Chapter 1: What is Marketing? PDF

Author Comment - What Is Marketing? Pause here and think about how you'd answer this question before studying OBJECTIVE 1-1 Define marketing and outline the steps in the marketing process. marketing. Then...

Author Comment - What Is Marketing? Pause here and think about how you'd answer this question before studying OBJECTIVE 1-1 Define marketing and outline the steps in the marketing process. marketing. Then see how your answer changes as you read the chapter. Marketing, more than any other business function, deals with customers. Although we will soon explore more detailed definitions of marketing, perhaps the simplest definition is this one: Marketing is engaging customers and managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering value and satisfaction. For example, Amazon dominates the online marketplace by creating a world-class online buying experience that helps customers to "find and discover anything they might want to buy online." Facebook has attracted more than 2 billion active web and mobile users worldwide by helping them to "connect and share with the people in their lives." And Starbucks dominates the U.S. out-of-home coffee market by "creating a culture of warmth and belonging, where everyone is welcome."2 Sound marketing is critical to the success of every organization. Large for-profit firms such as Google, Target, Coca-Cola, Procter & Gamble, and Microsoft use marketing. But so do not-for-profit organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches. 30  Chapter 1: Marketing: Creating Customer Value and Engagement 31 You already know a lot about marketing-it's all around you. Marketing comes to you in the good old traditional forms: You see it in the abundance of products at your nearby shopping mall and the ads that fill your TV screen, spice up your maga­ zines, or stuff your mailbox. )) But in recent years, marketers have assembled a host of new marketing approaches, everything from imaginative websites and smartphone apps to biogs, online videos, and social media. These new approaches do more than just blast out messages to the masses. They reach you directly, personally, and interactively. Today's marketers want to become a part of your life and enrich your experiences with their brands. They want to help you live their brands. At home, at school, where you work, and where you play, you see marketing in almost everything you do. Yet there is much more to marketing than meets the consumer's casual eye. Behind )) Marketing Is all around you, in good old traditional forms and in a it all is a massive network of people, technologies, and host of new forms, from websites and mobile apps to online videos and activi­ties competing for your attention and purchases. This book social media. will give you a complete introduction to the basic concepts and Leung Cho Pan/123 RF prac­tices of today's marketing. ln this chapter, we begin by defining marketing and the marketing process. Marketing Defined What is marketing? Many people think of marketing as only selling and advertising. We are bombarded every day with TV commercials, catalogs, spiels from salespeople, and online pitches. However, selling and advertising are only the tip of the marketing iceberg. Today, marketing must be understood not in the old sense of making a sale-"telling and selling"-but in the new sense of satisfying customer needs. lf the marketer engages consumers effectively, understands their needs, develops products that provide superior customer value, and prices, distributes, and promotes them well, these products will sell easily. In fact, according to management guru Peter Drucker, "The aim of marketing is to make selling unnecessary."3 Selling and advertising are only part of a larger marketing mix-a set of marketing tools that work together to engage customers, satisfy customer needs, and build customer relationships. Broadly defined, marketing is a social and managerial process by which individuals and organizations obtain what they need and want through creating and exchanging value with others. In a narrower business context, marketing involves building profitable, value­ Marketing laden exchange relationships with customers. Hence, we define marketing as the process The process by which companies by which companies engage customers, build strong customer relationships, and create engage customers, build strong customer customer value in order to capture value from customers in return.4 relationships, and create customer value in order to capture value from customers in return. The Marketing Process )) Figure 1.1 presents a simple, five-step model of the marketing process for creating and capturing customer value. In the first four steps, companies work to understand consumers, create customer value, and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. By creating value for consumers, they in turn capture value from consumers in the form of sales, profits, and long-term customer equity. In this chapter and the next, we examine the steps of this simple model of marketing. In this chapter, we review each step but focus more on the customer relationship steps­ understanding customers, engaging and building relationships with customers, and capturing value from customers. In Chapter 2, we look more deeply into the second and third steps-designing value-creating marketing strategies and constructing marketing programs.  32 Part 1: 0tflnlng Mllbtintg and the llwtlng Proca1 c,..i. value for cu.lomer9 ind Cept&n value from bulld cuatomer ,.,.tlOMhlpe cuatomera In '9tum Underltand 1he ONJgna Construct an Engage c:uslometa, Capture value customer value­ Integrated t>uld profitable mertcetpllee Ind maiMllng program relatlonshlpe, and from customers to customr needs driven martcetlng lhaldeOvers create profits and stTategy create customer and wants superior value delight customer equity » Figure 1.1 The Marltetlng Tlli$ f!QlnSIIOWS ln1!UWII. CIUl!ngvu b'QIIIDm9s. C3llln vau mnCUIIIXl"ffl 1n ll!U1I. This fiwt.Sll!p l)RUSS aim Ille Process: Creating and Capturing nat!tP;I Rlftlrk lcr Ille resi Ille and lhe rsnmir Ille 1!11. Customer Value Author Comment - Understanding the Marketplace and Customer Marketing is all about aeating Vilkle for custaners. So, as the f'tst step III the Needs mar1cetJng process, the company l11JSI llRy OBJECTIVE 1·2 Explain the Importance of understanding the marbtplace and customers and llldetst.and QJStomers and the maricelplace. Identify the five core marketplace concepts. As a first