978-0134292663 Chapter 1 Lecture Notes

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Chapter 1: Welcome to the World of Marketing

Chapter 1

Welcome to the World of Marketing:

Create and Deliver Value

I. CHAPTER OVERVIEW

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering,

and exchanging offerings that have value for customers, clients, partners, and society at large.

Therefore, marketing is all about delivering value to stakeholders, that is, to everyone who is

affected by a transaction. Organizations that seek to ensure their long-term profitability by

identifying and satisfying customers’ needs and wants adopt the marketing concept.

In Chapter 1, these concepts are explored. In addition, students learn the definition of product and

benefit. Students are introduced to the four Ps and their interdependent relationship. Students

quickly learn that marketing is a part of our everyday life.

II. CHAPTER OBJECTIVES

 Explain what marketing is, the marketing mix, what can be marketed, and the value of

marketing.

 Explain the evolution of the marketing concept.

 Understand value from the perspectives of customers, producers, and society.

 Explain the basics of market planning.



III. CHAPTER OUTLINE

►MARKETING MOMENT INTRODUCTION

Use a top of mind awareness exercise to introduce the different facets of marketing. Instruct students to

write down the first word that pops into their head when you say these words: your school name, soup,

jeans, marketing, and salesperson. Explain that school name, soup and jeans were just “warm ups.”

(Although Campbell’s is likely to be the most popular answer for soup—this is great time to illustrate

dominant market share). Most students will respond “advertising” or “sales” in response to marketing—

this gives the instructor a chance to introduce the marketing mix and make that point that marketing

covers more than just communication.

p. 3 REAL PEOPLE, REAL CHOICES—HERE’S MY PROBLEM AT

TWITTER

Chapter 1 begins with a discussion of Twitter, a social media platform

that democratizes the world by providing a forum for users to share

their experiences and views. The question becomes: how do we harness

the innovation within Twitter’s walls and leverage it to solve challenges

the team faces with employees, consumers, and marketers? And

subsequently, how can we track it?

1. Make a case for the management team to hold weekly meetings to

discuss ideas and innovations within Twitter.

2. Build an internal online tool to allow employees to share, build,

and measure ideas (i.e., a Twitter within Twitter).

3. Share ideas on Twitter to galvanize support and subsequently share

findings with the Twitter team.

Visit the Twitter

website here—

https://twitter.com

Part 1: Understand the Value Proposition

Go to MyMarketingLab for the option Michael chose.

p. 4

p. 5

p. 6

1. MARKETING: WHAT IS IT?

Marketing is first and foremost about satisfying consumer needs. We

like to say that the consumer is king (or queen), but it’s important not to

lose sight of the fact that the seller also has needs—to make a profit, to

remain in business, and even to take pride in selling the highest-quality

products possible. Products are sold to satisfy both consumers’ and

marketers’ needs—it’s a two-way street. Marketing is the activity, set of

institutions, and processes for creating, communicating, delivering, and

exchanging offerings that have value for customers, clients, partners,

and society at large.

1.1 Marketing Is the Activity, Institutions, and Processes

The importance organizations assign to marketing activities varies a lot.

Sometimes a company uses the term marketing when what it really

means is sales or advertising. No matter what size the firm, a marketer’s

decisions affect—and are affected by—the firm’s other operations.

1.2 Creating, Communicating, Delivering, and Exchanging: The

Marketing Mix

To satisfy needs, marketers need many tools. The marketing mix

consists of the tools the organization uses to create a desired response

among a set of predefined consumers. These tools include the product,

the price, the promotional activities and the places. We refer to the

marketing mix as the four Ps: product, price, promotion, and

place.

Although we talk about the four Ps as separate parts of a firm’s

marketing strategy, in reality, product, price, promotion, and place

decisions are interdependent. Decisions about any one of the four are

affected; and affect every other marketing mix decision. Let’s look at

each of the four Ps to gain some more insight into their role in the

marketing mix.

1.2.1 Product

The product is a good, a service, an idea, a place, and a person—

whatever is offered for sale in the exchange. This aspect of the

marketing mix includes the design and packaging of a good, as well as

its physical features and any associated services, such as free delivery.

1.2.2 Promotion

Promotion, often referred to as marketing communications, includes all

the activities marketers undertake to inform consumers about their

products and to encourage potential customers to buy these products.

1.2.3 Place

Place refers to the availability of the product to the customer at the

desired time and location. This P relates to a channel of distribution,

Figure 1.1

Snapshot: The

Marketing Mix

Chapter 1: Welcome to the World of Marketing

p. 6

p. 7

p. 8

which is the set of firms that work together to get a product from a

producer to a consumer.

1.2.4 Price

Price is the assignment of value, or the amount the consumer must

exchange to receive the offering. Marketers often turn to price to

increase consumers’ interest in a product.

At the heart of every marketing act—big or small—is an “exchange

relationship.” An exchange occurs when a person gives something and

gets something else in return.

1.3 Offerings . . . : What Can We Market?

We’ll refer to any good, service, or idea that we can market as a

product, even though what you buy may not take a physical form.

1.3.1 Consumer Goods and Services

Consumer goods are the tangible products that individual consumers

purchase for personal or family use. Services are intangible products

that we pay for and use but don’t own. In both cases, though, keep in

mind that the consumer looks to obtain some underlying value, such as

convenience, security, or status, from a marketing exchange.

1.3.2 Business-to-Business Goods and Services

Business-to-business marketing is the marketing of goods and services

from one organization to another. Although we usually relate marketing

to the thousands of consumer goods begging for our dollars every day,

the reality is that businesses and other organizations buy a lot more

goods than consumers do. They purchase these industrial goods for

further processing or to use in their own business operations.

E-commerce is the buying and selling of products on the Internet.

