Download review your understanding

CHAPTER 1
MARKETING: CONNECTING WITH CUSTOMERS
CHAPTER OBJECTIVES:
1. Introduce the concept of marketing, including its definition, purpose, and role in
creating exchanges.
2. Provide an overview of what is involved in making marketing decisions, including
examples of product, price, promotion, and place decisions to create a marketing mix.
3. Contrast the periods of marketing evolution, from the early history through the eras of
production, sales, and customer marketing, leading up to today.
4. Show the five key forces that are dramatically influencing how organizations will
connect with customers in the 21st century.
5. Illustrate how marketing pertains to each individual.
CHAPTER OUTLINE:
Teaching Note: As discussed in the early part of this chapter, many people view
marketing as promotion. Whether in the form of advertising, sales promotion, or even
personal selling, these are the most visible and obvious elements of marketing to the
typical consumer. As an instructor in this field we must be prepared to provide a detailed
answer the question, “what is marketing?” In doing this, what we must initially
accomplish is to show the student that much of marketing occurs “behind the scenes”
and that marketing’s role in society has evolved over the years and continues to do so.
In a way, marketing is just a complicated process of matching materials found in nature
or fabricated from those materials with the needs of individuals. Matching of each
individual need, of course, would be impossible if the consumer had to search out each
item they required from the producer. As such, marketing plays an important role in the
accumulation and allocation of goods. Marketing is also a study of considerations on the
decision to trade or not to trade. Sellers may accept low prices if they are relived of
certain requirements while buyers may pay a higher price if provide with extra services
or some sort of additional value.
Marketers also need some sort of general explanation for the behavior of individuals and
organizations insofar as conscious choice is involved. As a result, marketing is often a
function of psychology, sociology, and anthropology mixed with economics. Someday
marketing may need to even look beyond the act of purchasing goods and service more to
the study of why buyers consume products to begin with.
1
1) The Concept of Marketing: Connecting with Customers
2) The Definition of Marketing
a) The Process of Planning and Executing
b) Product, Price, Promotion, and Place
c) Markets for Ideas, Goods, and Services
i) Consumer Markets
ii) Business-to-Business Markets
iii) Nonprofit Markets
iv) Internal Markets
d) Creates Exchanges That Satisfy Individual and Organizational Objectives
i) Form, Place, Time, and Ownership Utility
ii) Organizational Objectives
3) The Marketing Concept: The Purpose of Marketing
a) Understand the Needs and Wants of Customers
b) Create Customer Value Through Satisfaction and Quality
c) More Effectively and Efficiently Than Competitors
4) The Marketing Strategy Process
a) Situation Analysis
b) Targeting
c) Positioning
d) Marketing Mix Decisions
i) Product Strategy
ii) Place Strategy
iii) Promotion Strategy
iv) Price Strategy
5) The Evolution of Marketing
a) The Production Era
b) The Sales Era
c) The Customer Marketing Era
6) Connecting With Customers in the 21st Century
a) Connecting Through Relationships
2
b) Connecting Through Technology
i) Process and Product Technology
ii) The Internet
iii) Marketplace and Marketspace
c) Connecting Globally
d) Connecting With Diversity
e) Connecting Ethically
i) Ethics
ii) Social Responsibility
7) Marketing: Your Involvement
CONNECTED: SURFING THE WEB
Procter & Gamble
1. Find and read P&G’s history from 1945 to 1980 called “New Lands and Dynamic
Growth.” Relate this information to its relevant period of marketing evolution.
The information found in “New Lands and Dynamic Growth” relates to the
production era of the marketing evolution.
2. Choose a recent news release that discusses one of the five key marketing forces.
Describe how this might influence or affect P&G’s ability to connect with customers.
A news release titled “Procter and Gamble Signs Record Contract with Minority
Vendor, Specialized Package Group” shows P&G’s shows the use of one of the five
key marketing forces. The contract with Specialized Package Group underlines the
program’s unquestionable value in terms of building relationships with minority
businesses and minority consumers.
