Chapter 1 1. MARKETING AND ITS CORE CONCEPTS: Needs, Wants, Demands, exchange, relationship and network, Competition 2. 3. 4. 5. 6.

Marketing Tasks, Marketing Concepts and Tools, Different philosophies of marketing management / Company Orientations Toward the Marketplace. 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 demands 2. Marketing offers: including products, services and experiences 3. Value and satisfaction 4. Exchange, transactions and relationships 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 offersome 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 con-sistently 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 revolutionary 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 organization must maintain or improve its quality and continually measure consumer satisfaction.

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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, Xrated 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.

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What is Marketing? Many Things Can Be Marketed!

Marketing people are involved in marketing 10 types of entities:
Goods Services Experiences Events Persons Places Properties Organizations Information 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, engi-neers, 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 informa-tion. 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 posi-tioning forcefully and creatively. BUSINESS MARKETS Companies selling business goods and services face welltrained and well-informed professional buyers who are skilled in evaluating competi-tive 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 gov-ernment agencies need to price carefully because these organizations have limited pur-chasing 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 cho-sen 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 dietseeking 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

Diagram

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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 car-ries 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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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.

EXCHANGE AND TRANSACTIONS

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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, retail-ers, ad agencies, university scientists, and others) with whom it has built mutually profitable business relationships.

EXCHANGE AND TRANSACTIONS

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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 prod-uct 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.

EXCHANGE AND TRANSACTIONS

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 Industry competition. A company sees its competitors as all companies making the same prod-uct or class of products Form competition. A company sees its competitors as all companies manufacturing products that supply the same service. 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 con-sumer durables, foreign vacations, and new homes MARKETING ENVIRONMENT Competition represents only one force in the environ-ment 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, dis-tributing, and promoting the offering. The main actors are the company, suppliers, dis-tributors, dealers, and the target customers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agen-cies, banking and insurance companies, transportation, and telecommunications com-panies. Included with distributors and dealers are agents, brokers, manufacturer repre-sentatives, and others who facilitate finding and selling to customers. The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment, and social-cultural environment. 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 numer-ous decisions on the mix of marketing tools to use. The marketing mix is the set of mar-keting 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 mar-keting: product, price, place, and promotion Diagram 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 com-pany's marketing efforts? What relative weights should be given to the interests of the organization, the customers, and society? Very often these interests conflict. The production concept The production concept is one of the oldest concepts in business. The production con-cept holds that consumers will prefer products that are widely available and inexpen-sive. Managers of production-oriented businesses concentrate on achieving High pro-duction 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. . The product concept Other businesses are guided by the product concept, which holds that consumers will favor those products that offer the Most quality, Prformance, 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 excep-tional products. They get little or no customer input, and very often they will not even examine competitors' products. 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 fresh-fruit 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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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 prod-uct 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 con-sumer 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 repre-sentatives, and others who facilitate finding and selling to customers.
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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 mar-keting: product, price, place, and promotion
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Marketing Management Marketing Management

Management Orientations
Production concept Product concept Selling concept Marketing concept

Societal marketing concept

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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 1 - 41

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 fresh-fruit 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 Concepts The selling concept

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 aggres-sive 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 prospects 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 1 - 43 carries high risks

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 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 impor-tant 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 researchmust 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 depart-ment so much as a company 1 - 51 orientation.

Marketing Concepts
To foster teamwork among all departments, the company carries out internal mar-keting 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 adver-tising, 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 1 functions work together to respond to, serve, and satisfy the- 55 customer.

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 supplying- 57 1 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 enter-tainment into stores with coffee bars, lectures, demonstrations, and performances. They are marketing an "experience" rather than a product assortment.

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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: 1. Benchmarking: 10. Target marketing: 2. Alliances: 11. Customization: 3. Partner-suppliers: 12. Customer database: 13. Integrated marketing 4. Market-centered: communications: 5. Global and local: 14. Channels as partners: 6. Decentralized: 15. Model-based decision 7. Customer relationship marketing: making: 8. Customer lifetime value 16. Reengineering: 17. Outsourcing: 9. Customer share: 18. E-commerce
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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 life-time 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 well- defined target markets. Eg- specialinterest magazines, TV channels, and Internet newsgroups. Customization: From selling the same offer in the same way to everyone in the target mar-ket to individualizing and customizing messages and offerings. Customer database: From collecting sales data to building a rich data warehouse of infor-mation about individual customers' purchases, preferences, and demographics, and profitability. Companies can then apply data mining techniques to discover new seg-ments 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-tobusiness 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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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
Key Concepts
Attracting, retaining and growing customers Building customer relationships and customer equity
Customer value/satisfaction Perceptions are key Meeting/exceeding expectations creates satisfaction Loyalty and retention Benefits of loyalty Loyalty increases as satisfaction levels increase Delighting consumers should be the goal Growing share of customer Cross-selling

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CRM
Key Concepts
Attracting, retaining and growing customers Building customer relationships and customer equity
Customer equity
The total combined customer lifetime values of all customers. Measures a firm s performance, but in a manner that looks to the future.

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CRM
Key Concepts
Attracting, retaining and growing customers Building customer relationships and customer equity
Customer relationship levels and tools
Target market typically dictates type of relationship
Basic relationships Full relationships

Customer loyalty and retention programs

Adding financial benefits Adding social benefits 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
Via technology With customers With marketing partners With the world
Advances in computers, telecommunications, video-conferencing, etc. are major forces.
Databases allow for customization of products, messages and analysis of needs.

The Internet
Facilitates anytime, anywhere connections Facilitates CRM Creates marketspaces
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Marketing Challenges
Connecting
Via technology With customers With marketing partners With the world
Selective relationship management is key.
Customer profitability analysis separates winners from losers.

Growing share of customer

Cross-selling and upselling are helpful.

Direct sales to buyers are growing.

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Marketing Challenges
Connecting
Via technology With customers With marketing partners With the world
Partner relationship management involves:
Connecting inside the company Connecting with outside partners
Supply chain management Strategic alliances
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Marketing Challenges
Connecting
Via technology With customers With marketing partners With the world
Globalization
Competition New opportunities

Greater concern for environmental and social responsibility Increased marketing by nonprofit and publicsector entities
Social marketing campaigns
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