Chapter 1

MARKETING AND ITS CORE CONCEPTS:

1. Needs, Wants, Demands, exchange,
2. relationship and network,
3. Competition.
4. Marketing Tasks,
5. Marketing Concepts and
6. Tools,
7. Different philosophies of marketing management /
Company Orientations Toward the Marketplace.
8. How Business and Marketing Are Changing.
 What is Marketing?

• Marketing is managing profitable

customer relationships
– Attracting new customers
– Retaining and
– Growing current customers
• “Marketing” is NOT synonymous with
“sales” or “advertising”
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 What is Marketing?
Marketing is an organizational function and a set of
processes for creating, communicating, and delivering
value to customers and for managing customer
relationships in ways that benefit the organization and
its stakeholders

Kotler’s social definition:

“Marketing is a social and managerial process by which
individuals and groups obtain what they need and
want through creating and exchanging products and
value with others.”

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 Marketing
A social definition shows the role marketing plays in society. One
marketer said that marketing's role is to "deliver a higher standard
of living.
For a managerial definition, marketing has often been described as
"the art of selling products,"
The Marketing Process
A simple 5-step model of the marketing process. In the 1st 4 steps,
• Companies work to understand consumers,
• Create customer value, and
• Build strong customer relationships. In the final step,
• Companies reap the rewards of creating superior customer value.
• By creating value for consumers, they in turn capture value from
consumers in the form of Sales, Profits, and Long-term customer
equity
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•
 Marketing
We will examine the steps of this simple model of marketing.
Marketing
The process by which companies create value for customers and
build strong customer relationships in order to capture value from
customers in return.
 
As a first step, marketers need to understand customer needs and
wants and the marketplace within which they operate. We now
examine five core customer and marketplace concepts:
1. needs, wants, and demands;
2. marketing offers (products, services, and experiences];
3. value and satisfaction ;
4. exchanges and relationships; and
5. markets
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 What is Marketing?

Core Marketing Concepts

1. Needs, wants, and 3. Value and
demands satisfaction
2. Marketing offers: 4. Exchange,
including products, transactions and
services and
relationships
experiences
5. Markets
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 Marketing
Customer Needs, Wants, and Demands
Needs - Human needs are states of felt deprivation. They include
basic Physical needs for food, clothing, warmth, and safety;
Social needs for belonging and affection; and Individual needs for
knowledge and self-expression. These needs were not created by
marketers; they are a basic part of the human makeup.
Wants is willingness to buy. They are the form human needs take
as they are shaped by culture and individual personality. Wants are
shaped by one's society and are described in terms of objects that
will satisfy needs.
Demand - When want is backed by buying power, wants become
demands. Outstanding marketing companies go to great lengths to
learn about and understand their customers' needs, wants, and
demands.
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 Marketing
Marketing Offers-Products, Services, information and
Experiences
Consumers' needs and wants are fulfilled through a marketing
offer-some combination of products, services, information, or
experiences offered to a market to satisfy a need or want.
Marketing offers are not limited to physical products. They also
include services, activities or benefits offered for sale that are
essentially intangible and do not result in the ownership of
anything.
Many sellers make the mistake of paying more attention to the
specific products they offer than to the benefits and
experiences produced by these products. These sellers suffer
from "marketing myopia." Smart marketers look beyond the
attributes of the products and services they sell experience.
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 Marketing- Setting expectation
Consumers usually face a broad array of products and services
that might satisfy a given need. How do they choose among
these many marketing offers? Customers form expectations
about the value and satisfaction that various marketing offers will
deliver and buy accordingly. Satisfied customers buy again and
tell others about their good experiences. Dissatisfied customers
often switch to competitors and disparage the product to others.
Marketers must be careful to set the right level of expectations.
If they set expectations too low, they may satisfy those who buy
but fail to attract enough buyers. If they raise expectations too
high, buyers will be disappointed. Customer value and customer
satisfaction are key building blocks for developing and managing
customer relationships.

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 Marketing
Exchange
• Marketing occurs when people decide to satisfy needs and
wants through exchange relationships. Exchange is the act of
obtaining a desired object from someone by offering
something in return.
• Marketing consists of actions taken to build and maintain
desirable exchange relationships with target audiences
involving a product, service, idea, or other object. Beyond
simply attracting new customers and creating transactions,
the goal is to retain customers and grow their business with
the company. Marketers want to build strong relationships by
con­sistently delivering superior customer value.
• The concepts of exchange and relationships lead to the
concept of a market.

