Download CHAPTER 1 An Overview of Marketing

CHAPTER 1
An Overview of Marketing
LEARNING OBJECTIVES
1
Define the term "marketing"
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.
2
Describe four marketing management philosophies
Four competing philosophies strongly influence the role of marketing and marketing activities within an
organization. These philosophies are commonly referred to as production, sales, marketing, and societal marketing
orientations.
The production orientation focuses on internal efficiency to achieve lower prices for consumers. It assumes that price
is the critical variable in the purchase decision.
A sales orientation assumes that buyers resist purchasing items that are not essential and that consumers must be
persuaded to buy.
The marketing orientation is based on an understanding that a sale predominantly depends on the customer's decision
to purchase a product and on the customer's perception of the value of that product. Responsiveness to customer wants is
the central focus of the marketing orientation.
The societal marketing orientation holds that the firm should strive to satisfy customer needs and wants while
meeting organizational objectives and preserving or enhancing both the individual's and society's long-term best interests.
3
Discuss the differences between sales and market orientations
Selling Orientation
Organization's focus is inward on the firm's needs
Marketing Orientation
Focus is outward on the wants and preferences of
customers
Business is defined by its goods and services offered
Product is directed to everybody
Business is defined by benefits sought by customers
Product is directed to specific groups (target
markets)
Primary goal is profit through maximum sales volume
Primary goal is profit through customer satisfaction
Goals are achieved primarily through intensive promotion Goals are achieved through coordinated marketing
4
Describe the marketing process
Marketing managers are responsible for a variety of activities that together represent the marketing process. These
include: matching the role of marketing with the firm’s vision and mission, setting objectives, analyzing internal and
external information, developing strategy, planning a marketing mix, implementing strategy, designing performance
measures, and evaluating and adjusting strategy.
5
Describe several reasons for studying marketing
Marketing provides a delivery system for a standard of living, which is a monumental task in a society such as the
United States, where a typical family consumes 2.5 tons of food per year.
No matter what an individual's area of concentration in business, the terminology and fundamentals of marketing are
important for communicating with others in the firm.
Between one-fourth and one-third of the entire civilian work force in the United States performs marketing activities.
Marketing offers career opportunities in areas such as professional selling, marketing research, advertising, retail buying,
distribution management, product management, product development, and wholesaling.
Chapter 1  An Overview of Marketing
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As a consumer of goods and services, everyone participates in the marketing process every day. By understanding
marketing, one can become a more sophisticated consumer.
PRE-TEST
Answer the following questions to see how well you understand the material. Re-take it after you review to check
yourself.
1.
Marketing is defined as:
2.
What five conditions must be satisfied for any kind of exchange to take place?
3.
The four variables of the marketing mix are: _____________________________________________. Which is the
most important variable?
4.
Four marketing management philosophies are:
5.
List five ways in which a marketing orientation is different from a sales orientation.
Sales Orientation
Marketing Orientation
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
_________________________________________
6.
List seven steps in the marketing process:
7.
Name four reasons for studying marketing:
4
Chapter 1  An Overview of Marketing
CHAPTER OUTLINE
1
Define the term "marketing"
I.
What Is Marketing?
A.
Marketing is not the same as selling or advertising.
B.
Marketing includes selling, advertising, making products available in stores, arranging displays,
maintaining inventories, and much more.
C.
Marketing is a philosophy or a management orientation that stresses the importance of customer
satisfaction, as well as the set of activities used to implement this philosophy.
D.
The American Marketing Association definition of marketing:
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
goals.
1.
The Concept of Exchange
The concept of exchange means that people give up something in order to receive something
that they would rather have.
The usual medium of exchange is money. Exchange can also be fostered through barter or
trade of items or services.
a.
Five conditions must be satisfied for an exchange to take place:
1.
2.
3.
4.
5.
There must be at least two parties.
Each party must have something the other party values.
Each party must be able to communicate with the other party and deliver
the goods or services sought by the other trading party.
Each party must be free to accept or reject the other's offer.
Each party must want to deal with the other party.
