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Chapter 1:
Chapter Objectives
After reading this chapter, students should understand:
·The marketing concept
·Different organizational philosophies about marketing
·The importance of being customer focused
·The job of the marketing manager
·Typical marketing organizational forms
·How marketing is changing
Chapter Overview
This chapter provides an overview to the fundamentals of marketing and the role
of the marketing manager. Key concepts covered include: The definition of marketing,
the marketing concept, organizational differences, customer orientation, the marketing
value chain, the marketing plan, and the role of the marketing manager in the marketing
process.
Chapter Outline and Key Terms
Marketing Philosophies
Key Terms:
·The Marketing Concept
·Organizational Philosophies:
·Sales Driven Organization
·Technology/Product Driven Organization
·Marketing Driven Organization
·Customer Driven Organization
Definition: The Marketing Concept emphasizes a customer focus or organizing the
resources of the firm toward understanding customers’ needs and wants and offering
products and services that meet those needs.
·The purpose of a business is to create and keep a customer (Peter Drucker)
·It is also about being competitor focused and making a profit
·Consistent with serving specific customer segments and turning away or not
serving unprofitable segments
·Marketing concept and customer focus are not only key marketing concepts
but core business concepts as well.
Illustration: ING Direct (www.ingdirect.com)
Online banking, investment, and mortgage lending. Select number of on-site
locations called “cafes:” New York, Philadelphia, Los Angeles, Wilmington, DE,
Chicago, St. Cloud, MN, and Honolulu. Serves specific profitable customer
segments only.
Checking: 35,000 free ATMS, free person-to-person payments
Investing: No account minimum; choose from stocks, mutual funds, and ETFs,
instant transfers between bank and brokerage accounts
Mortgage Lending: No points or rate buy downs, free bi-weekly payments, low
closing costs
Organizational Philosophies: Four different strategic approaches to the marketplace.
Three are not consistent with the customer-focused marketing concept. The four concepts
are:
·Sales Driven
·Technology or Product Driven
·Marketing Driven
·Customer Driven
Characteristics of each approach include:
Sales Driven
·Aggressive sales orientation.
·Marketing acts in a supporting role such as marketing communications and
promotion.
·Little emphasis on listening to the customer or customer’s wants and needs.
·Interested in volume, not profits.
·Sells to all comers.
·Flexible price, credit, and service policies to “close the deal.”
·Give the customer everything they want; even if not in customer’s best interest.
Technology or Product Driven
·Focus on R&D and sales.
·Temptation by engineering to over-engineer a product rather than meet the
customer’s need with a simple solution.
·Little regard to the role of marketing and sales teams.
·Technology may not be solution to anyone’s problem.
Marketing Driven
·Embraces marketing, but to the excess.
·Much money spent on marketing research and test marketing so product is
extremely well fine-tuned.
·Rely on customers to tell them what they want rather than taking risks and
anticipating customer needs.
·Multiple layers of marketing management including brand managers, associate
brand managers, assistant brand managers.
·Multiple layers of decision makers.
Illustration: Sony Betamax (www.sony.com)
·Did not meet customer needs.
·Better picture quality but consumers questioned whether or not it the difference
could be detected.
·Key difference was playing time. Betamax had only one hour of capacity.
·Discovered consumers wanted minimum of two hours of play time.
·Sony’s attempt at finding a strategic partner who could produce the two-hour
format failed.
Customer Orientation
Key Terms:
·Customer-orientation
·Value Chain
·Valued-added Activities
Definition: Customer Orientation. Customers do not inherently want to buy products.
Products cost money, for corporate buyers, reduce profits. Customers buy products for
the benefits that the product features provide.
The Customer-Oriented Organization
·Customer-oriented organizations understand: There is a difference between the
physical products engineers often describe and the products customers buy.
·Marketing’s role:
·Understand what benefits customers are seeking.
·Translate them into products.
·Retranslate the physical products or services back into benefit terms
customers can understand.
·Customer-oriented organization can be described in terms of whether or not it
views customer relationships as long or short term.
·Short-term relationships are not consistent with customer-orientation.
·Customer-oriented organizations make their key investments in their
customers and long-term satisfaction.
How to Create a Customer-Oriented Organization
·Information on buying influences distributed to every corporate function.
·Strategic and tactical decisions made cross-functionally and cross-divisionally.
·Divisions and functions make coordinated decisions and execute them with
commitment.
The Marketing Value Chain (Figure 1.2)
Traditional Value Chain:
·Dictates that companies start with core competencies and assets to decide
what products to make or services to sell.
·Dictates selection of inputs and raw materials, which are then made into
products and sold through channels of distribution to the customer.
·The traditional value chain is a “company-centric approach.”
The Alternative Approach or Reverse Value Chain
·This is the traditional value chain reversed
·Start with the customer rather than the firm
·Focus on marketing programs, product/service offering, inputs/raw
materials and assets/core competencies.
Marketing as a Value-Added Activity
Marketing takes the basic physical attributes of a product or service and adds
value to some segment(s).
·Examples of value-added activities include:
·Branding.
·Customer service.
·Packaging.
·Anything that differentiates the product or service in the marketplace.
·Not only about creating value but find customers who appreciate the value-
added benefits.
Marketing Manager’s Role
·Differs from organization to organization
·Typical marketing manager interactions (Figure 1.7)
Internal Interactions
·Marketing research
·Sales
·Public relations
·Purchasing
·Manufacturing/distribution
·Research and development
·Legal
·Finance
·Board
·Senior Management
External Interactions
·Advertising agency
·Suppliers
·Channels
·Media
·Government
Illustration: Motorola (www.motorola.com)
Motorola’s problems in the cell market were a direct result of the
interactions as shown in Figure 1.7
They failed in:
Customer-manager interaction.
·Technology-customer interaction.
·Manufacturing interaction.
·The marketing manager can control some of these interactions
and others cannot.
·Mechanism for improving the interactions is the marketing plan.
The Marketing Plan
Key Terms:
·Marketing plan
Definition: Marketing Plan. A written document containing the guidelines for the
product’s marketing programs and allocations over the planning period.
Marketing Involvement
All marketing managers should be aware and become involved in marketing
planning.
Key Features
·It is a written plan.
·Because it is written, it becomes easier to communicate throughout the
organization.
·Provides a concrete history of the product’s strategies over time.
·Helps educate new managers and pinpoints responsibilities.
Key Benefits
·Forces marketing managers to analyze the internal and external environments.
