Marketing Fundamentals: Value to Consumers, Firms, and Society - PDF

Chapter 1 Marketing’s Value to Consumers, Firms, and Soci...

Chapter 1 Marketing’s Value to Consumers, Firms, and Society © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  What is Marketing? © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing—What’s It All About? All Those Bicycles! More Than Selling and Advertising (top-left): Monkey Business Images/Shutterstock; (top-right): Pixtal/AGE Fotostock; (bottom): Jonathan © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Gelber/FStop Images GmbH/Alamy Stock Photo Things a manager should do before and after deciding to produce and sell a bike Analyze Needs Determine Wants Identify Competition Predict Designs Determine Where Decide Promotion Estimate Price Provide Service © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. ©Pixtal/AGE Fotostock  Marketing Is Important to You Important to every consumer! Important to your job! (and your next job, too) Affects innovation and standard of living (top): ikonoklast/123RF; (middle): Shutterstock / Monkey © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Business Images; (bottom): Decisive Images/Alamy How Should We Define Marketing? Performance of activities that seek to accomplish objectives… …from producer to …by anticipating a customer or Marketing customer or client client. needs… …and directing a flow of need- satisfying goods and services…  Marketing Profit and More Than Nonprofit Persuasion Builds Key Begins with Relationships Characteristics Needs Involves Doesn’t Do It Exchanges Alone © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. MARKETING: BOTH FOR PROFITS AND NON- PROFITS  Who Markets?  What Is Marketed? Goods Services Ideas 1-8  MARKETING INVOLVES EXCHANGES  Parties with Unsatisfied Needs  A Desire and Ability to be Satisfied  A Way for the Parties to Communicate  Something to Exchange 1-9 When marketing was not important PURE SUBSISTENCE ECONOMY—each family unit produces everything it consumes. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  MARKETING BEGINS WITH NEEDS  Consumers May Not Know or Cannot Describe What They Need or Want 1-11 Consumer Needs: Cheetos lip balm (2005) 1-12  Consumer Needs: Dyson vacuum cleaners © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing Builds Relationships Firms’ Products Customer and Satisfied Customers Services © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Micro View Of Marketing Thus far, we are looking at marketing from a micro view, focusing on the set of activities performed by a single organization. BUT there is also a Macro view.. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Macro-Marketing Emphasis Is On Every Society Whole System Needs It Key Characteristics Matches Producers and Consumers © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Macro-Marketing System Every society needs a macro-marketing system, because: It helps to match supply and demand; Different producers in a society have different objectives, resources, and skills; Every consumer has a different set of needs; System must effectively match consumers and producers.  Functions of an effective macro-marketing system: Delivering the goods and services that consumers want and need; Getting products to them at the right time, in the right place, and at a price they’re willing to pay; Keeping the consumers satisfied after the sale and bringing them back to purchase again when they are ready. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Macro Marketing Is a social process that directs the flow of goods and services from producers to consumers in a way that effectively matches supply and demand and achieves the objectives of society. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Marketing Facilitates Production and Consumption (Exhibit 1-1) Production Sector Spatial Separation Separation in Time Discrepancies of Marketing Quantity needed to Separation of Information overcome Discrepancies of discrepancies and separations Separation in Values Assortment Separation of Ownership Consumption Sector © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Separation Between Producers and Consumers Economies of Scale - Lower Unit Cost Unit Cost © $ Output Marketing Bridges the Gap! Marketing Producers Consumers Functions © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Jetta Productions/Getty Images Think about what marketing functions the following parties perform.. Walmart (retailer) Manufacturer/Producer General Mills Cheerios Distributor (wholesaler) © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Universal Functions of Marketing Buying Selling Market Transporting Information Marketing Functions Risk Taking Storing Standardization Financing & Grading © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Who Performs Marketing Functions? Producers Wholesalers Other Specialists Transport Firms Retailers Ad Agencies ISPs Product Testing Research Firms Firms Consumers © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Overcoming Spatial Separation ((top-left): Brasil2/iStock/Getty Images; (bottom-left): Andre © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Penner/AP Images; (right): zjuzjaka/Shutterstock  Economic Systems Command Market-Directed Economy Economy Government Adjusts itself officials decide Price is value about production measure and distribution OR Freedom of choice May work well if: Simple economy Government’s role Little variety limited Adverse Public interest conditions groups/consumers © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Model