Economic Benefits of Marketing

Economic Benefits of Marketing Why do customers care about marketing? 1) ADDS VALUE Bridges the gap between: MARKETING - SELLER - Making the Product - CUSTOMER - Buying the Product

Economic Benefits of Marketing Why do customers care about marketing? 2) Reduces Prices for products / services 3) Creates NEW and IMPROVED products

Economic Benefits of Marketing Why do customers care about marketing? 1) ADDS VALUE - Makes Products More Useful FORM INFORMATION Economic Utility PLACE TIME POSSESSION

Economic Benefits of Marketing FORM UTILITY Changing raw materials or putting parts together to make them more useful. Example: The parts of a lounge chair— the wood frame, the fabric, the glue and nails, and the reclining mechanism—are less useful by themselves. Putting them together adds form utility. NOTE: This is a manufacturing function NOT MARKETING function.

Economic Benefits of Marketing PLACE UTILITY Having Product Where Customers Can Buy It Example: Selling directly to the customer through catalogs. Example: Selling to customers over the internet. Example: Having product available in your area.

Economic Benefits of Marketing TIME UTILITY Having product available at a time convenient for customers Example: Retailers offer large supplies of backpacks in the late summer, near the beginning of the school year. Example: Convenient Shopping Hours

Economic Benefits of Marketing POSSESSION UTILITY Exchange of a product for some monetary value. Example: Taking credit cards and checks rather than just cash enables customers to buy products. Example: Offer installment or layaway plans.

Economic Benefits of Marketing INFORMATION UTILITY Providing information so the customer is comfortable buying. Example: Salespeople explain features of products. Example: Packaging explains qualities and uses. Example: Advertising informs consumers about products.

Economic Benefits of Marketing 2) Lower Prices for Consumers hmmmm…HOW does marketing lower prices? Demand Increases Lower Fixed Costs Produce More Demand Increases Lower Prices Competitors Enter

Economic Benefits of Marketing LOWERING PRICES (COSTS) When demand is high, manufacturers make larger quantities, which reduces the unit cost of each product. Example: Assume fixed costs are $20,000: Quantity Produced Fixed Cost Per Unit 10,000 $ 2.00 100,000 $ 0.20

Economic Benefits of Marketing 3) New and Improved Products Marketing Increases Demand More Competitors Enter Find New Ways to Attract Customers

Economic Benefits of Marketing Why do customers care about marketing? SUMMARY Makes Product More Useful (Adds Value) Economic Utility Lowers Prices Reduced Unit Costs and Competition New and Improved Products Competition Breeds Innovation

Economic Benefits of Marketing Reviewing Key Terms and Concepts - Quiz 1. What is meant by the economic concept of utility? 2. Which economic utility is not classified as a marketing utility? Why? 3. Besides added value, what are two other benefits of marketing?