1.3.2.1 Not-for-Profit Marketing

You don’t have to be a businessperson to use marketing principles.

Many not-for-profit organizations also known as nongovernmental

organizations or NGOs, including museums, zoos, and even churches,

practice the marketing concept.

The intense competition for support of civic and charitable activities

means that only the not-for-profits that meet the needs of their

constituents and donors will survive.

1.3.3 Idea, Place, and People Marketing

Marketing principles are also used to market ideas, places, and people.

Examples include:

Tourism marketing

Promoting rock and sports stars

Temporarily famous people promoted on YouTube



Part 1: Understand the Value Proposition

Some of the same principles that go into “creating” a celebrity apply to

you. An entertainer must “package” his/her talents, identify a market

that is likely to be interested, and work hard to gain exposure to these

potential customers by appearing in the right venues.

Website: Big Brothers Big Sisters is an example of a non-profit organization. What benefits are offered to

the volunteer? Can you cite examples of societal marketing on this site?

www.bbbs.org Go to Volunteer page.

Discussion question: Have you ever thought about the fact that not-for-profit companies need to use

marketing as well? If not, why?

p. 9 1.4. VALUE FOR CUSTOMERS

According to the marketing concept, marketers first identify consumer

needs and then provide products that satisfy those needs to ensure the

firm’s long-term profitability. A need is the difference between a

consumer’s actual state and some ideal or desired state. When the

difference is big enough, the consumer is motivated to take action to

satisfy the need. Needs relate to physical functions (such as eating) or to

psychological ones (such as social acceptance). The specific way a person

satisfies a need depends on his or her unique history, learning

experiences, and cultural environment.

Table 1.1

Value for

Customers

Website: Subaru is one company that tries to meet the psychological needs of consumers to feel safe (as

well as their need for reliable transportation). Visit the Subaru website: www. Subaru .com

Chapter 1: Welcome to the World of Marketing

p. 9

p. 10

A want is a desire for a particular product we use to satisfy a need in

specific ways that are influenced culturally and socially.

A product delivers a benefit when it satisfies a need or want. For

marketers to be successful, they must develop products that provide one

or more benefits that are important to consumers.

When you couple desire with the buying power or resources to satisfy a

want, the result is demand.

A market consists of all the consumers who share a common need that

can be satisfied by a specific product and who have the resources,

willingness, and authority to make the purchase.

A marketplace used to be a location where buying and selling occurs face

to face. In today’s “wired” world, however, buyers and sellers might not

even see each other. The modern marketplace may be

face-to-face, or through a mail-order catalog, a TV shopping network,

an eBay auction, or a phone app.

Marketplaces are evolving. Consumers, especially younger ones, would

rather rent than purchase. Rentrepreneurs make money by renting out

their stuff when they aren’t using it—offering everything from barbecue

grills and power tools to Halloween costumes. Some analysts refer to

this mushrooming trend as collaborative consumption.

Exhibit: Uber and

other ride-sharing

services

Website: Visit White Castle’s website. What “benefit” are they touting? Would you classify it as a

“want” or a “need”? http://www.whitecastle.com/

Discussion question: What are your favorite marketplaces in which to shop and why?

p. 10 1.4.1 Marketing Creates Utility

Marketing transactions create utility, which refers to the sum of the

benefits we receive when we use a good or service.

Marketing processes create several different kinds of utility to provide

value to consumers:

Form utility is the benefit marketing provides by transforming

raw materials into finished products.

Place utility is the benefit marketing provides by making

products available where customers want them.

Time utility is the benefit marketing provides by storing products

until they are needed.

Possession utility is the benefit marketing provides by allowing

the consumer to own, use, and enjoy the product.

Exhibit: Rent the

Runway

p. 11 1.4.2 Value for Clients and Partners

Marketing meets the needs of diverse stakeholders. The term

Part 1: Understand the Value Proposition

p. 11

stakeholders here refers to buyers, sellers, investors in a company,

community residents, and even citizens of the nations where goods and

services are made or sold—in other words, any person or organization

that has a “stake” in the outcome. Thus, marketing is about satisfying

everyone involved in the marketing process.

1.4.3 Value for Society at Large

Is it possible to contribute to society and the earth and contribute to

your paycheck? Target, one the largest retailers, announced that two of

its top priorities are environmental sustainability and responsible

sourcing.

Exhibit: Green

Marketing

p. 11

p. 12

2. WHEN DID MARKETING BEGIN? THE EVOLUTION OF A

CONCEPT

2.1 The Production Era

A production orientation works best in a seller’s market when demand

is greater than supply because it focuses on the most efficient ways to

produce and distribute products. Essentially, consumers have to take

whatever is available. Under these conditions, marketing plays a

relatively insignificant role—the goods literally sell themselves because

people have no other choices. Firms that focus on a production

orientation tend to view the market as a homogeneous group that will be

satisfied with the basic function of a product.

Table 1.2

Marketing’s

“Greatest Hits”

p. 12 2.2 The Sales Era

When product availability exceeds demand in a buyer’s market,

businesses may engage in the “hard sell” in which salespeople

aggressively push their wares. Selling orientation means that

management views marketing as a sales function, or a way to move

products out of warehouses so that inventories do not pile up. The

selling orientation gained in popularity after World War II. The selling

orientation prevailed well into the 1950s. However, consumers as a rule

do not like to be pushed, and the hard sell gave marketing a bad image.

Companies that still follow a selling orientation tend to be more

successful at making one-time sales rather than at building repeat

business. We are most likely to find this focus among companies that sell

unsought goods—products that people do not tend to buy without some

prodding.

