MKTG 3310 Chapter 1 PDF

Chapter 1: What is marketing? What is marketing? A lot of people think marketing is just advertising or sales. It includes those things, but much more. Here are some of the most common misconceptions about marketing... Misconception 1: "Marketing is common sense" Common sense misconceptions: 1. "Low...

Chapter 1: What is marketing? What is marketing? A lot of people think marketing is just advertising or sales. It includes those things, but much more. Here are some of the most common misconceptions about marketing... Misconception 1: "Marketing is common sense" Common sense misconceptions: 1. "Lower price is always better." ○ Sometimes a higher price is better; depends on the ○ product, what the customer is buying and why Example: buying a Rolex watch because it is a luxury and expensive. High prices add value2. "Better service leads to higher profits" People will pay for a certain level of service ○ Ex: Walmart can offer better prices because they don't have to spend the extra money on customer service versus Target or Publix, where customers expect a little better service and are willing to pay a higher price, no matter what level of service the customer wants and is willing to pay for. 3. "More choice is better." Limited choices are better for both the company and consumer ○ Ex: Sears used to be the dominant retailer—more important than Walmart in its day, with hundreds of pages of products—even house kits like the Auburn model (1916ish), but they eventually got so big and had so many products that more focused retailers like Toys R Us and Best Buy and discount retailers like WalMart started taking away big chunks of their market. Sears was too slow to change is now mostly gone. ○ Being focused is better! Misconception 2: "Marketing= sales or advertising" ○ Reality: it also includes many other things, such as product design and pricing and distribution/supply chain. A range of integrated decisions. ○ The 4 P’s Product Price Place Promotion Decisions Misconception 3: "Marketing makes people buy what they don't need." ○ Need: lack of means of subsistence. (ex., I need food.) ○ Want: the strong desire for something (ex., I want a steak or McDs) ○ Demand: want+ buying power+ willingness (I want a fancy steak dinner at expensive restaurant, but I don't want to spend the money even though I I have it, so I bought a McDonald's value meal. ○ The reality is that marketing can influence wants (important, not needs!). You need food, but marketing can influence which food you want. Misconception 4: "Marketing is an art." ○ Facts: 1. Creativity does not guarantee marketing success; marketing is part art and part science. 2. The list of clever ads and brands that create buzz and then fail is long (Pets.com). 3. There are many companies that do not have exciting marketing but are successful (ex. UPS, Tide). 4. Creativity can enhance good marketing, but it is not sufficient for success (much of marketing is skills which can be built vs abilities which you either have or don't) Misconception 5: "Marketing doesn't involve numbers." ○ Reality: Marketing is full of numbers Ex: Have to be able to calculate how much profit you make or what happens to profit if you charge one price vs another, market share, and lots of numbers in marketing, but not hard math—just addition, subtraction, multiplication, and division 1.2) Marketing Defined ○ Marketing: managing exchanges with customers Most people do not understand marketing all that well. Marketing is complicated! THIS IS THE ROLE OF MARKETING! ○ It involves at least two parties for exchange to happen (typically buyer and seller but can also include nonprofits. ○ Each party has something of value to the other (customer has money that Starbucks wants and Starbucks has coffee that customer wants—potential exchange) ○ They are willing and able to make an exchange (customer is willing to pay $4.29 for a Mocha Latte), so both get something they value more than what they gave up since customers think coffee is worth more than $4.29 and Starbucks makes a profit since the total cost of providing the coffee is less than $4.29. Market: the exchange partners and where they come together (example, any retail stores like clothes stores or grocery stores, but increasingly digital or online like Amazon or Ebay). Marketing plan: goals, how to achieve them, and measuring them with budgets and timeline, spelling out our specific activities and who will be responsible for doing them. ○ Target market: the primary group of customers you would prefer to exchange with. They are the focus of the marketing plan. For example,. Publix targets customers who are willing to spend a bit more for better service and slightly higher quality grocery items than Winn Dixie or Walmart targets customers who want to spend less and expect lower prices but less service and less choice. ○ Your target market will purchase from you, pay a higher price than others for the same thing, and keep coming back 1.3) The philosophy of marketing (also referred to as orientation, or how marketers think about the world differently). ○ Accounting thinks about things in terms of balance since debits and credits have to be equal. Marketing is different. The best marketers manage exchanges to maximize benefits for both parties. ○ (Ex. The customer has to feel like they got maximum value, while the marketer also gets what The customer wants, which is most of the time a higher price for more profit.) Conflict in exchange: Company wants the maximum price with the