Marketing - McGraw Hill (2022) PDF

Creating Customer Chapter Relationships 1 and Value through Marketing Bombas Is Solving Social Problems with Great Socks and LEARNING OBJECTIVES Great Marketing! After reading this chapter Randy Goldberg and David Heath are on...

Creating Customer Chapter Relationships 1 and Value through Marketing Bombas Is Solving Social Problems with Great Socks and LEARNING OBJECTIVES Great Marketing! After reading this chapter Randy Goldberg and David Heath are on a mission—a social mission—to give away you should be able to: millions of socks to homeless shelters. You may know the company they founded, Bombas, for its comfortable socks. And if you’ve purchased a pair you also helped LO 1-1 Define marketing and them achieve their mission because for every pair of socks purchased at Bombas, identify the diverse they donate a pair to someone affected by homelessness! factors that influence Their story started when Goldberg and Heath were co-workers at another com- marketing actions. pany and learned that socks are the most requested item at homeless shelters. They LO 1-2 Explain how marketing decided to build a company that could solve the problem using the buy-one-give-one discovers and satisfies model. Today Bombas has annual sales of more than $250 million and has donated more than 50 million clothing items.1 consumer needs. What is the secret to Bombas’s success? Read on to hear the rest of the story! LO 1-3 Distinguish between marketing mix factors and environmental Creating Better Socks forces. Once they decided on the mission, the two entrepreneurs began to research the LO 1-4 Explain how sock market. They discovered that most consumers were in “replenishment organizations build mode”—simply buying socks to replace old ones.2 In addition, socks were not viewed as being very comfortable. Goldberg and Heath concluded that better strong customer socks would attract more consumers and allow them to donate more socks, so relationships and they began the process of designing “the most comfortable socks in the history of customer value feet.” They spent several years conducting research and testing prototypes with through marketing. features they thought made better socks. The result was a sock with a seamless LO 1-5 Describe the toe, a cushioned foot bed, an arch support system, elastic construction to keep characteristics of a the socks up, and blister tabs on the backs of ankle socks. The donated socks, market orientation. specifically designed for people experiencing homelessness are dark-colored, rein- forced, and antimicrobial-treated.3 Building a Brand with a Purpose The combination of their social mission and their exceptional product was an im- portant platform for starting their company. From there the co-founders used many elements of marketing to build their brand. First, the name Bombas comes from the Latin word for “bumblebee,” and is significant because bees live in a hive and work together to make their world a better place. They added a bee as their logo and adopted “Bee Better” as their motto to describe a mantra or a way of approaching every day. All of these elements were designed to communicate that the brand is driven by more than profits.  3 Source: Bombas, LLC/Instagram, Inc. Source: Bombas, LLC Source: Bombas, LLC The new company raised money on crowdfunding site Indiegogo (www.indiegogo. com), created a direct-to-consumer website to sell its socks, and relied heavily on word of mouth to reach customers. Then Bombas received additional funding through a television appearance on Shark Tank and needed a marketing program that could reach a national audience and also communicate its messages of social impact and product quality. Podcasts and video ads were logical communication tools because they could attract attention with audio and visual messages and they provided enough time to explain the VIDEO 1-1 social cause and the details of the product quality. Bombas also began using advertising on Bombas Video Facebook, Instagram, and YouTube. You may have seen some of Bombas’s TV ads for its kerin.tv/16e/v1-1 “The Greatest Sock Never Sold” campaign. The Bombas website features a video titled “Most Important Socks in the World” with more than 4 million views!4  Bombas Today The Bombas web page says “We’re Bombas. We believe that a more comfortable world is a better world. That everyone, no matter their circumstances, deserves to put on clean clothes that make them feel good.” Bombas has certainly succeeded at this goal and it continues to grow. The company recently expanded its distribution through re- tail partners such as Nordstrom, Dick’s Sporting Goods, Scheels, and Athleta stores. The company also expanded its product line to include T-shirts, underwear, and is looking at other possible products to offer. According to Heath, “I think when we look to the future, we could easily be a billion-dollar brand in revenue in the next 5 to 10 years.” The company’s commitment to responsible growth is also empha- sized by its B-Corp certification which is given to Bombas for meeting the highest standards of social and environmental performance, David Heath and Randy transparency, and accountability to balance profit and purpose.5 Goldberg started Bombas to help solve a social problem: Bombas, Marketing, and You Socks are the most requested Will Randy Goldberg and David Heath continue their success story—particularly with the item at homeless shelters. appearance of many other sock competitors and many new companies building altruism Their buy-one-give-one model into their business models? For Bombas, one key factor will be how well it understands and has allowed them to donate uses marketing—the subject of this book. Bombas is also the subject of Video Case 1 at the millions of pairs of socks! end of this chapter! Courtesy of Bombas WHAT IS MARKETING? The good news is that you are already a marketing expert! You perform many marketing activities and make marketing-related decisions every day. For example, would you sell more Samsung 110-inch MicroLED “The Wall” TVs at $100,000 or $24,999? You answered $24,999, right? So your experience in shopping gives you some expertise in marketing. As a consumer, you’ve been involved in thousands of marketing decisions, mostly on the buying and not the selling side. But to test your expertise, answer the “marketing expert” questions posed in Figure 1–1. You’ll find the answers within the next several pages. Are you a marketing expert? If so, what would you pay for this cutting-edge TV? Source: Samsung 4  FIGURE 1–1 Answer the questions below. The correct answers are given later in the chapter. The see-if-you’re-really- a-marketing-expert test. 1. What is the name of the zero-calorie, sugar-free, gluten-free, vegan soft drink that is sweetened with natural ingredient stevia? (a) Coca-Cola, (b) Coca-Cola Zero Sugar, 5 (c) Pepsi Zero Sugar, (d) Zevia. 2. True or False: The 65-year lifetime value of a loyal auto repair center customer is $147,000. 3. To be socially responsible Patagonia encourages its customers to do which of the CHAPTER 1 Creating Customer Relationships and Value through Marketing following with its products? (a) repair, (b) trade, (c) recycle, (d) all three. The bad news is that good marketing isn’t always easy. That’s why every year thousands of new products fail in the marketplace and then quietly slide into oblivion. Marketing and Your Career Marketing affects all individuals, all organizations, all industries, and all countries. This book seeks to teach you marketing con- cepts, often by having you actually “do marketing”—by putting you in the shoes of a marketing manager facing actual marketing decisions. The book also shows marketing’s many applications and how it affects our lives. This knowledge should make you a better consumer and enable you to be a more informed citizen, Elon Musk, the chief executive officer of Tesla and and it may even help you in your career planning. SpaceX, began building businesses shortly after Perhaps your future will involve doing sales and marketing for graduating from college. a large organization. Working for a well-known company—Apple, Reuters/Alamy Stock Photo Ford, Facebook, or General Mills—can be personally satisfying and financially reward- ing, and you may gain special respect from your friends. Start-ups and small businesses also offer marketing careers. Small businesses are the source of the majority