Chapter 1 An Overview of Contemporary Marketing

1. Chapter 1An Overview ofContemporary Marketing Jason C. H. Chen, Ph.D. Professor School of Business Administration Gonzaga University Spokane, WA 99223 chen@jepson.gonzaga.edu

2. OPENING VIGNETTE WWW.AMAZON.COM • What is the basis for Amazon.com’s initial success? • What are some of the marketing services used by Amazon.com to build their customer base?

3. Service Master

4. MARKETING WANTS Customer Satisfaction NEEDS

5. Customer Satisfaction • Customer satisfaction is the extent to which a firm fulfills a consumer’s needs, desires, and expectations • As some needs are met, others may become more important • Expectations may change based on experiences • Satisfying experiences may lead to increasing expectations • Disappointing experiences may reduce expectations • Expectations may be realistic or unrealistic

6. Types of Utility and How They Are Provided Provided by marketing Provided by production with guidance of marketing Time Form Utility: Value that comes From satisfying Human needs Place Possession Task

7. Toyota

8. Marketing and Beyond Marketing is the business function that deals with customers’ unfulfilled needs and wants. The role of marketing in organizations is to identify and measure customer needs and wants, determine which target markets the organization can serve, decide on the appropriate products and services to serve these markets, and determine the optimal methods of pricing, promoting, and distributing the products or services. Successful organizations are those that integrate the objectives and resources of the organization with the needs and opportunities in the marketplace.

9. Marketing and Beyond In today’s competitive environment, market-oriented thinking is a necessity. A successful implementation of the marketing concept requires knowledge of the internal (company) and external (competitors and customers) environments, and how they are influenced by marketing mix variables -- product, price, distribution, and promotion.

10. What is Marketing? “The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organization goals.” American Marketing Association

11. Marketing “Human activities of satisfying needs and wants through the exchange processes.” Another Definition

12. What is Marketing • MICRO-MARKETING: • the performance of activities that seek to accomplish an organization's objectives by anticipating customer or client needs and directing a flow of need-satisfying goods and services from producers to customer or client • MACRO-MARKETING: • a social process that directs an economy's flow of goods and services from producers to consumers in a way that effectively matches supply and demand and accomplishes the objectives of society • AMA COMMITTEE DEFINITION: • marketing is the process of planning and executing conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives

13. Ranges of Applications of Marketing Service Physical Good PRODUCT

14. The Importance of Marketing Marketing is Valuable to a Variety of Organizations: • Corporate For-Profit • Nonprofit • The Military • Religious & Ethnic Groups • Small Firms • Individual Marketers

15. Marketing as an Organizational Philosophy Can be Stated Formally as a Mission Statement Can be Established Informally through The Communications and Actions of Top Management Indicates the Types of Activities the Organization Values

16. Three Marketing Philosophies • Production Philosophy • Selling Philosophy • Marketing Philosophy

17. Three Marketing Philosophies • Production Philosophy A business philosophy that emphasizes the production function. An organization following such a philosophy values activities related to improving production efficiency or producing sophisticated products and services. The guiding belief is “the best-produced products can be easily marketed.”

18. Three Marketing Philosophies • Selling Philosophy A business philosophy that emphasizes the selling function. Organizations following such a philosophy focus on the selling process to address changes in market conditions. The guiding belief is “any product can be old, if enough selling effort is given to it.”

19. Three Marketing Philosophies • Marketing Philosophy A business philosophy that emphasizes satisfying the needs of the customer. Organizations following such a philosophy have organizational wide commitment to satisfying the needs of the customer. The guiding belief is “long term success depends on satisfying the needs of the customer.”

20. The Marketing Concept • The purpose of an organization aims all its efforts at satisfying its customers – at a profit. • Satisfying needs requires integrated and coordinated efforts through out the organization. • Organizations should focus on long-term success.

21. Organizations with a Marketing Orientation Carry Out the Marketing Concept Customer satisfaction Total company effort The marketing concept Profit (or another measure of long-term success) as an objective

22. Building Customer Equity Customer Equity is the Financial Value of a Firm’s Customer Relationships and Consists Of: • Profits from first-time customers, and, • Expected profits from all future sales.

23. Three Ways to Increase Customer Equity • Decrease the cost of acquiring new customers. • Retain more customers longer. • Increase profits from retained customers by selling them more at higher margins and with lower marketing expenses. IT ROLE?

24. Building Customer Equity Integrates: Short-term Orientations New Customers Long-term Orientations Existing Customers

25. Exhibit 1-1: Customer equity relationships (process) Organizational strategy & execution Providing exceptional customer value Achieving completely satisfied customers Earning high customer loyalty Increasing sales growth & profits Building customer equity

26. 3 Keys to Building Customer Equity • High loyalty levels lead to increased sales growth, higher profitability & higher customer equity. • Completely delighted & satisfied customers are best for earning customer loyalty. • Exceptional value is needed to delight & completely satisfy customers. Customer equity relationships (Exhibit 1-1)

27. Customer Value The Calculation: The revenue stream from repeat purchases + The revenue stream from referrals = The Lifetime Value of a Loyal Customer What is customer value?

28. Marketing as a Societal Process • Defined as “a process that facilitates the flow of goods and services from producers to consumers in a society.” Consumers of Goods & Services Producers of Goods & Services

29. Marketing as a Societal Process • Issues to Consider: • What institutions are involved in the system? • What activities do these institutions perform? • How effective is the system at satisfying customer needs? • How efficiently can the system provides desired goods and services?

30. Marketing as a Societal Process Consumer choices are the invisible hand that guides the economy Government planners decide what consumers should get • A society’s marketing system is closely related to its political and economic systems. Marketing-Directed Economic Systems Planned Economic Systems

31. Marketing Concerns in Eastern Europe How to: • Become more market-oriented and consumer- responsive? • Improve product quality? • Change product design, assortment, finishing & packaging? • How to increase communications efforts? • Increase merchandising efforts? • Use competitive pricing? • Institute promotional pricing & price discounts

32. Marketing is a Process Consisting Of: 1.Marketing Exchanges 2.Marketing Strategies 3.Marketing Activities 4.Marketing Positions 5.Marketing Institutions

33. EXCHANGE is the “transfer of something tangible or intangible, actual or symbolic between 2 or more social actors.” Transactions in marketing exchanges can use: Money Barter Time & Money Votes Marketing Exchanges Buyer’s Exchange Marketer’s Goods Or Services

34. Central Markets Help Exchange B. Only five exchanges are required when a middleman (intermediary) in a central market is used A. Ten exchanges are required when a central market is not used Pots Pots Hats Baskets Central Market middleman Hats Baskets Hoes Knives Hoes Knives

35. Marketing Strategies/Decisions Select a Target Market Develop a Marketing Mix To Satisfy Market Needs

36. A Marketing Strategy C

37. A Marketing Strategy – showing the 4 P’s of a Marketing Mix Product Place Price Promotion C

38. Exhibit 1-5: Marketing Mix Decisions ( p.11) Product Decisions Marketing Mix Integrated Marketing Communications Decisions Price Decisions Distribution Decisions

39. Exhibit 1-6: Marketing strategies Maybelline Mary Kay Clinique Target market Product Price Distribution Marketing communication Low End Cosmetics Low Mass Merchandise Advertising through mass media Middle Cosmetics Moderate Direct to consumers Personal selling to consumers in home High End Cosmetics High Upscale department stores Targeted advertising and personal selling to consumers in stores

40. Marketing Activities Producers End Users Universal Functions of Marketing Buying Selling Transporting Storing Financing Risk Taking Standardizing & Grading Obtaining Marketing Information

41. Marketing Positions • Marketing Manager • Product Manager • Advertising Manager • Distribution Manager • Purchasing Manager • Marketing Research Manager • Public Relations Manager • Customer Service Manager • Sales Manager (Exhibit 1-8, p.14)

42. Information Information Money (income) Information Model of a Market-Directed Economy CONSUMERS Goods and Services PRODUCT- MARKET Information Information Money (expenditures) GOVERNMENT Money (income) Production resources Information Information Information RESOURCE MARKET Money (expenditures) PRODUCERS Information Primary direction Secondary direction of feedback

43. Model of a Market-Directed Macro-Marketing System Many Individual Producers (heterogeneous supply) Middlemen intermediaries Facilitators Perform universal marketing functions To overcome discrepancies and separation of production and consumers Monitoring by government(s) and public interest groups Monitoring by government(s) and public interest group To create utility and direct flow of need-satisfying goods and services Many Individual Consumers (heterogeneous demand)

44. A Contemporary Marketing Framework Marketing Environment Entrepreneurship Marketing Global Ethics Productivity Customer Value Relationship Technology Marketing Environment

45. Exhibit 1-10: Key marketing perspectives Marketing perspective Definition Viewing the world as the potential marketplace to include identifying and responding both to market opportunities around the world and to different cultural groups within each market. GLOBAL Building partnerships with firms outside the organization and encouraging teamwork among different functions within the organization in order to develop long-term customer relationships. RELATIONSHIP Addressing the morality of marketing decisions and practicing social responsibility to include ecological considerations. ETHICS Constantly looking for ways to give customers more for less. Trying to get the best return for each marketing dollar spent. Translating new and emerging technologies into successful products and services, and using technology to improve marketing practice. CUSTOMER VALUE PRODUCTIVITY TECHNOLOGY Focusing on information, on risk taking, and on being proactive in marketing efforts. ENTREPRENEURSHIP

46. E-Commerce • E-commerce refers to exchanges between individuals or organizations—and activities that facilitate those exchanges—based on applications of information technology. • Innovations in e-commerce are making many firms and markets more effective (work better) and/or more efficient (less costly) • Examples: • Websites the facilitate promotion, buying and selling • Shared databases that allow buyers and sellers do a better job in planning inventory requirements • Online Auction sites to match supply and demand © 2002 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin—for use only with Basic Marketing

47. Focus on e-Business Applications Knowledge Management/Business Intelligence E-Commerce E-Customer Relationship Procurement Network Trading Network E-Channel Management Businesses & Consumers Businesses M:1 M:N 1:N E-Portal Management E-Services SCM/ERP/Legacy Appls