minimum benefits ○ (Company wants to sell you the most basic car for $50,000!) ○ The customer wants the minimum price with the maximum benefits (I want a new car with leather, style, power, quality, sunroof, everything...for free?) The basic goal is to maximize how much the customer is willing to pay while making sure the customer thinks they got more than what they paid for. to be willing to pay a high price but still think they got great value (marketing's job) Perceived value: the perceived benefits relative to the perceived costs associated with an exchange (mostly the benefits of the product like comfort, ease of use, style, etc for earbuds for example, compared to the costs, which is often mainly the price paid, but sometimes there are also costs like inconvenience, time, aggravation,and so on. Different customers have different perceptions (even for the same things) ○ The goal is to find a company that can maximize perceived value relative to competition (this is why companies identify and focus their efforts on specific target customers, so they know the customers, what they want, and what costs they are willing to give up). ○ To be successful, marketers have to understand the perceived value associated with a particular exchange for a group of customers and then find out what influences that group’s perceptions of value. Must understand customer perceptions to influence them (hard to do since different customers want different things, but also since figuring this out would mean you have to somehow speak with or communicate with lots of different customers, which is expensive and difficult. Marketing research measures marketing activity outcomes (answers the question: did this specific marketing tactic work—like measuring if giving Free samples at Sam's Club actually get new customers to buy the product. Value propositions are combinations of benefits that will appeal to some specific groups, but not others. ○ Ex. AirBnb The role of marketing research is that good marketers are naïve scientists (they try something, check to see if it worked, and then try to improve, then keep repeating this process). While there is an art to successful marketing, it should be methodical (companies should always be doing marketing and should always be trying new things to see what works and what doesn't. Then they should work to improve what works and figure out why things didn't work to see (If there is something they could do differently, that might work better.) Ex. A new gym in town wants to increase the number of memberships and thinks it would be a good idea to go around to nearby apartment complexes and hand out flyers about the gym and memberships with a coupon. marketing research (measuring the outcomes of specific marketing activities against goals). To test an idea to see if it is effective, the idea should have a specific goal against which to measure the outcomes (Ex., we want to have 100 new people sign up for gym memberships by the end of the week in response to this flyer we are handing out at the apartments. You must measure marketing outcomes to see if your marketing works (Count how many new accounts you get at the end of the event to see if you reached 100 or not.). Marketing doesn't always work, and good marketing means taking calculated risks (We handed out flyers to advertise the gym, but we only got 50 new memberships. We look to see what went wrong. Oh, two of the apartment buildings where we handed out flyers have gyms in the basement. Change where you had your flyers to apartments without gyms nearby and see if results improve and how much. 1.4) Marketing orientations ○ Represent an approach to marketing that influences practice - sequence in terms of development, but actually the orientations are still in practice today (used cars still use sales orientation—get the sale at maximum price and don't worry about relationships, and computer chip manufacturers still use primarily a production orientation—build it and they will come—about better and better chips) ○ Timeline in the United States (and similar developed economies) We refer to marketing during the manufacturing era between 1850 and 1945 as a production orientation. ○ Companies strived to produce what customers wanted. Because many of these products were new to the market, demand was high. Sales went to the company that produced the most efficient and cost-effective version of the product. During this period, marketing was characterized by a sales orientation, with the primary goal of marketing being to determine how to most effectively sell products to specific customers. ○ Sales goals were short term and focused, favoring single transactions rather than repeat purchases. Marketing Orientation: Instead, companies focused on understanding exactly what customers wanted and tried to provide the product or service at a profit. The goal of marketing changed from selling to satisfying customers. ○ The concept of customer relationship marketing gained popularity, where companies would focus their efforts on understanding the target market so well that they built a relationship with customers over time. ○ Perhaps, one of the surprises from this approach was the discovery by some companies that not all customers are desirable. Social Orientation: Consumers use technology to socialize with each other and with companies and generally to interact with the world around them. ○ social responsibility—companies acting at least in part in the best interests of society rather than their own interests.