of new U.S. jobs. So you might become your own boss by being an entrepreneur and starting your own business. Shortly after leaving Stanford, Elon Musk, for example, started and sold a web soft- ware company called Zip2. With the proceeds from that business he started another business that merged with another and became PayPal. When PayPal was purchased by eBay, Musk founded another venture called SpaceX, which develops and manufactures space launch vehicles and hopes to send a mission to Mars “well before 2030.” Since those initial business start-ups, Musk also started the electric car company Tesla and a solar power company called SolarCity. In addition, he has started a design competition for a high-speed transportation system called Hyperloop, a nonprofit artificial intelli- gence company called OpenAI, a neurotechnology company called Neuralink, and a tunnel construction firm called The Boring Company. Perhaps your interest in market- ing will lead to new business successes like Musk’s!6 Marketing: Delivering Value to Customers The American Marketing Association represents individuals and organizations involved LO 1-1 in the development and practice of marketing worldwide. It defines marketing as the Define marketing and activity, set of institutions, and processes for creating, communicating, delivering, and identify the diverse exchanging offerings that have value for customers, clients, partners, and society at factors that influence marketing actions. large.7 This definition shows that marketing is far more than simply advertising or personal selling. It stresses the need to deliver genuine value in the offerings of goods, services, and ideas marketed to customers. Also, notice that an organization’s marketing activities should also create value for its partners and for society.  The Organization and Its Departments Society Society Research Alliances Human Ownership and Other resources Shareholders development organizations department (owners) department Senior Information Manufacturing technology department management department Partnerships Relationships Suppliers Finance Marketing Customers department department Environmental forces Social Economic Technological Competitive Regulatory To serve both buyers and sellers, marketing seeks (1) to discover the needs and wants FIGURE 1–2 of prospective customers and (2) to satisfy them. These prospective customers include A marketing department both individuals, buying for themselves and their households, and organizations, buying relates to many people, organizations, and for their own use (such as manufacturers) or for resale (such as wholesalers and retailers). forces. Note that the The key to achieving these two objectives is the idea of exchange, which is the trade of marketing department things of value between a buyer and a seller so that each is better off after the trade.8 both shapes and is shaped by its relationship with these The Diverse Elements Influencing Marketing Actions internal and external Although an organization’s marketing activity focuses on assessing and satisfying con- groups. sumer needs, countless other people, groups, and forces interact to shape the nature of its actions (see Figure 1–2). Foremost is the organization itself, whose mission and ob- jectives determine what business it is in and what goals it seeks. Within the organiza- tion, management is responsible for establishing these goals. The marketing department works closely with a network of other departments and employees to help provide the customer-satisfying products required for the organization to survive and prosper. Figure 1–2 also shows the key people, groups, and forces outside the organization that influence its marketing activities. The marketing department is responsible for facilitating relationships, partnerships, and alliances with the organization’s customers, its shareholders (or often representatives of nonprofit organizations), its suppliers, and other organizations. Environmental forces involving social, economic, technological, competitive, and regulatory considerations also shape an organization’s marketing actions. Finally, an organization’s marketing decisions are affected by and, in turn, often have an important impact on society as a whole. The organization must strike a balance among the sometimes differing interests of these groups. For example, it is not possible to simultaneously provide the lowest-priced and highest-quality products to customers and pay the highest prices to suppliers, the highest wages to employees, and the maximum dividends to shareholders. What Is Needed for Marketing to Occur For marketing to occur, at least four factors are required: (1) two or more parties (indi- viduals or organizations) with unsatisfied needs, (2) a desire and ability on their part to 6  have their needs satisfied, (3) a way for the parties to communi- cate, and (4) something to exchange. Two or More Parties with Unsatisfied Needs Suppose you’ve developed an unmet need—a desire for a late-night meal 7 after studying for an exam—but you don’t yet know that Domino’s has a location in your area. Also unknown to you is that Domino’s has a special “mix & match” offer for any two or more of its menu items, just waiting to be ordered and picked up or delivered by its self-driving delivery robot, Nuro. This is an example of two parties CHAPTER 1 Creating Customer Relationships and Value through Marketing with unmet needs: you, desiring a meal, and your local Domino’s owner, needing someone to place an order. Marketing doesn’t happen in a vacuum. The text describes the four factors needed to buy a product Desire and Ability to Satisfy These Needs Both you from Domino’s and possibly have it delivered by its and the Domino’s owner want to satisfy these unmet needs. self-driving delivery robot, Nuro. Furthermore, you have the money to pay for a purchase and the Source: Domino’s IP Holder LLC time to place an order. The Domino’s owner has the desire to sell its products but also the ability to do so since the items are easily made and delivered to (or picked up by) you. A Way for the Parties to Communicate The marketing transaction of purchas- ing a Domino’s pizza or one of its other products will never occur unless you are aware the product exists and you know how to make a purchase (at a Domino’s location, on Dominos.com, or via a store phone number). Similarly, Domino’s won’t be able to sell its products unless there’s a market of potential buyers nearby. When you receive a cou- pon on your phone or drive by and see the Domino’s store location, this communication barrier between you (the buyer) and the Domino’s owner (the seller) is overcome. Something to Exchange Marketing occurs when the transaction takes place and both the buyer and seller exchange something of value. In this case, you exchange your money ($5.99) for each item ordered from Domino’s Mix & Match menu. Both you and the Domino’s owner have gained and also given up something, but you are both better off because each of you has satisfied the other’s unmet needs. You have the opportunity to eat Domino’s food items to satisfy your hunger, but you gave up some money to do so; the Domino’s owner gave up the pizza, salad, and other items but received money, which will help the owner remain in business. The ethical and regulatory foundations of this exchange process are central to marketing and are discussed in Chapter 3. LEARNING REVIEW 1-1. What is marketing? 1-2. Marketing focuses on and consumer needs. 