Economics: Conditions of Exchange

Exchange and Transaction

• Exchange is the act of obtaining a desired product from someone by offering something in return.
• Conditions for exchange potential to exist:
  • At least two parties involved
  • Each party has something of value to the other
  • Each party can communicate and deliver
  • Each party is free to accept or reject the exchange offer
  • Each party believes it is appropriate to deal with the other
• Transaction: the trade of values between two parties, involving at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement.

Relationship Marketing

• Relationship marketing is the practice of building long-term satisfying relationships with key parties (customers, suppliers, distributors) to retain their long-term preferences and business.
• Goals of relationship marketing:
  • Build trust and loyalty
  • Deliver high-quality products and services
  • Provide fair prices
  • Establish strong economic, technical, and social ties
• Outcome: building a unique company asset called a marketing network.

Marketing Concepts

• Production Concept: focus on making quality products, assuming consumers will prefer those with the most quality, performance, and features.
  • Managers may fail to appreciate customer needs and focus on technology.
• Product Concept: assume customers will prefer products with the most quality, performance, and features.
  • Managers may focus on product design without customer input, leading to "marketing myopia" (focus on product over customer needs).
• Customer-perceived value: the customer's evaluation of the difference between all benefits and costs of a market offering relative to those of competing offers.

Customer Satisfaction

• Customer satisfaction depends on the product's perceived performance relative to a buyer's expectations.
• Customer satisfaction leads to:
  • Greater customer loyalty
  • Better company performance
• Smart companies aim to delight customers by promising only what they can deliver and then delivering more.

Demand Management

• Marketing managers may face different states of demand, including negative demand, where the product is disliked or avoided.
• Marketing task is to manage demand effectively, considering factors such as:
  • Unstable cost of energy
  • Increased level of pollution
  • Changing government role in environmental protection

Environmental Factors

• Technological Environment:
  • Technology has a significant impact on lives, consumption patterns, and economic well-being.
  • Marketers must consider technical developments that are acceptable to society.
• Political and Legal Environment:
  • Organizations must follow the rules, regulations, and restrictions of the government.
  • Increasing amount of legislation regulating businesses.
• Social and Cultural Environment:
  • Affects how and why people live and behave, influencing customer buying behavior and the economic, political, and legal environment.
  • Variables include language, education, religious beliefs, and lifestyle.

Consumer Buying Decisions

• Five criteria to consider:
  • Length of time to make a decision
  • Costs of goods and services
  • Degree of information search
  • Number of alternatives considered
• Four types of consumer buying decisions:
  • Complex Buying Behavior: high involvement, significant differences among brands, expensive, risky, or self-expressive products.
  • Dissonance-Reducing Buying Behavior: high involvement, but little difference among brands.
  • ... (to be continued)

Quiz on the conditions required for exchange to take place, including multiple parties, valuable goods, communication, and freedom to accept or reject offers.