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 Marketing
Market
• A market is the set of actual and potential buyers of a product.
These buyers share a particular need or want that can be satisfied
through exchange relationships.
• Marketing means managing markets to bring about profitable
customer relationships.  
• The new economy and need for Marketing
Change in consumer attitude to
• Substantial increase in buyers power
• Information boom
• Competition
Change in companies capabilities
• Information boom
• Economically sound status
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 Marketing
Marketing tasks
We can distinguish three stages through which marketing practice
might pass:
• Entrepreneurial marketing: Most companies are started by
individuals who live by their wits.  
• Formulated marketing: As small companies achieve success, they
inevitably move toward more formulated marketing. They spend
considerable sums on TV advertising, employs dozens of
salespeople, and carries on sophisticated marketing research. 
• Intrepreneurial marketing: Many large companies get stuck in
formulated marketing, poring over the latest Nielsen numbers,
scanning market research reports, trying to fine-tune dealer
relations and advertising messages. These companies lack the
creativity and passion of the guerrilla marketers in the
entrepreneurial stage.
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 Marketing
Their brand and product managers need to get out of the office,
start living with their customers, and visualize new ways to add
value to their customers' lives.
• The bottom line is that effective marketing can take many forms.
There will be a constant tension between the formulated side of
marketing and the creative side. It is easier to learn the
formulated side, which will occupy most of our attention in this
book; but we will also describe how real creativity and passion
operate in many companies.

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 Marketing
The scope of marketing
• Marketing is typically seen as the task of creating, promoting,
and delivering goods and services to consumers and
businesses. Management, marketers are responsible for
demand management. Marketing managers seek to influence
the
•  Level,
•  Timing, and
•  Composition of demand to meet the organization's
objectives.

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 Marketing
Types of demand
• Negative demand. A major part of the market dislikes Latent
demand the product and may even pay a price to avoid it-
vaccinations, dental work, vasectomies, and gallbladder
operations, for instance. Employers have a negative demand for
ex-convicts and alcoholics as employees. The marketing task is to
analyze why the market dislikes the product and whether a
marketing program consisting of product redesign, lower prices,
and more positive promotion can change beliefs and attitudes
• 2. No demand Target consumers may be unaware of or
uninterested in the product. Farmers may not be interested in a
new farming method, and college students may not be interested
in foreign-language courses. The marketing task is to find ways to
connect the benefits of the product with people's natural needs
and interests.
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 Marketing
Types of demand
• 3. Latent demand Consumers may share a strong need that
cannot be satisfied by any existing product. There is a strong
latent demand for harmless cigarettes, safer neighborhoods, and
more fuel-efficient cars.
• 4. Irregular demand Many organizations face demand that varies
on a seasonal, daily, or even hourly basis. Much mass-transit
equipment is idle during off-peak hours and insufficient during
peak travel hours. The marketing task, called synchromarketing is
to find ways to alter the pattern of demand through flexible
pricing, promotion, and other incentives.
• 5. Full demand. Organizations face full demand when they are
pleased with their volume of business. The marketing task is to
maintain the current level of demand in the face of changing
consumer preferences and increasing competition. The
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organization must maintain or improve its quality and continually
 Marketing
Types of demand
• Overfull demand Some organizations face a demand level that is
higher than they can or want to handle. The marketing task,
called demarketing requires finding ways to reduce demand
temporarily or permanently. General demarketing seeks to
discourage overall demand and includes such steps as raising
prices and reducing promotion and service. Selective demarketing
consists of trying to reduce demand from those parts of the
market that are less profitable.
• Unwholesome demand. Unwholesome products will attract
organized efforts to discourage their consumption. Unselling
campaigns have been conducted against cigarettes, alcohol, hard
drugs, handguns, X-rated movies, and large families. The
marketing task is to get people who like something to give it up,
using such tools as fear messages, price hikes, and reduced
availability. 1 - 17
 What is Marketing?
Many Things Can Be Marketed!
Marketing people are involved in
marketing 10 types of entities:
• Goods • Places
• Services • Properties
• Experiences • Organizations
• Events • Information
• Persons • Ideas
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GOODS Physical goods constitute the bulk of most countries
production and marketing effort. Not only do companies market
their goods, but thanks to the Internet, even individuals can
market goods. -eBay
SERVICES As economies advance, a growing proportion of their
activities is focused on the production of services. Services
include the work of airlines, hotels, etc, as well as professionals
working within or for companies, such as accountants, lawyers,
engi­neers, doctors, software programmers, and management
consultants. Many market offerings consist of a variable mix of
goods and services.
EXPERIENCES Walt Disney World's Magic Kingdom represents
experiential marketing: customers visit a fairy kingdom, a pirate
ship, or a haunted house.

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EVENTS Marketers promote time-based events, such as the
Olympics, company anniversaries, major trade shows, sports
events, and artistic performances.
•PERSONS Celebrity marketing is a major business. Artists,
musicians, CEOs, physicians, high-profile lawyers and financiers,
and other professionals are also getting help from celebrity
marketers.
•PLACES Places-cities, states, regions, and whole nations-
actively to attract tourists, factories, company headquarters, and
new residents.
•PROPERTIES are intangible rights of ownership of either real
property (real estate) or financial property (stocks and bonds).
Properties are bought and sold, and this requires marketing.

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•ORGANIZATIONS Organizations actively work to build a strong,
favorable image in the minds of their target publics. Companies
spend money on corporate identity ads.
• INFORMATION Information can be produced and marketed as
a product. This is essentially what schools and universities
produce and distribute at a price to parents, students, and
communities. Encyclopedias and most nonfiction books
market informa­tion. Magazines such as Road and Track and
Byte supply information about the car and computer worlds,
respectively.
• IDEAS Every market offering includes a basic idea.

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The decisions marketers make
Following are four different types of markets: consumer,
business, global, and nonprofit.
CONSUMER MARKETS Companies selling mass consumer goods
and services This requires getting a clear sense of their target
customers and what need(s) their product will meet, and
communicating brand posi­tioning forcefully and creatively.
BUSINESS MARKETS Companies selling business goods and
services face well­trained and well-informed professional buyers
who are skilled in evaluating competi­tive offerings. Advertising
plays a role, but a stronger role is played by sales force, price,
and the company's reputation for reliability and quality.
GLOBAL MARKETS Companies selling goods and services in the
global marketplace face additional decisions and challenges.
They must decide which countries to enter; how to enter each
country (as an exporter, licenser, joint venture partner, contract
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The decisions marketers make
manufacturer, or solo manufacturer); how to adapt their product
and service features to each country; how to price their products
in different countries in a narrow enough band to avoid creating
a gray market for their goods; and how to adapt their
communications to fit the cultural practices of each country.
NONPROFIT AND GOVERNMENTAL MARKETS Companies selling
their goods to nonprofit organizations such as churches,
universities, charitable organizations, or gov­ernment agencies
need to price carefully because these organizations have limited
pur­chasing power. Lower prices affect the features and quality
that the seller can build into the offering. Much government
purchasing calls for bids, with the lowest bid being favored, in
the absence of extenuating factors.
 
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Marketing concepts and tools (core marketing concepts) 
TARGET MARKETS AND SEGMENTATION A marketer can rarely
satisfy everyone in a market. Therefore, marketers start by dividing
up the market. Market segments can be identified by examining
demographic, psychographic, and behavioral differences among
buyers. The marketer then decides which segments present the
greatest opportunity-which are its target markets. For each cho­sen
target market, the firm develops a market offering. The offering is
positioned in the minds of the target buyers as delivering some
central benefit(s).
Traditionally, a "market" was a physical place where buyers and
sellers gathered to buy and sell goods.
Economists now describe a market as a collection of buyers and
sellers who transact over a particular product or product class (the
housing market or grain market); but marketers view the sellers as
constituting the industry and the buyers as constituting the market.
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Marketing concepts and tools (core marketing concepts) 
MARKETPLACE, MARKETSPACE, AND METAMARKET Business
people often use the term market to cover various groupings of
customers. They talk about need markets (the diet-seeking market),
product markets (the shoe market), demographic markets (the
youth market), and geographic markets (the French market); or
they extend the concept to cover other markets, such as voter
markets, labor markets, and donor markets Modern economies
abound in markets. Five basic markets

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Distinguish between a marketplace and market space.
The marketplace is physical, as when one goes shopping in a store;
market space is digital, as when one goes shopping on the Internet.
Many observers believe that an increased amount of purchasing will
shift into marketspace.'
Metamarket is describe as a cluster of complementary products
and services that are closely related in the minds of consumers
but are spread across a diverse set of industries. The automobile
metamarket consists of automobile manufacturers, new car and
used car dealers, financing companies, insurance companies,
mechanics, spare parts dealers, service shops, auto magazines,
classified auto ads in newspapers, and auto sites on the Internet. In
purchasing a car, a buyer

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MARKETERS AND PROSPECTS A marketer is someone seeking a
response (attention, a purchase, a vote, a donation} from another
party, called the prospect. If two parties are seeking to sell
something to each other, we call them both marketers.

