Defining MarketingMarketing is the creation, communication, and delivery of value, as well as the management of customer relationships for a lifetime. Show
Learning Objectives Define marketing, its role within a firm, and the competitive advantages it offers. Key TakeawaysKey Points
Key Terms
Defining Marketing Marketing is the act of facilitating the exchange of a given commodity for goods, services, and/or money to deliver maximum
value to the consumer. From a societal point of view, marketing is the link between a society's material requirements and its economic patterns of response. Marketing satisfies these needs and wants through both the exchange processes and building long-term relationships. The Role of Marketing within A Firm The official American Marketing Association definition published in July 2013 defines marketing as "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. "
Marketing is often a critical part of a firm's success, but its importance must be kept in perspective. For many large manufacturers such as Proctor & Gamble, Microsoft, Toyota, and Sanyo, marketing represents a major expenditure, as these businesses depend on the effectiveness of their marketing effort. Conversely, for regulated industries (such as utilities, social services, medical care, or small businesses providing a one-of-a-kind product ) marketing may be little more than a few informative brochures. Marketing Metrics Continuum: The Marketing Metrics Continuum provides a framework to categorize metrics from the tactical to the strategic. Marketing as a Source of Competitive Advantage The specific role of marketing is to provide assistance in identifying, satisfying, and retaining customers. Noted Harvard Business Professor Theodore Levitt claimed the purpose of all business is to "find and keep customers. " Customer Wants and NeedsConsumer wants and needs should drive marketing decisions, and no strategy should be pursued until it passes the test of consumer research. Learning Objectives Identify how customers fulfill their wants and needs from a marketing perspective Key TakeawaysKey Points
Key Terms
Demand is the economic principle that describes a consumer's desire, willingness and ability to pay a price for a specific good or service. A firm in the market economy survives by producing goods that are in demand by consumers. Consequently, ascertaining
consumer demand is vital for a firm's future viability. Many companies today have a customer focus. In this approach, consumer wants and needs are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs and wants of potential consumers. Customer Decision ProcessThere is a five step process that consumers can go through in making a purchase decision. These steps include:
The customer decision process begins with need identification. Whether we act to resolve a particular problem depends upon two factors: the magnitude of the discrepancy between what we have and what we need, and the importance
of the problem. This involves the concept of consumer motivation, which is the internal drive consumers experience to fulfill conscious and unconscious wants and needs. Once the problem is recognized, it must be defined in such a way that the consumer can actually initiate the action that will bring about a relevant solution. Focusing on Customers: What cellphone customers wanted in 1997 is likely very different than what smartphone users want today. Caveats of a Customer Focus Customer focus should be treated as a subset of the corporate strategy rather than the sole
driving factor. This means looking beyond current-state customer focus to predict what customers will demand in the future, even if they themselves discount the prediction. Product, Placement, Promotion, and PriceProduct, placement, promotion, and price are four elements of the marketing mix crucial to determining a brand's unique selling proposition. Learning Objectives Show the characteristics of each of the four elements, or "Four Ps" that make up the "marketing mix. Key TakeawaysKey Points
Key Terms
Product, placement, promotion and price are the four elements of the marketing mix. ProductThe term "product" is defined as anything, either tangible or intangible, offered by the firm; as a solution to the needs and wants of the consumer; something that is profitable or potentially profitable; and a goods or service that meets the requirements of the various governing offices or society. The two most common ways that products can differentiated are:
Intangible products are service-based, such as the tourism industry, the hotel industry, and the financial industry. Tangible products are those that have an independent physical existence. Typical examples of mass-produced, tangible objects are automobiles and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. Tangible Luxury Good: A 1932 Horch 670 V12 is an example of a tangible product. Its price should reflect its image as a classic automotive collectible. Every product is subject to a life-cycle that starts with its introduction and is followed by a growth phase, a maturity phase, and finally a period of decline as sales falls. Marketers must do careful research on the length of the product's life-cycle and focus their attention on different challenges that arise as the product moves through each stage. 4Ps in Action: Coca Cola's marketing strategy includes elements of all four Ps. The marketer must also consider the product mix, which includes factors such as product depth and breadth. Product depth refers to the
number of sub-categories of products a company offers under its broad spectrum category. For example, Ford Motor Company's product category is automobiles. It's product depth includes sub-categories such as passenger vehicles, commercial vehicles, transport vehicles, et cetera. This broad spectrum category is also known as a product line. Product breadth, on the other hand, refers to the number of product lines a company offers. Placement Product distribution (or placement) is the process of making a product or service accessible for use
or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.