Discussion question: Do you mind when someone tries to “hard sell” you on a product? How do you

usually react to “hard sell” salesperson?

p. 12 2.3 The Relationship Era

A consumer orientation satisfies customers’ needs and wants. With

inflation and recession in the past, firms had to do more than meet

consumers’ needs—they had to do this better than the competition and

do it repeatedly. They increasingly concentrated on improving the

quality of their products. By the early 1990s, many in the marketing

community followed an approach termed Total Quality Management

(TQM). The TQM perspective takes many forms. Essentially, TQM is a

management philosophy that involves all employees from the assembly

line onward in continuous product quality improvement.

Table 1.3

The Evolution of

Marketing

Chapter 1: Welcome to the World of Marketing

p. 13

p.13

p. 14

2.4 The Triple-Bottom-Line Orientation

A triple-bottom-line orientation means building long-term bonds with

customers rather than merely selling them stuff today. This new way of

looking at business emphasizes the need to maximize three components:

The financial bottom line: Financial profits to stakeholders

The social bottom line: Contributing to the communities in which

the company operates

The environmental bottom line: Creating sustainable business

practices that minimize damage to the environment or that even

improve it

Another result of this new way of long-term thinking is the societal

marketing concept, which maintains that marketers must satisfy

customers’ needs in ways that also benefit society while still delivering a

profit to the firm.

An important trend now is for companies to think of ways to design and

manufacture products with a focus on sustainability, which we define as

“meeting present needs without compromising the ability of future

generations to meet their needs.” Sustainability applies to many aspects

of doing business, including social and economic practices (e.g., humane

working conditions and diplomacy to prevent wars that deplete food

supplies, atmospheric quality, and of course, lives). One other crucial

pillar of sustainability is the environmental impact of the product.

Green marketing, the development of marketing strategies that support

environmental stewardship by creating an environmentally founded

differential benefit in the minds of consumers, is being practiced by

most forward-thinking firms today.

In addition to building long-term relationships and focusing on social

responsibility, triple-bottom-line firms place a much greater focus on

accountability—measuring just how much value marketing activities

create. This means that marketers at these organizations ask hard

questions about the true value of their efforts and their impact on the

bottom line. These questions all boil down to the simple acronym of

ROMI (return on marketing investment). Marketers now realize that if

they want to assess just how much value they are creating for the firm,

they need to know exactly what they are spending and what the concrete

results of their actions are.

Exhibit: Habitat

for Humanity

Website: Visit Girls Inc. (inspiring all girls to be strong, smart, and bold) for a discussion about the social

marketing concept: www.girlsinc.org

►Marketing Moment In-Class Activity

A company developed a game called JFK Reloaded, which allows the participant to get behind Lee

Harvey Oswald’s sniper rifle and recreate the assassination. The player, who can most closely replicate the

shot, wins the game. How would you assess this product in terms of the societal marketing concept?

Part 1: Understand the Value Proposition

►Marketing Moment In-Class Activity

Marketing occurs in non-business organizations under different names. Can you think of other names for

“customers” in non-business organizations? Example—hospitals: patients, psychologists: clients, schools:

students, non-profits: donors, etc.

p. 14

p. 15

2.5 What’s Next in the Evolution of Marketing?

In the years ahead we will see an acceleration of the most important factors

that marketers think about today. These predictions include: Good content,

big data, mobile marketing, marketing metrics, customer interaction, and

the demand for companies to do good even as they do well.

Mobile marketing, interacting with consumers via mobile phones, tablets,

and wearable screens such as smart watches, will be one of the prime

factors in marketing’s future.

User-generated content in which consumers engage in marketing activities

such as creating advertisements, will grow and overtake the importance of

branded content.

Corporate citizenship, also called corporate social responsibility, refers to a

firm’s responsibility to the community in which it operates and to society

in general. In the future, good corporate citizenship will become a major

marketing function.

Ripped from

the Headlines:

Ethical/Sustain

able Decisions

in the Real

World

►Marketing Moment In-Class Activity

Should e-cigarettes be marketed like any other widely available product such as milk or music?

Chapter 1: Welcome to the World of Marketing

p. 16

p. 17

3. THE VALUE OF MARKETING AND THE MARKETING OF

VALUE

One way to look at value is to think of it as a ratio of benefits to costs—

customers “invest” their time and money to do business with a firm, and

they expect benefits in return.

3.1 Value from the Customer’s Perspective

The value proposition includes the whole bundle of benefits the firm

promises to deliver, not just the benefits of the product itself.

Marketers then communicates these benefits to the customer in the form of

a value proposition, a marketplace offering that fairly and accurately sums

up the value that the customer will realize if he or she purchases the

product. The challenge to the marketer is to create an attractive value

proposition. A big part of this challenge is convincing customers that this

value proposition is superior to others they might choose from competitors.

3.2 Value from the Seller’s Perspective

Value from a seller’s perspective can take many forms such as money,

prestige or pride in their competitive advantage.

Smart companies today understand that making money from a single

transaction does not provide the kind of value they desire. In recent years,

many firms have transformed the way they do business. They now regard

consumers as partners in the transaction rather than as passive “victims.”

Brandfests are events hosted by companies to thank customers for their

loyalty.

It is more expensive to attract new customers than it is to retain current

ones. Companies that calculate the lifetime value of a customer look at how

much profit they expect to make from a particular customer, including

each purchase he or she will make from them now and in the future. To

calculate lifetime value, companies estimate the amount the person will

spend and then subtract what it will cost to maintain this

relationship.

p.18 ►METRICS MOMENT How do marketers measure value? Increasingly,

they develop marketing scorecards that report (often in quantified terms)

how the company or brand is actually doing in achieving various goals. We

can think of a scorecard as a marketing department’s report card.

Throughout this book, we will give you the opportunity to “get your hands

dirty” as you calculate ROI using various kinds of scores, or metrics.

