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Chapter 1 Welcome to the World of Marketing: Create and Deliver Value Chapter Objectives Understand who marketers are, where they work, and marketing’s role in the firm Explain what marketing is and how it provides value to everyone involved in the marketing process Explain the evolution of the marketing process Understand the range of services and goods that organizations market Understand value from the perspectives of customers, producers, and society 1-2 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Real People, Real Choices: Decision Time at Ron Jon Surf Shop, Inc. Which tactic should Ron use to advertise at airports? – Option 1: Focus advertising on rental cars by placing Ron Jon ads on maps and mirror hangers – Option 2: Advertise on wall-mounted backlit photographs (dioramas) – Option 3: Advertise on escalator “gateways” 1-3 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Welcome to a “Brand You” You are a product and have “market value” as a person You “position” yourself for a job interview Don’t “sell yourself short” Personal image consultants often help people to devise a “marketing strategy” Your choice of goods and services allows you to package and promote yourself 1-4 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Who and Where of Marketing Marketers: – Are real people who make choices that affect themselves, their companies, and millions of consumers (see “Real People, Real Choices”) – Work cross-functionally within the firm – Enjoy exciting, diverse careers 1-5 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Value of Marketing Definition of marketing (AMA, 2007) – 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. 1-6 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Marketing Meets Needs Marketing meets the needs of diverse stakeholders – Stakeholders are buyers, sellers, investors, community residents, citizens Marketing concept – Identifying and satisfying consumer needs to ensure long-term profitability The modern marketplace – Takes many forms, including a mall, eBay auction, e-commerce Web site 1-7 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Marketing is about Creating Utility Utility: The sum of the benefits we receive from using a product/service – Form utility – Place utility – Time utility – Possession utility 1-8 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Marketing is about Exchange Relationships An exchange occurs when something is obtained for something else in return—like cash for goods or services – Buyer receives an object, service, or idea that satisfies a need – Seller receives something of equivalent value • Example: money, barter of services or goods, trade-ins 1-9 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Evolution of Marketing The Production Era – Production orientation The Sales Era – Selling orientation The Relationship Era – Consumer orientation – Total quality management The Triple Bottom Line Era 1-10 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Production Era Dominated by production orientation: – A management philosophy that emphasizes the most efficient ways to produce and distribute products. Marketing played an insignificant role Henry Ford’s Model T and Ivory soap are examples of products that were created under a production orientation 1-11 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Sales Era When product availability exceeds demand, businesses may focus on a one-time sales of goods rather than repeat business Dominated by selling orientation: – Managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory 1-12 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Relationship Era Focused on a customer orientation: – A management philosophy that emphasizes satisfying customers’ needs and wants Marketing becomes more important in the firm Total Quality Management (TQM) is widely followed in the marketing community 1-13 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Triple Bottom Line Era: Make Money and a Contribution Focuses on building long-term bonds with customers – Triple orientation seeks to maximize the financial, social, and environmental bottom lines Marketing uses customer relationship management (CRM) – CRM involves systematically tracking consumers’ needs in ways that also benefit society and delivers profit to the firm 1-14 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Triple Bottom Line Era: Make Money and a Contribution Social marketing concept: – Management philosophy that marketers must satisfy customers’ needs in ways that also benefit society and deliver value to the firm Sustainability: – Creating products that meet present needs and ensuring that future generations can have their needs met 1-15 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Triple Bottom Line Era: Make Money and a Contribution Greater focus on accountability – ROI (Return on Investment) is the direct financial impact of a firm’s expenditure of resources such as time or money 1-16 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall What Can Be Marketed? From “serious” goods/services to fun things – Products mirror changes in popular culture – Marketing messages often communicate myths Product: any good, service, or idea – Consumer goods/services – Business-to-business goods/services – Not-for-profit marketing – Idea, place, and people marketing 1-17 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Marketing of Value Value: – The benefits a customer receives from buying a good or service Marketing communicates the value proposition: – A marketplace offering that fairly and accurately sums up the value that the customer will realize if he/she purchases product/service 1-18 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Value from the Customer’s Perspective Customer perspective: – Value is the ratio of costs (price) to benefits (utilities) – Value proposition includes the whole bundle of benefits the firm promises to deliver, not just the benefits of the product itself • Brand image is a critical component 1-19 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Value from the Seller’s Perspective Value for the seller takes many forms – Making a profitable exchange – Earning prestige among rivals – Taking pride in doing what a company does well – Nonprofits: motivating, educating, or delighting the public 1-20 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Building Value Through Customers Customers are now regarded as partners rather than victims It is more expensive to attract new customers than to retain current ones Calculating the lifetime value of a customer allows a firm to decide which customers are “worth keeping” vs. which should be “fired” 1-21 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Providing Value Through Competitive Advantage Creating a competitive advantage requires: – Identification of a distinctive competency: The ability of a firm to outperform the competition by providing customers with a benefit the competition cannot provide Turning distinctive competencies into differential benefits 1-22 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Adding Value Through the Value Chain Value chain: A series of activities involved in designing, producing, marketing, delivering, and supporting any product 1-23 – Inbound logistics – Operations – Outbound logistics – Marketing final product – Service Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Consumer-Generated Value: From Audience to Community Consumer-generated value: – Everyday people functioning in marketing roles such as: • Creating ads • Providing input into new product development • Serving as retailers – Social networking is growing explosively • Wisdom of crowds – Open source business models 1-24 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Value from Society’s Perspective Marketing transactions and company activities influence the world and add or subtract value from society Stressing ethical or socially responsible decisions is often good business in the long run 1-25 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall The Dark Side of Marketing Marketing is often criticized Illegal practices do occur Some marketing activities have detrimental effects on society The dark side of marketing: – Terrorism, addictive consumption, exploitation, illegal activities, shrinkage, anticonsumption 1-26 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Marketing as a Process Marketing planning (thinking carefully and strategically about the big picture) – Analyzing the marketing environment – Developing a marketing plan – Deciding on a market segment – Choosing the marketing mix—product, price, promotion, and place 1-27 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Real People, Real Choices: Decision Made at Ron Jon Surf Shop Bill chose option 2 – Implementation: Ron Jon tested the use of dioramas in the Orlando Airport at gate arrival and baggage claim areas. Survey data gathered at the Cocoa Beach store showed that shoppers noticed airport ads – Measuring Success: Distributed 7,500 shopper surveys; collected demographic and travel data (for non-residents) 1-28 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall Keeping It Real: Fast-Forward to Next Class Decision Time at PaperBackSwap Meet Richard of PaperBackSwap Firm is considering methods of building Web site traffic and customers for PaperBackSwap The decision to be made: Which environmental trend should be used to propel the new service into the limelight? 1-29 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permissionCopyright of the publisher. Printed in theEducation, United States of America. © 2009 Pearson Inc. Publishing as Prentice Hall 1-30 Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall