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Marketing: Real People, Real Choices

Ninth Edition

Chapter 1
Welcome to the
World of
Marketing

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Learning Objectives
1.1 Explain what marketing is, the marketing mix, what

can be marketed, and the value of marketing.


1.2 Explain the evolution of the marketing concept.
1.3 Understand value from the perspectives of
customers, producers, and society.
1.4 Explain the basics of market planning.

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Real People, Real Choices:
A Decision Maker at Twitter
Which option should be pursued?
• Option 1: Hold weekly meetings to discuss ideas and
innovations within Twitter
• Option 2: Build an internal online tool to allow
employees to share, build, and measure ideas
• Option 3: Get feedback from the external Twitter
community to shape Twitter’s product vision

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Marketing: What is it?
• As consumers, you all know a lot about it!
• Marketing is first and foremost about satisfying
customer needs in a profitable manner.

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AMA Definition of Marketing
• 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.

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Marketing Defined: Activity,
Institutions, Processes
• Marketing includes many different activities:
 More than just sales and advertising
 Involves interactions with non-marketers: Finance,
HR, MIS, Operations, Accounting, etc.
• Marketing is also a decision process.

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Marketing Defined: Creating,
Communicating, Delivering, and
Exchanging

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Marketing Facilitates Exchange
• Exchange occurs when one party gives up
something and in return for receiving something
else.
• Conditions for Exchange
 At least two people or organizations must be willing
to make a trade.
 Have something the other party wants
 Agree on value of exchange and terms
 Each party free to accept or reject exchange

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Marketing Defined: Offerings
• Product: any good, service,
or idea
 Consumer goods/services
 Business-to-business
goods/services
 Not-for-profit marketing
 Idea, place, and
people marketing

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15 Minutes of Frame
• People “package” themselves with their social
media profiles.
• Microcelebrity

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Marketing Defined: Value for
Customers
• Marketing concept
 Modern marketers practice the marketing concept:
identifying and satisfying the needs of consumers to
ensure profitability.
• Practicing the marketing concept is complex.

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Needs, Wants, and Benefits
• Needs
 Difference between actual and desired state
 Can be physiological or psychological

• Wants
 Desire to satisfy a need in a particular way
 Influenced by history, past experience, and culture
• Benefits
 Consumer received benefit when need satisfied

• Demand
 Customers’ desires for products coupled with the resources
needed to obtain them

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Markets and Marketplaces
• A market consists of all consumers who share a
common need that can be satisfied by a specific
product, and who have resources, willingness and
authority to purchase.
• A marketplace is any location or medium used to
facilitate an exchange.

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Collaborative Consumption
• Consumers increasingly would rather rent than
purchase the products they use.
 Examples?
• Traditional marketers are also looking to take
advantage of this trend.

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Marketing Creates Utility
• Utility represents the sum of benefits a consumer
receives from use of a product.
 Form utility
 Place utility
 Time utility
 Possession utility

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Place Utility
• Rent the Runway is a new
service that rents high-end
dresses from fashion
designers and rents them
at a one-tenth of the cost of
buying the same garment in
the store.
Rent the Runway

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Marketing Defined: Value for Society
• Is it possible to make profits and contribute to
society and the planet in a positive way?
• Corporate responsibility at Target
 In 2012, Target set goals for all seafood sold in
stores to be sustainable and traceable.
 Reusable bag program saves consumers $7
million.
 50+% of apparel is labeled “machine wash cold” to
help reduce energy consumption.

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Summary: Marketing Defined
• Marketing encompasses activities and process that
create, communicate, deliver value-based
exchanges.
 Benefits to stakeholders beyond just businesses and
consumers
How does the definition of marketing relate to you
as a consumer? To your future career?

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Evolution of the Marketing Concept
• Production era
• Selling era
• Relationship era
• Triple bottom-line era

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Production Era
• Marketing dominated by a production orientation
 A management philosophy that emphasizes the
most efficient ways to produce and distribute
products.
• Marketing promotions played a minor role.
• Henry Ford’s Model T and Ivory soap are examples
of products that were created under a production
orientation.

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Sales Era
• Dominated by selling orientation
 A managerial view of marketing as a sales function,
or a way to move products out of warehouses to
reduce inventory.
 Emphasis on aggressive promotional activities
• Post–World War II, production capacity exceeded
demand.
 Led businesses to focus on one-time sales of goods
rather than repeat business.