NEEDS, WANTS, AND DEMANDS Needs are the basic human

requirements. People need food, air, water, clothing, and shelter to
survive. People also have strong needs for recreation, education,
and entertainment. These needs become wants when they are
directed to specific objects that might satisfy the need.
Needs pre-exist marketers. Marketers, along with other societal
factors, influence wants. Marketers might promote the idea that a
Mercedes would satisfy a person's need for social status. They do
not, however, create the need for social status.
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PRODUCT, OFFERING, AND BRAND Companies address needs by
putting forth a value proposition, a set of benefits they offer to
customers to satisfy their needs. Which can be a combination of
products, services, information, and experiences.

A brand is an offering from a known source. A brand name such as

McDonald's car­ries many associations in the minds of people:
hamburgers, fun, children, fast food.

VALUE AND SATISFACTION The offering will be successful if it

delivers value and satisfaction to the target buyer. Value can be
seen as primarily a combination of quality, service, and price (QSP),
called the customer value triad. Value increases with quality and
service and decreases with price.
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 Value = Benefits =
Costs
Functional benefits + Emotional benefits___
Monetary costs+Time costs+Energy costs+Psychic costs
 
The marketer can increase the value of the customer offering in
several ways:
1. Raise benefits
2. Reduce costs
3. Raise benefits and reduce costs
4. Raise benefits by more than the raise in costs
5. Lower benefits by less than the reduction in costs

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 EXCHANGE AND TRANSACTIONS
Exchange is only one of four ways in which a person can obtain a
product.
Product can be obtain by
Self-producing, eg- hunts, fishes, or gathers fruit. Use force to
get a product, as in a holdup or burglary. Beg, one can offer a
product, a service, or money in exchange for something he or
she desires.

Exchange, which is the core concept of marketing, is the process

of obtaining a desired product from someone by offering
something in return.

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 EXCHANGE AND TRANSACTIONS
For exchange potential to exist, five conditions must be satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other
party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with
the other party. .
Exchange is a value-creating process because it normally leaves
both parties better off.
Two parties are engaged in exchange if they are negotiating-
trying to arrive at mutually agreeable terms. When an
agreement is reached, we say that a transaction takes place.
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 EXCHANGE AND TRANSACTIONS
But transactions do not always require money as one of the
traded values. A barter transaction involves trading goods or
services for other goods or services, as when lawyer.
A transaction involves several dimensions:
1. At least two things of value,
2. Agreed-upon conditions,
3. a time of agreement, and
4. a place of agreement.
A legal system supports and enforces compliance on the part of
the transactors.
RELATIONSHIPS AND NETWORKS Transaction marketing is part
of a larger idea called relationship marketing. Relationship
marketing has the aim of building mutually satisfying long-term
relations with key parties--customers, suppliers, distributors-in
order to earn and retain their business.
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 EXCHANGE AND TRANSACTIONS
Relationship marketing builds strong economic, technical, and
social ties among the parties. It cuts down on transaction costs
and time. In the most successful cases, transactions move from
being negotiated each time to being a matter of routine.

Marketing network - The ultimate outcome of relationship

marketing is the building of a unique company asset called a
marketing network. A marketing network consists of the
company and its supporting stakeholders (customers,
employees, suppliers, distributors, retail­ers, ad agencies,
university scientists, and others) with whom it has built mutually
profitable business relationships.

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 EXCHANGE AND TRANSACTIONS
MARKETING CHANNELS To reach a target market, the marketer uses
three kinds of marketing channels.
Communication channels deliver and receive messages from target
buyers, and include newspapers, magazines, radio, television, mail, telephone,
 Distribution channels to display, sell, or deliver the physical prod­uct
or service(s) to the buyer or user. They include distributors,
wholesalers, retailers, and agents.
Service channels to carry out transactions with potential buyers.
Service channels include warehouses, transportation companies,
banks, and insurance companies that facilitate transactions.
Marketers clearly face a design problem in choosing the best mix of
cdmmunication, distribution, and service channels for their offerings.
SUPPLY CHAIN Whereas marketing channels connect the marketer to
the target buyers, the supply chain describes a longer channel
stretching from raw materials to components to final products that
are carried to final buyers. 1 - 34
 COMPETITION
COMPETITION includes all the actual and potential rival
offerings and substitutes that a buyer might consider
There are four levels of competition.
1. Brand competetion
2. Industry competition. A company sees its competitors as all
companies making the same prod­uct or class of products
3. Form competition. A company sees its competitors as all
companies manufacturing products that supply the same
service.
4. Generic competition. A company sees its competitors as all
companies that compete for the same consumer dollars.
Volkswagen would see itself competing with companies that
sell major con­sumer durables, foreign vacations, and new
homes
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 MARKETING ENVIRONMENT
MARKETING ENVIRONMENT Competition represents only one
force in the environment in which the marketer operates.
The marketing environment consists of the
Task environment and
Broad environment
The task environment includes the immediate actors involved in
producing, distributing, and promoting the offering. The main
actors are the company, suppliers, distributors, dealers, and the
target customers. Included in the supplier group are material
suppliers and service suppliers such as marketing research
agencies, advertising agencies, banking and insurance
companies, transportation, and telecommunications companies.
Included with distributors and dealers are agents, brokers,
manufacturer repre­sentatives, and others who facilitate finding
and selling to customers. 1 - 36
 MARKETING ENVIRONMENT
The broad environment consists of six
components:
• demographic environment,
• economic environment,
• natural environment,
• technological environment,
• political-legal environment, and
• social-cultural environment.
•  

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 MARKETING PROGRAM
MARKETING PROGRAM The marketer's task is to build a
marketing program or plan to achieve the company's desired
objectives. The marketing program consists of numerous
decisions on the mix of marketing tools to use. The marketing
mix is the set of marketing tools the firm uses to pursue its
marketing objectives in the target market.
•  
• McCarthy classified these tools into four broad groups that
he called the four Ps of mar­keting:
• product,
• price,
• place, and
• promotion

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 Marketing Concepts
• The production concept
• The product concept
• The selling concept
• The marketing concept
• The societal marketing concept
• We have defined marketing management as the conscious
effort to achieve desired exchange outcomes with target
markets, but what philosophy should guide a company's
marketing efforts? What relative weights should be given to
the interests of the organization, the customers, and
society? Very often these interests conflict.

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 Marketing Concepts
The production concept
The production concept is one of the oldest concepts in
business. The production concept holds that consumers will
prefer products that are widely available and inexpensive.
Managers of production-oriented businesses concentrate on
achieving
• High production efficiency,
• Low costs, and
• Mass-distribution.
• They assume that consumers are primarily interested in
product availability and low prices. This orientation makes
sense in developing countries, where consumers are more
interested in obtaining the product than in its features.
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 Marketing Concepts
The product concept
Other businesses are guided by the product concept, which holds
that consumers will favor those products that offer the
• Most quality,
• Performance, or
• Innovative features.
Managers in these organizations focus on making superior products
and improving them over time. They assume that buyers admire
well-made products and can evaluate quality and performance.
However, these managers are sometimes caught up in a love affair
with their products.
Product-oriented companies often trust that their engineers can
design exceptional products. They get little or no customer input,
and very often they will not even examine competitors' products
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 Marketing Concepts
The product concept
The product concept can lead to "marketing myopia." Railroad
management thought that travelers wanted trains and overlooked
the growing competition for transportation from airlines, buses,
trucks, and automobiles. Coca-Cola, focused on its soft-drink
business, missed seeing the market for coffee bars and fresh­fruit
juice bars that eventually impinged on its soft-drink business.
McDonald's is in danger of overfocusing on its hamburger business
while many diners are turning to sandwiches, pizza, tacos, and other
fast foods.

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 Marketing
The selling concept
Concepts
The selling concept is another common business orientation. The
selling concept holds that consumers and businesses, if left alone,
will ordinarily not buy enough of the organization's products. The
organization must, therefore, undertake an aggres­sive selling and
promotion effort. This concept assumes that consumers typically
show buying inertia or resistance. The company has to effectively
sell and promotion.The selling concept is practiced most
aggressively with unsought goods, goods that buyers normally do
not think of buying, such as insurance, encyclopedias, and funeral
plots. These industries have perfected various sales techniques to
locate propspects and hard sell them on their products' benefits.
Most firms practice the selling concept when they have
overcapacity. Their aim is to sell what they make rather than make
what the market wants. However, marketing based on hard selling
carries high risks 1 - 43
 Marketing Concepts
The marketing concept
Instead of a product-centered, "make-and-sell" philosophy, we shift
to a customer ­centered, "sense-and-respond " philosophy. The
job is not to find the right customers for your product, but the
right products for your customers.
The marketing concept holds that the key to achieving its
organizational goals consists of the company being more effective
than competitors in creating, delivering, and communicating
superior customer value to its chosen target markets.  
The selling concept takes an inside-out perspective. It starts with the
factory, focuses on existing products, and calls for heavy selling
and promoting to produce profitable sales.

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 Marketing Concepts
The marketing concept
The marketing concept rests on four pillars:
• Target market,
• Customer needs,
• Integrated marketing, and
• Profitability.
 
Target market,
• Companies do best when they choose their target market(s)
carefully and prepare tailored marketing programs.

