Chapter 1 Review Notes

Be familiar with these videos found on Moodle:

1. Jeni’s Ice Cream
2. Patagonia
3. Doritos Customer Made Advertisement

1. Define marketing and discuss how it is more than just “telling and selling.”

Marketing is managing profitable customer relationships. The twofold goal of marketing is to

attract new customers by promising superior value and to keep and grow current customers
by delivering satisfaction. Hence, marketing is defined as the process by which companies
create value for customers and build strong customer relationships in order to capture
value from customers in return. Today, marketing must be understood not in the old sense of
making a sale—“telling and selling”—but in the new sense of satisfying customer needs. If
the marketer understands consumer needs; develop products and services that provide
superior customer value; and prices, distributes, and promotes them effectively, this goal will
be achieved easily.

2. Marketing has been criticized because it “makes people buy things they don’t really
need.” Refute or support this accusation.

The most basic concept underlying marketing is that of human needs. Human needs are
states of felt deprivation. They include basic physical needs for food, clothing, warmth, and
safety; social needs for belonging and affection; and individual needs for knowledge and
self-expression. These needs were not created by marketers; they are a basic part of the
human makeup. Wants are the form human needs take as they are shaped by culture and
individual personality. Wants are shaped by one’s society and are described in terms of
objects that will satisfy needs. Although marketers do not create customers’ needs, they may
influence their wants.

3. Discuss the two important questions the marketing manager must answer to design a
winning marketing strategy. How does the manager go about answering these questions

To design a customer-driven marketing strategy, the marketing manager must answer two
important questions: What customers will we serve (what’s our target market)? and How
can we serve these customers best (what’s our value proposition)?
The company must first decide who it will serve—that is, the target market. It does this by
dividing the market into segments of customers (market segmentation) and selecting which
segments it will go after (target marketing). Some people think of marketing management as
finding as many customers as possible and increasing demand. But marketing managers
know that they cannot serve all customers in every way. By trying to serve all customers,
they may not serve any customers well. Instead, the company wants to select only customers
that it can serve well and profitably. Ultimately, marketing managers must decide which
customers they want to target and on the level, timing, and nature of their demand. Simply
put, marketing management is customer management and demand management. The
 company must also decide how it will serve targeted customers—how it will differentiate and
position itself in the marketplace. A company’s value proposition is the set of benefits or
values it promises to deliver to consumers to satisfy their needs.

4. What are the five different marketing management orientations? Which orientation do
you believe Apple follows when marketing products such as the iPhone and iPad?

The five alternative concepts under which organizations design and carry out their
marketing strategies are: the production, product, selling, marketing, and societal marketing
concepts.
1) The production concept holds that consumers will favor products that are available and
highly affordable. Therefore, management should focus on improving production and
distribution efficiency.
2) The product concept holds that consumers will favor products that offer the most in
quality, performance, and innovative features. Under this concept, marketing strategy focuses
on making continuous product improvements.
3) The selling concept holds that consumers will not buy enough of the firm’s products
unless it undertakes a large-scale selling and promotion effort.
4) The marketing concept holds that achieving organizational goals depends on knowing
the needs and wants of target markets and delivering the desired satisfactions better than
competitors do. Under the marketing concept, customer focus and value are the paths to sales
and profits. Instead of a product-centered “make and sell” philosophy, the marketing concept
is a customer-centered “sense and respond” philosophy.
5) The societal marketing concept questions whether the pure marketing concept overlooks
possible conflicts between consumer short- run wants and consumer long-run welfare. The
societal marketing concept holds that marketing strategy should deliver value to customers in
a way that maintains or improves both the consumer’s and the society’s well-being.

