Essentials of Marketing

Chapter 1Marketing’s Value to Consumers, Firms, and Society

McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

At the end of this presentation, you should be able to:

1. Know what marketing is and why you should learn about it.

2. Understand the difference between marketing and macro-marketing.

3. Know the marketing functions and why marketing specialists—including intermediaries and collaborators—develop to perform them.

4. Understand what a market-driven economy is and how it adjusts the macro-marketing system.

1–2

At the end of this presentation, you should be able to:

5. Know what the marketing concept is—and how it should guide a firm or nonprofit organization.

6. Understand what customer value is and why it is important to customer satisfaction.

7. Know how social responsibility and marketing ethics relate to the marketing concept.

8. Understand the important new terms.

1–3

More than Selling or Advertising

All Those Bicycles!

The Management Job in Marketing

More than Selling and Advertising

1–4

Things a Firm Should Do in Producing a Bike

Themarketing mix

Themarketing mix

Predict Wants

Estimate Demand

Predict When

Determine Where

Estimate Price

Decide Promotion

Estimate Competition

Provide Service

Analyze Needs

1–5

Production vs. Marketing

Creates Customer Satisfaction

MarketingMakes sure right goods &

services are produced

Production• Making Goods

• Performing Services

1–6

Marketing Is Important to You!

Important to every consumer!

Important to your job!

Affects innovation and standard of living

1–7

Marketing Stimulates New Ideas

Courtesy of The Procter & Gamble Company.

1–8

Marketing Affects Innovation

1–9

What Is Marketing?

and

Macro View

• Social process

• Matches supply with demand

Micro View

• Set of activities

• Performed by individual organizations

1–10

Marketing

KeyCharacteristics

Profit and Nonprofit

More than Persuasion

Begins with Needs

Doesn’t Go It Alone

Involves Exchanges

Builds Relationships

1–11

Building Customer Relationships

1–12

Macro-Marketing

KeyCharacteristics

Matches Producers and

Consumers

Emphasis is on Whole System

Every Economy Needs It

1–13

Can Mass Production Satisfy a Society’s Consumption Needs?

Economies of Scale - Lower Unit Cost

UnitCost

$

Producers ConsumersMarketingFunctions

Marketing Bridges the Gap!Output

1–14

Overcoming Spatial Separation

1–15

Marketing Facilitates Production and Consumption (Exhibit 1-1)

Production Sector

Marketing needed to overcome

discrepancies and separations

Discrepancies of Quantity

Discrepancies of Assortment

Spatial Separation

Separation in Time

Separation of Information

Separation in Values

Separation of Ownership

Consumption Sector 1–16

Universal Functions of Marketing

MarketingFunctions

Buying Selling

Transporting

Storing

StandardizationStandardization& GradingFinancing

Risk Taking

MarketInformation

1–17

Who Performs Marketing Functions?

TransportFirms

ISP's

ProductTestingFirms

Ad Agencies

ResearchFirms

Wholesalers OtherSpecialists

Retailers

Consumers

Producers

1–18

How Decisions are Made in an Economic System

OR

CommandEconomy

• Government officials decide

• May work well if:• Simple

economy• Little Variety• Adverse

Conditions

Market-Directed Economy

• Adjusts itself• Price is value

measure• Freedom of

choice• Government’s

role limited

1–19

Model of a Market-Directed Macro-Marketing System (Exhibit 1-2)

Many Individual Producers(heterogeneous supply)

Many Individual Producers(heterogeneous supply)

Many Individual Producers(heterogeneous supply)

IntermediariesIntermediariesIntermediaries CollaboratorsCollaboratorsCollaborators

Perform universal marketing functionsPerform universal marketing functionsPerform universal marketing functions

To overcome discrepancies andseparation of producers and consumersTo overcome discrepancies andseparation of producers and consumersTo overcome discrepancies andseparation of producers and consumers

To create value and direct flow ofneed-satisfying goods and servicesTo create value and direct flow of

need-satisfying goods and servicesTo create value and direct flow of

need-satisfying goods and services

Many Individual Consumers(heterogeneous demand)

Many Individual Consumers(heterogeneous demand)

Many Individual Consumers(heterogeneous demand)

Monitoring by government(s)and public interest groups

1–20

Marketing’s Role Has Changed Over Time

Focus:Sell Surplus

Long-RunCustomer Satisfaction

Focus:

Focus:Increase Supply

Focus:Beat Competition

Focus:Coordinate and Control

Simple Trade Era

Production Era

Sales Era

Marketing Department Era

Marketing Company Era

1–21

The Marketing Concept (Exhibit 1-3)

