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Marketing Chapter 1 Overview of Marketing Dhruv Grewal Michael Levy McGraw-Hill/Irwin Copyright © 2008 by the McGraw-Hill Companies, Inc. All rights reserved. 1-2 Building Value Online Benefits buyers and sellers Prioritized searches Customized ads Customized searches Each of these innovative marketing companies succeeds because it provides good value to its customers. AIM, music, expanded communication options © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-3 What is Marketing? Marketing is an organizational function and a set of processes for creating, capturing*, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-4 Missing Component Missing capturing value Value capture is essential to successful marketers 1-5 Marketing is NOT Simply about buyers and sellers exchanging money for goods and services Simply about making a profit 1-6 Marketer’s Responsibility Marketers must address the ethical implications of their actions on society in general. 1-7 Value The fundamental purpose of marketing is to create value for both the firm and customer. Value is in essence what you get for what you give up. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-8 Test Your Knowledge Which of the A) B) C) D) following statements about marketing is NOT true? Marketing entails an exchange. Marketing is simply about making a profit. Good marketing requires thoughtful planning. Because marketing costs money, good marketers carefully seek potential customers who have both an interest in the product and an ability to buy. 1-9 Marketing’s Core Aspects © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-10 Core One: Satisfying Customer Needs and Wants • Begins with understanding their needs and wants • Developing products and services © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-11 Satisfying Customer Needs and Wants How does a company address the diverse needs and wants of consumers for dental care products? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-12 Case in Point: Crest Challenge Address the diverse needs and wants of consumers for dental care products. Answer Develop a deep understanding of what benefits consumer are seeking in their dental care products and develop brands designed to deliver those benefits. Results Crest provides a wide variety of dental care products to deliver the desired benefits. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-13 Core Two: Marketing Entails Exchange • The exchange can occur between any two parties • Not simply a buyer and seller exchanging money for a good or service • Can be an exchange of information for convenience © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-14 Marketing Entails an Exchange Communications/Delivery Customers/ Consumers (Buyers) BARNES&NOBLE.com Goods/Services Producers (Sellers) Money/Information © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-15 Test Your Knowledge Which of the A) B) C) D) following is NOT part of a marketing exchange? Sellers provide products or services. Sellers communicate and facilitate delivery. Marketers assess the effectiveness of their advertising. Buyers complete the exchange by giving money and information to the seller. 1-16 Core Three: Marketing Requires Product, Price, Place, and Promotion Decisions Product Promotion 4P’s Place © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Price 1-17 Product Goods Services Ideas © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-18 Price time money Price is everything the buyer gives up in exchange for the product. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin energy 1-19 Place All activities necessary to get the product to the right customer when that customer wants it. Supply chain management is the field that examines these activities. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-20 Place: Supply Chain Management How does a company get the product to the right customer when and where they want it? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-21 Case in Point: H&H Bagels Challenge Answer Results To expand distribution beyond the New York area. Using an online distribution system to allow customers all over the world to order directly from stores in New York City. •H&H now ships bagels to over 20 different countries directly from the shops in New York City. •The product has become so popular that it has been featured in popular TV shows and movies. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-22 Promotion • The communication activities of marketing • Used to inform, persuade and remind potential buyers • Used to influence their opinions or elicit a response © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-23 Test Your Knowledge Promotion is ____________ by a marketer that informs, persuades, and reminds potential buyers about a product or service to influence their opinions or elicit a response. A) smoke-and-mirrors B) coercion C) teasing D) communication 1-24 Entrepreneurial Marketing RBK from Reebok Sports, entertainment and fashion Competitiveness + cutting edge style + entertainment © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-25 Core Four: Marketing Can Be Performed by Both Individuals and Organizations B2B: Wholesaling is often only Business to Business B2C: All retailing is Business to Consumer selling C2C: Swap Meets, EBay, yard sales, etc. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-26 Core Five: Marketing Occurs in Many Settings Both profit and non-profit entities Developing economies Entire industries 1-27 Core Six: Marketing Helps Create Value Production-oriented era Sales-oriented era Market-oriented era Value-based marketing era © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-28 Adding Value Harrods = extreme luxury “By Invitation” loyalty program Tied to level of spending with $88K or more qualifying for the Chairman’s Club © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-29 Value-Based Marketing Firms must offer customers something in excess of that being offered by the competitors. Firms must understand how each aspect of their product/service creates value for customers. Discussion question #1 What do you think are the key features of a hotel that create value? Discussion question #2 How do the keys features vary depending on the segment of traveler? 1-30 Examples of Value Keys for Hotels Service Quality Restaurant Quality Hotel Personnel Location Convenience of Booking Rewards Program © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin Room Comfort Free Internet Service 1-31 Value for a Business Traveler Service Quality Room Comfort Rewards Program Free Internet Service Location © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-32 Value for a Leisure Traveler Hotel Personnel Service Quality Room Comfort Restaurant Quality Location © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-33 Value is in the Eye of the Beholder That movie was a waste of money. That movie was so worth seeing! Discussion question If they saw the same movie, what could account for the difference in value derived from the experience? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-34 How Firms Compete on the Basis of Value • Constantly changing consumers perceptions • Firms must constantly monitor the marketplace in order to create value © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-35 Test Your Knowledge What must firms do to become value driven? A) Share information, balance benefits and costs, and build customer relationships. B) Set low prices, put profit above service, and use effective marketing strategies. C) Make logistics a priority, expand globally, and always offer new goods and services. D) Keep a vigilant eye on the market-place, undercut competitors, and provide competitive salaries. 1-36 Becoming Value Driven: Sharing Information Information technology such as Customer Relationship Management (CRM) programs are increasingly used by marketers to ensure that data is transmitted throughout the firm. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-37 Sharing Information Why is sharing and coordinating information such a critical success factor for any firm? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-38 Case in Point: Zara Challenge Answer How does the flagship brand of Europe’s fastest growing apparel retailer keep up with the latest trends? By implementing sophisticated information technology into its customer tracking and supply chain functions. •Zara now has over 760 women’s clothing stores in 55 countries. Results •Products move from design through the supply chain and onto the stores shelves in about two weeks. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-39 Becoming Value Driven: Balancing Benefits and Cost • Understand key benefits • Focus on key benefits • Eliminate cost of less strategic benefits © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-40 Becoming Value Driven: Building Relationships With Customers Take a long term view of customer relationships Use data to assist in maintaining the relationship © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-41 Why is Marketing Important? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-42 Marketing Expands Firms Global Presence Starbucks often promotes the same product in different countries. What products do you see in common? Starbucks US Starbucks Germany Starbucks Australia Starbucks Taiwan © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-43 Pervasive Throughout the Organization Discussion question How did Toyota use the Scion Road Trip to ensure that all firm activities were focused on creating value for the Scion customer? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-44 Marketing As Pervasive Across the Supply Chain Each step in the supply chain involves marketing All members in the chain must ultimately focus on creating value for their customer and the end user consumer © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-45 Test Your Knowledge Which of the following would NOT be considered part of a supply chain? A) consumer B) retailer C) manufacturer D) customer service representative 1-46 Marketing Makes Life Easier and Provides Employment Opportunities Choices of products and services choices as well as information about those choices Employment in diverse fields such as research, sales, promotions, global marketing © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-47 Marketing Enriches Society Discussion question Why do you think breast cancer is a good cause for Avon Foundation to support? © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-48 Marketing Can Be Entrepreneurial Though important to large firms, marketing is equally important to the success of small ventures—especially new ventures. © 2007 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin 1-49 Chapter 1 Glossary Customer relationship management: A business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty among the firm’s most valued customers. Goods: Items that you can physically touch. Ideas: Include thoughts, opinions, and philosophies, and intellectual concepts such as these also can be marketed. Services: Intangible customer benefits that are produced by people or machines and cannot be separated from the producer. Supply chain: The group of firms that make and deliver a given set of goods and services. Supply chain management: Refers to a set of approaches and techniques that firms employ to efficiently and effectively integrate their suppliers, manufacturers, warehouses, stores, and other firms involved in the transaction into a seamless value chain.