5. Explain the difference between share of customer and customer equity. Why are these
concepts important to marketers?

Share of customer is the share a business gets of the customer’s purchasing in their product
categories. For example, consumers purchase financial services from banks and other
financial institutions such as insurance companies. Many insurance companies now offer
banking and investment services to capture a greater share of an individual consumer’s
purchases of these offerings.
Increasing share of customer is one way to increase a customer’s lifetime value—the value to
a company of a satisfied, loyal customer over his or her lifetime. To increase share of
customer, firms can offer greater variety to current customers or create programs to cross-sell
and up-sell in order to market more products and services to existing customers. Customer
equity is the total combined customer lifetime values of all of the company’s current and
potential customers. Clearly, the more loyal the firm’s profitable customers, the higher the
firm’s customer equity. Customer equity may be a better measure of a firm’s performance
 than current sales or market share. Whereas sales and market share reflect the past, customer
equity suggests the future.

Understanding these concepts is important to marketers because developing marketing

activities that create value for customers should, ultimately, create value in return, in the
form of current and future sales, market share, and profits. By creating superior customer
value, the firm creates highly satisfied customers who stay loyal and buy more. This, in turn,
means greater long-run returns for the firm.

6. Discuss trends impacting marketing and the implications of these trends on how
marketers deliver value to customers.

The major changes in the marketplace are:

(1) the uncertain economic environment: sudden economic downturn, beginning in 2008 in
the United States, has left consumers short of both money and confidence, causing many of
them to rethink their spending priorities. In response, companies have aligned their marketing
strategies with the new economic reality, emphasizing the value in their value propositions.
(2) growth of digital technologies: the recent technology boom has created a digital age,
which has had a major impact on the ways companies bring value to their customers. The
digital age has provided marketers with exciting new ways to learn about and track customers
and to create products and services tailored to individual customer needs.
(3) globalization: in an increasingly smaller world, companies are now connected globally
with their customers and marketing partners.
(4) sustainable marketing: as the worldwide consumerism and environmentalism
movements mature, today’s marketers are being called to develop sustainable marketing
practices. Corporate ethics and social responsibility have become hot topics for almost every
business, and more forward-looking companies readily accept their responsibilities to the
world around them.
(5) the growth of not-for-profit marketing: marketing also has become a major part of the
strategies of many not-for-profit organizations, such as colleges, hospitals, churches, and so
on that provide value. Sound marketing can help them attract membership and support.

Chapter 2 Review Notes

Video on Moodle Nike Unveils New Commercial Featuring . . . .

1. Explain what is meant by a market-oriented mission statement and discuss the

characteristics of effective mission statements.

A mission statement is a statement of the organization’s purpose—what it wants to

accomplish in the larger environment. A clear mission statement acts as an “invisible hand”
that guides people in the organization. Some companies define their missions myopically in
product or technology terms (“we make and sell furniture” or “we are a chemical-processing
firm”). But mission statements should be market oriented and defined in terms of satisfying
basic customer needs. Products and technologies eventually become outdated but basic
market needs may last forever. Mission statements should be meaningful and specific yet
motivating. They should emphasize the company’s strengths in the marketplace. Too often,
 mission statements are written for public relations purposes and lack specific, workable
guidelines. Finally, a company’s mission should not be stated as making more sales or profits
—profits are only a reward for creating value for customers. Instead, the mission should
focus on customers and the customer experience the company seeks to create.

2. Define strategic planning and briefly describe the four steps that lead managers and the
firm through the strategic planning process. Discuss the role marketing plays in this
process.

Strategic planning is the process of developing and maintaining a strategic fit between the
organization’s goals and capabilities and its changing marketing opportunities. At the
corporate level, the company starts the strategic planning process by defining its overall
purpose and mission. This mission then is turned into detailed supporting objectives that
guide the whole company. Next, headquarters decides what portfolio of businesses and
products is best for the company and how much support to give each one. In turn, each
business and product develops detailed marketing and other departmental plans that support
the companywide plan. Marketing planning occurs at the business-unit, product, and market
levels. Marketing supports company strategic planning with more detailed plans for specific
marketing opportunities.