1-3. What four factors are needed for marketing to occur? HOW MARKETING DISCOVERS AND SATISFIES CONSUMER NEEDS The importance of discovering and satisfying consumer needs in order to develop and offer LO 1-2 successful products is so critical to understanding marketing that we look at each of these Explain how marketing two steps in detail next. Let’s start by asking you to analyze the following three products. discovers and satisfies consumer needs. Discovering Consumer Needs The first objective in marketing is discovering the needs of prospective customers. Marketers often use customer surveys, concept tests, and other forms of marketing For these three products, identify (1) what benefits the product provides buyers and (2) what factors or “showstoppers” might doom the product in the marketplace. Answers are discussed in the text. (Left) Source: Snap Inc.; (Center) ZUMA Press, Inc./ Alamy Stock Photo; (Right) Source: Stitch Fix, Inc. Smart glasses. No-sugar sodas. A clothing subscription service. research (discussed in detail in Chapter 8) to better understand customer ideas. Many firms also use “crowdsourcing” or “innovation tournaments” to solicit and evaluate ideas from customers. At LEGO Group, for example, ideas that are submitted to LEGO Ideas (ideas.lego.com) and receive 10,000 votes from site visitors are considered for possible addition to the product line. LEGO Group products that were discovered through the website include its Big Bang Theory model, its Women of NASA set, its Central Perk coffee shop model (the coffee shop featured in the Friends TV show), and a model based on the Winnie-the-Pooh franchise! Sometimes, however, customers may not know or be able to describe what they need and want. Smartphones, connected homes, and electric cars are all examples of this, in which case an accurate long-term prediction of consumer needs is essential.9 The Challenge: Meeting Consumer Needs with New Products While marketers are improving the ways they can generate new-product ideas, experts estimate that it takes 3,000 raw ideas to generate one commercial success. Market intel- ligence agency Mintel estimates that 38,000 new products are introduced worldwide each month. In addition, studies of new-product launches indicate that about 40 per- cent of the products fail. Robert M. McMath, who has studied more than 110,000 new-product launches, has two key suggestions: (1) focus on what the customer benefit is, and (2) learn from past mistakes.10 The solution to preventing product failures seems deceptively obvious. First, find out what consumers need and want. Second, produce what they need and want, and don’t produce what they don’t need and want. The three products shown previously illustrate just how difficult it is to achieve new-product success, a topic covered in more detail in Chapter 10. Without reading further, think about the potential benefits to customers and possible “showstoppers”—factors that might doom the product—for each of the three products pictured. Some of the products may come out of your past, and others may be on your horizon. Here’s a quick analysis of the three products: VIDEO 1-2 · Smart Glasses. Several years ago Google launched a brand of smart glasses called Google Glass. The new product was head-mounted and similar in appearance to Spectacles Smart a pair of glasses. In addition, though, the glasses had Internet capabilities, a cam- Glasses era, phone, speaker, microphone, touchpad, and a heads-up display. While the kerin.tv/16e/v1-2 product was popular among technology enthusiasts it did not attract a mass mar- ket. Showstoppers included its $1,500 price tag, a general perception that it looked “nerdy,” and concerns that wearing the device might violate privacy 8  rights. Google discontinued the product, although it has recently reintroduced the concept as an Enterprise Edition for businesses, and other brands such as Spectacles, Focals and Vuzix are offering models that are trying to attract the consumer market!11 VIDEO 1-3 · Zevia No-Sugar Soda. As consumer preferences have shifted, beverage companies have expanded their offerings to include drinks with less sugar. Soda producers, 9 Zevia Ad for example, have offered new products such as Coca-Cola Zero Sugar and Pepsi kerin.tv/16e/v1-3 Zero Sugar which are made with the artificial sweetener aspartame. New prod- ucts are also being developed as the U.S. Food & Drug Administration’s Nutri- tion Facts label requirements provide more information about added sugars. CHAPTER 1 Creating Customer Relationships and Value through Marketing Zevia, for example, produces a zero-calorie, sugar-free, gluten-free, vegan, soft drink that is sweetened only with the natural ingredient stevia. A potential show- stopper: In the past, consumers reported that products with stevia sweetener had a bitter aftertaste. Will Zevia be different? As always, as a consumer you will be the judge!12 · Stitch Fix Subscription. Approximately 5 million consumers buy brands through subscription services today. Stitch Fix hopes to appeal to customers with an array of clothing and accessories from top brands and private labels. Each delivery, or Fix, uses expert stylists and clothing fit technology to build your personalized wardrobe. The service is available in two-week, or one-, two-, or three-month op- tions and allows consumers to specify their price preferences. What are potential showstoppers? First, the competition is growing—there are already 400–600 sub- scription box services in the United States. Second, consumers may tire of receiv- ing new products each month, particularly if they find several brands that meet their needs.13 Firms spend billions of dollars annually on marketing and technical research that significantly reduces, but doesn’t eliminate, new-product failure. So meeting the chang- ing needs of consumers is a continuing challenge for firms around the world. Consumer Needs and Consumer Wants Should marketing try to satisfy con- sumer needs or consumer wants? Marketing tries to do both. Heated debates rage over this question, fueled by the definitions of needs and wants and the amount of freedom given to prospective customers to make their own buying decisions. A need occurs when a person feels deprived of basic necessities such as food, cloth- ing, and shelter. A want is a need that is shaped by a person’s knowledge, culture, and personality. So if you feel hungry, you have developed a basic need and desire to eat something. Let’s say you then want to eat a Chocolate Chip or Peanut Butter Banana Clif Bar because, based on your past experience, you know it will satisfy your hunger need. Effective marketing, in the form of creating an awareness of good products at fair prices and convenient locations, can clearly shape a person’s wants. Certainly, marketing tries to influence what we buy. A question then arises: At what point do we want government and society to step in to protect consumers? Most consumers would say they want government to protect them from harmful drugs and unsafe cars but not from candy bars and soft drinks. To protect college students, should Studying late at night for an government restrict their use of credit cards?14 Such questions have no clear-cut an- exam and being hungry, you swers, which is why legal and ethical issues are central to marketing. Because even decide to eat a Chocolate psychologists and economists still debate the exact meanings of need and want, we shall Chip or Peanut Butter Banana use the terms interchangeably throughout the book. Clif Bar. Is this a need or a As shown on the left side of Figure 1–3 on the next page, discovering needs involves want? The text discusses the looking carefully at prospective customers, whether they are children buying M&M’s role of marketing in influencing candy, college students buying Chobani Greek Yogurt, athletes buying Bombas socks, decisions like this one. or firms buying Xerox color copiers. A principal activity of a firm’s marketing depart- Michael Neelon Food/Alamy ment is to scrutinize its consumers to understand what they need and want and the Stock Photo forces that shape those needs and wants.  