Apply the Metrics

1. Using Table 1.4 as a template, develop a scorecard for customer

satisfaction with your marketing class. You will need to develop your

own relevant items for satisfaction measurement.

2. Then have the students in your class complete the scorecard now and

again in the middle of the semester.

3. Summarize, interpret, and present the results.

Table 1.4 An

Example of a

Customer

Service

Scorecard

Part 1: Understand the Value Proposition

pp. 17-19 3.2.1 Provide Value through Competitive Advantage

How does a firm go about creating a competitive advantage? The first step

is to identify what it does really well. A distinctive competency is a firm’s

capability that is superior to that of its competition.

The second step in developing a competitive advantage is to turn a

distinctive competency into a differential benefit—one that is important to

customers. Differential benefits set products apart from competitors’

products by providing something unique that customers want. Differential

benefits provide reasons for customers to pay a premium for a firm’s

products and exhibit a strong brand preference.

Effective product benefits must be both different from the competition and

from things customers want. A firm that delivers these desired benefits

provides value to its customers and other stakeholders.

Table 1.5 How

Some Firms

Achieve a

Competitive

Advantage with

a Distinctive

Competency

pp. 18-20

p.20

3.2.2 Add Value through the Value Chain

Many different players—both within and outside a firm—need to work

together to create and deliver value to customers. The value chain is a

useful way to appreciate all the players that work together to create value.

This term refers to a series of activities involved in designing, producing,

marketing, delivering, and supporting any product. In addition to

marketing activities, the value chain includes business functions such as

human resource management and technology development.

The main activities of value-chain members include the following:

Inbound logistics: Bringing in materials to make the product

Operations: Converting the materials into the final product

Outbound logistics: Shipping out the final product

Marketing: Promoting and selling the final product

Service: Meeting the customer’s needs by providing any additional

support required

We have organized this book around the sequence of steps necessary to

ensure that the appropriate value exchange occurs and that both parties to

the transaction are satisfied—making it more likely they will continue to do

business in the future.

3.2.3 Consumer-Generated Value: From Audience to Community

One of the most exciting new developments in the marketing world is the

evolution of how consumers interact with marketers. Haul videos are

videos consumers post on YouTube that detail the latest stuff they bought.

Consumer-generated content include:

Ghirardelli Chocolate broadcast consumer-generated comments in

New York’s Times Square about when and where they most

Figure 1.2

Snapshot:

Apple’s Value

Chain

Figure 1.3

Process:

Create and

Deliver Value

Chapter 1: Welcome to the World of Marketing

enjoyed eating its chocolate squares.

At iReport, budding citizen journalists can upload photos and

videos to CNN in response to breaking news.

p. 21 3.2.4 Consumer Generated Value: Social Networking

Consumers also create value through social media, Internet-based

platforms that allow users to create their own content and share it with

others who access their sites. On social networking platforms, a user posts

a profile on a website and he or she provides and receives links to other

members of the network to share input about common interests.

Cloud is a network of servers that provide an almost infinite amount of

storage space.

Social networking is an integral part of what many call Web 2.0, the new

generation of the World Wide Web that incorporates social networking

and user interactivity. Web 3.0 refers to the current generation of the web

that offers consumers real-time instant communications through live chats

and instant messaging and marketers the ability to track customers’ online

behavior. Web 4.0 gives consumers access to thousands of apps and makes

the ability to use their smartphones and tablets to access brands anywhere

and anytime a necessity.

The web categorizes entries according to folksonomy rather than

“taxonomy.” In other words, sites rely on users rather than pre-established

systems to sort contents.

The “Wisdom of Crowds” perspective (from a book by that name) argues

that under the right circumstances, groups are smarter than the smartest

people in them are. If this is true, it implies that large numbers of

(non-expert) consumers can predict successful products. Marketers rely on

crowdsourcing when they outsource marketing activities to a large group

of people, often through a social networking community.

p. 22

p. 23

3.3 Value from Society’s Perspective

Every company’s activities influence the world around it in ways both good

and bad. We must consider how marketing transactions add or subtract

value from society. Companies usually find that stressing ethics and social

responsibility also is good business, at least in the long run.

3.3.1 The Dark Side of Marketing and Consumer Behavior

Whether intentionally or not, some marketers do violate their bond of trust

with consumers. Despite the best efforts of researchers, government

regulators, and concerned industry people, sometimes consumers’ worst

enemies are themselves—our desires, choices, and actions often result in

negative consequences to ourselves and the society in which we live.

Some dimensions of “the dark side” of consumer behavior include:



Terrorism

Addictive consumption: Consumer addiction is a physiological or

psychological dependency on goods or services.

Exploited people: Sometimes people are used or exploited, willingly

or not, for commercial gain in the marketplace. Consumed

Part 1: Understand the Value Proposition

consumers are people who themselves become commodities.

Illegal activities: The cost of crimes consumers commit against

business has been estimated at more than $40 billion per year.

Shrinkage: Someone steals from a store every five seconds.

Anticonsumption: Some types of destructive consumer behavior are

anticonsumption, when people deliberately deface products.

►Marketing Moment In-Class Activity

Ask students to think of businesses that engage in socially responsible activities. What is the activity and

how does it help society?

Discussion question: Do you personally feel that marketing is “evil?” Why or why not?

p. 24

4. MARKETING AS A PROCESS

Our definition of marketing also refers to processes. This means that

marketing is not a one-shot operation. When it’s done right, marketing

is a decision process in which marketing managers determine the

strategies that will help the firm meet its long-term objectives and then

execute those strategies using the tools they have at their disposal.

A big part of the marketing process is market planning, where we think

carefully and strategically about the “big picture” and where our firm and

its products fit within it. Firms (or individuals) that engage in marketing

planning ask questions like these:

What product benefits will our customers look for in three to five

years?