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 Marketing Concepts
Customer needs company can define its target market but fail to
correctly understand the customers' needs. Consider the following
example:
Understanding customer needs and wants is not always simple.
Some customers have needs of which they are not fully conscious,
or they cannot articulate these needs, or they use words that
require some interpretation. What does it mean when the
customer asks for an "inexpensive" car, a "powerful" lawnmover, a
"fast" lathe, an "attractive" bathing suit, or a "restful" hotel?
Consider the customer who says he wants an inexpensive car. The
marketer must
probe further.

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 Marketing Concepts
We can distinguish among five types of needs:
Stated needs (the customer wants an inexpensive car)
Real needs (the customer wants a car whose operating cost, not its
initial price, is low)
Unstated needs (the customer expects good service from the
dealer)
Delight needs (the customer would like the dealer to include an
onboard navigation system)
Secret needs (the customer wants to be seen by friends as a savvy
consumer)
Even the idea of meeting or responding to people's needs is too
limited a view of a company's role in the marketplace.

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 Marketing Concepts
Many consumers do not know what they want in a product.
Consumers did not know much about cellular phones when they
were first introduced. Nokia and Ericsson fought to shape consumer
perceptions of cellular phones. Companies must help customers
learn what they want.
Responding only to the stated need may shortchange the
customer. Consider a woman who enters a hardware store and asks
for a sealant to seal glass window panes. This customer is stating a
solution, not a need. The salesperson might suggest that tape would
provide a better solution. The customer may appreciate that the
salesperson met her need, not her stated solution.

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 Marketing Concepts
A distinction needs to be drawn between
Responsive marketing,
Anticipative marketing, and
Creative marketing.
• Responsive marketing marketer finds a stated need and fills it.
• Anticipative marketing marketer looks ahead into what needs
customers may have in the near future.
• Creative marketing marketer discovers and produces solutions
customers did not ask for but to which they enthusiastically
respond.
•  

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 Marketing Concepts
• Why is it supremely important to satisfy target customers?
Because a company's sales each period come from two groups:
• New customers and
• Repeat customers.
• One estimate is that attracting a new customer can cost five times
as much as pleasing an existing one." Also, it might cost 16 times
as much to bring the new customer to the same level of
profitability as the lost customer. Customer retention is thus more
impor­tant than customer attraction.
Integrated marketing When all the company's departments work
together to serve the customer's interests, the result is integrated
marketing. Unfortunately, not all employees are trained and
motivated to work for the customer.

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 Marketing Concepts
• The marketing vice president of a major European airline wants to
increase the airline's traffic share. His strategy is to build up
customer satisfaction through providing better food, cleaner
cabins, better-trained cabin crews, and lower fares; yet he has no
authority in these matters. The catering department chooses food
that keeps down food costs; the maintenance department uses
cleaning services that keep down cleaning costs;
• Integrated marketing takes place on two levels.
• First, the various marketing functions-sales force, advertising,
customer service, product management, marketing research-
must work together.
• Second, marketing must be embraced by the other
departments; they must also "think customer." "Marketing is far
too important to be left only to the marketing department!"
Marketing is not a depart­ment so much as a company orientation. 1 - 51
 Marketing Concepts
To foster teamwork among all departments, the company carries out
internal mar­keting as well as external marketing.
• External marketing is marketing directed at people outside the
company.
• Internal marketing is the task of hiring, training, and motivating
able employees who want to serve customers well. In fact,
internal marketing must precede external marketing. It makes no
sense to promise excellent service before the company's staff is
ready to provide it.]
• Master marketing companies invert the chart, At the top are the
customers; next in importance are the front-line people who
meet, serve, and satisfy the customers; under them are the
middle managers, whose job is to support the front-line people so
they can serve the customers well; and at the base is top
management, whose job is to hire and support good middle1 man.- 52
 Marketing Concepts
Profitability The ultimate purpose of the marketing concept is to
help organization achieve their objectives. In the case of private
firms, the major objective is long-run profitability; in the case of
nonprofit and public organizations, it is surviving and attracting
enough funds to perform useful work. Private firms should not
aim for profits as such, but rather to achieve profits as a
consequence of creating superior customer value. A company
makes money by satisfying customer needs better than its
competitors.
•  