The decision regarding how to distribute a product has, as its foundation, basic economic concepts, such as utility. Utility represents the advantage or fulfillment a customer receives from consuming a good or service. Understanding the utility a consumer expects to receive from a product being offered can lead marketers to the correct distribution strategy. PromotionThe three basic objectives of promotion are:
A marketer may use advertising, public relations, personal selling, direct marketing, and sales promotion to achieve these objectives. A promotional mix specifies how much attention to give each of the five subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate image. Price The price is the amount a customer pays for the product. The concept of price is in contrast to the concept of value, which is the perceived utility a customer will receive from a product. Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, often it will affect the demand and sales as well. The marketer should set a
price that complements the other elements of the marketing mix. A well chosen price should (a) ensure survival (b) increase profit (c) generate sales (d) gain market share, and (e) establish an appropriate image. SIVA: Solution, Incentive/Information, Value, and AccessCustomer-focused marketing is known as SIVA which provides a demand-centric alternative to the four P's supply side of marketing management. Learning Objectives Reconstruct the "Four Ps" supply side model (product, price, placement and promotion ) to create "SIVA" (solution, information/incentives, value and access), a customer centric alternative Key TakeawaysKey Points
Key Terms
SIVA is a formal approach to customer-focused marketing. It stands for Solution, Information, Value, and Access. This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand and customer-centric alternative to the well-known four Ps supply side model (product, price, placement, promotion) of marketing management. SIVA Customer-Focused Approach: Guitars are not a 1 size suits all product. Guitar companies must be aware of what their customers need and want. Solution → Product The "Product" in the four Ps model is
replaced by "Solution" in order to shift focus to satisfying the consumer needs. The product is no longer a one-size fits all offering, but rather a solution created to solve a problem for the customer. The customer-centric focus allows customers to feel cared for because they are offered a custom solution. The Marketing ExchangeThe act of obtaining a desired object from someone by offering something of value in return is called the exchange process. Learning Objectives Examine the significant elements of the marketing exchange, when a product or service is offered by a company to a customer in a sales transaction Key TakeawaysKey Points
Key Terms
The Marketing ExchangeThe exchange process is the act of obtaining a desired object from someone by offering something of value in return. The exchange between the person in need (i.e., someone who offers money or some other personal resource) and the organization selling the product, service, or idea results in a transaction. The top goal of any marketing organization is to facilitate and help increase sales transaction by convincing potential consumers and existing customers to buy their company's product or service. Amazon : Online shopping and modern technology give consumers access to unlimited information and product choices. With the emergence of the Internet and e-commerce during the 1990s, the nature of the marketing exchange for businesses and customers has changed drastically. Today's consumers have access to far more and far better information. They also have many more choices. Businesses must provide personalized, relevant and high quality content that competes with a fast, ever-changing competitive landscape. Simple Marketing Exchange: In marketing, there's an exchange between the company and the consumer. A chart that shows a simple marketing exchange - customer identifies a need, customer responds to marketing stimulus, currency is exchanged for the product, and mutual value is reached. Trade-Off Analysis The exchange process allows the parties to assess the relative trade-offs they must make to satisfy their respective needs and wants. For the marketer, analysis of these trade-offs is guided by company policies and objectives. For example, a company may engage in exchanges only when the
profit margin is 10% or greater. Buyers also have personal policies and objectives that guide their responses in an exchange. Unfortunately, buyers seldom write down their personal policies and objectives. Even more likely, they often do not understand what prompts them to behave in a particular manner. This is the mystery, or the "black box," of buyer behavior that makes the exchange process so unpredictable and difficult for marketers to understand. Negotiation There tends to be some negotiation between the parties in the exchange process. Individuals
on both sides attempt to maximize rewards and minimize costs in their transactions so as to obtain the most profitable outcomes. Ideally, all parties achieve a satisfactory level of reward. Complex Marketing Exchange: In a complex marketing exchange, there are more dynamics that must be understood and met by the company. A chart that shows a complex marketing exchange - customer identifies a need, customers makes an offer, an agreement is reached, currency is exchanged for the product, and mutual value is reached. Understanding Buyer Behavior Will Jumpstart the Exchange Process When we use the term "buyer", we are referring to an individual, group, or organization that engages in market exchange. In fact, there are differences in the characteristics of these three entities and how they behave in an exchange. Therefore, individuals and groups are traditionally placed in the consumer category, while organizations are placed in the second category.