3. Locate and read P&G’s pages on diversity. Why does P&G value a diverse
organization? How might these values influence marketing decisions?
P&G believes developing and managing a strong, diverse organization is essential to
achieving their business purpose and objectives. They value the different
perspectives that diverse people bring to the business. The workplace environment
encourages collaboration, which brings different talents and experiences together to
produce better ideas and superior services and products.
General Mills
1. Find and read General Mills’ information on its international operations. Select a
strategic alliance General Mills has formed with another organization. How do you
think this alliance contributes to relationship marketing?
3
General Mills had formed a strategic alliance will Nestle to form Cereal Partners
Worldwide. This joint venture will build a strong foundation for General Mills'
future growth worldwide.
2. Read “What’s News” and select an example of General Mills using one or more
elements of the marketing mix. Do you think this is an effective way to make a
connection with customers? Why or why not?
The news release titled "Betty's Baked Goods Coming to Knott's Camp Snoopy at
Mall of America" shows that General Mills is effectively combining the four
controllable variables of marketing- product, price, promotion, and place. This is an
effective way to connect with consumers. The new store will be selling Betty
Crocker products in a large, successful mall. This business decision is sure to become
a money-maker.
3. In what types of markets foes General Mills operate? Give examples.
General Mills operates in the market of consumer foods. With sales in excess of $5
billion, General Mills ranks among the largest consumer foods companies in the
United States.
REVIEW YOUR UNDERSTANDING
1. What is marketing? What are the key elements in its definition?
Marketing is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create exchanges that
satisfy individual and organizational objectives. (pp. 5-6)
2. What are the four basic areas (types of markets) where marketing is typically
applied?
Marketing is typically applied in consumer markets, business-to-business markets,
nonprofit markets, and internal markets. (pp. 6-8)
3. What is a utility? What are the four types of utility involved in marketing exchanges?
Utility is a term economists use to describe the want-satisfying potential of a good or
service. There are four fundamental types of utility- form, place, time, and
ownership. (pp. 8-9)
4. What is the difference between a need and a want? Give examples of each.
Needs are fundamental requirements the meeting of which is the ultimate goal of
behavior. Wants are a specific form of consumption desired to satisfy needs.
For example, Boeing addresses the need of United Airlines for aircraft by designing
planes the airline will want. (p. 10)
5. What is the marketing concept? What are its three key aspects?
The marketing concept recognizes the long-run nature of successful marketing. It’s
three key aspects are: to understand the needs and wants of customers, to create
4
customer value through satisfaction and quality, and to operate more effectively and
efficiently than competitors. (pp. 9-10)
6. What is a marketing strategy? Describe each of its four steps.
The marketing concept is implemented through the marketing strategy process, the
series of steps the organization takes to interface with the rest of the world. The four
steps are: situation analysis, targeting, positioning, and development of the marketing
mix. (p. 12)
7. How do product, place, promotion, and price decisions form the marketing mix?
Give examples of each decision.
Product strategy includes decisions about which products to develop, how to manage
current products, and which products to phase out. The object of place strategy is to
serve customers by providing products where and when they are needed. The
promotion strategy includes determining the objectives to be attained, as well as
creating messages and the forms they will take. The objective of price strategy is to
set prices to reflect the value received by customers and to achieve the volume and
profit required by the organization. (pp. 14-16)
8. What the stages in marketing evolution? Describe each of the three marketing eras.
The stages in marketing evolution are the production era, sales era, and customer
marketing era. During the production era, companies focused on ways to make
products in mass quantities. The sales era focused on ways to sell more efficiently.
The customer marketing era emphasizes customer satisfaction and value. (pp. 16-17)
9. What are the five key forces shaping marketing as we enter the 21st century?
Describe each.
The future will center around better ways of connecting with customers. The five key
forces are: connecting through relationships, connecting through technology,
connecting with diversity, connecting globally, and connecting ethically. (p. 18)
10. How does marketing relate to you? List four ways.
Marketing affects everybody in many ways. It comes from many angles- the
prospective marketer, member of a target market, as a customer, and as a citizen.