Profit (or another measure of long-term success) as

an objective

Total company

effort

Customer satisfaction

The MarketingConcept

1–22

Creating Customer Satisfaction

Prestige Brands Holdings, Inc. 1–23

Checking Your Knowledge

A store that is popular with newlyweds runs a wedding gift registry. Five minutes before closing time on a Sunday, a young couple enters the store and wants to register—a process that usually takes 30 minutes or more. A sales associate advises the couple to come back when they have more time, even though a recent memo from the store’s regional manager specifically instructed store personnel to stay after closing time to help such customers. Which key element of the marketing concept is the main problem area in this situation?

A. Customer need

B. Total company effort

C. Customer satisfaction

D. Marketing orientation

E. Product orientation

1–24

Adopting the Marketing Concept

1–25

The Marketing Concept and Customer Value

Costs Benefits

Take Customer’s Point of View

Customer May Not Dwell on Value

Where Does Competition Fit?

Customer Value Builds Relationships

Customer Value Reflects

Benefits and Costs

1–26

Costs, Benefits, and Customer Value(Exhibit 1-5)

Perceivedsuperior

value

Perceivedinferiorvalue

High

HighLowLow

Costs target customer sees to obtain benefits

Benefits targetcustomer sees

in a firm’s goods and services

1–27

Interactive Exercise: Customer Value

1–28

Checking Your Knowledge

Which of the following statements, made by marketing managers, illustrates an understanding of the concept of customer value?

A. “It’s more important to acquire new customers than to retain old ones.”

B. “The only time it’s really necessary to demonstrate superior customer value is right before the actual sale.”

C. “My main concern is with meeting this month’s sales quota—I’ll worry about relationship building later.”

D. “I might think my product is a good value, but what really counts is if the customer thinks it’s a good value.”

E. “Customer value really boils down to which product is the least expensive.” 1–29

Checking Your Knowledge

A computer manufacturer is attempting to increase the customer value associated with purchases of its products. Which of the following might be a way to achieve this increase in value?

A. Reduce price.

B. Increase technical support for customers.

C. Increase warranty coverage.

D. Offer free shipping.

E. Any of the above, depending on the needs of the target market.

1–30

Total Company Effort to Satisfy

Customers

Total Company Effort to Satisfy

Customers

Putting It All Together (Exhibit 1-6)

Build Profitable Customer

Relationships

AttractCustomers

Offer Superior Customer Value

SatisfyCustomersRetain Customers

Increase Sales to Customers

1–31

The Marketing Concept Applies in Nonprofit Organizations

Newcomers to Marketing

Will “Satisfied Customers”

Offer Support?

The Bottom Line?

May Not Be Organized for

Marketing

Characteristics Characteristics of Nonprofit

Organizations

1–32

Government Marketing

1–33

Marketing Concept Used by Nonprofit Services

1–34

Social Responsibility

The Marketing Concept, Social Responsibility, and Marketing Ethics

Should All Consumer Needs Be Satisfied?

What if Profits Suffer?

Micro - MacroDilemma

The Marketing Concept Guides Ethics

Group Needs Individual Needs

Do All Marketers Act Responsibly?

1–35

The Micro-Macro Dilemma

1–36

Social Responsibility

1–37

You should now be able to:

1. Know what marketing is and why you should learn about it.

2. Understand the difference between marketing and macro-marketing.

3. Know the marketing functions and why marketing specialists—including intermediaries and collaborators—develop to perform them.

4. Understand what a market-driven economy is and how it adjusts the macro-marketing system.

1–38

You should now be able to:

5. Know what the marketing concept is—and how it should guide a firm or nonprofit organization.

6. Understand what customer value is and why it is important to customer satisfaction.

7. Know how social responsibility and marketing ethics relate to the marketing concept.

8. Understand the important new terms.

1–39

Key Terms

Production

Customer satisfaction

Innovation

Marketing

Pure subsistence economy

Macro-marketing

Economies of scale

Universal functions of marketing

Buying function

Selling function

Transporting function

Storing function

Standardization and grading

Financing

Risk-taking

Market information function

Intermediary

1–40

Key Terms

Collaborators

E-commerce

Economic system

Command economy

Market-directed economy

Simple trade era

Production era

Sales era

Marketing department era

Marketing company era

Marketing concept

Production orientation

Marketing orientation

Customer value

Micro-macro dilemma

Social responsibility

Marketing ethics

1–41