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 Marketing Concepts
Several scholars have found that companies who embrace the
marketing concept achieve superior performance. However, most
companies do not embrace the marketing concept until driven to it
by circumstances. Various developments problem forces them to
take the marketing concept to heart:
• Sales decline:.
• Slow growth:
• Changing buying patterns:
• Increasing competition:
• Increasing marketing expenditures: Companies may find that
their expenditures for adver­tising, sales promotion, marketing
research, and customer service are yielding poor results.
Management then decides it is time to undertake a serious
marketing audit to improve its marketing.
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 Marketing Concepts
 In the course of converting to a marketing orientation, a company
faces three hurdles:
• Organized resistance,
• Slow learning, and
• Fast forgetting.
Some company departments (often manufacturing, finance, and
R&D) believe a stronger marketing function threatens their power in
the organization.
•  Initially, the marketing function is seen as one of several equally
important functions in a check-and-balance relationship. A few
enthusiasts go further and say marketing is the major function of
the enterprise, for without customers there would be no
company. Customer rather than marketing at the center of the
company. They argue for a customer orientation in which all
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 The societal marketing concept
Some have questioned whether the marketing concept is an
appropriate philosophy in an age of environmental deterioration,
resource shortages, explosive population growth, world hunger
and poverty, and neglected social services. Are companies that do
an excellent job of satisfying consumer wants necessarily acting in
the best long-run interests of consumers and society? The marketing
concept sidesteps the potential conflicts among consumer wants,
consumer interests, and long-run societal welfare.
The societal marketing concept holds that the organization's task is
to determine the needs, wants, and interests of target markets and
to deliver the desired satisfactions more effectively and efficiently
than competitors in a way that preserves or enhances the
consumer's and the society's well-being.

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 The societal marketing
• The societal marketing concept calls upon marketers to build
social and ethical considerations into their marketing practices.
• Companies see cause-related marketing as an opportunity to
enhance their corporate reputation, raise brand awareness,
increase customer loyalty, build sales, and increase press
coverage. They believe that customers will increasingly look for
signs of good corporate citizenship that go beyond supplying
rational and emotional benefits.
• The societal marketing concept calls upon marketers to build
social and ethical considerations into their marketing practices
• Companies see cause-related marketing as an opportunity to
enhance their corporate reputation, raise brand awareness,
increase customer loyalty, build sales, and increase press
coverage. They believe that customers will increasingly look for
signs of good corporate citizenship that go beyond supplying1 - 57
rational and emotional benefits.
How business and marketing are changing
• These major forces have created new behaviors and
challenges:
• Customers increasingly expect higher quality and service and
some customization. They perceive fewer real product
differences and show less brand loyalty. They can obtain exten­
sive product information from the Internet and other sources,
which permits them to shop more intelligently. They are
showing greater price sensitivity in their search for value.
• Brand manufacturers are facing intense competition from
domestic and foreign brands, which is resulting in rising
promotion costs and shrinking profit margins. They are being
further buffeted by powerful retailers who command limited
shelf space and are putting out their own store brands in
competition with national brands.

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How business and marketing are changing
• Store-based retailers are suffering. Small retailers are
succumbing to the growing power of giant retailers and
"category killers." Store-based retailers are facing growing
competition from catalog houses; direct-mail firms;
newspaper, magazine, and TV direct-to ­customer ads; home
shopping TV; and e-commerce on the Intemet. As a result,
they are experiencing shrinking margins. In response,
entrepreneurial retailers are building enter­tainment into
stores with coffee bars, lectures, demonstrations, and
performances. They are marketing an "experience" rather
than a product assortment.
• Company, responses and adjustments
• Companies are doing a lot of soul-searching, and many highly
respected companies are changing in a number of ways. Here
are some current trends:
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How business and marketing are changing
• Company, responses and adjustments (cont.)
• Benchmarking: From relying on self-improvement to studying
"world-class performers" and adopting "best practices."
• Alliances: From trying to win alone to forming networks of
partner firms.
• Partner-suppliers: From using many suppliers to using fewer
but more reliable suppliers who work closely in a
"partnership" relationship with the company.
• Market-centered: From organizing by products to organizing
by market segment.
• Global and local: From being local to being both global and
local, called "glocal."
• Decentralized: From being managed from the top to
encouraging more initiative from bottom level.
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How business and marketing are changing
Company, responses and adjustments (cont.)
Marketers also are rethinking their philosophies, concepts, and
tools. Here are the major marketing themes in the new
economy:
• Customer relationship marketing: From focusing on
transactions to building long-term, profitable customer
relationships. Companies focus on their most profitable
customers, products, and channels.
• Customer lifetime value: From making a profit on each sale to
making profits by managing life­time sales.
• Customer share: From a focus on gaining market share to a
focus on building customer share. A bank aims to increase its
share of the customer's wallet;

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How business and marketing are changing
Company, responses and adjustments (cont.)
• Target marketing: From selling to everyone to trying to be the
best firm serving well­defined target markets. Eg- special-
interest magazines, TV channels, and Internet newsgroups.
• Customization: From selling the same offer in the same way
to everyone in the target mar­ket to individualizing and
customizing messages and offerings.
• Customer database: From collecting sales data to building a
rich data warehouse of infor­mation about individual
customers' purchases, preferences, and demographics, and
profitability. Companies can then apply data mining
techniques to discover new seg­ments and trends hidden in
the data.

