Unit 1: Introduction to Marketing
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, experiences, organizations, people, places, causes, and events to create and maintain relationships that satisfy individual and organizational objectives.
In order to understand basic marketing concepts you should become familiar with the following terms:
Consumer – The ultimate user of a good or service.
Consumer Orientation – A management philosophy that focuses on ways to satisfy customers’ needs and wants.
Marketing Concept – A company-wide consumer orientation that focuses on identifying and satisfying the needs and wants of target markets more effectively and efficiently than competitors do in order to achieve organizational goals and ensure the organization’s long-term profitability.
Need – Recognition of any difference between a consumer’s actual state and some ideal or desired state.
Want – The desire to satisfy needs in specific ways that are shaped by culture, social influences, and individual personality.
Benefit – The outcome sought by a customer that motivates buying behavior—that satisfies a need or want.
Demand – Customers’ wants for products coupled with the resources to obtain them.
Market – All of the customers and potential customers who share a common need that can be satisfied by a specific product, who (1) have the resources to exchange for it, (2) who are willing to make the exchange, and (3) who have the authority to make the exchange.
Marketplace – Any location or medium used to conduct an exchange.
Buyer’s Market – Market in which there are more goods and services than people willing to buy them.
Seller’s Market – Market in which there are more buyers for fewer goods and services.
Exchange – The process by which some transfer of value occurs between a buyer and a seller in order to satisfy perceived needs.
Value – The amount of money, goods, or services that is considered to be a fair equivalent for something else.
Value Proposition – A marketplace offering that fairly and accurately sums up the value that will be realized if the product is purchased.
Oversold Product – The value proposition is exaggerated, and the buyer doesn’t receive the level of satisfaction he or she was expecting.
Undersold Product – The value proposition is not properly communicated, and the product doesn’t get the assigned worth it deserves.
Customer Satisfaction – The extent to which a product’s perceived performance matches a buyer’s expectations.
Product – Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a need or want. (See definition of marketing.)
Consumer Products – Products purchased by individual consumers for personal or family use.
Services – Intangible products that are exchanged directly from the producer to the customer and that do not result in the ownership of anything.
Business-to-Business Marketing (B2B) – Marketing of those goods and services that business and organizational customers need to produce other goods and services, for resale, or to support their operations.
Industrial Products (Business Products) – Products bought by individuals or organizations for further processing or for use in doing business.
E-Commerce – The buying and selling of goods and services electronically, usually over the Internet.
Not-For-Profit Organizations – Organizations with charitable, educational, community and other public service goals that buy goods and services to support their functions and to attract and serve their members.
Nontraditional Marketing – The application of marketing beyond its traditional boundaries: person marketing, place marketing, cause marketing, event marketing, and organization marketing.
Person Marketing – Marketing efforts designed to cultivate the attention and preference of a target market toward a person.
Place Marketing – Marketing efforts designed to attract visitors to a particular area; improve consumer images of a city, state, or nation; and/or attract new business.
Cause Marketing – Identification and marketing of a social issue, cause, or idea to selected target markets.
Event Marketing – Marketing of sporting, cultural, and charitable activities to selected target markets.
Organization Marketing – Marketing efforts of mutual-benefit organizations, service organizations, and government organizations that seek to influence others to accept their goals, receive their services, or contribute to them in some way.
Concepts of Marketing:
The production orientation is a management philosophy that emphasizes the most efficient ways to produce and distribute products. The idea is that consumers will favor products that are available and highly affordable. This philosophy works best in a seller’s market. This orientation is also applicable today when a product’s cost is too high and improved productivity is needed to bring it down.
The Product Orientation
The product orientation is the idea that consumers will favor products that offer the most quality, performance and features and that the organization should therefore devote its energy to making continuous product improvements. This concept can be summed up by “If you can build a better mousetrap, the world will beat a pathway to your door.” While product quality is important, the product orientation can lead to marketing myopia—management’s failure to recognize the scope of its business. When inflicted with this malady, the organization is too focused on product features, etc. and not focused sufficiently on the benefits for which the firm’s customers purchase the product. A benefits-focused company is a consumer-oriented company. Companies suffering from marketing myopia are in danger of not introducing new technologies that provide related benefits—and could subsequently go bankrupt. Is American Airlines an airline company or a transportation company? If AA focuses too much on being the best airline it can be—rather than the best transportation company it can be, it could pass up the opportunity of introducing Star Trek transporters—assuming they will become available at some point. If AA doesn’t adopt this new technology, airplanes just might become obsolete; and AA could be out of business.