FIGURE 1–3 Organization’s marketing department Marketing seeks first to discover consumer Satisfy consumer needs needs through by designing a marketing extensive research. Discover Concepts for program having the right It then seeks to consumer needs products combination of: satisfy those needs by researching what Product by successfully consumers’ needs are Price implementing a Promotion marketing program Place possessing the right combination of the marketing mix—the four Ps. Information about needs Products, services, ideas Potential consumers: The market What a Market Is Potential consumers make up a market, which is people with both the desire and the ability to buy a specific offering. All markets ultimately are people. Even when we say a firm bought office equipment, we mean one or several people in the firm decided to make the purchase. People who are aware of their unmet needs may have the desire to buy the product, but that alone isn’t sufficient. People must also have the ability to buy, such as the authority, time, and money. People may even “buy” an idea that results in an action, such as having their blood pressure checked annually or switching to a reusable water bottle. Satisfying Consumer Needs Marketing doesn’t stop with the discovery of consumer needs. Because the organization LO 1-3 obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain Distinguish between needs of a specific group of potential consumers. This is the target market—one or marketing mix factors more specific groups of potential consumers toward which an organization directs its and environmental forces. marketing program. The Four Ps: Controllable Marketing Mix Factors Having selected its target market consumers, the firm must take steps to satisfy their needs, as shown on the right side of Figure 1–3. Someone in the organization’s marketing department, often the marketing manager, must develop a complete marketing program to reach consumers by using a combination of four elements, often called “the four Ps”—a useful shorthand reference to them first published by Professor E. Jerome McCarthy:15 ·· Product. A good, service, or idea to satisfy the consumer’s needs. Price. What is exchanged for the product. ·· Promotion. A means of communication between the seller and buyer. Place. A means of getting the product to the consumer. We’ll define each of the four Ps more carefully later in the book, but for now it’s im- portant to remember that they are the elements of the marketing mix. These four elements are the controllable factors—product, price, promotion, and place—that can be used by the marketing manager to solve a marketing problem. For example, when a company puts a product on sale, it is changing one element of the marketing mix— namely, the price. The marketing mix elements are called controllable factors because they are under the control of the marketing department in an organization. Managing 10  the marketing mix allows an organization to create a cluster of benefits that satisfies customers’ needs.16 The Uncontrollable, Environmental Forces While 11 marketers can control their marketing mix factors, there are forces that are mostly beyond their control (see Figure 1–2). These are the environmental forces that affect a marketing decision, which consist of social, economic, technological, competitive, and regulatory forces. Examples are what con- sumers themselves want and need, changing technology, the CHAPTER 1 Creating Customer Relationships and Value through Marketing state of the economy in terms of whether it is expanding or contracting, actions that competitors take, and government restrictions. Covered in detail in Chapter 3, these five forces may serve as accelerators or brakes on marketing, sometimes expanding an organization’s marketing opportunities and at other times restricting them. The recent coronavirus pan- demic, for example, challenged firms to modify their market- ing mix with new purchase and delivery options, but also restricted many firms by reducing in-store traffic. Traditionally, many marketing executives have treated these environmental forces as rigid, absolute constraints that are entirely outside their influence. However, recent studies and marketing successes have shown that a forward-looking, action-oriented firm can often affect some environmental forces by achieving technological or competitive break- throughs, such as temi’s personal robots, Amazon’s AI assis- Firms can affect some environmental forces with tant, Google’s Duplex chatbot, and Alibaba’s AliMe customer breakthrough products such as personal robots. service technology. Source: Temi THE MARKETING PROGRAM: HOW CUSTOMER RELATIONSHIPS ARE BUILT An organization’s marketing program connects it with its customers. To clarify this LO 1-4 link, we will first discuss the critically important concepts of customer value, customer Explain how relationships, and relationship marketing. Then we will illustrate these concepts using organizations build 3M’s marketing program for its Post-it® Flag Highlighter products. strong customer relationships and customer value through marketing. Relationship Marketing: Easy to Understand, Hard to Do Intense competition in today’s fast-paced global markets has prompted many successful U.S. firms to focus on “customer value.” Gaining loyal customers by providing unique value is the essence of successful marketing. What is new is a more careful attempt at understanding how a firm’s customers perceive value and then actually creating and delivering that value to them.17 Customer value is the unique combination of benefits received by targeted buyers that includes quality, convenience, on-time delivery, and both before-sale and after-sale service at a specific price. In addition, firms now try to place a dollar value on the purchases of loyal, satisfied customers during their lifetimes. For example, automobile collision repair centers estimate that loyal customers average $2,350 per repair, return eight times, and provide 50 referrals over 65 years, a value of $147,000!18 Research suggests that firms cannot succeed by being all things to all people. Instead, firms seek to build long-term relationships with customers by providing unique value to them. Many successful firms deliver outstanding customer value with one of three value strategies: best price, best product, or best service.19 Target, Starbucks, and Nordstrom provide customer With the intense competition among U.S. businesses, being seen as “best” is admit- value using three very tedly difficult. Still, the three firms shown in the ads above have achieved great success different approaches. For their as reflected in the mission, vision, and values statements they stress and live by:20 strategies, see the text. (Left) Source: Target Brands, Inc.; (Center) Source: Starbucks Coffee · “make Best price: Target. Target uses the brand promise of “Expect More, Pay Less ” to® Target the preferred shopping destination for our guests by delivering out- standing value.” · Best Company; (Right) Source: Wiley product: Starbucks. Starbucks seeks “to inspire and nurture the human spirit— one person, one cup and one neighborhood at a time.” Its ads remind customers that Starbucks coffee is “perfect.” · Best service: Nordstrom. As a leading fashion specialty retailer, Nordstrom works to “deliver the best possible shopping experience, helping our customers express their style—not just buy fashion.” Nordstrom is “committed to providing our cus- tomers with the best possible service—and to improving it every day.” Remaining among the “best” is a continuing challenge for today’s businesses. A firm achieves meaningful customer relationships by creating connections with its customers through careful coordination of the product, its price, the way it is promoted, and how it is placed. The hallmark of developing and maintaining effective customer relationships is today called relationship marketing, which links the organization to its individual customers, employees, suppliers, and other partners for their mutual long-term benefit. Relationship marketing involves a personal, ongoing relationship between the organiza- tion and its individual customers that begins before the sale and may evolve through different types of relationships after the sale.21 Information technology, along with cutting-edge manufacturing and marketing pro- cesses, better enables companies to form relationships with customers today. Smart, connected products, now elements of “the Internet of Everything,” help create de- tailed databases about product usage. Then, using data analytics, or the examination of data to discover relevant patterns, companies can gain insights into how products create value for customers. For example, BMW receives data transmitted by each new vehicle it sells and General Electric collects information sent in by the jet engines it builds to help understand how customers use their products and when service may be needed. The Ritz-Carlton Hotel Company trains each of its employees to observe guest preferences and record them in the guest recognition system. In addition, the hotel’s statement of values, called Gold Standards, guides employees to “build strong relationships and create Ritz-Carlton guests for life,” and the website includes a variety of ways for customers to become part of its online community, including a Twitter-based concierge service.22 12 Ritz-Carlton hotels use relationship marketing concepts—tailoring the purchase experience to each 13 individual—to create lifelong customers. Paul Hilton/Bloomberg/Getty Images CHAPTER 1 Creating Customer Relationships and Value through Marketing The Marketing Program and Market Segments Effective relationship marketing strategies help marketing managers discover what prospective customers need and convert these ideas into marketable products (see Fig- ure 1–3). These concepts must then be converted into a tangible marketing program— a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers. Ideally, buyers can be formed into market segments, which are relatively homogeneous groups of prospective buyers who (1) have common needs and (2) will respond similarly to a marketing action. This action might be a product feature, a pro- motion, or a price. As shown in Figure 1–3, in an effective organization this process is continuous: Consumer needs trigger product concepts that are translated into actual products that stimulate further discovery of consumer needs. LEARNING REVIEW 1-4. An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its. 1-5. What are the four marketing mix elements that make up the organization’s marketing program? 