Exchange may not take place even if all of these conditions exist, but these
conditions are necessary for exchange to be possible.
2
Describe four marketing management philosophies
II.
Marketing Management Philosophies
Four competing philosophies strongly influence an organization’s marketing activities. These philosophies are
commonly referred to as production, sales, marketing, and societal orientations.
A.
Production Orientation
The production orientation focuses on internal capabilities of the firm rather than on the desires and
needs of the marketplace. The firm is concerned with what it does best, based on its resources and
experience, rather than with what consumers want.
.
B.
Sales Orientation
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A sales orientation assumes that more goods and services will be purchased if aggressive sales
techniques are used and that high sales result in high profits.
C.
The Marketing Concept and Market Orientation
1.
This philosophy, called the marketing concept, states that the social and economic
justification for an organization’s existence is the satisfaction of customer wants and needs
while meeting organizational objectives.
2.
The marketing concept involves:
a.
b.
c.
3.
Firms that adopt and implement the marketing concept are said to be market oriented.
Market orientation requires
a.
b.
c.
d.
4.
5.
D.
Focusing on customer wants and needs so the organization can differentiate its
product(s) from competitors’ offerings
Integrating all the organization’s activities, including production, to satisfy these
wants and needs
Achieving long-term goals for the organization by satisfying customer wants and
needs legally and responsibly
Top management leadership
A customer focus
Competitor intelligence
Interfunctional coordination to meet customer wants and needs and deliver superior
values
Understanding your competitive arena and competitor’s strengths and weaknesses is a critical
component of market orientation.
Market-oriented companies are successful in getting all business functions together to deliver
customer value.
Marketing Societal Orientation
1.
2.
The philosophy called a marketing societal orientation states that an organization exists not
only to satisfy customer wants and needs and to meet organizational but also to preserve or
enhance individual's and society's long-term best interests.
This orientation extends the marketing concept to serve three bodies rather than two:
customers, the organization itself, and society as a whole.
3
Discuss the differences between sales and marketing orientations
III.
Differences Between Contrasting Sales and Marketing Orientations
A.
The Organization's Focus
1.
2.
3.
Sales-oriented firms tend to be inward-looking. They focus on satisfying their own needs
rather than those of customers.
Market-oriented firms derive their competitive advantage from an external focus.
Departments in these firms coordinate their activities and focus on satisfying customers.
Customer Value
a.
b.
6
Customer value is the ratio of benefits to the sacrifice necessary to obtain those
benefits.
Creating customer value is a core business strategy of many successful firms.
Chapter 1  An Overview of Marketing
c.
Marketers interested in customer value
1.
2.
3.
4.
5.
.
4.
Offer products that perform
Give consumers more than they expect
Avoid unrealistic pricing
Give the buyer facts
Offer organization wide commitment in service and after-sales support
Customer Satisfaction
Customer satisfaction is the feeling that a product has met or exceeded the customer’s
expectations. The organizational culture focuses on delighting customers rather than on
selling products.
5.
Building Relationships
Relationship marketing is a strategy that entails forging long-term partnerships with
customers and contributing to their success.
a.
b.
c.
d.
6.
The Internet is an effective tool for generating relationships with customers.
Customers benefit from stable relationships with suppliers.
A sense of well-being occurs when one establishes an ongoing relationship with
provider.
Most successful relationship marketing strategies depend upon: customer-oriented
personnel, effective training programs, employees with authority to make decisions
and solve problems, and teamwork.
Customer-Oriented Personnel
All employees in marketing-oriented firms must be customer-oriented for the customer
satisfaction goals to be met. Often one employee is the only contact a customer has with a
company.
7.
The Role of Training
Leading marketers recognize the role of employee training in customer service. In order to
have full participation and understanding of the marketing philosophy, companies such as
Walt Disney World, McDonald's, and American Express train all their employees to become
customer-oriented.
8.
Empowerment
Empowerment is the practice of giving employees expanded authority to solve customer
problems as they arise. This technique improves customer service by improving
responsiveness.
9.