Marketing plays a key role in the company’s strategic planning in several ways:
(1) it provides a guiding philosophy—the marketing concept—that suggests that company
strategy should revolve around building profitable relationships with important consumer
groups;
(2) it provides inputs to strategic planners by helping to identify attractive market
opportunities and by assessing the firm’s potential to take advantage of them; and
(3) within individual business units, marketing designs strategies for reaching the unit’s
objectives.

3. Explain why it is important for all departments of an organization—marketing,

accounting, finance, operations management, human resources, and so on—to “think
consumer.” Why is it important that even people who are not in marketing understand
it?

Each department is a link in the company’s internal value chain that carries out value-
creating activities to design, produce, market, deliver, and support the firm’s products. The
firm’s success depends not only on how well each department performs its work, but also on
how well the various departments coordinate their activities. A company’s value chain is
only as strong as its weakest link. Success depends on how well each department performs its
work of adding customer value and on how well the activities of various departments are
coordinated. Ideally then, a company’s different functions should work in harmony to
produce value for consumers. Every department in an organization should “think consumer”
to deliver value for the customer, so it is important for every employee to understand his or
her role in creating customer value.
4. Define positioning and explain how it is accomplished. Describe the positioning for the
following brands: Wendy’s, Chevy Volt, Amazon.com, Twitter, and Coca-Cola.

Positioning is arranging for a product to occupy a clear, distinctive, and desirable place
relative to competing products in the minds of target consumers. Effective positioning begins
with differentiation—actually differentiating the company’s market offering so that it gives
consumers more value.

Wendy’s positioning is “Quality is our recipe.” The chain offers fresh, made-to-order high-
quality food with real ingredients.

Chevy’s Volt is “the electric car that is redefining the automotive world.” The Volt is
differentiating itself from other electric automobiles, such as Nissan’s Leaf, with its gas-
powered backup engine so there is no fear of being stranded by a dead battery.

Amazon.com offers “everything from A to Z.” Notice how the logo has an arrow going from
the A to the Z in the word Amazon and is in the shape of a smile.

With Twitter, you can “Discover what’s happening right now, anywhere in the world.” You
can find out what’s going on in 140 characters or less.

Coca-Cola’s current campaign says it all about the brand’s positioning—“Open happiness.”

5. Define each of the four Ps. What insights might a firm gain by considering the four Cs
rather than the four Ps?

The four Ps of marketing are product, price, place, and promotion.

Product means the goods-and-services combination the company offers to the target market.
Price is the amount of money customers have to pay to obtain the product.
Place includes company activities that make the product available to target consumers.
Promotion means activities that communicate the merits of the product and persuade target
customers to buy it. The four Cs—customer solution, customer cost, convenience, and
communication—describe the four Ps from the customer’s viewpoint. By examining
products and services using the four Cs, marketers may be better equipped to build customer
relationships and offer true value.

6. What is return on marketing investment? Why is it difficult to measure?

Return on marketing investment (or marketing ROI) is the net return from a marketing
investment divided by the costs of the marketing investment. It is difficult to measure
 primarily due to lack of a consistent definition of marketing ROI and tools to measure it. In
measuring financial ROI, both the R and the I are uniformly measured in dollars. But
measuring marketing benefits such as advertising impact aren’t easily put into dollar returns.

Chapter 3 Review Notes

Videos on:
1. Meet Photon
2. How to Manage Five Generations in the Modern Workplace

1. Describe the elements of a company’s marketing environment and why marketers play
a critical role in tracking environmental trends and spotting opportunities.