The Selling Orientation
The selling orientation is a managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory. This concept has the idea that consumers will not buy enough of the organization’s products unless the organization undertakes a large-scale selling and promotion effort. This concept is typically practiced with unsought goods—those that buyers don’t normally think of buying, such as insurance. This view of marketing will oftentimes be utilized in a buyer’s market. Their aim is to sell what the company makes rather than make what the market wants. This kind of marketing carries a high risk of alienating customers and can work against the development of long-term relationships.
The Marketing Concept: A Consumer Orientation
As stated above, the marketing concept is a company-wide consumer orientation that focuses on identifying and satisfying the needs and wants of target markets more effectively and efficiently than competitors do in order to achieve organizational goals and ensure the organization’s long-term profitability. Total Quality Management (TQM) programs which include continuous product quality improvement are extensions of the consumer orientation.
The Relationship Orientation
The relationship orientation takes the consumer orientation one step further by focusing on establishing and maintaining relationships with both customers and suppliers. Relationship marketing involves long-term, value-added relationships developed over time with customers and suppliers—as opposed to focusing on transactions with faceless customers and suppliers. Relationship marketing gives a company new opportunities to gain a competitive advantage by moving customers up a loyalty hierarchy from new customers to regular purchasers, to loyal supporters, and then to advocates of the firm’s goods and services. The concept of customer relationship management (CRM) sees marketing as a process of building long-term relationships with customers in order to maintain high levels of customer satisfaction and customer retention. Today’s companies are going beyond designing strategies to attract new customers and create transactions with them. They are using customer relationship management to retain current customers and build profitable, long-term relationships with them. The new view is that marketing is the science and art of finding, retaining, and growing profitable customers. The costs of attracting new customers are rising. On average it costs 5 to 10 times as much to attract a new customer as it does to keep a current customer satisfied. It’s easier and less expensive to make an additional sale to a satisfied, existing customer than it is to make a new sale to a new customer. Companies now realize that losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. This is known as the lifetime value of a customer. The customer’s lifetime value is the potential profit generated by a single customer’s purchase of a firm’s products over the customer’s lifetime. The customer’s lifetime value of a Taco Bell customer exceeds $12,000. Lexus estimates that a single satisfied and loyal customer is worth $600,000 in lifetime sales. A company can lose money on a specific transaction but still benefit greatly from a long-term relationship. Smart companies are focused on customer satisfaction and retention. Customer satisfaction is the extent to which a product’s perceived performance matches a buyer’s expectations. You should only promise what you can deliver and deliver more than you promise. When a company or its products deliver less than expected, the customer is dissatisfied. When performance is equal to expectations, the customer is satisfied. However, when you can deliver more than expected, your customer will be delighted. This is what marketers are striving for today. They are aware of the critical importance in terms of profitability of satisfying their customers and consequently retaining them. They first look to existing customers for additional sales—rather than to new customers.
The Societal Marketing Orientation
The societal marketing orientation is the idea that the organization should determine the needs, wants, and interests of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumer’s and society’s well-being. It questions whether the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer long-run welfare.
The Importance of Marketing:
Marketing is important for a number of reasons. First, marketing creates utility. Utility is the usefulness or benefit consumers receive from a product. Utility can also be described as the want-satisfying power of a product. Form utility is the benefit the company’s production function provides by transforming raw materials into finished products. Place utility is the benefit marketing provides by making products available where customers want them. Time utility is the benefit marketing provides by storing products until they are needed. Possession utility is the benefit marketing provides by allowing the consumer to own, use, and enjoy the product.
If an organization has adopted the marketing concept, marketing activities will be assigned great importance. The basic marketing concept applies to all aspects of the firm’s activities.
In our daily lives, we are surrounded by marketers’ creations. Marketers play an important role in providing the materials that become part of our popular culture. Marketing messages often communicate myths and stories containing symbolic elements that express the shared emotions and ideals of our culture.
In many ways our society is at the mercy of marketers, because we trust them to sell us products that are safe and perform as promised. We also trust them to price and distribute these products fairly. Companies usually find that stressing ethics and social responsibility is good business in the long run.
Note: The above lecture notes were compiled by David Gerth. These materials are a composite of quotations, paraphrases, and ideas from Marketing: Real People, Real Choices, Solomon & Stuart, 2003, Prentice Hall; Contemporary Marketing, Boone & Kurtz, 2004, Thomson; Principles of Marketing, Kotler & Armstrong, 2004, Prentice Hall; and David Gerth. They are only intended for the noncommercial use of students in David Gerth’s marketing classes for educational purposes.