Teamwork
Teamwork entails collaborative efforts of people to accomplish common objectives.
B.
The Firm's Business
1.
A sales-oriented firm defines its business in terms of the goods and services it offers, like a
encyclopedia publisher defining itself simply as a book publisher/seller.
2.
A market orientated firm defines its business based on the benefits customers seek.
Chapter 1  An Overview of Marketing
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3.
Why is this customer benefit definition so important?
a.
b.
c.
4.
Focusing on customer wants does not mean that customers will always receive the specific
goods and services they want.
a.
b.
C.
2.
A sales-oriented organization targets its products at "everybody" or "the average customer."
However, few "average" customers exist.
The market-oriented firm
a.
b.
c.
Recognizes that different customer groups have different wants
Targets specific subgroups of customers
Designs special products and marketing programs for these groups
The Firm's Primary Goal
1.
2.
E.
Giving the customer exactly what he or she wants is not practical if doing so
threatens the survival of the firm.
Sound professional judgment must influence the decision about which goods or
services should be offered. Perhaps the most prudent course will be to alter the way
consumers perceive their needs and means of satisfaction.
Those To Whom the Product Is Directed
1.
D.
It ensures the firm keeps focusing on customers
It encourages innovation and creativity by reminding people that there are many
ways to satisfy customer wants.
It stimulates an awareness of changes in customer desires and preferences.
The goal of a sales-oriented firm is profitability through sales volume. The focus is on
making the sale rather than developing a long-term relationship with a customer.
The ultimate goal of most market-oriented organizations is to make a profit from satisfying
customers. Superior customer service enables a firm to have large amounts of repeat
business, customer loyalty, and higher profit margins.
Tools the Organization Uses to Achieve Its Goals
1.
2.
Sales-oriented firms seek to generate sales volume through intensive promotional activities,
mainly personal selling and advertising.
Market-oriented organizations recognize that promotion is only one of the four basic tools
that comprise the marketing mix.
The tools are the marketing mix elements (the four P's): product, place (distribution),
promotion, and price.
3.
The important distinction is that market-oriented firms recognize that each of the four
components of the marketing mix is of equal importance: sales-oriented organizations view
promotion as the primary means of achieving their goals.
4
Describe the marketing process
V.
The Marketing Process
A.
8
Understanding the organization’s mission and vision, and the role marketing plays.
Chapter 1  An Overview of Marketing
B.
Setting marketing objectives
C.
Gathering, analyzing, and interpreting information about the organization’s situation, including its
strengths and weaknesses, as well as opportunities and threats in the environment.
D.
Developing marketing strategy by deciding exactly which wants and whose wants the organization will
try to satisfy, and by developing appropriate marketing activities to satisfy the desires of selected target
markets.
E.
Implementing the marketing strategy
F.
Designing performance measures
G.
Periodically evaluating marketing efforts and making changes if needed.
5
Describe several reasons for studying marketing
VI.
Why Study Marketing?
A.
Marketing Plays an Important Role in Society
Marketing provides a delivery system for a complex standard of living. The number of transactions
needed everyday in order to feed, clothe, and shelter a population the size of the one in the United
States is enormous and requires a sophisticated exchange mechanism.
B.
Marketing Is Important to Businesses
Marketing provides the following vital business activities
1.
2.
3.
4.
5.
C.
Marketing Offers Outstanding Career Opportunities
1.
2.
D.
Assessing the wants and satisfactions of present and potential customers
Designing and managing product offerings
Determining prices and pricing policies
Developing distribution strategies
Communicating with present and potential customers
Between one-fourth and one-third of the entire civilian work force in the United States
performs marketing activities.
Marketing offers career opportunities in areas such as professional selling, marketing
research, advertising, retail buying, distribution management, product management, product
development, and wholesaling.
Marketing Affects Your Life Every Day
1.
2.
As consumers of goods and services, we participate in the marketing process every day.
Almost 50 cents of every dollar consumers spend goes to pay marketing costs such as market
research, product research and development, packaging, transportation, storage, advertising,
and sales-force expenses.