A company’s marketing environment consists of the actors and forces outside marketing that
affect marketing management’s ability to build and maintain successful relationships with
target customers. More than any other group in the company, marketers must be the
environmental trend trackers and opportunity seekers. Although every manager in an
organization needs to observe the outside environment, marketers have two special aptitudes.
They have disciplined methods—marketing research and marketing intelligence—for
collecting information about the marketing environment. They also spend more time in
customer and competitor environments. By carefully studying the environment, marketers
can adapt their strategies to meet new marketplace challenges and opportunities. The
marketing environment is made up of a microenvironment and a macroenvironment. The
microenvironment consists of the actors close to the company that affect its ability to serve
its customers—the company, suppliers, marketing intermediaries, customer markets,
competitors, and publics. The macroenvironment consists of the larger societal forces that
affect the microenvironment—demographic, economic, natural, technological, political, and
cultural forces. We look first at the company’s microenvironment.

2. List some of the demographic trends of interest to marketers and discuss whether these
trends pose opportunities or threats for marketers.

The major trends discussed in the chapter include: (1) the changing age structure of the
population, (2) the changing American family, (3) geographic shifts in population, (4) a
better-educated, more white-collar, more professional population, and (5) increasing
diversity.

3. Discuss current trends in the economic environment of which marketers must be aware
and provide examples of companies’ responses to each trend.

The economic environment consists of factors that affect consumer purchasing power and
spending patterns. Marketers must pay close attention to major trends and consumer
spending patterns both across and within their world markets.
4. Discuss trends in the natural environment of which marketers must be aware and
provide examples of companies’ responses to them.

The natural environment involves the natural resources that are needed as inputs by
marketers, or that are affected by marketing activities. Marketers should be aware of several
trends in the natural environment. The first involves growing shortages of raw materials.
Marketers need to rely less on nonrenewable resources and use renewable resources more
wisely. A second environmental trend is increased pollution. Industry will almost always
damage the quality of the natural environment. A third trend is increased government
intervention in natural resource management. The governments of different countries vary in
their concern and efforts to promote a clean environment. The general hope is that companies
around the world will accept more social responsibility, and that less expensive devices can
be found to control and reduce pollution.

Concern for the natural environment has spawned the so-called green movement. Today,
enlightened companies go beyond what government regulations dictate. They are developing
environmentally sustainable strategies and practices in an effort to create a world economy
that the planet can support indefinitely. They are responding to consumer demands with more
environmentally responsible products, such as recyclable or biodegradable packaging,
recycled materials and components, better pollution controls, and more energy-efficient
operations. More and more, they are recognizing the link between a healthy ecology and a
healthy economy. They are learning that environmentally responsible actions can also be
good business.

5. Compare and contrast core beliefs/values and secondary beliefs/values. Provide an

example of each and discuss the potential impact marketers have on each.

Core beliefs and values are passed on from parents to children and are reinforced by schools,
churches, business, and government.
Secondary beliefs and values are more open to change. Believing in marriage is a core belief;
believing that people should get married early in life is a secondary belief. Marketers have
some chance of changing secondary values but little chance of changing core values.

6. Explain how companies can take a proactive stance toward the marketing environment.

Many companies view the marketing environment as an uncontrollable element to which

they must react and adapt. They passively accept the marketing environment and do not try to
change it. They analyze the environmental forces and design strategies that will help the
company avoid the threats and take advantage of the opportunities the environment provides.
Other companies take a proactive stance toward the marketing environment. Rather than
simply watching and reacting, these firms take aggressive actions to affect the publics and
forces in their marketing environment. Such companies hire lobbyists to influence legislation
affecting their industries and stage media events to gain favorable press coverage. They run
advertorials (ads expressing editorial points of view) to shape public opinion. They press
lawsuits and file complaints with regulators to keep competitors in line, and they form
contractual agreements to better control their distribution channels. By taking action,
companies can often overcome seemingly uncontrollable environmental events. Marketing
management cannot always control environmental forces. In many cases, it must settle for
simply watching and reacting to the environment. For example, a company would have little
success trying to influence geographic population shifts, the economic environment, or major
cultural values. But whenever possible, smart marketing managers take a proactive rather
than reactive approach to the marketing environment.