The answers to these two questions form the basis for target market selection, and, ultimately, the design of a market offering. Purchase DecisionsIn order to better understand the marketing exchange, it is important for marketers to grasp how consumers go about making purchase decisions. In general, the consumer decision process includes the following steps:
As the consumer moves through these various phases, internal and external conditions are influencing the consumer's actions throughout the purchasing process. Internal influences include beliefs, feelings, demographics, lifestyle, motivation, and personality. Psychological factors
include an individual's perception, attitude and belief, while personal factors include income level, personality, age, occupation and lifestyle. For example, a consumer may enter the purchase decision stage for a particular product, but decide to buy a different brand after receiving negative feedback from a trusted friend. Relationship Building with Various StakeholdersThe key to building a strong stakeholder relationship is communicating effectively with all stakeholders. Learning Objectives Diagram the relationship of
stakeholders, both internal and external, to a company including proper methods of communication Key TakeawaysKey Points
Key Terms
Defining Stakeholders Stakeholders are involved in and/or affected (negatively or
positively) by the outcome and impact of an action, project or program. Stakeholders can be divided into two main categories: Types of Stakeholders
Communicating with Internal & External StakeholdersMarketing communication can be divided into two flows directed at different target audiences. This necessitates different yet compatible communication strategies. A company cannot be telling a customer one story and stockholders another. Marketing Communication: Marketing communication uses different yet compatible communication strategies based on the target audience. Planning Preparing a communication plan involves five key points: Tools & TechniquesCommunication can be in different forms including:
The key to building a strong stakeholder relationship is communicating with all members of the company. Stakeholders should have a clear idea of a company's strategy. After any stakeholder discussions, it is important to create a written report of what was discussed. The report can have information on various projects, goals or new initiatives. The report should be detailed yet concise:
The Dynamic EnvironmentSince the business environment is constantly changing and customer preferences keep evolving, marketers are required to adapt rapidly. Learning Objectives Contrast the ever-evolving characteristics of a micro and macro marketing environments and how they apply to the proactivity, profitability and viability of a company Key TakeawaysKey Points
Key Terms
The Dynamic EnvironmentA successful marketing campaign increases a company's profits and helps it reach its strategic goals. However, there are challenges to marketing because the business environment is constantly changing. Customer preferences and attitudes keep evolving and require managers to adapt rapidly. Another challenge involves reaching different target markets with culturally relevant propositions. McDonald's is said to be a good example of a company that can effectively reach a diverse audience. McDonald's in Seoul, South Korea: McDonald's marketing takes cultural factors into consideration when creating products and campaigns. Proactive attention to the environment allows marketers to prosper by efficiently marketing in areas with the greatest customer potential. It is important to place equal emphasis on both the macro and micro-environment and to react accordingly to changes within them. Reactive attention to the environment by marketers can lead to a disconnect with potential customers and can allow competitors to gain advantages that will win them a higher market share. The Marketing EnvironmentTwo key levels of the marketing environment are the micro-environment and the macro-environment. The Micro-environment The
micro-environment includes the company itself, its suppliers, marketing intermediaries, customer markets, and competitors. It also includes consumers, collaborators, and centers of influence. The Macro-environment The macro-environment includes concepts such as demography, economy, natural forces, technology, politics, and culture. Marketing by Individuals and FirmsMarketing by firms compared to marketing by individuals differs greatly in terms of customization level and personal attention. Learning Objectives Distinguish between the process used when deciding on marketing plan for a firm or organization and the process used for an individual Key TakeawaysKey Points