(p. 29)
DISCUSSION OF CONCEPTS
1. Describe marketing, highlighting examples from your daily life that illustrate each of
its four aspects.
Marketing, as defined by the American Marketing Association (AMA), is the process
of planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, and services to create exchanges that satisfy individual and
organizational objectives. Marketing, is thus actions, decisions, and relationships that
firms execute with respect to all customers in an attempt to satisfy their needs and
5
wants. Examples should look to exploring how the product, price, place, and
promotion elements of marketing impact customers each and every day.
Teaching Note: It is important to stress that marketing must adjust to the ever
changing needs of customers and society. Some marketers will argue that selling to
consumers is easier in some senses and more difficult in others. There are many new
way to reach customers through direct marketing and yet the customer is often
overwhelmed by communication and distribution tactics of today. Five different
marketers can arrive at five different solutions to the same problem. All may be
right; all may be wrong. In marketing we really don’t know the right decision from
the wrong decision until after it has happened. Further, all the marketing science in
the world will never eliminate the gut instinct that sometimes works in spite of all of
the evidence to the contrary. Nevertheless, there is a logic and a system to marketing
that greatly increases the probability of success. These are what must be learned.
(See slides 1-1 and 1-2)
2. Identify one company with which you are familiar and describe four ways in which it
provides utility.
The local tire stores offers form utility selling rubber, nylon, and steel that has been
combined and formed into a mixture that fits the size required on my vehicle. They
offer the product in the town that I live in and therefore they provide place utility.
The store has inventory in stock that meets my needs when I want to buy and they
allow the transaction to occur more easily by accepting credit cards as a form of
payment for the tires.
Teaching Note: It is important to expand upon the notion of form utility to take into
account both goods and services. Whether the production process results in a
tangible product or an intangible service, it always converts inputs into outputs. In
this conversion process, it may make major changes in raw materials or combine a
set of finished components. A meat cutter performs a production function by reducing
a side of beef to steaks, roasts, and ground beef. A railroad combines trains, rails,
and employees to create its output: the service of carrying passengers where they
want to go. Both of these processes create form utility. (See slide 1-3)
3. Discuss the activities involved in implementing the marketing concept. How do they
pertain to customers, competitors, and the marketing organization?
Implementing the marketing concept means accomplishing three things. First,
understanding the needs and wants of the customer. Next, creating customer value
through satisfaction and quality. Finally, operating more effectively and efficiently
than the firm’s competitors. Clearly, this means that a firm that practices the
marketing concept understands the customer, the competitive environment, and the
goals that are appropriate for the organization.
Teaching Note: General Electric’s 1952 annual report included a comment that is
often considered the original description of the marketing concept. It is as follows:
6
“. . . introduces marketing at the beginning, rather than at the end of the production
cycle, and integrates marketing into each phase of the business. Thus, marketing,
through its studies and research, will establish for the engineer, the design and
manufacturing departments, what the consumer wants in a given product, what price
he is willing to pay, and where and when it will be wanted. Marketing will have
authority in product planning, production, scheduling, and inventory control, as well
as in sales, distribution, and servicing of the product.” (See slide 1-4)
4. Describe the steps in developing a marketing strategy. Why is it important to target
prior to positioning? Why is positioning important prior to marketing mix decisions?
The steps in developing a marketing strategy are:
 Situation analysis – understanding the marketing environment, the customers
needs, and the competition
 Targeting – selecting groups of potential customers that the firm hopes to satisfy
 Positioning – creating a unique image for the firm’s products in the mind of the
target market
 Developing the marketing mix – creating a product, price, place, and promotion
strategy to meet the needs of the target market.
Targeting is done first so that the customers are identified and understood.
Positioning is done next so that the marketing mix strategies can be developed to
support the product’s unique image.
