CHAPTER 1

Marketing: The Art and Science of Satisfying Customers

MSA2005

Objectives
1. 2. 3. 4. 5. 6. 7. 8.

Define marketing, explain how it creates utility, and describe its role in the global marketplace Contrast marketing activities during the four eras in the history of mktg. Explain the importance of avoiding marketing myopia. Describe the characteristics of not-for-profit marketing. Identify and briefly explain each of the five types of non-traditional marketing Explain the shift from transaction based marketing to relationship marketing Identify the universal functions of mktg Demonstrates the relationship between ethical business practices, social responsibility, and marketplace success

MSA2005

Scope of Marketing
Marketing is typically seen as the task of creating, promoting, and delivering goods and services to final consumers and business buyers. Marketer are skilled in stimulating demand for a companys products and responsible for demand management.

MSA2005

What is Marketing?
Marketing

has been defined by the AMA as an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

MSA2005

Defining Marketing
Marketing is a societal 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. - Philip Kotler (p. 7)

MSA2005

Marketing
Marketing is the process of planning and executing the conception of, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives.

MSA2005

What is What is Marketing? Marketing?

Process by which individuals and groups

obtain what they need and want through creating and exchanging products and value with others. Marketing is the delivery of customer satisfaction at a profit.

More simply:

MSA2005

What is the Marketing Concept?

The

Marketing Concept is a business philosophy that holds that the key to achieving organizational goals consists of the companys being more effective than competitors in creating, delivering, and communicating customer value to its chosen markets.

MSA2005

Music to a Marketers Ears

Theyre the best. I always eat there. I only fly with that airline. I buy my electronics at that store.

MSA2005

AMA Mission Statement Our principal roles are: To always understand and satisfy the needs of marketers so as to provide them with products and services that will help them be better marketers. To empower marketers through information, education, relationships and resources that will enrich their professional development and careers. To advance the thought, application and ethical practice of marketing. Source: AMA, Marketing Power Web Site
MSA2005

Four Types of Utility Created by Marketers

TYPE DESCRIPTION EXAMPLES ORGANIZAITONAL FUNCTION RESPONSIBLE Form Conversion of raw materials Skippy Peanut Butter; State Farm Productiona and components into automobile insurance policy; finished goods and services Boeing 767 aircraft Availability of goods and services when consumers want them One-hour dry cleaning; Marketing LensCrafters eyeglass guarantee; Federal Express guarantee of package delivery by 10:30 a.m. the next day Soda machines in school lobbies; Marketing coffee and snacks in Barnes & Noble bookstores; day cares in office complexes; ATM machines in gas stations; mailboxes outside convenience stores Retail sales (in exchange for currency or credit-card payment); swap meets Marketing

Time

Place

Availability of goods and services at convenient locations

Ownership (possession)

Ability to transfer title to goods or services from marketer to buyer

Marketing provides inputs related to consumer preferences, but the actual creation of form utility is the responsibility of the production function.
a

MSA2005

Creating Utility

By creating Time, Place, and Ownership Utility, FedEx is adding value.

MSA2005

Marketing Variables
Marketing Mix

Product Price Promotion Distribution

Using the Marketing Mix to build long term relationships.

MSA2005

The Marketing Mix The Four Ps

The Four Cs
Marketing Mix Product Place
Channels Coverage Promotion Assortments Locations Inventory Communication Transport Sales promotion Advertising Sales Force Public Relations Direct Marketing MSA2005

Product variety Quality Design Features Brand name Packaging Sizes Services Warranty Returns

Customer Solution

Convenience

List price Discounts Allowances Credit period

Customer Cost

Price

How to Create Customers

Identifying customer needs Designing goods and services that meet those needs Communicating information about those goods and services to prospective buyers Making the goods or services available at times and places that meet customers needs Pricing goods and services to reflect costs, competition, and customers ability to buy Providing for the necessary service and followup to ensure customer satisfaction after the purchase MSA2005

Creating Customers

Creating customers that want to stay with you is all about identifying needs, providing goods and services that meet those needs, pricing, and follow-up service. AOL prides itself in making it easy to stay in touch with your loved ones and friends or to get information. You can do all of this through a very easy system to use. They also stress their customer service number for any problems customers might have.
MSA2005

Four Eras of Marketing History

ERA Production
Prior to 1920s

Sales
Prior to 1950s

Marketing
Since 1950s

Relationship
Since 1990s

A good product will sell itself.

Creative advertising and selling will overcome consumers resistance and convince them to buy.

The consumer rules! Find a need and fill it.

Long term relationships with customers and other partners lead to success.