1-6. What are environmental forces? 3M’s Strategy and Marketing Program to Help Students Study “How do college students really study?,” asked David Windorski, a 3M inventor of Post-it® brand products, when thinking about adding new items to the Post-it® line.23 To answer this question, Windorski hired a team of four college students. Their task was to observe and question other students about their study behavior, such as how they used their textbooks, took notes, wrote term papers, and reviewed for exams. As part of their research, the team observed that students often highlight a passage and then mark the page with a Post-it® Note or the smaller Post-it® Flag. Windorski realized there was an opportunity to merge the functions of two products—highlighters and Post-it® markers—into one product to help students study! 3M’s initial product line of Moving from Ideas to Marketable Products Post-it® Flag Highlighters and After testing several models, Windorski concluded he had Post-it® Flag Pens included to build a highlighter product that would dispense Post-it® variations in color. Flags because the Post-it® Notes were simply too large to Mike Hruby/McGraw Hill put inside the barrel of a highlighter. Next, hundreds of the highlighter prototypes with Post-it® Flags inside were produced and given to students—and also office workers—to get their reactions. This research showed that students loved the convenience of the Post-it® Flags in the highlighter. The research also suggested that many peo- ple in offices also need immediate access to Post-it® Flags but while writing with pens. So, the Post-it® Flag Pen was born! Students are a potential market for this product, too, but probably a smaller mar- ket segment than office workers. VIDEO 1-4 3M Post-it® Flag Highlighters Ad A Marketing Program for the Post-it® Flag Highlighter and Post-it® kerin.tv/16e/v1-4 Flag Pen After several years of research, development, and production engineering, 3M introduced its new products. Figure 1–4 outlines the strategies for each of the four marketing mix elements in 3M’s program to market its Post-it® Flag Highlighters and Post-it® Flag Pens. Although similar, we can compare the marketing program for each FIGURE 1–4 of the two products: Marketing programs for the launch of two Post-it® brand products · Post-it ® Flag Highlighter. The target market shown in the orange column in Fig- ure 1–4 is mainly college students, so 3M’s initial challenge was to build student targeted at two target market segments. MARKETING PROGRAM ACTION TO REACH: COLLEGE STUDENT OFFICE WORKER RATIONALE FOR MARKETING MARKETING MARKET SEGMENT MARKET SEGMENT PROGRAM ACTION MIX ELEMENT Offer Post-it® Flag Offer Post-it® Flag Listen carefully to the needs Product Highlighter to help college Pen to help office workers and wants of potential strategy students in their studying in their day-to-day work customer segments to use activities 3M technology to introduce a useful, innovative product Seek retail price of about Seek retail price of about Set prices that provide $2.99 to $3.99 for a single $5.99 to $7.99 for a genuine value to the Price Post-it® Flag Highlighter two-pack of Post-it® customer segment being strategy or $7.99 to $9.99 for a Flag Pens; wholesale prices targeted three-pack are lower Run limited promotion Run limited promotion Increase awareness among with a TV ad and some among distributors to get potential users who have Promotion ads in college newspapers them to stock the product never heard of this new, strategy and then rely on student innovative 3M product word-of-mouth messages Distribute Post-it® Flag Distribute Post-it® Flag Make it easy for prospective Highlighters through Pens through office buyers to buy at convenient Place college bookstores, office wholesalers and retailers retail outlets (both products) strategy supply stores, and mass as well as mass or to get at work (Post-it® merchandisers merchandisers Flag Pens only) 14  awareness of a product that they didn’t know existed. The company used a mix of print ads in college newspapers and a TV ad and then relied on word-of-mouth advertising—students telling their friends about how great the product is. Gaining distribution in college bookstores was also critical. Plus, 3M charged a price to 15 distributors that it hoped would give a reasonable bookstore price to students and an acceptable profit to distributors and 3M. · Post-it® Flag Pen. The primary target market shown in the green column in Figure 1–4 is people working in offices. The Post-it® Flag Pens are mainly busi- ness products—bought by the purchasing department in an organization and stocked as office supplies for employees to use. So the marketing program for CHAPTER 1 Creating Customer Relationships and Value through Marketing Post-it® Flag Pens emphasizes gaining distribution in outlets used by an organiza- tion’s purchasing department. How well did these new 3M products do in the marketplace? They have done so well that 3M bestowed a prestigious award on David Windorski and his team. The success of Welcome to the most recent the Post-it® Flag Highlighter and the Post-it® Flag Pen encouraged Windorski to con- generation of Post-it® Flag tinue to conduct research about how the products were used. Feedback suggested there Highlighters: the Post-it® Flag + was another opportunity in the market: A 3-in-1 combination that has a highlighter on Highlighter & Pen. The cap one end, a pen on the other, and 3M Post-it® Flags in the removable cap. The latest in contains the Post-it® Flags. the family of 3M product innovations is shown in the photo! McGraw HIll HOW MARKETING BECAME SO IMPORTANT To understand why marketing is a driving force in the modern global economy, let us LO 1-5 look at (1) the evolution of the market orientation, (2) the focus on customer relation- Describe the ship management, (3) ethics and social responsibility in marketing, and (4) the breadth characteristics of a and depth of marketing activities. market orientation. Evolution toward a Market Orientation Many American manufacturers have experienced four distinct stages in the life of their firms.24 The first stage, the production era, covers the early years of the United States up until the 1920s. Goods were comparatively scarce and buyers were willing to accept virtually any goods that were available and make do with them.25 In the sales era from the 1920s to the 1960s, manufacturers found they could produce more goods than buyers could consume. Competition grew. Firms hired more salespeople to find new buyers. This sales era continued into the 1960s for many American firms. Starting in the late 1950s, marketing became the motivating force among many American firms and the marketing concept era dawned. The marketing concept is the idea that an organization should (1) strive to satisfy the needs of consumers while also (2) trying to achieve the organization’s goals. General Electric probably launched the marketing concept and its focus on consumers when its 1952 annual report stated: “The concept introduces... marketing... at the beginning rather than the end of the pro- duction cycle and integrates marketing into each phase of the business.”26 Firms such as Southwest Airlines, Marriott, and Facebook have achieved great suc- cess by putting a huge effort into implementing the marketing concept, giving their firms what has been called a market orientation. An organization that