Chapter 1  An Overview of Marketing
9
VOCABULARY PRACTICE
Fill in the blank(s) with the appropriate term or phrase from the alphabetized list of chapter key terms.
customer satisfaction
customer value
empowerment
exchange
marketing
marketing concept
1
1.
marketing orientation
production orientation
relationship marketing
sales orientation
societal marketing concept
teamwork
Define the term "marketing"
The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and
services to create ____________________ that satisfy individual and organizational objectives defines
_____________________________.
2
2.
Describe four marketing management philosophies
There are four alternative marketing management philosophies. The first focuses on the firm's internal capabilities
rather than the needs and desires of the marketplace; this is the _____________________________. The second
philosophy is the _____________________________, which assumes that buyers resist purchasing nonessential
items, so aggressive sales techniques should be used to sell more products. The third philosophy, focuses on
customer needs and wants, is the _____________________________. Finally, a firm that decides to focus on the
long-term best interests of its customers and society has adopted the _____________________________.
3.
When a firm focuses on customer wants, integrates all firm activities to satisfy these wants, and achieves long-term
goals by satisfying these wants legally and responsibly, the firm is using the _____________________________.
3
4.
Discuss the differences between sales and market orientations
Marketers who offer products that perform beyond customer expectations, avoid unrealistic pricing, give consumers
the facts and commit to after-sales support are in creasing _____________________________.
5.
When an organization focuses on meeting and exceeding the needs of customers' rather than selling products, the
organization will likely achieve _____________________________.
6.
A strategy of forging long-term partnerships with customers, becoming part of the customer’s organization and
contribute to its success is called ___________________________.
7.
When people collaborate their efforts to accomplish common objectives, they are practicing
_____________________________.
8. Marketing-oriented firms which give their employees expanded authority to solve customer problems immediately
are _____________________________ their workers.
Check your answers to these questions before proceeding to the next section.
10
Chapter 1  An Overview of Marketing
TRUE/FALSE QUESTIONS
Mark the statement T if it is true and F if it is false.
1
Define the term "marketing"
_____
1.
A marketing exchange cannot take place unless each party in the exchange has something that the other
party values.
_____
2.
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 needs is management.
2
Describe four marketing management philosophies
_____
3.
The owners of the Stayfast fasteners Company are pleased with their low unit costs and high production
volumes. Salespeople are unnecessary because buyers are always waiting for new tires to come off the
assembly line. Stayfast currently has a great sales orientation.
_____
4.
The president of EOB Putting Devices does not find it necessary to conduct much marketing research
because the telephone selling campaign has been such a successful marketing strategy. EOB has a
marketing orientation.
5.
The marketing manager for International Internet Inc proposes to senior management that the company
create Internet kiosks to be given to poor, isolated groups around the world. She argues that although this
will not likely be profitable anytime in the near future, it will provide needed access to information for
these
people and exemplify the company’s long-term goals and societal marketing orientation.
3
_____
4
_____
5
____
Discuss the differences between sales and marketing orientations
6.
You are about to start manufacturing and selling ferret food. You have met with your board of directors
and discussed consumer benefits and sacrifices regarding the purchase of your food. Knowing the ratio
of benefits to sacrifices allows you to specify how much customer value you will achieve.
7.
As the new marketing major hired by Antiquated Approaches Company, you suggest the company could
profit from repeat sales and referrals if you develop a strategy of forging long-term partnerships with
existing customers. You are proposing the company take a better sales orientation.
Describe the marketing process
8.
The marketing mix variables are product, place, promotion, and price.
Describe reasons for studying marketing
9.
The most important reason to study marketing is to make money.
Check your answers to these questions before proceeding to the next section.
Chapter 1  An Overview of Marketing
11
AGREE/DISAGREE QUESTIONS
For the following statements, indicate reasons why you may agree and disagree with the statement.
1.
The marketing orientation actually encompasses both the sales orientation and the production orientation.
Reason(s) to agree:
Reason(s) to disagree:
2.
Marketing is the job of everyone in a business organization, not just the marketing department.