In the United States and other highly industrialized economies

MSA2005

Company Orientations Towards the Marketplace

Production Concept Production Concept Product Concept Product Concept Selling Concept Selling Concept Marketing Concept Marketing Concept
Consumers prefer products that are widely available and inexpensive Consumers favor products that offer the most quality, performance, or innovative features Consumers will buy products only if the company aggressively promotes/sells these products Focuses on needs/ wants of target markets & delivering value better than competitors
MSA2005

Customer Delivered Value

Starting point
Factory

Focus
Existing products

Means
Selling and promotion

Ends
Profits through sales volume

(a) The selling concept

Market Customer needs Integrated marketing Profits through customer satisfaction

(b) The marketing concept

MSA2005

Relationship Marketing

Netpulse, LLC uses a monitoring system to help in diagnosing problems from a remote location. They also provide innovative ways to help their customers, Health Club Owners, attract members. Netpulse, LLC has the ability to provide cardiovascular equipment with a flat LCD screen enabling exercisers to surf the web, listen to CDs, watch personal TV, and still use the equipment. This is a good example of providing for a win, win situation leading to Relationship Marketing, the building of long term relationships.
MSA2005

Emergence of the Marketing Concept

Sellers Market. Market in which there are more buyers for fewer goods and services. Buyers Market. Market in which there are more goods and services than people willing to buy them. Consumer Orientation. Emphasizes first determining unmet consumer needs and then designing a system for satisfying them. Marketing Concept . Company-wide consumer orientation with the objective of achieving long-run success.
MSA2005

Converting Needs to Wants

By focusing on the benefits resulting from these goods and services, effective marketing converts needs and wants. Ex: A need for a pair of pants may be converted to a desire for jeans and further, a desire for jeans from Levis.

MSA2005

Avoiding Marketing Myopia

Managements failure to recognize the scope of its business.

MSA2005

Avoiding Marketing Myopia by Focusing on Benefits

Company
MCI Worldcom

Myopic DescriptionCompany MottoAvoiding Myopia

We are a telephone company. We are in the airline business. We are a communications company. We are in the transportation business. We are in the financial services business. We are in the entertainment business.
MSA2005

Northwest Airlines

Prudential Securities We are in the stock brokerage business. Sony We are in the video game business.

Marketing in not-for-profit organizations

a. Over 15 million people are employed by not-for-profit organizations. b. Not for profit organizations operate in both the public and private sectors c. Some not-for-profit organization adopt a marketing concept by forming a partnership with a for-profit company that benefits both.

MSA2005

Characteristics of not-for-profit marketing

1. The bottom line (the overall profitability and financial performance of the organization) is not the major objective of notfor-profit organizations. 2. However, not-for-profit organizations still need to generate sufficient revenues, often from donors, to accomplish their objectives. Marketing can help. 3. Like profit-seeking firms, not-for-profit organizations may market tangible goods and services. 4. A customer or service user of a not-for-profit organization often has less control over the organizations destiny than they would in the case of a profit-seeking firm. 5. Resource contributors to not-for-profit organizations may try to interfere with the marketing program in order to promote a message that the donor feels is more important.
MSA2005

Categories of Nontraditional Marketing

Type
Person marketing

Brief Description
Marketing efforts designed to cultivate the attention and preference of a target market toward a person Marketing efforts designed to attract visitors to a particular area; improve consumer images of a city, state, or nation; and/or attract new business

Examples
Celebrity Britney Spears; athlete Tiger Woods; political candidates Georgia: Experience the Soul of Georgia; Belize: Catch the Adventure; Tennessee: Sounds Good to Me

Place marketing

Cause marketing

Identification and marketing of a social issue, cause, or idea to selected target markets Marketing of sporting, cultural, and charitable activities to selected target markets

Welfare to Work. It works. Friends dont let friends drive drunk. NASCAR Pepsi 400; Beijing Olympics

Event marketing

Organization marketing

Marketing efforts of mutual-benefit organizations, U.S. Army: An Army of One. service organizations, and government American Red Cross: organizations that seek to influence others to Together we can save a life accept their goals, receive their service, or contribute to them in some way
MSA2005

Place Marketing, Form of Nontraditional Marketing

What has this type of advertising done for Louisiana tourism? Increased visitor inquiries from 525,000 to over 2.8 million. Increased visits to the state by 28% from 1993 to 2001.
Source: Peter A. Mayer Advertising Agency

MSA2005

Technology Revolution in Marketing

Interactive marketing. Buyer-seller communications. Internet. All-purpose global network of 50,000 different networks. World Wide Web (WWW or Web). Interlinked collection of graphically rich information sources within the larger Internet. Broadband technology. Extremely high speed, alwayson Internet connection. Interactive television service. A package that includes a return path for viewers to interact with programs on commercials.
MSA2005

Online Techniques Four Broad Categories

1. 2. 3.