of a Market-Directed Macro-Marketing System (Exhibit 1-2) Many Individual Producers (heterogeneous supply) Intermediaries Collaborators Perform universal marketing functions Checks on the system: Customer vote with dollars Customer voice satisfaction To overcome discrepancies and separation of producers / consumers & dissatisfaction Public interest groups share information To create value and direct flow of The government sets the need-satisfying goods and services “rules of the game” Many Individual Consumers (heterogeneous demand) © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing’s Role Has Changed a Lot Over the Years Focus: Simple Trade Era Families Sell Surplus Production Era: Ind Rev. Focus: – 1920s Increase Supply Focus: Sales Era: 1930s to 1950 Beat Competition Marketing Department Focus: Era: after 1950s Coordinate & Control Marketing Company Era: Focus: Long-Run Since 1960s Customer Satisfaction © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  The Marketing Concept (Exhibit 1-3) Customer Total company satisfaction effort The Marketing Concept Profit (or another measure of long-term success) as an objective © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing Concept 1. Customer satisfaction guides the whole system 2. Entire company works together 3. Survival and success need profit  Non-profits may adopt other measures of success 4. Adoption of the marketing concept is not universal. 5. Many organizations go beyond profit and focus on purpose  Triple bottom line – economic, social and environmental outcomes https://www.toms.com/us/impact.html © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Purpose Orientation “We want our associates and their unique abilities to reflect the communities we serve, and persons with disabilities are a vital part of that segment,”  Some Differences in Outlook between Adopters of a Production, Marketing, or Purpose Orientation (Exhibit 1–4) 1 Production Marketing Purpose Topic Orientation Orientation Orientation Customers should Customer, employee, Attitudes be glad we exist, Customer needs and community needs toward trying to cut costs determine determine company customers and bringing out company plans. plans. better products. A purpose engages All employees Attitudes Minimize labor employees and should be toward costs—employees increases their concerned with the employees are replaceable. productivity and customer attention to customers. Company follows its Product Company sells Company makes purpose and makes offering what it can make. what it can sell. what it can sell.  Some Differences in Outlook between Adopters of a Production, Marketing, or Purpose Orientation (Exhibit 1–4) 2 Production Marketing Purpose Topic Orientation Orientation Orientation To determine Advertising Role of To determine customer needs communicates the marketing customer reaction, and how well company’s purpose to research if used at all. company is customers and satisfying them. employees. Focus on new Focus is on Focus is on opportunities for Interest in technology and locating new making a greater innovation cost cutting. opportunities. impact on the company’s purpose. An activity required Satisfy customers Actively seek to satisfy Customer to reduce after the sale and customer needs service consumer they’ll come back beyond the core complaints. again. product offering.  Some Differences in Outlook between Adopters of a Production, Marketing, or Purpose Orientation (Exhibit 1–4) 3 Production Marketing Purpose Topic Orientation Orientation Orientation To determine Product features Need-satisfying customer and Focus of and how products benefits of goods employee needs and advertising are made. and services. how well the company satisfies each Customer Customers are loyal to satisfaction before Relation- Relationship ends the company and after the sale ship with when a sale is because of its product leads to profitable customer made and its commitment to long-term a greater purpose. relationships. Eliminate costs Eliminate costs that do Keep costs as low that do not give not give value to Costs as possible value to the customers or advance customer. company purpose.  Checking Your Knowledge Marketing Orientation vs. Production Orientation Firm A: "We've given the people in this city one of the finest museums in the world, but hardly anyone attends. It's a case of misplaced social values-and something must be done about it." Firm B: "We've got to find out what it is about our museum exhibits that turn people away. It's a case of needing to do a better job of meeting people's needs-rather than sitting back and waiting for people to see the light.“ Firm C: “Our consumers value our commitment to uplifting women around the world through business counseling. The consistently support us because of our goals” © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  1. MARKETING CONCEPT--an organization aims all its efforts at satisfying its customers— at a profit. 2. PRODUCTION ORIENTATION--making whatever products are easy to produce and then trying to sell them. 3. MARKETING ORIENTATION--trying to carry out the marketing concept. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Measuring performance 1. MARKETING METRICS—which refer to numeric data that allow marketing managers to evaluate performance, often against a target or goal (e.g., profit, revenue, cost) © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing Analytics in Action 1. Revenue = Price x Quantity 2. Profit = Revenue – Cost Jonah sells 100 shoes for $35 dollars each. The cost of each shoe is $10. What is the profit made? Revenue = 100x$35 = $3500 Cost = 100x$10= $1000 Profit = $2500 © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Marketing Analytics in Action 1. Revenue = Price x Quantity 2. Profit = Revenue – Cost How could Jonah increase profits? © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Costco and Starbucks What is the customer value being offered? 1-39  Customer Value Equals Benefits, Minus Costs (Exhibit 1-5) Benefits Costs Functional (save time, Monetary (money, simplify, provide info, reduce cost) interest rate, fees) Inconvenience Emotional (provide entertainment, lower – (time delay to receive anxiety, offer superior benefit, effort required to design/aesthetics, receive benefit) provide rewards) Life Changing (give hope, motivate, provide sense of belonging) © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  The Marketing Concept and Customer Value Take Customer’s Point of View Customer Value Reflects Benefits and Costs Customer May Not Dwell on Value Costs Benefits Where Does Competition Fit? Customer Value Builds Relationships © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Checking Your Knowledge Which of the following statements, made by marketing managers, illustrates an understanding of the concept of customer value? A. “It’s more important to acquire new customers than to retain old ones.” B. “The only time it’s really necessary to demonstrate superior customer value is right before the actual sale.” C. “My main concern is with meeting this month’s sales quota— I’ll worry about relationship building later.” D. “I might think my product is a good value, but what really counts is if the customer thinks it’s a good value.” E. “Customer value really boils down to which product is the least expensive.” © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Checking Your Knowledge A computer manufacturer is attempting to increase the customer value associated with purchases of its products. Which of the following might be a way to achieve this increase in value? A. Reduce price. B. Increase technical support for customers. C. Increase warranty coverage. D. Offer free shipping. E. Any of the above, depending on the needs of the target market. © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Putting It All Together (Exhibit 1-6) Total Company Effort to Satisfy Customers Build Profitable Offer Superior Customer Customer Value Relationships Increase Sales to Attract Customers Customers Retain Satisfy Customers Customers © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  The Marketing Concept Applies in Nonprofit Organizations Will “Satisfied Newcomers to Customers” Marketing Offer Support? Characteristics of Nonprofit Organizations May Not Be The Bottom Organized for Line? Marketing © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. The Micro-Macro Dilemma © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Source: New York City Department of Health/DCF Advertising  The Marketing Concept, Social Responsibility, and Marketing Ethics Micro–Macro Group Needs Individual Needs Dilemma Should all Society’s Do all consumer What if it cuts needs must be marketers act needs be into profits? considered responsibly? satisfied? The Marketing Concept Guides Ethics © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Left: ©Image Source/Takahiro Igarashi; Right: © Shutterstock / Monkey Business Images  Sample Criticisms of Marketing (Exhibit 1-8) Advertising is everywhere Easy consumer credit Poor quality and unsafe products Makes people Too many unnecessary materialistic products Criticisms Misuse of private Retailers raise prices information of consumers without providing anything in return Creates interest in Serves the rich and polluting products exploits the poor Overpromise service © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  #M4BW: Sustainable Development Goals © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. Source: United Nations  Horlicks 1. Developed in 1873 2. Malted drink powder taken warm with milk or water: sleep better and feel better. 3. Largest markets: UK and India.  Product in the U.K. 1. Taken warm 2. Has Added Vitamins and Minerals 3. Is sweet tasting and malty 4. Variants: Original., Light, Light malted chocolate 5. SKU: 2kg, 800g, 400g 6. Positioned as a drink before bedtime Question: What changes would you make to this product to target it to American consumers? Think about customer value from the perspective of the American consumer. How would you market the product, in terms of advertising, distribution and pricing?  Why I love Marketing Economics Psychology Anthropology Marketing  Key Terms 1. production 11. transporting function 2. customer satisfaction 12. storing function 3. innovation 13. standardization and 4. marketing grading 5. pure subsistence 14. financing economy 15. risk taking 6. macro-marketing 16. market information 7. economies of scale function 8. universal functions of 17. intermediary marketing 18. collaborators 9. buying function 19. economic system 10. selling function © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.  Key Terms 20. command economy 30. marketing metrics 21. market-directed 31. triple bottom line economy 32. customer value 22. simple trade era 33. micro–macro dilemma 23. production era 34. social responsibility 24. sales era 35. marketing ethics 25. marketing department era 26. marketing company era 27. marketing concept 28. production orientation 29. marketing orientation © 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.