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Advertising’s Role
in Marketing
Part 1: A Passion for the Business
Chapter 2
Prentice Hall, © 2009
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CHAPTER KEY POINTS
Questions We’ll Answer
• What is marketing and what are its key
concepts?
• What are the different types of markets,
and how do they relate to the marketing
process?
• Who are the key players in marketing?
• How are agencies organized, and how do
they work with their clients?
Prentice Hall, © 2009
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WHAT IS MARKETING?
Defining Marketing
• Traditionally, marketing is the way a
product is designed, tested, produced,
branded, packaged, priced, distributed,
and promoted.
• “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.”—American
Marketing Association
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WHAT IS MARKETING?
Key Concepts in Marketing
• The Marketing
Concept
• Exchange
• Differentiation
& Competitive
Advantage
• Added Value
• Branding
• Marketing should focus first
on identifying the needs and
wants of the consumer, rather
than building products the
consumer may not want.
• Two steps of the marketing
concept:
– Determine customer needs and
wants through research.
– Develop, manufacture, market,
and service goods that fill those
needs and wants—solve
customers’ problems.
Prentice Hall, © 2009
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WHAT IS MARKETING?
Key Concepts in Marketing
• The Marketing
Concept
• Exchange
• Differentiation
& Competitive
Advantage
• Added Value
• Branding
• Exchange is the act of trading
a product or service for
something of value (money)
• Two types of exchange:
economic and communication
Prentice Hall, © 2009
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WHAT IS MARKETING?
Key Concepts in Marketing
• The Marketing
Concept
• Exchange
• Differentiation
& Competitive
Advantage
• Added Value
• Branding
• A brand’s competitive
advantage is where it’s
different from its competitors
and superior in some way.
• In marketing, this concept is
called differentiation.
– Price
– Design
– Performance
– distribution
– Brand image
– Reliability
Prentice Hall, © 2009
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WHAT IS MARKETING?
Key Concepts in Marketing
• The Marketing
Concept
• Exchange
• Differentiation
& Competitive
Advantage
• Added Value
• Branding
• Added value is a marketing or
advertising activity that makes
the product more valuable,
useful or appealing to
consumers.
• Other ways to add value:
– More convenient to buy
– Lower price
– More useful features
– Higher quality
– Status symbol
– More knowledgeable
employees
Prentice Hall, © 2009
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WHAT IS MARKETING?
Key Concepts in Marketing
• The Marketing
Concept
• Exchange
• Differentiation
& Competitive
Advantage
• Added Value
• Branding
• Branding is the way marketers
create a special meaning for a
product.
• Brand image is based on
communication and on the
consumer’s personal
experiences with the product.
• Brand equity refers to the
financial value based on the
reputation and meaning the
brand name has acquired over
time.
Prentice Hall, © 2009
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WHAT IS MARKETING?
Types of Markets
• Consumer Markets
– Those who buy products or services for personal use.
• Business-to-Business Markets
– Companies that buy products or services to use in
their own business or to make products.
• Institutional Markets
– Nonprofits such as hospitals, governments, schools
that provide goods and services for the benefit of
society.
• Channel Markets
– Resellers and intermediaries who buy finished or
semi-finished products and resell them for a profit.
Prentice Hall, © 2009
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WHAT IS MARKETING?
The Marketing Plan
Steps in the Marketing Process
1. Research the consumer marketplace and
competitive marketplace and develop a situation
analysis or SWOT analysis.
2. Set objectives for the marketing effort.
3. Assess consumer needs and wants, segment the
market into groups, target specific markets.
4. Differentiate and position the product relative to
the competition.
5. Develop the marketing mix strategy.
6.
Evaluate the effectiveness of the strategy.
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WHAT IS MARKETING?
Marketing Research
Marketing Research
• Research markets, product categories,
consumers, and the competitive situation.
• Planners need to know as much as they can
about the marketplace so they can make
informed, insightful strategic decisions.
• SWOT (Strengths, Weaknesses,
Opportunities, Threats) helps managers
turn data into insights.
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WHAT IS MARKETING?
Marketing Research
Key Strategic Decisions
• Objectives—increase sales, share of market, or
broader distribution
• Segmenting and targeting
–
–
–
•
Target market
Segmenting
Target audience
Differentiating and positioning.
–
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The point of differentiation positions the product within
the competitive environment, relative to consumer needs.
Positioning is how consumers view the brand relative to
others in the category.
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WHAT IS MARKETING?
The Marketing Mix
• Product
• Distribution
• Pricing
• Marketing
Communication
• Includes product design
and development, product
operation and
performance, branding,
and physical packaging.
• Product design,
performance, and quality
are key to a product’s
success.
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WHAT IS MARKETING?
The Marketing Mix
• Product
• Distribution
• Pricing
• Marketing
Communication
• The channels used to move a
product from manufacturer to
buyer.
• Types of distribution:
– Direct marketing to consumer
– Channel marketing through
resellers and retailers
• Strategic distribution decisions:
– Market coverage strategy
– Push strategies
– Pull strategies
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WHAT IS MARKETING?
The Marketing Mix
• Product
• Distribution
• Pricing
• Marketing
Communication
• Price is based on:
– Cost of making and marketing the
product and seller’s expected
profit level.