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Relationship Era
• Focused upon a consumer orientation
 A management philosophy that emphasizes
satisfying customers’ needs and wants
• Marketing plays a more central role
 Emergence of the marketing concept
 Total Quality Management (TQM) and other quality
initiatives gains wide acceptance

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Triple Bottom-Line Era
• Management seeks to
maximize financial,
social, and
environmental bottom
lines.
 Emergence of societal
marketing concept
 Emphasis on ROI
measurement across
all three areas
This ad focuses on the
environmental bottom line

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Sustainability
• Sustainability is about creating products that
meet present needs while ensuring future
generations can have their needs met.
 Green marketing is one type of sustainable
business practice.

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What’s Next in the Evolution of
Marketing?
• Mobile marketing
• User-generated content
• Corporate citizenship
• Big data

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The Changing World of Marketing
• Marketing has experienced many changes
 Production → Selling → Relationship → Triple
Bottom Line
• Marketing in the midst of an exciting period of
rapid change right now!
What skills will marketers need to succeed in a “Big
Data” era?

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Ethical/Sustainable Decisions in the
Real World
• Many people are literally addicted to their phones
and tablets.
• Nearly three-quarters of Americans sleep with
their smart phones.
Should companies try to increase the amount of time
consumers spend with their small screens?

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The Value of Marketing and the
Marketing of Value
• Value is benefits received by the consumer from a
product relative to total costs.
• Marketing activities lead to value creation through
innovations that enhance customer benefits and
reduce costs.
• Marketing promotional activities communicate the
value proposition.

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Value from the Customer’s
Perspective
• Customer perspective:
 Value is the ratio of perceived benefits to perceived
costs.
 Value proposition includes the whole bundle of
benefits the firm promises to deliver, not just the
benefits of the product itself.

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Value from the Seller’s Perspective
• Value for the seller can take many forms.
• What is the economic value of a single customer?
 Typically more costly to acquire than to retain
• Marketers should look to increase value through
co-creation.

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Table 1.4 An Example of a Customer
Service Scorecard
Item 1st Qtr. Quarterly Scores 2nd 3rd Qtr.
Qtr.

Satisfaction with blank blank blank


C1 Employee responsiveness 60% 65% 68%
C2 Product selection 60% 62% 63%
C3 Service quality 60% 62% 55%
C4 Cleanliness of facility 75% 80% 85%
C5 Knowledge of employees 62% 62% 58%
C6 Appearance of employees 60% 62% 63%
C7 Convenience of location 60% 65% 68%

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Table 1.5 How Some Firms Achieve a
Competitive Advantage with a
Distinctive Competency
Company Distinctive Differential Benefit Competitive Advantage
Competency
Coca-Cola Distribution and Convenience and Other soft drinks are unable to take
marketing brand awareness for loyal customers away from Coke.
communications customers all over Coca-Cola has more than 50% of the
the world world soft-drink market.
Apple Product quality and Easy access to Apple’s sales of its Mac computer
design cutting-edge increased 28.5% as the overall
technology market for PCs decreased.
Southwest Price point Appeals to budget- Southwest is the number one
Airlines conscious domestic carrier in the U.S.
consumers
Amazon.co Fulfillment and Availability, Amazon holds about a 50% market
m distribution convenience, and share for books sold via the Internet.
ease of access of
product
Starbucks Product quality Customer Starbucks has just under 33% of the
satisfaction market share in its industry.

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Figure 1.2 A Value Chain for the
Apple iPod

Source: Based on information from Erik Sherman, “Inside the Apple iPod Design Triumph,”
May 27, 2006, http://www.designchain.com/coverstory.asp?issue=summer02.

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Figure 1.3 Steps in the Value Chain

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Consumer Generated Value: From
Audience to Community
• Everyday people are generating value instead of
just buying it.
/www.crashthesuperbowl.com
• Web 4.0 puts the internet on smart phones.
• Social networking platforms provide numerous
opportunities for marketers.

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Value from Society’s Perspective
• Marketing transactions may add or subtract value
from society.
 Stressing socially responsible and ethical decisions
is good for business.
• Marketing often faces criticisms.
 “Dark side” marketing and consumption issues.

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Value of Marketing
• Marketing activities facilitate exchanges that
create, communicate, and deliver value to
customers.
• Sellers and society at large also derive value from
these exchanges.
 But marketing is sometimes misused
Are criticisms of marketing justified?

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Marketing as a Process (1 of 2)
Marketers ask questions related to:
• Product benefits
• Capabilities
• Additional customer groups
• Changes in technology
• Changes in social and cultural values
• Environmental issues
• Legal and regulatory issues

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Marketing as a Process (2 of 2)
• Marketing plan
• Mass market
• Market segment
• Target market
• Positioning

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Copyright

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