Reason(s) to agree:
Reason(s) to disagree:
3.
Only students who are majoring in marketing should be required to take marketing courses.
Reason(s) to agree:
Reason(s) to disagree:
4.
The definition of marketing is really the same as the definition of management.
Reason(s) to agree:
Reason(s) to disagree:
12
Chapter 1  An Overview of Marketing
MULTIPLE-CHOICE QUESTIONS
Select the response that best answers the question, and write the corresponding letter in the space provided.
1
Define the term "marketing"
_____
1.
Which of the following is true about marketing?
a. Marketing is a philosophy that stresses producer satisfaction.
b. Marketing is a product.
c. Marketing involves everyone in an organization.
d. Marketing is used for products only.
e. Marketing involves projects, profits, production, and distribution.
_____
2.
Go-Go International wants to sell their products in a country that does not have an internationally
accepted currency. One way Go-Go could overcome this problem would be to:
a. insist the country join the World Trade Organization
b. barter for a product from the country and then sell it in international markets.
c. encourage the country to adopt the U.S. dollar as their currency.
d. get the U.S. government to accept the country’s currency.
e. organize assistance so the country can improve its international credibility.
_____
3.
If you were in the marketing consulting business which of the following clients could you NOT serve?
a. The Boston Museum of Science, which needs to determine what exhibits should it offer visitors
b. The State of Mississippi, which needs to attract tourists
c. Dr. Susan Scott, an orthopedic surgeon wishing to open a practice in your home town
d. The World Gym, which needs to determine where to locate its next outlet for customers
e. All of the above could be served by a marketing consultant
_____
4.
You are concerned with managing the exchange between the Red Cross and its blood donors. Which of
the following costs would you have to be concerned about to create the ideal exchange?
a. The travel costs incurred by donors visiting the Red Cross blood donation sites.
b. The personal energy and time expended by the donor
c. Your opportunity costs lost by not engaging in some other activity
d. All of the above are marketing costs that would be of concern to someone managing the exchange
situation
e. None of the above are costs of exchange situations
2
Describe four marketing management philosophies
_____
5.
Florence Rock, the owner of Yesterday Products, Inc. is production-oriented. If you were in charge of
her marketing operations, which of the following statements might you use as a guiding principle if you
wish to meet Ms. Rock's demand?
a. "I'm a customer and everyone is like me. I buy on price, therefore everyone does, as well."
b. "We need to buy the fastest production equipment as possible to raise productivity and keep prices
at the lowest possible level."
c. "We produce the best widgits in the market place."
d. All of the above would be consistent with Mr. Stone's demands.
e. None of the above would be consistent, because all reflect a sales orientation.
_____
6.
Peter's company does an excellent and efficient job of churning thousands of Nit-Pickers off the
assembly line every day. One problem with this approach to marketing is the failure to consider whether
Nit-Pickers also meet the needs of the marketplace.
a. customer orientation
b. sales orientation
c. discount orientation
d. marketing orientation
e. production orientation
Chapter 1  An Overview of Marketing
13
_____
7.
Jacque Lewellyn's company markets gourmet syrups. Jack knows that buyers may consider the product
nonessential, and he assumes that if he hires a team of aggressive, persuasive salespeople, buyers will
buy more of the polish. Jacque has a:
a. sales orientation
b. production orientation
c. promotion orientation
d. marketing orientation
e. customer orientation
_____
8.
Beth has noticed the lack of specialty recycling centers in her community, although local neighborhood
clubs have repeatedly asked the city to provide such centers. Beth has decided to become certified in
waste disposal and hopes to open a battery and motor oil recycling center next year. She hopes to
include the innovative service of home pickup and delivery of recyclables. This business philosophy
supports a(n) orientation.
a. production
b. sales
c. retail
d. marketing
e. enterprise
_____
9.
The American Banking Company tells its salespeople to try to sell credit cards to everyone they meet or
contact. In contrast, the Family Financial Company concentrates on credit designed for single parents.
