CHAPTER

ONE

MARKETING: A FOCUS ON CUSTOMER RELATIONSHIPS AND VALUE

1-1

2000 McGraw-Hill Ryerson Limited

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

Define marketing and explain the importance of (1) discovering and (2) satisfying consumer needs and wants. Distinguish between marketing mix elements and environmental factors. Understand how organizations build strong customer relationships using current thinking about customer value and relationship marketing.
1-2
2000 McGraw-Hill Ryerson Limited

AFTER READING THIS CHAPTER YOU SHOULD BE ABLE TO:

Describe how todays market orientation era differs from prior eras oriented to production and selling. Understand the meaning of ethics and social responsibility and how they relate to the individual, organizations, and society. Know what is required for marketing to occur and how it creates customer value and utilities for consumers.
1-3
2000 McGraw-Hill Ryerson Limited

Rollerblade Skates
Conversations with in-line skaters indicated that using Rollerblade skates: was incredible fun was a great aerobic workout and made the skater stronger and healthier was quite different from traditional skating, which was practiced alone, mostly inside, and by young girls would have great appeal to people other than just off-season ice hockey skaters and skiers.
1-4
2000 McGraw-Hill Ryerson Limited

PP1-1 Number of In-line skaters in North America

Number of N. A. in-line skate participants (millions) 35 30 25 20 15 10 5
3.0 David Samuels and his Rollerblade team target new opportunities

Number Numberof of in-line skaters in-line skaters passes passes10,000,000 10,000,000 Two Twobrothers brothers reinvent reinvent in-line in-lineskates skates
Rollerblades guerilla marketing launches in-line skate industry

First FirstExtreme Extreme Games Gamesfeatures features in-line skating in-line skating competition competition
18.8

29.1 27.5

22.5

12.6 9.4 6.2 4.3

0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000

1-5

2000 McGraw-Hill Ryerson Limited

PP1-2a The see-if-youre-really-a-marketing-expert test

1.In a magazine article, a well-known actress said she often Rollerbladed for fun and exercise. What was Rollerblade, Inc.s reaction? (a) delighted, (b) upset, or (c) somewhere in between. Why? 2.What is Polavision? (a) a new breathable contact lens, (b) a TV network that competes with Home Box Office, (c) special bifocal glasses, (d) instant movies, or (e) a political newspaper.
1-6
2000 McGraw-Hill Ryerson Limited

PP1-2b The see-if-youre-really-a-marketing-expert test

3. Right after World War II, IBM commissioned a study to estimate the total market for electronic computers. The studys results were (a) less than 10, (b) 1,000, (c) 10,000, (d) 100,000, or (e) 1 million or more. 4. True or false: Building good customer relationships is a critical marketing issue today, as illustrated by having a loyal Kleenex customer spending more than $1,000 during his or her lifetime, in todays dollars. 5. True or false: Grinding done by city kids today uses a skateboard with bad wheels or bearings.
1-7
2000 McGraw-Hill Ryerson Limited

Definition of Marketing

Marketing Marketing is is .. .. .. ..
the the process process of of planning planning and and executing executing the the conception, conception, pricing, pricing, promotion, promotion, and and distribution distribution of of ideas, ideas, goods, goods, and and services services to to create create exchanges exchanges that that satisfy satisfy individual individual and and organizational organizational objectives. objectives.
1-8
2000 McGraw-Hill Ryerson Limited

Definition of Market Orientation

An An organization organization that that has has a a market market orientation orientation focuses focuses its its efforts efforts on on .. .. .. ..
(1) (1)Continuously Continuously collecting collectinginformation information about about customers customers needs needsand and competitors competitors capabilities, capabilities,

(2)sharing (2)sharing this this information information across across departments, departments, and and (3) (3)using using the the information information to tocreate create customer customer value. value.
1-9
2000 McGraw-Hill Ryerson Limited

Definition of Exchange

Exchange Exchange is is .. .. .. ..
the the trade trade of of things things of of value value between between buyer buyer and and seller seller so so that that each each is is better better of of after after the the trade. trade.
1-10
2000 McGraw-Hill Ryerson Limited

PP1-3 An organizations marketing department relates to many people, groups, and forces The Organization Society Society
Alliances Other Organizations Research and Development Human Resources Ownership Shareholders (owners)

Manufacturing Partnerships Suppliers

Management

Information Systems Relationships

Finance

Marketing

Customers

Environmental
Social
1-11

Forces
Competitive Regulatory

Economic

Technological

2000 McGraw-Hill Ryerson Limited

Requirements for Marketing to Occur

For marketing to occur, at least 4 factors are required: 1. Two or more parties (individuals or organizations) with unsatisfied needs, 2. a desire and ability on their part to be satisfied, 3. a way for the parties to communicate, and 4. something to exchange.
1-12
2000 McGraw-Hill Ryerson Limited

Concept Check

1. 2.