Key Terms
Marketing by FirmsA marketing strategy is the combination of all of an organization's marketing goals into one comprehensive plan. The overall marketing strategy of an organization should focus on developing relationships with customers to understand their needs while also developing goods, services and ideas to meet those needs. Creating a marketing strategy generally involves six steps:
General Marketing Strategies
Ansoff Matrix Ansoff Matrix: Igor Ansoff created a matrix that shows alternative corporate growth strategies. The growth strategies include:
Marketing by IndividualsMarketing by individuals, as opposed to organizations, can be most clearly differentiated by the strategy of personal selling. Personal selling is the act of using people to sell products to consumers face-toface. The personal selling process is a seven step approach:
These are very general steps, but they form a foundation for differentiating between marketing by individuals and by firms. Personal selling represents the focus and customization that can be achieved through marketing on the individual level as opposed to the organizational level. More specific subjects in the realm of personal
selling include qualifying leads; additional information gathering beyond the customer meeting; negotiating; ensuring delivery, training, and satisfactory use of products; and ensuring adequate billing and collection techniques. These factors will be explored in more detail in later chapters. Adding ValueMarketing adds value to an organization by communicating relevant positioning and building long-term customer relationships. Learning Objectives Analyze, from a marketing perspective, how the "value" of a business and the products sold is quantified and qualified Key TakeawaysKey Points
Key Terms
Adding ValueA main goal of marketing is to add value to an organization. Marketing also aims to present the value an organization's products can add to a consumer's life. It is able to accomplish this via the following avenues:
Marketing Methods Used to Deliver Value For marketers to deliver value to a firm's customers, and also add value to the firm itself, they must consider what is known as the "total market offering. " This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as
compared to the market offerings and prices of competitors. Value, in this sense, can be defined as the relationship of a firm's market offerings to those of its competitors. Customer Value AnalysisTo reveal the company's strengths and weaknesses compared to other competitors, it is important to conduct a customer value analysis. This is the collection and evaluation of data associated with customer needs and market trends. The steps are as follows:
Value Proposition Conducting an effective customer value analysis can lead a company to creating an accurate value proposition. A value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services.
Louis Vuitton Store on Champs-Elysees in France: Louis Vuitton's marketing team communicates value to consumers by utilizing a high price point. Licenses and AttributionsCC licensed content, Shared previously
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Which of the following is essential for good value chain management quizlet?design products that have fewer component parts. encourage employees to come up with as many new product ideas as possible. Which of the following is essential for good value chain management? The marketing function should define business in terms of customer needs rather than the type of products.
Is a technique that focuses all functions within an organization on improving?Understanding Total Quality Management (TQM)
Total quality management is a structured approach to overall organizational management. The focus of the process is to improve the quality of an organization's outputs, including goods and services, through the continual improvement of internal practices.
Is a management technique that focuses on improving attributes?total quality management (TQM) A management technique that focuses on improving the quality of an organization's products and services. Focus on the customer.
Is an approach that creates teams of expert change agents known as green belts and black belts?Six Sigma shares with TQM its focus on improving value chain processes to increase quality; but it differs because TQM emphasizes top-down organization wide employee involvement, whereas the Six Sigma approach is to create teams of expert change agents, known as "green belts and black belts," to take control of the ...
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