What capabilities does our firm have that set it apart from the

competition?

What additional customer groups might provide important market

segments for us in the future?

How will changes in technology affect our production process, our

communication strategy, and our distribution strategy?

What changes in social and cultural values are occurring now that

will affect our market in the next few years?

How will customers’ awareness of environmental issues affect their

attitudes toward our manufacturing facilities?

What legal and regulatory issues may affect our business in both

domestic and global markets?

Answers to these and other questions provide the foundation for

developing an organization’s marketing plan. This document describes the

marketing environment, outlines the marketing objectives and strategy,

and identifies who will be responsible for carrying out each part of the

marketing strategy.

Some firms choose to reach as many customers as possible so they offer

their goods or services to a mass market that consists of all possible

customers in a market regardless of the differences in their specific needs

and wants.

Although this approach can be cost-effective, the firm risks losing potential

customers to competitors whose marketing plans instead try to meet the

needs of specific groups within the market. A market segment is a distinct

Chapter 1: Welcome to the World of Marketing

group of customers within a larger market who are similar to one another

in some way and whose needs differ from other customers in the larger

market. Depending on its goals and resources, a firm may choose to focus

on one segment. A target market is the segment(s) on which an

organization focuses its marketing plan and toward which it directs its

marketing efforts. A product’s market position is how the target market

perceives the product in comparison to competitor’s brands.

Part 1: Understand the Value Proposition

IV. END-OF-CHAPTER ANSWER GUIDE

Chapter Questions and Activities

QUESTIONS: TEST YOUR KNOWLEDGE

Briefly explain what marketing is.

Though marketing can be described in many ways, the best definition is that marketing is the

process of planning and executing the conception, pricing, promotion, and distribution of ideas,

goods, and services to create exchanges that satisfy individual and organizational objectives.

1-2. List and describe the elements of the marketing mix.

Product: a good, service, idea, place, person—whatever is offered for sale in exchange.

Price: the assignment of value or the amount the consumer must exchange to receive the offering.

Place: the availability of the product to the customer at the desired time and location.

Promotion: all of the activities marketers undertake to inform consumers or organizations about

their products, and to encourage customers to buy these products.

1-3. Define the terms consumer goods, services, and industrial goods.

Consumer goods are the tangible products that individual consumers purchase for personal or

family use. Examples: laundry detergent, food, home computer.

Services are intangible products that we pay for and use but never own. Examples: dry cleaning, tax

preparation, dermatologist.

Industrial goods are bought by organizations for further processing or for use in their business

operations. Examples: wood for paper, rubber for tires, steel for cars.

Chapter 1: Welcome to the World of Marketing

1-4. Explain needs, wants, and demands. What is the role of marketing in each of these?

A need is the difference between a customer’s actual state and some ideal or desired state. A

marketer knows that when the difference is big enough, the consumer is motivated to take action to

satisfy the need. The marketer seeks to discover consumer needs and focus on the differences

between the mentioned states.

A want is a desire for a particular product used to satisfy a need in specific ways that are

influenced . The marketer focuses on delivering benefits that satisfy a want or a need. These

benefits must be important to consumers.

Demand occurs when desire is coupled with the buying power or resources to satisfy a want.

Marketers must meet demands better than competition.

1.5. What is utility? How does marketing create different forms of utility?

Utility is the usefulness or benefit received by consumers from a product. Marketing creates several

forms of utility: a) form utility, raw materials are changed into a finished product; b) place utility,

the organization makes products available where consumers want them; c) time utility, products

are stored until they are needed by the consumer; and d) possession utility, the organization allows

the consumer to own, use, and/or enjoy the product.

Trace the evolution of the marketing concept.

The marketing concept has gone through a few stages throughout the years. These stages include:

The Production Era: a production orientation works best in a seller’s market when demand is

greater than supply because it focuses on the most efficient ways to produce and distribute

products.

The Sales Era: a selling orientation means that management views marketing as a sales function, or

a way to move products out of warehouses so that inventories do not pile up.

The Relationship Era: a consumer orientation that satisfies customers’ needs and wants.

Part 1: Understand the Value Proposition

The Triple Bottom Line: a triple bottom-line orientation means building long-term bonds with

customers rather than merely selling them stuff today. This new way of looking at business

emphasizes the need to maximize three components: the financial bottom line, the social bottom

line, and the environmental bottom line.

Customer relationship management (CRM) involves systematically tracking consumers’

preferences and behaviors over time in order to tailor the value proposition as closely as possible to

each individual’s unique wants and needs.

The social marketing concept, which maintains that marketers must satisfy customers’ needs in

ways that also benefit society while still delivering a profit to the firm.

Sustainability is defined, as “meeting present needs without compromising the ability of future

generations to meet their needs.

Accountability—measuring just how much value marketing activities create (ROI: return on

investment).

1.7. Explain how marketers practice the societal marketing concept and sustainability.

An important trend now is for companies to think of ways to design and manufacture products with

a focus on sustainability, defined as “meeting present needs without compromising the ability of

future generations to meet their needs.” Sustainability applies to many aspects of doing business,

including social and economic practices (e.g., humane working conditions and diplomacy to prevent

wars that deplete food supplies, atmospheric quality, and of course, lives).

1.8. Describe the Internet and how Web 3.0 and 4.0 provide greater opportunities for marketers

to interact with their customers.

In the 1990s, the Internet (Web 1.0) was typified by static content provided by a site’s creator. Web

3.0 refers to the current generation of the web that offers consumers real-time instant

communications through live chats and instant messaging and marketers the ability to track

customers’ online behavior. Web 4.0 gives consumers access to thousands of apps and makes the

ability to use their smartphones and tablets to access brands anywhere and anytime a necessity.