step, marketers need to understand customer needs and wants and the marketplace in which they operate. We examine five core customer and marketplace concepts: ( l) needs, wants, and demands: (2) market offerings (products, services, and experiences); (3) value and satisfaction; (4) exchanges and relationships; and (5) markets. Needs Customer Needs, Wants, and Demands States of felt deprivation. The most basic concept underlying marketing is that of human needs. Human needs are Wants states of felt deprivation. They include basic physical needs for food, clothing, warmth, and The form human needs lake as they are safety; social needs for belonging and affection; and individual needs for knowledge and self­ shaped by culture and individual personality. expression. Marketers did not create these needs; they are a basic part of the human makeup. Demands Wants are the fonn human needs take as they are shaped by culture and individual Human wants that are backed by buying personality. An American needs food but wants a Big Mac, fries, and a soft drink. A per powet son in Papua, New Guinea, needs food but wants taro, rice, yams, and pork. Wants are shaped by one's society and are described in tenns of objects that will satisfy those needs. When backed by buying power, wants become demands. Given their wants and resources, people demand products and services with benefits that acid up to the most value and satisfaction. Companies go to great lengths to learn about and under­ stand customer needs, wants, and demands. They conduct consumer research, analyze mountains of customer data, and observe customers as they shop and interact, offline and online. People at all levels of the company-including top management-stay close to customers: 5 To see up close what their customers experience, Airbnb's CEO BriM Chesley and his co-founder Joe Gebbia regularly stay at the company's host locations. When Airbnb first listed rentals back in 2009, Chesley and Gebbia personally visited all of their New York hosts, staying with them, writing reviews, and making sure they lived up 10 the company's lofty vision. Such personal visits help the pair to shape new customer solutions based on real user experi­ ence. )) Similarly, Target's energetic CEO, Brian Cornell. makes regular unanoouoced visits to Target stores, accompanied by lo­ cal moms and loyal Target shoppers. Cornell likes nosing around )) Staying close lo customers: Energetic Target CEO Brian Cornell makes stores and getting a real feel for what's going on. It gives him "greai, regular unannounced visits lo Target stores, accompanied by local moms genuine feedback." He and other Target executives even visit cus­ and loyal Target shoppers. tomers in their homes, opening closet doors and poking around in Adr.ennan+Gruber cupboards to tmderstand their product choices and ooying habits.  Chapter 1: MarkeUn g: CreaUng Cuatomer Valut and Engagement 39 Starting Focus Means Ends point The aelllng Selling Profits through Tile ITIWIJr,g conctP1 ExlsUng taus an ou!lide-ln view concept Factory products and sales volume promoting !)'.at IOCU5eS 011 satls/y!no QJS!Omef needs as a l),JII 10 p1or11S As The selling corcepl lakes an Sowiv.est AJrHres' colorlul inside--Out view l!lal locuses on 1ouroo pCJ1S 1t 'We dool existino products and heavy The marketing Profits through have a muutlno selling. The aim Is to sell whal Customer Integrated concept Market needs marketing customer deoartment we have a the company makes rather lhan satisfaction customei department· making whal lhe customer wanls. )) Figure 1.3 Selling and Marketing Concepts Contrasted In many cases, however, customers don't know what they want or even what is pos­ sible. As Henry Ford once was believed to have remarked, "If I'd asked people what they wanted, they would have said faster horses."9 For example, even 20 years ago, how many consumers would have thought to ask for now-commonplace products such as tablet computers, smartphones, digital cameras, 24-hour online buying, digital video and music streaming, and GPS systems in their cars and phones? Such situations call for c11stomer­ driving marketing-understanding customer needs even better than customers themselves do and creating products and services that meet both existing and latent needs, now and in the future. As legendary Apple cofounder Steve Jobs once said, "Our job is to figure out what [consumers are) going to want before they do....Our task is to read things that are not yet on the page."10 Societal marketing concept The idea that a company's marketing decisions should consider consumers' wants, The Societal Marketing Concept. The societal marketing concept questions whether the company's requirements, consumers' long­ the pure marketing concept overlooks possible conflicts between consumer short-run run Interests, and society's long-run Interests. wants and consumer long-run welfare. Is a firm that satisfies the immediate needs and wants of target markets always doing what's best for its consumers in the long run? The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer's and society's well-being. It calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the abil­ ity of future generations to meet their needs. As the lext example shows. Jeni's Splendid Ice Creams Even more broadly, many leading business and marketing thinkers are now preaching knows that doing good can be!lelit both the convnunlty the concept of shared value, which recognizes that societal needs, not just economic needs, and the company. It lhrives by 'making bener ice crwns and bringing people together." define markets.11 The concept of shared value focuses on creating economic value in a way that also creates value for society. A growing number of companies known for their hard-nosed approaches to business-such as Google, GE, IBM, Johnson \ Society & Johnson, Unilever, and Walmart-are rethinking the interactions between (Human welfare) society and corporate performance. They are concerned not just with short-term economic gains but with the well-being of their customers, the depletion of nat­ ural resources needed by their businesses, the welfare of key suppliers, and the economic well-being of the communities in which they operate. Societal As )) Figure 1.4 shows, companies should balance three considerations in marketing setting their marketing strategies: company profits, consumer wants, and society's concept intersts. e Consumers Company (Want satisfaction) (Profits) )) Figure 1.4 Three Considerations Underlying the Societal Marketing Concept