mission and combine that
with an understanding of the market to develop the company’s marketing plan. Figure "Steps
in Creating a Marketing Plan" shows the steps involved in creating a marketing plan.

The book then moves into understanding customers (market decisions). Understanding the
customer’s wants and needs; how the customer wants to acquire, consume, and dispose of the
offering; and what makes up their personal value equation are three important goals. Marketers
want to know their customers who they are and what they like to do so as to uncover this
information. Generally, this requires marketing researchers to collect sales and other related
customer data and analyze it.

Steps in Creating a Marketing Plan

Once this information is gathered and digested, the planners can then work to create the right
offering. Products and services are developed, bundled together at a price, and then tested in
the market. Decisions have to be made as to when to alter the offerings, add new ones, or drop
old ones. These product and price decisions are the focus of the next set of chapters and are
the second step in marketing planning.

Following the material on offerings, we explore the decisions associated with building the
value chain. Once an offering is designed, the company has to be able to make it and then be
able to get it to the market. This step, planning for the delivery of value, is the third step in the
marketing plan.

The fourth step is creating the plan for communicating value. How does the firm make
consumers aware of the value it has to offer? How can it help them recognize that value and
decide that they should purchase products? These are important questions for marketing
planners.

Once a customer has decided that her personal value equation is likely to be positive, then
he/she will decide to purchase the product. That decision still has to be acted on, however,
which is the exchange. The details of the exchange are the focus of the last few chapters of the
book. As exchanges occur, marketing planners then refine their plans based on the feedback
they receive from their customers, what their competitors are doing, and how market
conditions are changing.

DISCUSSION QUESTIONS

1. Compare and contrast a four Ps approach to marketing versus the value approach
(creating, communicating, and delivering value). What would you expect to be the
same and what would you expect to be different between two companies that apply
one or the other approach?
2. Assume you are about to graduate. How would you apply marketing principles to
your job search? In what ways would you be able to create, communicate, and deliver
value as a potential employee, and what would that value be, exactly? How would you
prove that you can deliver that value?
3. Is marketing always appropriate for political candidates? Why or why not?
4. How do the activities of marketing for value fulfill the marketing concept for the
market-oriented organization?
5. This chapter introduces the personal value equation. How does that concept apply
to people who buy for the government or for a business or for your university? How
does that concept apply when organizations are engaged in social marketing?
6. This chapter addresses several reasons why marketing is an important area of
study. Should marketing be required for all college students, no matter their major?
Why or why not?
7. Of the four marketing functions, where does it look like most of the jobs are?
What are the specific positions? How are the other marketing functions conducted
through those job positions, even though in a smaller way?
8. Why is service-dominant logic important?
9. What is the difference between a need and a want? How do marketers create
wants? Provide several examples.
10. The marketing concept emphasizes satisfying customer needs and wants. How
does marketing satisfy your needs as a college student? Are certain aspects of your life
influenced more heavily by marketing than others? Provide examples.
11. A company’s offering represents the bundling of the tangible good, the intangible
service, and the price. Describe the specific elements of the offering for an airline
carrier, a realtor, a restaurant, and an online auction site.
12. The value of a product offering is determined by the customer and varies
accordingly. How does a retailer like Walmart deliver value differently than Banana
Republic?
13. Explain how Apple employed the marketing concept in designing, promoting, and
supplying the iPhone. Identify the key benefit(s) for consumers relative to comparable
competitive offerings.

Case Study

FORD CARS GO IN FOR A SERVICE

To many people, cars come pretty close to the goods-dominant extreme of a goods–services
continuum. They are produced in factories from the combination of thousands of components,
and to most people the physical properties of a car can readily be assessed. But recent
experience from the car sector suggests that car manufacturers may be rather more enthusiastic
to describe themselves as service-oriented companies.

The days are long gone when a car manufacturer would sell a car on the strength of its design
features, and then forget about the customer until the time came to replace the car three years
later. Car manufacturers have realized that car buyers seek more than the tangible offering -
important though that is. Over time, they have moved increasingly into services in an attempt
to gain a larger share of car buyers' wallets.

In the UK, Ford has led the way in many aspects of this increasing service orientation. It saw
an opportunity in the 1970s with the liberalization of consumer credit regulations to offer car
buyers loan facilities with which to make their car purchase. Not only did this make it easier
for middle-income groups to buy its cars, it also allowed Ford to retain the margins which
would otherwise have gone to banks who were the main alternative source of car loan finance.
Ford Motor Credit has become a licensed credit broker and a major profit centre within the
company.

The next major attempt to gain a greater share of car buyers' wallets came through offering
extended warranties on the cars it sold. Traditionally, new cars had come with just twelve
months warranty, but Ford realized that many buyers wanted to buy peace of mind that they
were not going to face unexpected repair bills after their initial warranty had expired. Increased
competition from Japanese importers, and the improving reliability of its new cars encouraged
this development.
By the mid-1990s, Ford came round to the view that many of its customers were buying
mobility services, rather than a car per se. So it came up with schemes where customers paid a
small deposit, followed by a fixed amount per month, in return for which they received
comprehensive finance and warranty facilities. In addition, it promised that the company would
take back the car after three years and replace it with a new one. Marketed under the ‘Options'
brand name, Ford was soon selling nearly half of its new cars to private buyers using this
method. Over time the scheme was developed to include facilities for maintaining and insuring
the car.

Repairs and maintenance have always been important in the car sector, but manufacturers
tended to lose out on much of the benefits of this because of a fragmented dealership network.
Separate customer databases for maintenance and new car sales often did not meet and Ford
found that it had very little direct communication with the people who had bought its cars. By
the 1990s, the dealership network was becoming more closely integrated with Ford's
operations and new opportunities were seized for keeping new car buyers within the Ford
dealership system. Recent buyers could be alerted to new services available at local dealers,
using a database managed centrally by Ford. Numerous initiatives were launched, such as
Ford's own mobile phone service. Ford sought to make it easy for customers to get back on the
road when their own car was taken in for servicing, so the provision of car hire facilities
contributed to the service ethos. In 1996 the company linked up with Barclaycard to offer a
Ford branded credit card, so Ford found itself providing a service to its customers which was
quite removed from the tangible cars that it sold (although points accrued using the card could
be used to reduce the price of a new Ford car).

By 2000, volume car manufacturers had ceased to make big profits in the UK. In 2002, Ford,
with 18 per cent of the market made just £8 millions in profits on its European operations.
Falling profit margins on selling new cars were partly offset by profits made on service-based
activities. In the same year, the company made £1.38 billions worldwide from its credit arm,
which arranged finance for about 40 per cent of all new cars that it sold. But adding services is
not a guaranteed route to increased profitability. Ford's acquisition of the KwikFit tyre fitting
chain failed to be a success and it was later sold back to its founder at a price well below what
Ford had paid for it. Could this have been a warning that Ford's core competencies lie in
engineering and design, rather than running labour intensive service operations?

CASE STUDY REVIEW QUESTIONS

1. Given the evidence of Ford, is it still appropriate to talk about the goods and services sectors
being quite distinctive?

2. What business is Ford in? What business should it be in?

3. Discuss the view that Ford should do what it is good at designing cars and leave services to
other companies.