has a market orientation focuses its efforts on (1) continuously collecting information about cus- tomers’ needs, (2) sharing this information across departments, and (3) using it to cre- ate customer value. The customer relationship era, the brown bar in Figure 1–5 on the next page, started in the 1980s and continues today as firms continuously seek to satisfy the high expectations of customers. New technologies such as artificial intelligence, natural language processing, robotics, augmented reality, and virtual reality often increase value for consumers and enhance customer relationships.27  FIGURE 1–5 Four different Production era orientations in the history of American business. Today’s Sales era customer relationship era focuses on satisfying the high Marketing concept era expectations of customers. Customer relationship era 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 Focusing on Customer Relationship Management A recent focus in the customer relationship era has been the advent of digital market- ing, in which organizations and their customers develop relationships through applica- tions (apps) and social media websites such as Instagram, Facebook, Twitter, and YouTube, among others. This focus has allowed organizations to understand and mar- ket to current and prospective customers in ways that are still evolving. An important outgrowth of this focus on the customer is the recent attention placed on customer relationship management (CRM), the process of identifying prospective buyers, understanding them intimately, and developing favorable long-term perceptions of the organization and its offerings so that buyers will choose them in the marketplace and become advocates after their purchase.28 This process requires the involvement and commitment of managers and employees throughout the organization29 and a growing application of information, communication, and digital technology, as will be described throughout this book. The foundation of customer relationship management is really customer experience, which is the internal response that customers have to all aspects of an or- ganization and its offering. This internal response includes both the direct and indirect contacts of the customer with the company. Direct contacts include the customer’s contacts with the seller through buying, using, and obtaining services. Indirect contacts most often involve unplanned “touches” with the company through word-of-mouth com- ments from other customers, reviewers, and news reports. In terms of outstanding cus- tomer experience, Trader Joe’s is high on the list. Not surprisingly, it is ranked as one of America’s favorite supermarket chains.30 What makes the customer experience at Trader Joe’s unique? The reasons include: · Setting low prices, made possible by offering its own brands rather than well- known national ones. · Offering unique, affordable products, like Speculoos Cookie Butter, Hatch Chile Mac & Cheese, and Trader Ming’s Mandarin Orange Chicken, not available from other retailers. · Encouraging employee “engagement” to help customers, like actually walking them to where the roasted chestnuts are—rather than saying “aisle five.” This commitment to providing an exceptional customer experience is what gives Trader Joe’s its high rankings. It is also the reason why Trader Joe’s doesn’t authorize or sell its products online. According to a company spokesperson, “The store is our brand and our products work best when they’re sold as part of the overall customer ex- perience within the store. Part of that customer experience is the value we are commit- ted to providing customers, each and every time they shop our stores—great products of the highest quality at great prices.”31 16 Trader Joe’s is consistently ranked as one of America’s favorite supermarket chains. This reflects the company’s 17 focus on providing a great customer experience, as described in the text. Phelan M. Ebenhack/AP Images CHAPTER 1 Creating Customer Relationships and Value through Marketing Ethics and Social Responsibility in Marketing: Balancing the Interests of Different Groups Today, the standards of marketing practice have shifted from an emphasis on producers’ interests to consumers’ interests. Guidelines for ethical and socially responsible behav- ior can help managers balance consumer, organizational, and societal interests. Facebook’s ads acknowledge Ethics Many marketing issues are not specifically addressed by existing laws and the growing importance of regulations. Should information about a firm’s customers be sold to other organiza- privacy and describe the tions? Should online advertising that reaches young children be restricted? Should con- company’s efforts to provide sumers be on their own to assess the safety or authenticity of a product? These questions consumers with more control raise difficult ethical issues. Many companies, industries, and professional associations through its privacy settings. have developed codes of ethics, policies, and guidelines to assist managers. Facebook, Source: Facebook for example, is changing its view on privacy and states on its website: “We’re committed to protecting your information and giving you more control over your privacy choices.” Social Responsibility While many ethical issues involve only the buyer and seller, others involve society as a whole. For example, suppose you have the oil in your car changed at a local oil change center. Is this just a transaction between you and the service center? Not quite! The used oil and oil filter have potential to contaminate the environment if they are not recycled, and contamination represents a cost to society in terms of lost use of landfill space or eventual cleanup of the discarded waste products. To reduce the social cost of individual purchases today, many organizations use a variety of strategies that range from pure philanthropy, to environmentally friendly and sustainable practices, to creating “shared” value.32 These strategies illustrate the issue of social respon- sibility, the idea that organizations are accountable to a larger society. The well-being of society at large should also be recognized in an orga- nization’s marketing decisions. In fact, some marketing experts stress the societal marketing concept, the view that organizations should satisfy the needs of consumers in a way that provides for society’s well-being. For example, Patagonia’s Worn Wear program encourages its customers Strategies in marketing art museums can include new “satellite” museums such as this one for the Louvre in Abu Dhabi... Source: Louvre Abu Dhabi to repair, trade, and eventually recycle all of its products. Patagonia says, “One of the most responsible things we can do as a company is to make high-quality stuff that lasts for years and can be repaired, so you don’t have to buy more of it.”33 Similarly, some marketing approaches, such as the buy-one-give-one model used by Bombas, build an important social cause into their offering. The Breadth and Depth of Marketing Marketing today affects every person and organization. To understand this, let’s analyze (1) who markets, (2) what is marketed, (3) who buys and uses what is marketed, (4) who benefits from these marketing activities, and (5) how consumers benefit. Who Markets? Every organization markets. It’s obvious that busi- ness firms involved in manufacturing (Patagonia), retailing (Trader Joe’s), and providing services (Marriott) market their offerings. And nonprofit organizations such as museums (the Louvre), your local hospital or col- lege, places (cities, states, countries), and even special causes (Race for the Cure) also engage in marketing. Finally, individuals such as political candidates often use marketing to gain voter attention and preference. What Is Marketed? Goods, services, and ideas are marketed. Goods are physical objects, such as toothpaste, smartphones, or automo- biles, that satisfy consumer needs. Services are intangible items such as airline trips, financial advice, or art museums. Ideas are thoughts about concepts, actions, or causes.... or using an app to take an In this book, goods, services, and ideas are all considered “products” that are mar- interactive tour of Russia’s keted. So a product is a good, service, or idea consisting of a bundle of tangible and State Hermitage Museum. intangible attributes that satisfies consumers’ needs and is received in exchange for Source: Smartify CIC money or something else of value. Services like those offered by art museums, hospitals, and sports teams are relying more heavily on effective marketing. For example, financial pressures have caused art museums to innovate to market their unique services—the viewing of works of art by visitors—to increase revenues. This often involves levels of creativity unthinkable several decades ago. This creativity ranges from establishing a global brand identity by launching overseas VIDEO 1-5 Hermitage Tour museums to offering sit-at-home video tours. France’s Louvre, home to the Mona Lisa kerin.tv/16e/v1-5 painting, opened a new satellite museum in Abu Dhabi, housed in a striking domed building.34 Russia’s world-class, 1,000-room State Hermitage Museum wanted to find a 18  way to market itself to potential first-time visitors. So it developed a free app to guide visitors through the museum and provide information about events and exhibits. Ideas are most often marketed by nonprofit organizations or the govern- 19 ment. So The Nature Conservancy markets the cause of protecting the en- vironment. Charities market the idea that it’s worthwhile for you to donate your time or money. The Boys & Girls Clubs of America promote pro- grams for underrepresented youth. And state governments in Arizona and Florida market taking a warm, sunny winter vacation in their states. CHAPTER 1 Creating Customer Relationships and Value through Marketing Who Buys and Uses What Is Marketed? Both individuals and organizations buy and use products that are marketed. Ultimate consumers are the people who use the products and services purchased for a household. In contrast, organizational buyers are those manufac- turers, wholesalers, retailers, service companies, nonprofit organizations, and government agencies that buy products and services for their own use or for resale. Although the terms consumers, buyers, and customers are sometimes used for both ultimate consumers and organizations, there is no consistency on this. In this book you will be able to tell from the ex- ample whether the buyers are ultimate consumers, organizations, or both. Marketing Boys & Girls Clubs of America programs for underrepresented youth can Who Benefits? In our free-enterprise society, there are three specific benefit society. groups that benefit from effective marketing: consumers who buy, organi- Source: Boys & Girls Clubs of America zations that sell, and society as a whole. True competition between prod- ucts and services in the marketplace ensures that consumers can find value from the best products, the lowest prices, or exceptional service. Providing choices leads to the consumer satisfaction and quality of life that we expect from our economic system. Organizations that provide need-satisfying products with effective marketing pro- grams—for example, Amazon, Apple, and L’Oréal—have grown. But competition creates problems for ineffective competitors, including the many retailers such as Brooks Broth- ers, J.Crew, Payless ShoeSource, Brookstone, Sears, and Neiman Marcus that recently filed for bankruptcy. Finally, effective marketing benefits society by addressing issues such as deceptive advertising, labeling, recycling, nonprofits, and social change.35 In addition, effective marketing enhances competition, which both improves the quality of products and ser- vices and lowers their prices. This makes countries more competitive in world markets and provides jobs and a higher standard of living for their citizens. How Do Consumers Benefit? Marketing creates utility, the benefits or customer value received by users of the product. This utility is the result of the marketing exchange process and the way society benefits from marketing. There are four different utilities: form, place, time, and possession. The production of the product or service constitutes form utility. Place utility means having the offering available where consumers need it, whereas time utility means having it available when needed. Possession utility is the value of making an item easy to purchase through the provision of credit cards or financial arrange- ments. Marketing creates its utilities by bridging space (place utility) and hours (time util- ity) to provide products (form utility) for consumers to own and use (possession utility). LEARNING REVIEW 1-7. What are the two key characteristics of the marketing concept? 1-8. What is the difference between ultimate consumers and organizational buyers?  LEARNING OBJECTIVES REVIEW LO 1-1 Define marketing and identify the diverse factors that LO 1-3 Distinguish between marketing mix factors and influence marketing actions. environmental forces. Marketing is an organizational function and a set of processes Four elements in a marketing program designed to satisfy cus- for creating, communicating, and delivering value to custom- tomer needs are product, price, promotion, and place. These ers and for managing customer relationships in ways that ben- elements are called the marketing mix, the four Ps, or the efit the organization and its stakeholders. This definition marketer’s controllable variables. The marketing mix also relates to two primary goals of marketing: (a) discovering the provides a clear customer value proposition—a cluster of needs of prospective customers and (b) satisfying them. benefits that an offering satisfies. Environmental forces, also Achieving these two goals also involves the four marketing called uncontrollable variables, are largely beyond the organi- mix factors largely controlled by the organization and the five zation’s control. These include social, economic, technologi- environmental forces that are generally outside its control. cal, competitive, and regulatory forces. LO 1-2 Explain how marketing discovers and satisfies LO 1-4 Explain how organizations build strong customer consumer needs. relationships and customer value through marketing. The first objective in marketing is discovering the needs and The essence of successful marketing is to provide sufficient wants of consumers who are prospective buyers and customers. value to gain loyal, long-term customers. Customer value is This is not easy because consumers may not always know or be the unique combination of benefits received by targeted buy- able to describe what they need and want. A need occurs when a ers that usually includes quality, price, convenience, on-time person feels deprived of basic necessities such as food, clothing, delivery, and both before-sale and after-sale service. Marketers and shelter. A want is a need that is shaped by a person’s knowl- do this by using one of three value strategies: best price, best edge, culture, and personality. Effective marketing can clearly product, or best service. shape a person’s wants and tries to influence what a person buys. The second objective in marketing is satisfying the needs of tar- LO 1-5 Describe the characteristics of a market orientation. geted consumers. Because an organization obviously can’t satisfy Many firms have achieved great success by putting huge all consumer needs, it must concentrate its efforts on certain effort into implementing the marketing concept—the idea needs of a specific group of potential consumers or target mar- that an organization should (1) strive to satisfy the needs of ket—one or more specific groups of potential consumers toward consumers while also (2) trying to achieve the organization’s which an organization directs its marketing program. It then goals. Implementing the marketing concept creates a market selects its target market segment (or segments), which is a rela- orientation. An organization that has a market orientation tively homogeneous group of prospective buyers that (1) have focuses its efforts on (1) continuously collecting informa- common needs and (2) will respond similarly to a marketing tion about customers’ needs, (2) sharing this information action. Finally, the organization develops a set of marketing across departments, and (3) using it to create customer actions in the form of a unique marketing program to reach them. value. LEARNING REVIEW ANSWERS 1-1 What is marketing? 1-5 What are the four marketing mix elements that make up the organi- Answer: Marketing is the activity for creating, communicating, zation’s marketing program? delivering, and exchanging offerings that benefit customers, the Answer: product, price, promotion, place organization, its stakeholders, and society at large. 