Family Financial is:
a. missing out by not concentrating on the average customer
b. a company that would state that they are in the business of selling insurance
c. a selling-oriented company
d. recognizing that different customer groups have different needs and wants
e. aiming at a goal of profit through maximum sales volume
_____
10. Bob & Gary’s is a contemporary ice cream manufacturer that donates 10 percent of its earnings to the
local United Way organization. Bob & Gary’s has which type of orientation?
a. production
b. sales
c. promotion
d. marketing
e. societal marketing
3
_____
Discuss the differences between sales and market orientations
11. A sales orientation ___________, while a marketing orientation __________.
a. achieves profit through customer satisfaction, achieves profit through maximum sales volume
b. targets specific groups of people, targets everybody
c. delivers superior customer value, focuses on selling goods and services
d. has an “outward” focus, has an “inward” focus
e. uses intensive promotion to maximize profits, uses coordinated customer focus
4
Describe the marketing process
_____
12.
14
Which of the following is NOT a part of the marketing process?
a. understanding the organization’s mission
b. developing performance appraisals for marketing personnel
c. designing performance measures
d. setting objectives
e. determining target markets
Chapter 1  An Overview of Marketing
_____
13.
The marketing manager for Oil of Olan, a skin care product, is working with an advertising agency to
develop a new web site targeting teen-agers. Which of the following marketing mix variables best
describes this activity?
a. product
b. price
c. target market
d. distribution
e. promotion
5
Describe several reasons for studying marketing
_____
14. Jackie is a food science major at a state university and hopes to operate the family restaurant after
graduation. Jackie has been advised to take a marketing course in the school of business as an elective,
but she thinks this would be a waste of time. You are her friend and a marketing major. You advise that:
a. marketing is not relevant for a business like a family restaurant
b. Jackie declare a business minor because she needs a backup career
c. more nutrition and gourmet cooking classes will be most useful for Jackie
d. the main reason to take marketing is to teach Jackie how to advertise the restaurant
e. marketing knowledge will help Jackie to understand how she can satisfy consumers' needs and
wants
_____
15. Paul owns a small laboratory that makes biotech products. His company is growing fast, and there are
many things he does not understand about his customers. Should Paul take a marketing course?
a. Yes, because marketing is synonymous with selling, and Paul will want to learn aggressive sales
techniques to continue the company's growth
b. No, because he can hire an advertising firm and will not need further knowledge of marketing
c. No, because he has a high-tech business and will only be marketing to other tech people.
d. Yes, because the concept of marketing will help Paul to better serve and satisfy his customers
e. Yes, because marketing teaches businesses how to sell products that people don't need
Check your answers to these questions before proceeding to the next section.
ESSAY QUESTIONS
1.
The concept of exchange is crucial to the definition of marketing. What are the five conditions that must be satisfied
for an exchange to take place? Can marketing occur even if an exchange does not take place?
Chapter 1  An Overview of Marketing
15
2.
Assume you are a marketing manager. Describe the marketing strategy for each of the four orientations of
marketing management philosophy.
3.
Name and describe five key areas in which a market orientation differs from a sales orientation.
4.
Briefly define the marketing process activities.
5.
Your roommate sees you spending extra time studying this book and says, “why all the effort? Marketing is just
sales and advertising.” How do you respond?
16
Chapter 1  An Overview of Marketing
Internet Exercise
Visit your college or university’s web site. Go to the home page and look at the choices, read some of the introductory
information targeted for prospective students. Using the production, sales, marketing, and societal marketing orientations
discussed in Chapter 1, evaluate your university’s orientation. Use examples from the web site to justify your opinion.
CHAPTER NOTES
Use this space to record notes on the topics you are having the most trouble understanding.
Chapter 1  An Overview of Marketing
17
W ORK SPACE
ANSWERS TO THE END-OF-CHAPTER DISCUSSION AND WRITING QUESTIONS
Use this space to work on the questions at the end of the chapter.
ANSWERS TO THE END-OF-CHAPTER CASE
Use this space to work on the questions at the end of the chapter.
18
Chapter 1  An Overview of Marketing