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How business and marketing are changing
Company, responses and adjustments (cont.)
• Integrated marketing communications: From heavy reliance
on one communication tool such as advertising or sales force
to blending several tools to deliver a consistent brand image
to customers at every brand contact.
• Channels as partners: From thinking of intermediaries as
customers to treating them as partners in delivering value to
final customers. Every employee a marketer: From thinking
that marketing is done only by marketing, sales, and customer
support personnel to recognizing that every employee must
be customer-focused.
• Model-based decision making: From basing decisions on
intuition to basing decisions on models and facts on how the
marketplace works.
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How business and marketing are changing
• Company, responses and adjustments (cont.)
• Here are some current trends:
• Reengineering: From focusing on functional departments to
reorganizing by key processes, each managed by a
multidiscipline team.
• Outsourcing: From making everything inside the company to
buying more goods and services from outside if they are
cheaper and better.
• E-commerce: From attracting customers to stores and having
salespeople call on offices to making virtually all products
available on the Internet. Consumers can access pictures of
products, read the specs, shop among on-line vendors for the
best prices and terms, and click to order and pay. Business-to-
business purchasing is growing fast on the Internet.
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 Marketing Management

• Marketing management is “the art

and science of choosing target
markets and building profitable
relationships with them.”
– Creating, delivering and
communicating superior customer
value is key.

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 Marketing Management

• Customer Management:
– Marketers select customers that can
be served well and profitably.
• Demand Management:
– Marketers must deal with different
demand states ranging from no
demand to too much demand.
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 Marketing Management
Marketing Management

Management Orientations
• Production • Selling concept
concept • Marketing
• Product concept concept
• Societal marketing concept

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 CRM

• CRM – Customer relationship

management . . .
“is the overall process of building
and maintaining profitable customer
relationships by delivering superior
customer
value and satisfaction.”
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 CRM

• It costs 5 to 10 times MORE to attract a

new customer than it does to keep a
current customer satisfied.
• Marketers must be concerned with the
lifetime value of the customer.

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 CRM
• Customer value/satisfaction
Key Concepts – Perceptions are key
– Meeting/exceeding
expectations creates
• Attracting, satisfaction
• Loyalty and retention
retaining and – Benefits of loyalty
– Loyalty increases as
growing customers satisfaction levels increase
• Building customer – Delighting consumers should
be the goal
relationships and • Growing share of customer
– Cross-selling
customer equity
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 CRM

• Customer equity
Key Concepts – The total combined
customer lifetime
• Attracting, values of all
retaining and customers.
growing customers – Measures a firm’s
performance, but in a
• Building customer
manner that looks to
relationships and the future.
customer equity
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 CRM
• Customer relationship
Key Concepts levels and tools
– Target market typically
• Attracting, dictates type of
relationship
retaining and • Basic relationships
• Full relationships
growing customers – Customer loyalty and
• Building customer retention programs
• Adding financial benefits
relationships and • Adding social benefits
customer equity • Adding structural ties

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 Marketing Challenges

• Technological advances, rapid

globalization, and continuing social
and economic shifts are causing
marketplace changes.
• Major marketing developments can
be grouped under the theme of
Connecting.
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 Marketing Challenges

Connecting • Advances in computers,

telecommunications, video-
conferencing, etc. are major
• Via technology forces.
– Databases allow for
• With customers customization of products,
messages and analysis of
needs.
• With marketing • The Internet
partners – Facilitates anytime,
anywhere connections
• With the world – Facilitates CRM
– Creates marketspaces
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 Marketing Challenges

Connecting • Selective relationship

management is key.
– Customer profitability
• Via technology analysis separates
winners from losers.
• With customers • Growing “share of
• With marketing customer”
– Cross-selling and up-
partners selling are helpful.
• Direct sales to buyers
• With the world are growing.
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 Marketing Challenges

Connecting • Partner relationship

management involves:
• Via technology – Connecting inside the
company
• With customers – Connecting with
• With marketing outside partners
• Supply chain
partners management
• With the world • Strategic alliances

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 Marketing Challenges

• Globalization
Connecting – Competition
– New opportunities
• Via technology • Greater concern for
environmental and social
• With customers responsibility
• Increased marketing by
• With marketing nonprofit and public-
partners sector entities
– Social marketing
• With the world campaigns

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