Chapter 4 Marketing Begins with Customers Study Guide

What are the four basics of marketing? Understanding the marketing concept Planning a marketing strategy Responding to competition Integrating marketing into the business

What are the seven marketing functions? Product/Service Management Distribution Selling Marketing-Information Management Financing Pricing Promotion

Effective marketing is an investment because . . . It is responsible for matching a company’s offerings with market needs

Why is having a superior product or service not sufficient to assure success in business? Businesses must respond to customer needs and desires, or they will take their business elsewhere

What is the marketing concept? Using the needs of customers as the primary focus during the planning, production, distribution, and promotion of a product or service

If a new business regards marketing as an investment rather than as an expense, what is a common mistake that it is more likely to avoid? It is likely to avoid the mistake of cutting marketing expenditures when it faces a cash squeeze, because it realizes that marketing will increase future profits

What is wrong with treating marketing mainly as a problem-solving tool? Treating marketing mainly as a problem-solving tool may deprive a business of the many opportunities that marketers can identify and create when marketing is used to uncover new markets and seek out ways to improve customer satisfaction

When a business uses the marketing concept, what is the first step in its planning process? The first step in the planning process with the marketing concept is to conduct research to identify potential customers and their needs

Putting Marketing Up Front Planning that identifies how a company expects to achieve its goals is known as a strategy. Chapter 4

A good marketing mix is based on what? Customer needs and wants

Understanding the Customer Identifying customer needs Satisfying customer needs Chapter 4

Businesses tend to deal with customer needs in one of two ways Businesses tend to deal with customer needs in one of two ways. What are the two ways? Customers are all alike and can be influenced to buy what a business offers. Customers are quite different and they select products and services to meet their unique needs.

What is a market segment? A group of similar customers within a larger market – categorized according to similar characteristics

Two Views of Consumers Customers are all alike and can be influenced to buy what a business offers. Customers are quite different and they select products and services to meet their unique needs. Chapter 4

Planning the Offering The marketing mix Creating the right mix Developing products Making distribution decisions Pricing products and services Planning promotion Chapter 4

What is a market opportunity analysis? It prioritizes market segments to locate the best potential

What are the elements of the marketing mix? Product Development Distribution Pricing Products and Services Promotion

Parts of the product development decision that can improve customer satisfaction are ____________ such as _____________________________________________. Special Features unique design, construction, size, color, or operation, accessories

What is the most difficult marketing decision to understand and plan What is the most difficult marketing decision to understand and plan? Why? Pricing products and services. Marketers must try to balance the costs of the product with the customer’s feelings about the value of the product/service

In pricing products and services, what must marketers try to balance? The costs of the product with the customer’s feelings about the value of the product

How do consumers measure or define value of a product or service? Better quality More/better service Lower Prices  

What are the most common forms of promotion? Advertising Personal selling Sales Promotion Visual display Publicity

Under what conditions would promotion not be helpful to a company? If the company has a poor product, excessively high prices, or ineffective distribution

How might aggressive promotion be useless if distribution is ineffective? No matter how effective a promotional campaign, sales will not increase if the product cannot get to the consumer

Name three reasons it is difficult to meet customer needs They may not be sure of their needs or have conflicting needs They have limited resources with which to satisfy their needs People have very different needs

What do consumers with different needs require? Specialized products and services

Name several ways businesses can alter the prices they charge Prices can be altered with discounts Markdowns Allowances Trade-ins Coupons Extensions of credit

Why is it important for businesses to understand the consumer decision-making process? So they can provide the consumer with the right information at the right time to facilitate a satisfying exchange

What benefit do consumers get from a large number of competitors in a particular industry? More choices Cheaper prices Convenience

List the three types of competition? Intense Limited Monopolistic

Of the three types of competition, which is the most difficult type of competition? Why do you think this is so? Intense competition because the product is very similar and consumers can find a replacement very easily

What is pure competition? Many businesses offering the same product

What is an oligopoly? Only a few companies compete in the same market, consumers see few if any differences

What is some of the typical responses a business can make to deal with intense competition? Emphasize price Emphasize promotion – convince customers that their products were better, relatively minor differences as being important, unique brand names and images – more personalized or detailed information, non-traditional methods or media Distribution can focus on making the product available at better locations and times, with more careful handling, or greater customer service Pricing can offer alternative methods of payments, greater ease of obtaining credit, extended time for payment, or leasing

Explain limited competition and how businesses respond. Little or no direct competition – Monopoly Don’t have to worry so much about price or promotion Business concentrates on maintaining its advantage in the market Customers often become dissatisfied with their lack of choice

Explain monopolistic competition and how businesses respond. Many competitors, some differences among the choices It is important for the companies to have clearly-identified differences that result in customers selecting their brands Companies in monopolistic competition find the marketing concept to be of most value Focus different groups of customers and try to identify their needs They make changes to the marketing mix that not only make the brand different from its competitors but more attractive to potential customers

Why does monopolist competition allow businesses to benefit most from the marketing concept? Because the businesses with monopolies do not have to pay much attention to consumer needs, and businesses facing intense competition tend to rely primarily on price. Monopolistic competition gives a business an opportunity to differentiate its products to win customers from other businesses.

What are the five stages of the consumer decision-making process? Problem Recognition Information Search Alternative Evaluation Purchase Postpurchase Evaluation

Name three things that businesses use marketing research for. To identify customers, characteristics that make groups of customers different from others, their needs, and how they make purchase decisions To identify the type of competition and the strengths and weaknesses of competing companies To determine which are most effective and which are most profitable marketing strategies

From a consumer perspective, which type of competition offers the most choice? The least choice? Intense competition offers the most choice; limited competition offers the least

Explain what is meant by a “channel of distribution.” The businesses that work cooperatively to move products from the producer to the consumer

Another name for a channel member is? Middleman

List two types of channel members and what part(s) of the marketing mix the focus their efforts on. Wholesalers emphasize distribution planning; many help their customers with financing and provide marketing information Retailers are responsible for most final pricing decisions and use a variety of promotion activities to encourage consumers to purchase their products

What is a markup and how is it calculated? A markup covers a business’s operating expenses, taxes, and whatever profit it builds into its price before it passes a product on to another member of the channel or the end user The difference between the price a business pays for a product and the price it plans to sell the product for. Expressed as a percentage of the price paid by the business MU = Profit / Cost

Who is responsible for adding the markup to a product? The middleman

A video game store charges $28 for a video game that is purchased for $22. What is the markup on the video game? Round to the nearest percent. MU = $27 - $15 = 8 8/15 = 53.3 = 53%

A gift shop purchased 25 handmade scarves for $10. 50 each A gift shop purchased 25 handmade scarves for $10.50 each. If the price is marked up 20%, what will the customer be charged for each scarf? MU = $10.50 * .2 = $2.10 $10.50 + 2.10 = $12.60

What is the gross profit margin and how is it calculated? The gross profit margin is the difference between the price it plans to sell the product for and the price a business pays for a product. MU = Profit / Cost

A sweatshirt shop pays a local supplier $15 for each sweatshirt and charges customers $27. What is the gross profit margin on each sweatshirt? Round to the nearest percent. GPM = $27 - $15 = 8 8/27 = 29.6 = 30%

List three challenges faced by service businesses? The work directly with their consumers rather than through a channel of distribution, so they are responsible for the entire marketing mix More difficult to control quality of the service Distribution planning must be available where and when the customer wants it Difficult to promote since the customer can’t see or examine them

Why should not-for-profit organizations worry about marketing? Because satisfying their customers’ needs is necessary if they are to achieve whatever their goals are and maximize their effectiveness