– Also, based on what the market
will bear, competition, economic
well-being of customer, value of
product, and the consumer’s
ability to gauge the value.
• Pricing strategies:
– Customary pricing—movies
– Psychological pricing for affluent
customers
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WHAT IS MARKETING?
The Marketing Mix
• Product
• Distribution
• Pricing
• Marketing
Communication
• Includes personal selling,
advertising, public relations,
sales promotion, direct
marketing, events and
sponsorships, point of sale,
packaging.
• Personal sales uses face-to-face
contact with customers to create
immediate sales.
• Marketing communication is
about “Big Ideas.”
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THE KEY PLAYERS
Marketer
• The advertiser or client that is the company
or organization who produces and sells the
brand.
• The marketing function is usually handled by
a marketing department headed by a VP or
director of marketing.
• Some companies have a product or brand
manager who handles marketing and makes
all strategic decisions about design,
manufacture, and the marketing mix.
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THE KEY PLAYERS
Suppliers and Vendors
• They provide or produce the materials and
ingredients that are sold to manufacturers to
make products.
• In theory, every member of the supply chain
adds value.
• In practice, every member of the supply
chain is a partner in creating the product and
marketing the brand.
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THE KEY PLAYERS
Distributors and Retailers
• The distribution chain or channel of
distribution refers to all the companies who
help move a product from manufacturer to
buyer.
• The trade refers to upstream players
(suppliers and vendors in the supply chain)
and downstream players (companies in
distribution chain)
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THE KEY PLAYERS
Marketing Partners
• Suppliers, distributors, and marketing
communication agencies are partners in
supporting the brand and maintaining good
customer relationships.
• Affiliate marketing is a partnership in which
one company drives customers to another
company and may get a commission for
doing so.
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HOW AGENCIES WORK WITH THEIR CLIENTS
The Agency-Client Relationship
• Agencies and agency networks (holding companies)
• Companies have internal advertising departments
who act as a liaison between the marketing
department and advertising agency(ies).
• Advertisers may have one agency of record (AOR)
or several agencies.
• Agencies offer clients:
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Specialized services
Objective advice
Experienced staffing
Management of all advertising activities and personnel
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HOW AGENCIES WORK WITH THEIR CLIENTS
Types of Agencies
• Full-service Agencies
– Account management, creative services, media
planning, account planning, accounting, traffic,
production, and human resources
• Specialized by:
– Function (copy, art, media)
– Audience (minority, youth)
– Industry (healthcare, computers, agriculture)
– Market (minority groups)
• Creative Boutiques
– Small agencies focused on the creative product
• Media-buying Services
– Focused on purchasing media for clients
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HOW AGENCIES WORK WITH THEIR CLIENTS
How Agency Jobs Are Organized
• Account Management
– Serves as a liaison between the client and agency
– Three levels: management supervisor, account supervisor, account
executive
• Account Planning and Research
– Acts as the voice of the consumer
• Creative Development and Production
– People who create and people who inspire
– Creative directors, copywriters, art directors, producers
• Media Planning and Buying
– Recommend most efficient means of delivering the message
• Internal Agency Services
– Traffic, print production, financial services, human resources
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HOW AGENCIES WORK WITH THEIR CLIENTS
How Agencies Are Paid
• Commissions
– A percentage of the media cost
• Fees
– Hourly fee or rate plus expenses and travel
• Retainers
– Amount billed per month based on projected amount of
work and hourly rate charged
• Performance-based
– Based on percentage of sales or marketing budget
• Profit-based
– Greater risk if campaign doesn’t have desired impact
• Value Billing
– Based on value of creative strategy or ideas
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CURRENT DEVELOPMENTS IN MARKETING
Accountability
• Senior managers want marketing managers
to prove that their marketing is effective
based on:
– Sales increases
– Percentage share of the market the brand holds
– Return on Investment (ROI)
• Agencies are creating departments to help
marketers evaluate the efficiency and
effectiveness of their marketing
communication budgets.
Prentice Hall, © 2009
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CURRENT DEVELOPMENTS IN MARKETING
Integrated (Holistic) Marketing
• Focused on better coordinating all
marketing efforts to maximize customer
satisfaction.
• All areas of the marketing mix work
together to present the brand in a coherent
and consistent way.
• The goal is to manage all the messages
delivered by all aspects of the marketing
mix to present a consistent brand strategy.
Prentice Hall, © 2009
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CURRENT DEVELOPMENTS IN MARKETING
Emerging Marketing Strategies
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Relationship Marketing
Permission Marketing
Experience Marketing
Guerilla Marketing
Digital Marketing
Viral Marketing
Mobile Marketing
Social Network Marketing
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CURRENT DEVELOPMENTS IN MARKETING
Global Marketing
• Most countries have local, regional, and
international brands requiring international
advertising to promote the same brand in several
countries.
• Companies may have several international regional
offices and/or a world corporate headquarters.
• Agencies must adapt with new tools including one
language, one budget, and one strategic plan.
• The choice of an agency for international
advertising depends on whether the brand message
will be standardized or localized.
Prentice Hall, © 2009
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Copyright © 2009 Pearson Education, Inc.
Publishing as Prentice Hall
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