4.

The virtual storefront allows customers to view and order merchandise. Interactive brochures range from simple, onepage electronic flyers to multimedia presentations. Online newsletters provide current news, industry information, and contacts and links for internal and external customers. The Web. Consumers can order catalogs, refer to lists of frequently asked questions with answers, place order online, and send questions to company representatives.
MSA2005

The Web Marketing Questions

What types of goods and services can be successfully marketed on the Web? What characteristics make a successful Web site? Does the Internet offer a secure way to process customer orders? How will Internet sales affect traditional store-based and non-store retailing and distribution? What is the best use of this technology in a specific firms marketing strategy: promotion, image building, or sales?
MSA2005

The shift from transaction-based marketing to relationship marketing

Converting New Customers to Advocates Emphasize on Customer Lifetime Value Developing partnership and strategic alliances
Advocate
Loyal Supporter

Regular Purchaser

New Customer

The development, growth, and maintenance of longterm, cost-effective exchange relationships with individual customers, suppliers, employees, and other partners for mutual benefit.
MSA2005

Eight Universal Marketing Functions

1. Buying 2. Selling 3. Transporting 4. Storing 5. Standardizing and grading 6. Financing 7. Risk Taking 8. Securing Marketing Information
MSA2005

Programs that Promote Ethical Behavior and Social Responsibility Produce

Increased Employee Loyalty

Better Public Image Market Place Success Improved Financial Performance

MSA2005

Core Marketing Concepts

Needs, wants, and demands

Products and Services

Core Marketing Concepts

Markets Value, satisfaction, and quality Exchange, transactions, and relationships

MSA2005

What Motivates a Consumer to Take Action?

Needs - states of felt deprivation including physical needs for food, social needs for belonging and individual needs for selfexpression. i.e. I am thirsty. Wants - form that a human need takes as shaped by culture and individual personality. i.e. I want a Coca-Cola. Demands - human wants backed by buying power. i.e. I have money to buy a CocaCola.
MSA2005

What Will Satisfy Consumers Needs and Wants?

Products - anything that can be offered to a market to satisfy a need or want. Products also include: Persons, Places, Organizations, Activities, and Ideas.

Services - activities or benefits offered for sale that are essentially intangible and dont result in the ownership of anything. Examples: banking, airlines, haircuts, and hotels.
MSA2005

How Do Consumers Choose Among Many Products and Services?

Customer Value - difference between the value the customer gains from owning and using a product and the cost of obtaining the product. Customer Satisfaction - depends on the products perceived performance in delivering value relative to a buyers expectations. Both are closely linked to Quality and Total Quality Management (TQM).

MSA2005

How do Consumers Obtain Products and Services?

Exchanges - act of obtaining a desired object from someone by offering something, such as money, another good, or a service, in return. Transactions - trade of values between parties: one party gives X to another party and gets Y in return. Relationship Marketing - building long-term relationships with valued consumers, distributors, dealers, and suppliers.
MSA2005

Who Purchases Products and Services?

Market --buyers Market buyers who share a who share a particular need particular need or want that can or want that can be satisfied through be satisfied through exchanges and exchanges and relationships relationships Actual Actual Buyers Buyers

Potential Potential Buyers Buyers

MSA2005

Modern Marketing System

Suppliers Suppliers

Competitors Competitors

Environment

Company Company (Marketer) (Marketer)

Environment

Marketing Marketing Intermediaries Intermediaries

End User End User Market Market

MSA2005

Traditional Organization Chart

Top Management Middle Management Front-line people Customers

MSA2005

Customer-Oriented Organization Chart

Customers Front-line people Middle management Top management
s er om
us t C

om

er s
MSA2005

C t us

How Business and Marketing Changing

Customers increasingly expect higher quality and service and some customization Customers are more sensitive to price changes Customers can get more information easily Brand manufacturers are facing intense competition from domestic and foreign brands Increasing promotion costs and shrinking profit margin Store-based retailers are suffering due to the growing power of giant retailers and category killers Over saturation of store-based retailers New techniques in marketing products

MSA2005

Marketers responses and adjustments

Customers relationship marketing Customer lifetime value Target marketing Customization Customer database Integrated marketing communications Channels as partners Every employee a marketer Model-based decision making

MSA2005

Review
Course

Organization Tasks of Marketing Major Concepts & Tools of Marketing Marketplace Orientations Marketings Responses to New Challenges

MSA2005