1-6 What are environmental forces? 1-2 Marketing focuses on and consumer Answer: Environmental forces are the uncontrollable forces that needs. affect a marketing decision. They consist of social, economic, Answer: discovering; satisfying technological, competitive, and regulatory forces. 1-3 What four factors are needed for marketing to occur? 1-7 What are the two key characteristics of the marketing concept? Answer: The four factors are: (1) two or more parties (individuals Answer: An organization should (1) strive to satisfy the needs of or organizations) with unsatisfied needs; (2) a desire and ability on consumers while also (2) trying to achieve the organization’s goals. their part to have their needs satisfied; (3) a way for the parties to 1-8 What is the difference between ultimate consumers and organizational communicate; and (4) something to exchange. buyers? 1-4 An organization can’t satisfy the needs of all consumers, so it must Answer: Ultimate consumers are the people who use the products focus on one or more subgroups, which are its. and services purchased for a household. Organizational buyers are Answer: target market(s) those manufacturers, wholesalers, retailers, and government agencies that buy products and services for their own use or for resale. 20  FOCUSING ON KEY TERMS customer experience p. 16 market orientation p. 15 product p. 18 customer relationship management market segments p. 13 relationship marketing p. 12 (CRM) p. 16 marketing p. 5 societal marketing concept p. 17 21 customer value p. 11 marketing concept p. 15 target market p. 10 environmental forces p. 11 marketing mix p. 10 ultimate consumers p. 19 exchange p. 6 marketing program p. 13 utility p. 19 market p. 10 organizational buyers p. 19 CHAPTER 1 Creating Customer Relationships and Value through Marketing APPLYING MARKETING KNOWLEDGE 1 What consumer wants (or benefits) are met by the 4 A college in a metropolitan area wishes to increase following products or services? (a) 3M Post-it® Flag its evening offerings of business-related courses such Highlighter, (b) Nike running shoes, (c) Enterprise as marketing, accounting, finance, and management. Rent-A-Car, and (d) Amazon online shopping. Who are the target market customers (students) for 2 Each of the four products, services, or programs in these courses? question 1 has substitutes. Respective examples are 5 What actions involving the four marketing mix (a) a Bic™ highlighter, (b) Adidas tennis shoes, (c) an elements might be used to reach the target market in Uber or Lyft ride, and (d) a department store. What question 4? consumer benefits might these substitutes have in 6 What environmental forces (uncontrollable each case that some consumers might value more variables) must the college in question 4 consider in highly than those mentioned in question 1? designing its marketing program? 3 What are the characteristics (e.g., age, income, edu- 7 Does a firm have the right to “create” wants and try cation) of the target market customers for the follow- to persuade consumers to buy goods and services ing products or services? (a) National Geographic they didn’t know about earlier? What are examples magazine, (b) Chobani Greek Yogurt, (c) New York of “good” and “bad” want creation? Who should Giants football team, and (d) Facebook. decide what is good and what is bad? BUILDING YOUR MARKETING PLAN If your instructor assigns a marketing plan for your avoid glittering generalities. We offer these additional class, we hope you will be excited—for two reasons. bits of advice in selecting a topic: First, you will get insights into trying to actually “do Do pick a topic that has personal interest for you— marketing” that often go beyond what you can get by a family business; a business, product, or service simply reading the textbook. Second, thousands of grad- you or a friend might want to launch; or a student uating students every year get their first job by showing organization that needs marketing help. prospective employers a “portfolio” of samples of their Do not pick a topic that is so large it can’t be cov- written work from college—often a marketing plan if ered adequately or so abstract it will lack specifics. they have one. This can work for you. 1 Now to get you started on your marketing plan, list This “Building Your Marketing Plan” section at the four or five possible topics and compare these with the end of each chapter suggests ways to improve and criteria your instructor suggests and those shown ear- focus your marketing plan. You will use the sample lier. Think hard, because your decision will be with you marketing plan in Appendix A (following Chapter 2) all term and may influence the quality of the resulting as a guide, and this section after each chapter will help marketing plan you show to a prospective employer. you apply those Appendix A ideas to your own market- 2 When you have selected your marketing plan topic, ing plan. whether the plan is for an actual business, a possible The first step in writing a good marketing plan is to business, or a student organization, write the have a business or product that enthuses you and for “company description” in your plan, as shown in which you can get detailed information, so you can Appendix A (following Chapter 2).  VIDEO CASE 1 ® Bombas: Creating Socks with a Purpose! “We just wanted to help solve this problem,” explain Randy Goldberg and David Heath, co-founders of Bombas. And the problem was VIDEO 1-6 that socks are the most re- Bombas Video quested clothing item in home- Case less shelters. “We knew that if kerin.tv/16e/v1-6 we were going to donate a lot of socks, we needed to sell a lot of socks, and if we were going to sell a lot of socks, we needed to create something that was better than any other sock in the marketplace,” they add. The result? Bombas, and the most comfortable socks in the history of feet! THE COMPANY Goldberg and Heath met while working at a media com- Kevin Hagen/The New York Times/Redux pany and they quickly learned that they shared a pas- sion for entrepreneurship. “We shared a lot of ideas because bees are altruistic animals that live in a hive and about businesses that we thought were interesting and they work together to make their world a better place. we were generally looking around and seeing what was “We loved the name since we’re a company that was out there,” says Goldberg. Then Heath saw a quote on born out of a mission to give back to the community Facebook about the need for socks in homeless shelters, where we work and live,” he adds. The idea of working which led them to investigate the problem. “There’s a together was woven into their entire approach to brand- huge need; if you are living on the street and you’re ing. In fact, they selected “Bee Better” as their motto. homeless, a fresh pair of socks means a lot. And it turns They launched the business on the crowdfunding plat- out if you have a used pair of socks you’re not allowed to form Indiegogo with the hope of raising $15,000. Within donate them for hygiene reasons,” he adds. They could a month they had raised $150,000! The money allowed see there was an opportunity to help the community, them to build their website and begin selling their socks and they matched the problem with the concept of do- to the public. They also raised money from friends and nating an item for each item purchased pioneered by family, and shortly after their online debut they received TOMS Shoes and the online sales format used by Warby an invitation to appear on Shark Tank and received an Parker. “And that was the origin!” they proclaim. offer from investor Daymond John. The money and expo- To ensure that they would offer an exceptional prod- sure catapulted Bombas onto the national stage. “After uct, the two entrepreneurs began to research the socks that we were kind of off to the races doing what we do currently on the market. “We went out to all the stores best, telling our story, focusing on product, focusing on around us and looked at everything and we realized that community, and building the business,” says Goldberg. there was a massive gap between low-cost, low-quality commodity-type socks, and premium products that were sold at specialty stores,” explains Heath. “There were a THE MARKET lot of features and benefits that were incorporated into Building the business meant understanding consumers these premium-priced p