To what does the lifetime value of the customer refer, and how is it calculated?

Lifetime value refers to the profit made from each customer, including every purchase made from

now into the future. To calculate lifetime value, a firm estimates the amount the person will spend

and then subtracts what it will cost to maintain the relationship.

What does it mean a firm to have a competitive advantage? What gives a firm a competitive

advantage?

Chapter 1: Welcome to the World of Marketing

A firm has a competitive advantage when it is able to outperform the competition, providing

customers with a benefit the competition cannot. A competitive advantage gives consumers a reason

to choose one product over another repeatedly.

What is involved in market planning?

Firms (or individuals) that engage in marketing planning ask questions like these:

What product benefits will our customers look for in three to five years?

What capabilities does our firm have that set it apart from the competition?

What additional customer groups might provide important market segments for us in the future?

How will changes in technology affect our production process, our communication strategy, and our

distribution strategy?

What changes in social and cultural values are occurring now that will affect our market in the next

few years?

How will customers’ awareness of environmental issues affect their attitudes toward our

manufacturing facilities?

What legal and regulatory issues may affect our business in both domestic and global markets?

ACTIVITIES: APPLY WHAT YOU’VE LEARNED

1-12. In Class, 10–25 Minutes for Teams Assume that you are a marketing consultant employed by

a large retail chain that offers consumers products in a number of brick-and-mortar stores and

online. The retail organization wishes to increase its loyal customer base by engaging customers

through interaction opportunities on social networks. Develop a list of at least 10 specific social

network activities that will work together to increase customer engagement.

MyMarketingLab for answers to Assisted Graded Questions.

Part 1: Understand the Value Proposition

1-13. In Class, 10–25 Minutes for Teams Successful firms have a competitive advantage

because they are able to identify distinctive competencies and use these to create differential

benefits for their customers. Consider your business school or your university. What distinctive

competencies does it have? What differential benefits does it provide for students? What is its

competitive advantage? What are your ideas as to how your university could improve its

competitive position? Write an outline of your ideas.

Students will probably have a lot of opinions and ideas regarding this question. You might ask them

to explain the thought process they went through when enrolling in your school. Was your school

the student’s top choice? Why or why not? What could make this school more competitive? Have

the students’ opinions changed as they matriculated? Another useful tool to offer students working

on this task is to introduce them to the SWOT analysis. In particular, matching up a business

school’s strengths to opportunities often leads to insights about competitive advantages in the

marketplace.

1-14. In Class, 10–25 Minutes for Teams As college students, you and your friends sometimes

discuss the various courses you are taking. One of your friends says to you, “Marketing’s not

important. It’s just dumb advertising.” Another friend says, “Marketing doesn’t really affect

people’s lives in any way.” As a role-playing exercise, present your arguments against these

statements to your class.

A good way to make this an effective assignment is to have each student or student team submit a

proposal for a skit and choose the best two or three for class demonstration.

1-15. For Further Research (Individual) Recent reports indicate that consumers including

children and teens are becoming small screen addicts. Develop a series of questions (about 10). Use

these to Interview at least five of your fellow students about their use of smart- phones and tablets.

Write up a report on your finding and conclusions.

Students can interview their classmates about their use of smartphones and tablets.

1-16. For Further Research (Groups) Today’s marketers recognize that the Internet and

Big Data have changed marketing and will continue to change it in the years to come. Your team

assignment is to first find examples of how the Internet and Big Data have improved marketing for

some for-profit and not-for-profit organizations. Then develop your ideas on how the Internet and

Big Data could make contributions to society as a whole in the future. Develop a short presentation

for your class.

Chapter 1: Welcome to the World of Marketing

Groups should explore websites to find examples of how the Internet and Big Data have improved

marketing for some for-profit and not-for-profit organizations

MARKETING METRICS EXERCISE

The chapter discusses the growing importance of sustainability, and it notes that companies and

consumers increasingly consider other costs in addition to financial kinds when they decide what to

sell or buy. One of these cost categories is damage to the environment. How can marketers make it

easier for shoppers to compute these costs? The answer is more apparent in some product

categories than in others. For example, American consumers often are able to compare the power

consumption and annual costs of appliances by looking at their EnergyStar™ rating. In other

situations, we can assess the carbon footprint implications of a product or service; this tells us how

much CO2 our purchase will emit into the atmosphere (e.g., if a person flies from New York to

London). The average American is responsible for 9.44 tons of CO2 per year! A carbon footprint

comes from the sum of two parts, the direct, or primary, footprint and the indirect, or secondary,

footprint:

The primary footprint is a measure of our direct emissions of CO2 from the burning of fossil fuels,

including domestic energy consumption and transportation (e.g., cars and planes).

• The secondary footprint is a measure of the indirect CO2 emissions from the whole life cycle of

products we use, from their manufacture to their eventual breakdown.

Although many of us are more aware today that our consumption choices carry unseen costs, there

is still a lot of confusion about the best way to communicate the environmental costs of our actions

—and in many cases consumers aren’t motivated to take these issues into account unless the costs

impact them directly and in the short term.

1-17. As a consumer, what other metrics would you suggest that might reflect benefits of

sustainability initiatives that would motivate you to purchase from one provider or the other?

MyMarketingLab for answers to Assisted Graded Questions.

1-18. Would you buy from a demonstrably more expensive provider just because they exhibited a

higher level of commitment to sustainability?

Part 1: Understand the Value Proposition

MyMarketingLab for answers to Assisted Graded Questions.

CHOICES: WHAT DO YOU THINK?

Critical Thinking Journalists, government officials, and consumers have been highly critical of

companies for gathering and storing large amounts of data on consumers (i.e., Big Data). Others

argue that such practices are essential for firms to provide high-quality, affordable products that

satisfy consumers’ varied needs. What do you think? Should the government regulate such

practices? How can such practices hurt consumers? How can these practices help consumers?