What is marketing? Marketing focuses on __________ and _________ consumer needs.

3.

What four factors are needed for marketing to occur?

1-13

2000 McGraw-Hill Ryerson Limited

Needs & Wants

Should marketing try to satisfy consumer needs or wants? A need occurs when a person feels physiologically deprived of basic necessities such as food, clothing, and shelter. A want is a felt need that is shaped by a persons knowledge, culture, and personality. What are the legal, ethical, and moral implications of satisfying wants and needs?
1-14
2000 McGraw-Hill Ryerson Limited

PP1-4 Marketings first task:discovering consumer needs

Organizations marketing department

Discover consumer needs

Information about needs

Potential consumers: The market

1-15
2000 McGraw-Hill Ryerson Limited

What is a Market?
Potential consumers make up a market, which is: 1. 2. 3. People with the desire and with the ability to buy a specific product.
1-16
2000 McGraw-Hill Ryerson Limited

The Target Market

Because the organization obviously cant satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers. This is the target market -- one or more specific groups of potential consumers toward which an organization directs its marketing program.
1-17
2000 McGraw-Hill Ryerson Limited

The Four Ps: Controllable Marketing Mix Factors

Product Price Promotion Place

1-18
2000 McGraw-Hill Ryerson Limited

The Uncontrollable, Environmental Factors

Social Factors Economic Factors Technological Factors Competitive Factors Regulatory Factors
1-19
2000 McGraw-Hill Ryerson Limited

PP1-A Summary of factors that affect an organizations marketing program

e tiv c r o f es

Ec

on

m Co

ti e p

om

Marketing program

ic

for

ce

Prom

Prod

uct

otion

Technological forces

Environmental forces
1-20
2000 McGraw-Hill Ryerson Limited

Soci

Pr

ice

ac l P

al fo

rces

Reg ulat ory forc es

Consumer

Customer Value

Customer Customer value value is is.. .. .. ..

the the unique unique combination combination of of benefits benefits received received by by target target buyers buyers that that includes includes
quality quality price price convenience convenience on-time on-time delivery delivery before before & & after-sale after-saleservice service

1-21

2000 McGraw-Hill Ryerson Limited

Relationship Marketing
Relationship marketing is linking the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefits. Mutual long-term benefits between the organization and its customers require links to other vital stakeholders-including suppliers, employees, and partners such as wholesalers or retailers in a manufacturers channel of distribution.
1-22
2000 McGraw-Hill Ryerson Limited

Mass Customization Mass Customization is tailoring goods or services to the tastes of individual customers in high volumes at a relatively low cost.
1-23
2000 McGraw-Hill Ryerson Limited

Definition of Marketing Program

A A marketing marketing program program is. is. .. .. ..

a a plan plan that that integrates integrates the the marketing marketing mix mix to to provide provide a a good, good, service, service, or or idea idea to to prospective prospective buyers. buyers.
1-24
2000 McGraw-Hill Ryerson Limited

PP1-5 Marketings Second Task: Satisfying Consumer Needs

Organizations marketing department

Concepts for products

Discover consumer needs

Satisfy consumer needs Find the right combination of: Product Price Promotion Place

Information about needs

Goods, services, ideas

Potential consumers: The market

1-25
2000 McGraw-Hill Ryerson Limited

PP1-6a Marketing Program for two of Rollerblade, Inc.s skates, targeted at two distinctly different segments
Marketing Program Activity to Reach Marketing Mix Element Product Fast-Growing Kids Segment Offer the Xten-plus skate for children that extends so that it changes four shoe sizes as the children grow Rationale for Rough-Road Marketing Program Segment Activity Offer the Outback Use new-product X skate with research, the latest trapped air filled technology, and wheels & a fullextensive testing to suspension frame offer high-quality that cushions the skates that satisfy ride on rough the wants & needs roads & cracked of carefully defined pavement customer segments
2000 McGraw-Hill Ryerson Limited