Teaching Note: The term “positioning” is most commonly applied to decisions
concerning brands, but it is also used to describe the same decisions for stores,
companies, and whole product categories. Product positioning decisions are
strategic decisions. Consider Saturn’s positioning strategy. Saturn stresses value,
made in America by caring workers, and dealers who respect customers. Saturn
wants to be viewed as superior to its competitors on each of these attributes. If the
target market does not value this image or values the image portrayed by competitors
more, Saturn will surely fail. (See slide 1-5)
5. Compare and contrast the various eras of marketing, assessing the role each era
played in reaching the current relationship era.
During this century, the economy has moved through three basic eras in terms of the
focus of business. Those eras are:
 The production era – emphasis is upon new products and production efficiency
 The sales era – emphasis is upon selling products more effectively
 The customer marketing era – emphasis is upon customer satisfaction and value
Teaching Note: Another way that marketers distinguish between modern and
historical approaches to the marketplace is to make a distinction between
transactional and relational marketing. In the past, marketers focused on individual
isolated exchanges to satisfy customer needs. Marketers practicing a more
transactional approach were more concerned with attracting new customers than
working hard to retain existing customers. A fundamental part of the modern era of
marketing is seeking to establish and maintain mutually beneficial long-term
7
relationships with customers. One reason that relationship marketing appeals to
firms is that it is much more profitable over the long-run. (See slide 1-6)
6. Discuss the five forces shaping marketing by showing how they help implement the
marketing concept.
The five forces are:
 Connecting through relationships – marketers learn that by perfectly meeting the
customers needs, that customer will become loyal
 Connecting through technology – innovation is an important role of marketing
 Connecting with diversity – in an increasingly diverse society, marketers cannot
assume that all people are the same and must also learn to understand others’
points of view
 Connecting globally – opportunities for marketers are worldwide
 Connecting ethically – social responsibility and ethical behavior are important to
a company’s marketplace performance.
Teaching Note: Marketing is obviously changing very fast. Vast and rapid
technological changes are making an increasing number of products and services
obsolete. Intense international competition and growth of truly global markets have
forced firms to look well beyond their national boundaries. But marketing is not just
important within the industrial sector. Social institutions of all kinds, which had
thought themselves exempt from the pressures of the marketplace, are also beginning
to recognize the need for marketing in the management of their affairs. Charities,
colleges, museums, and even doctors are beginning to give attention to the marketing
concept. (See slide 1-7)
CASES:
Case1: Starbucks
1. The definition of marketing describes four types of decisions made by made by
marketers: product, price, promotion, and place. Identify a place and promotion
decision Starbucks has made.
A place strategy that Starbucks has made has been to locate stores primarily in large
urban areas and college towns. Starbucks key promotion decision has been to
communicate to customers that frequent visits to their stores is a lifestyle.
2. Based on the types of retail locations selected by Starbucks, what customer
characteristics form its target markets?
The typical Starbucks customer is active and on-the-go and would like to be able to
enjoy premium coffee products anywhere they are at, in urban environments or while
traveling at airports or even convenience stores.
8
3. The marketing concept holds that the purpose of marketing is to understand the needs
and wants of customers and create customer value through satisfaction and quality
more effectively and efficiently than competitors. Given the information provided in
this case, summarize how Starbucks implements the marketing concept.
Starbucks implements the marketing concept through its product quality. Despite its
rapid growth, Starbucks refuses to compromise quality and it will not franchise its
operations and is very selective about business alliances. This is all done in an effort
to maintain the quality and image of the product that their customers desire.
4. In 1997, Starbucks opened a new store every business day. This includes global
expansion into new markets. What factors must Starbucks consider as it continues to
pursue global opportunities?
Obviously, Starbucks must be careful to understand specific cultural tastes and
preferences as it expands into global markets. People from different cultures or
backgrounds do not necessarily have the same perceptions, needs, or wants. It is
imperative that they understand and respect the diversity of the world’s customers.
No two are alike.
9