In answering this question, the student should be encouraged to examine their life personally and

relate marketing to their daily activities and events. Areas that should be mentioned in this

discussion are consumer purchases (such as buying food, clothes, supplies at the bookstore, and

major purchases such as computers or cars) as well as advertising’s impact on their learning

processes (such as learning about new products, how to do things, and contemporary trends.

Students should look on the Internet for recent events regarding privacy issues and whether

governmental intervention is appropriate.

1-20. Ethics Despite best efforts to ensure product safety, products that pose a danger to

consumers sometimes reach the marketplace. At what point should marketers release information

about a product’s safety to the public? How should marketers be held accountable if their product

harms a consumer?

MyMarketingLab for answers to Assisted Graded Questions.

1-21. Critical Thinking The marketing concept focuses on the ability of marketing to satisfy

customer needs. As a typical college student, how does marketing satisfy your needs? What areas of

your life are affected by marketing? What areas of your life (if any) are not affected by marketing?

Chapter 1: Welcome to the World of Marketing

In answering this question, the student should be encouraged to examine their life personally and

relate marketing to their daily activities and events. Areas that should be mentioned in this

discussion are consumer purchases (such as buying food, clothes, supplies at the bookstore, and

major purchases such as computers or cars) as well as advertising’s impact on their learning

processes (such as learning about new products, how to do things, and contemporary trends). Other

areas include interactions with groups (such as the role that reference groups play in their purchase

processes and how others might be affected by marketing practice). It is also important to examine

career plans and aspirations (because most of these students will be business students, they should

understand how to pursue job opportunities and market themselves). There are obviously other

areas that students might mention such as the international environment, the environment itself,

and the legal environment. Each area mentioned should be examined and justified. Most students

will find that there will be few activities they pursue daily that are not touched by marketing. One

way to stimulate discussion in this area is to relate your own (the instructor’s) personal daily

experiences with marketing.

1-22. Critical Thinking Many consumers are concerned about the environment. They demand

green marketing activities and more green products. Still, most do not buy green products because

they are a few cents more expensive. How do you explain this? What are marketers doing wrong?

Should government intervene? What are your suggestions for successful green marketing?

Students can share ideas for successful green marketing to include ways to make others buy

green products.

1-23. Critical Thinking Consumer-generated commercials seem to be part of a broader trend

toward consumer-generated content of all sorts. examples include MySpace, Flickr

(where users post photos and comment on others’ pictures), blogging, and video-

sharing sites like YouTube. Do you think this is a passing fad or an important trend? How

(if at all) should marketers be dealing with these activities?

MyMarketingLab for answers to Assisted Graded Questions.

Ethics The American Psychological Association does not yet recognize Internet

addiction as a problem. Should it? Why and why not?

Part 1: Understand the Value Proposition

Student answers will vary. You can set up this discussion by surfing the APA website and typing in

addiction terms in the search engine—articles and publications will pop up because of your search.

Solicit suggestions for search terms related to addiction from students.

Ethics Crowdsourcing has a lot of upside—for the company initiating the crowdsourcing anyway.

The company gets to generate buzz among its fans as well as generate new product ideas and

inventive advertising campaigns for little to no investment. Is there an upside to crowdsourcing for

the customer, or are companies exploiting their users?

Students can role-play this question, taking opposite sides on the value of crowdsourcing.

The “Wisdom of Crowds” perspective (from a book by that name) argues that under the right

circumstances, groups are smarter than the smartest people in them are. If this is true, it implies

that large numbers of (non-expert) consumers can predict successful products. . Marketers rely on

crowdsourcing when they outsource marketing activities to a large group of people, often through a

social networking community.

MINI-PROJECT: LEARN BY DOING

The purpose of this mini-project is to develop an understanding of the importance of marketing to

different organizations.

Working as a team with two or three other students in your class, select an organization in your

community that practices marketing. It may be a manufacturer, a service provider, a retailer, a

not-for-profit organization—almost any organization will do. Then schedule a visit with someone

within the organization who is involved in the marketing activities. Arrange for a short visit in

which the person can give your group a tour of the facilities and explain the organization’s

marketing activities.

Divide the following list of topics among your team and ask each person to be responsible for

developing a set of questions to ask during the interview to learn about the company’s program:

• What customer segments the company targets.

• How it determines customer needs and wants.

• What products it offers, including features, benefits, and goals for customer satisfaction

Chapter 1: Welcome to the World of Marketing

• What its pricing strategies are.

• How it uses interactive content to engage customers.

• How it distributes products and whether it has e countered any problems.

• How it determines whether the needs and wants of customers are being met.

• Explain what marketers mean by the “societal marketing concept” and “sustainability” and ask

these are areas of concern to the organization. If so, how do they address

them in their organization’s

activities? If not, ask if they have any plans to move in this direction in the

future and, if so, how.

Develop a team report of your findings. In each section of the report, share what you learned that is

new or surprising to you compared to what you expected.

Develop a team presentation for your class that summarizes your findings. Conclude your

presentation with comments on what your team believes the company was doing that was

particularly good and what was not quite so good.

This project will help students understand the difficulty, but yet the necessity, of focusing on a value

proposition in an organization. Obviously, some firms do this better than others do. However, all

firms must consider what they deliver to the customer and how the customer accepts this

proposition. If there is disparity between what the consumer expects, what the consumer perceives

or sees, what the organization says it will provide or do, and what is actually received, problems will

arise. This basic project will aid the student in understanding the need to obtain information from

the marketplace and focus on delivering value to customers.