1-26

PP1-6b Marketing Program for two of Rollerblade, Inc.s skates, targeted at two distinctly different segments
Marketing Program Activity to Reach Marketing Mix Element Price Fast-Growing Kids Segment Price @ $99/pair Rationale for Rough-Road Marketing Program Segment Activity Price @ $199/pair Attempt to set prices that provide genuine value to the customer segment that is targeted

1-27

2000 McGraw-Hill Ryerson Limited

PP1-6c Marketing Program for two of Rollerblade, Inc.s skates, targeted at two distinctly different segments
Marketing Program Activity to Reach Marketing Mix Element Promotion Rationale for Fast-Growing Rough-Road Marketing Program Kids Segment Segment Activity Use demo vans & blade- Feature Rblade Continue to increase mobiles to introduce brand in ESPN awareness of in-line children to in-line in-line sports skating to those new skating while working competitions & to the sport while with Rblade dealers magazines such offering specific to place ads in local as Shape, Fitness, skate designs for newspapers Mademoiselle, and more advanced inline & local segments want them newspapers
2000 McGraw-Hill Ryerson Limited

1-28

PP1-6d Marketing Program for two of Rollerblade, Inc.s skates, targeted at two distinctly different segments
Marketing Program Activity to Reach Marketing Mix Element Place Fast-Growing Kids Segment Distribute the Xtenplus through sporting goods stores Rough-Road Segment Distribute the Outback X through specially in-line sporting goods stores Rationale for Marketing Program Activity Make it easy for buyers in the segment to buy at an outlet that is convenient and where they feel comfortable

1-29

2000 McGraw-Hill Ryerson Limited

How Rollerblade, Inc.s marketing mix actions today differ from those in 1986
BASIS OF COMPARISON
Number of competitors Main Rollerblade marketing objective Main marketing mix actions Product Price Promotion Place Place

SITUATION IN 1986
Almost none Inform/educate potential buyers; gain awareness Only a few models Relatively high, narrow range Guerilla marketing promotions on tiny budget to gain product exposure Sporting Sportinggoods goodsstores stores

SITUATION SITUATION TODAY TODAY

Over Over30 30 Stress StressRollerblades Rollerbladesbrand brand differences from competitors; differences from competitors; maintain maintainbrand brandloyalty loyalty Many Manymodels modelstargeted targetedat at different differentmarket marketsegments segments Wide Widevariations, variations,depending dependingon on model and retail outlet model and retail outlet More Morediverse diversepromotions, promotions,ads ads to stress Rollerblades brand to stress Rollerblades brand differences/advantages differences/advantages Broadened Broadeneddistribution distributionto to include chains, mass retailers include chains, mass retailers
2000 McGraw-Hill Ryerson Limited

1-30

Concept Check
1. An organization cant satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its ______________. What are the four marketing mix elements that make up the organizations marketing program? What are uncontrollable variables?
2000 McGraw-Hill Ryerson Limited

2.

3.
1-31

PP1-7 Four different orientations in the history of North American business

Production era

Sales era Marketing concept era

Market orientation era

1860 1880 1900 1920 1940 1960 1980 2000

1-32

2000 McGraw-Hill Ryerson Limited

Ethics & Social Responsibility -- Key Terms

ethics social responsibility societal marketing concept macromarketing micromarketing

1-33
2000 McGraw-Hill Ryerson Limited

The Breadth & Depth of Marketing

How marketing affects every person and organization Who markets? What do they market? Who buys and uses what is marketed? Who benefits from these marketing activities? How do they benefit?
1-34
2000 McGraw-Hill Ryerson Limited

Who buys and uses what is marketed?

Ultimate Consumers

Organizational Buyers
1-35
2000 McGraw-Hill Ryerson Limited

How Do Consumers Benefit?

Utility Utility Form Form Place Place Time Time Possession Possession
1-36

Examples Examples of ofMarketing Marketing Actions Actions that thatCreate CreateUtility Utility Product Productdesign, design, packaging packaging Distribution, Distribution, store storelocation location Inventory Inventory management, management, warehouses, warehouses, delivery delivery Transactions, Transactions, transfer transfer of ofownership ownership
2000 McGraw-Hill Ryerson Limited

Concept Check
1. Like Pillsbury, many firms have gone through four distinct orientations for their business: starting with the _______ era and ending with todays _______ era. What are the two key characteristics of the marketing concept? In this book the term product refers to what three things?
2000 McGraw-Hill Ryerson Limited

2. 3.

1-37