V. MARKETING IN ACTION CASE: REAL CHOICES AT

COCA-COLA

Summary of Case

Part 1: Understand the Value Proposition

What do you do when your customer starts to shrink, both literally and figuratively? The sale of

soft drinks in the U.S. is not what it used to be. The $98 billion soft-drink industry is being

challenged by changes in consumers’ attitudes toward both sugar-sweetened and diet drinks.

Historically, soft drinks have been a significant portion of the American diet and sales have grown

year after year. In the United States the rates of obesity, diabetes, and other weight-related health

issues are on the rise. In 2014, the Centers for disease Control and Prevention found that 35 percent

of U.S. adults were obese. And the problem is not limited to adults; with distressing regularity

children are being diagnosed as obese. Although obesity and its related issues are complicated and

have many different causes, soft drink manufacturers, like Coca-Cola, have been forced to bear a

large share of the blame. This combined with the current consumer trend toward a healthier

lifestyle has dealt a blow to the beverage industry. Since the 1990s, the sales of soft drinks have

fallen by more than 25 percent.

The association of obesity and soft drinks has become so much of a problem that in some cities,

politicians are proposing “soda taxes” to reduce the amount of sugar consumed. For now the

soft-drink manufacturers are winning the political battles but are in jeopardy of losing overall. One

of the consequences of these policy fights is that consumers are being reminded that soft drinks may

not be the healthiest choice.

Suggestions for Presentation

This case could be assigned for various online or in-class discussion activities.

Online Assignment Suggestions

Research companies such as PepsiCo, Dr. Peer, Evian, Perrier, Aquafina, and other competitors.

What is Coca-Cola’s competitive advantage?

Determine how each competitor’s product would be ranked in terms of product, price, place, and

promotion.

Visit the Coca-Cola website at www.coca-colacompany.com/ and report on the most recent

marketing strategies that are being accomplished.

In-Class Assignment Suggestions

In groups or as individuals, discuss the marketing strategy that Coca-Cola should consider, due to

increased obesity issues facing soft-drink companies.

Chapter 1: Welcome to the World of Marketing

Divide the class into groups of three to five students and have each group conduct a strengths,

weaknesses, opportunities and threats (SWOT) analysis to determine how Coca-Cola can develop

strategies to overcome adverse findings.

You Make the Call

1-30. What is the decision facing Coca-Cola?

How will this ongoing concern by public health officials effect how Americans feel about soft

drinks in the long run? Will soft drinks ever attain the negative status of tobacco products,

which many consumers have abandoned? Will Coca-Cola be able to reclaim its former

position as market leader or must coke change its focus to something else?

Students may come up with a number of different decisions that Coca-Cola might make such

as:

Coca-Cola needs to determine what marketing mix strategies would be effective for their future

success (and what strategies would not be as successful).

Students may be encouraged to factor in extensive marketing research designs in their answers.

New ideas for marketing mix strategies.

What factors are important in understanding this decision situation?

The following factors are important in understanding this decision situation:

Coca-Cola’s marketing strategy of product, price, place, and promotion needs to be superior to its

rivals.

The $98 billion soft-drink industry is being challenged by changes in consumers’ attitudes toward

both sugar-sweetened and diet drinks.

Part 1: Understand the Value Proposition

Sales of soft drinks have fallen by more than 25 percent since the 1990s.

In this health-conscious market, innovation is necessary for companies to attain and hold market

share.

Competitors in this marketplace include PepsiCo, other soft-drink, and water companies such as

Evian and Perrier.

Innovation must be accompanied with value in the minds of consumers.

What are the alternatives?

Students might recommend a variety of different marketing strategies and/or revisions to current

marketing strategies discussed in the case. Some possibilities include:

Develop an aggressive promotion plan.

Reduce pricing.

Develop a competitive advantage.

Monitor and understand how the competitors are potentially gaining power and influence.

Monitor on a continual basis the market position and pricing in relationship to competition.

Coca-Cola must show the benefit to consumers that will satisfy that need or want.

Marketers must develop the product with the benefits of the customers in mind.

Articulate why Coca-Cola is the choice to make for a soft-drink.

1-33. What decision(s) do you recommend?

Students may focus on several of the alternatives developed. They should be encouraged to

discuss which alternative actions are more critical.

1-34. What are some ways to implement your recommendations?

Chapter 1: Welcome to the World of Marketing

Students may make a variety of suggestions for implementation depending on their

recommendations. These may include specific promotional activities, specific pricing, research

activities, and many others.

WEB RESOURCES

Michael Baumwoll (Real People, Real Choices, Decision Time vignette): https://twitter.com

Coca-Cola: www.coca-colacompany.com/

Craigslist (online classifieds website): www.craigslist.org

The Sims (online virtual community): www.thesims.com/

Second Life (a 3-D virtual world created by its residents): www.secondlife.com

The SmartWay brand (identifies products and services that reduce transportation-related

emissions): www.epa.gov

Avon Foundation (to improve the lives of women globally): www.avoncompany.com

Girls Inc. (inspiring all girls to be strong, smart, and bold): www.girlsinc.org

Blogger.com (a small team in Google focusing on helping people have their own voice on the web

and organizing the world’s information from the personal perspective): www.blogger.com

Subaru: www.subaru.com

Part 1: Understand the Value Proposition

LinkedIn (professional network online community): www.linkedin.com

Ad Roll (lets publishers “connect” through a social network-style matching system to “roll-up”

their ad space into highly targeted packages that advertisers can buy across): www.adroll.com

Wikipedia (a multilingual, web-based, free content encyclopedia): www.wikipedia.org

Google (online search engine): www.google.com

YouTube (allows people to easily upload and share video clips): www.youtube.com

MediaPost (the media, marketing and advertising professional’s resource for complete news

coverage, engaging events, a focused social network, and comprehensive industry jobs, directories

and research): www.mediapost.com