CHAPTER 1 Marketing: The Art and Science of Satisfying Customers Chapter Objectives 1 Define marketing, explain how it creates utility, and describe its role in the marketplace. Contrast marketing activities during the four eras in the history of marketing. Explain the importance of avoiding marketing myopia. 4 Describe the characteristics of not-for-profit marketing. Identify and briefly explain each of the three types of nontraditional marketing. Outline the importance of creativity, critical thinking, and the technology revolution in marketing. 7 Explain the shift from transaction-based marketing to relationship marketing. Identify the universal functions of marketing. Demonstrate the relationship between ethical business practices, social responsibility, and marketplace success. 2 5 8 6 3 9

Marketing Vs. Advertising

A Definition of Advertising Advertising is paid communication through a non-personal medium in which the sponsor is identified and the message is controlled.

DEFINITION #1 (1960): MARKETING IS THE PERFORMANCE OF BUSINESS ACTIVITIES THAT DIRECT THE FLOW OF GOODS AND SERVICES FROM PRODUCER TO CONSUMER OR USER. DEFINITION #2 (1965): MARKETING IS THE PROCESS IN A SOCIETY BY WHICH THE DEMAND STRUCTURE FOR ECONOMIC GOODS AND SERVICES IN ANTICIPATED OR ENLARGED AND SATISFIED THROUGH THE CONCEPTION, PROMOTION, EXCHANGE AND PHYSICAL DISTRIBUTION OF GOODS AND SERVICES.

THE AMA’S 1985 DEFINITION: MARKETING IS THE PROCESS OF PLANNING AND EXECUTING THE CONCEPTION, PRICING, PROMOTION AND DISTRIBUTION OF IDEAS, GOODS AND SERVICES TO CREATE EXCHANGES THAT WILL SATISFY INDIVIDUAL AND ORGANIZATIONAL OBJECTIVES.

American Marketing Association’s new official definition of marketing released August 2004: 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.

Why the change? From AMA 9/15/04 issue of Marketing News The impetus to examine and possibly revise the official definition came from AMA CEO Dennis Dunlap. Currently, marketers are nearly unanimous in believing that the industry is rapidly changing, though that was not always the case. The first official definition of marketing was adopted in 1935 by the National Association of Marketing Teachers, a predecessor of the AMA. It was adopted by the AMA in 1948, and again in 1960 when the AMA revisited the definition and decided not to change it. This original definition stood for 50 years, until it was revised in 1985.

A Definition of Marketing Marketing: the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives.

Marketing creates utility through the exchange process WHAT IS MARKETING? Marketing creates utility through the exchange process Utility: Want-satisfying power of a good or service Form utility Time utility Place utility Ownership utility

WHAT IS MARKETING? • Production and marketing together create utility. • Utility The want-satisfying power of a good or service.

FOUR ERAS IN THE HISTORY OF MARKETING • Exchange process Activity in which two or more parties give something of value to each other to satisfy perceived need.

AVOIDING MARKETING MYOPIA • Marketing myopia Management’s failure to recognize the scope of its business.

EXPANDING THE TRADITIONAL BOUNDARIES OF MARKETING MARKETING IN NOT-FOR-PROFIT ORGANIZATIONS • Not-for-profits sometimes promote their messages through partnerships with commercial firms. • Example: America’s Second Harvest receiving assistance from food manufacturers and grocery stores. CHARACTERISTICS OF NOT-FOR-PROFIT MARKETING • Must compete with other organizations for donors’ dollars. • Must often market to multiple audiences. • Example: College or university targets prospective students, but also current students, parents, donors, alumni, faculty, government agencies, and others.

NONTRADITIONAL MARKETING

CREATIVITY AND CRITICAL THINKING • The challenges of the marketplace require critical thinking and creativity. • Creativity produces original ideas or knowledge. • Example: George de Mestral inventing Velcro after noticing burrs that stuck to his wool socks. • Critical thinking determines the authenticity, accuracy, and worth of information, knowledge, claims, and arguments. • Example: Microsoft forming an Internet research lab to develop and evaluate new products.

TECHNOLOGY REVOLUTION IN MARKETING • Technology—The business application of knowledge based on scientific discoveries, inventions, and innovations. • Internet sales in U.S. topped $143 billion in a recent year. INTERACTIVE AND INTERNET MARKETING • Interactive marketing—Customer controls amount and type of information received from a marketer. BROADBAND • Makes online marketing faster and easier than previously possible. WIRELESS • 41 percent of U.S. Internet users are “wireless ready.”

FROM TRANSACTION-BASED MARKETING TO RELATIONSHIP MARKETING • Focus is on developing customers into repeat, loyal customers to increase their lifetime value. • Repeat customers are a source of buzz marketing. DEVELOPING PARTNERSHIPS AND STRATEGIC ALLIANCES • Relationship marketing also applies to business-to-business relationships with suppliers, distributors, and other partners. • Strategic alliances Partnerships in which two or more companies combine resources and capital to create competitive advantages in a new market. • Not-for-profits often raise awareness and funds through strategic partnerships.

COSTS AND FUNCTIONS OF MARKETING • Marketing costs are typically 40 to 60 percent of total product costs. • Marketing performs eight universal functions: • Exchange functions—buying and selling • Physical distribution functions—transporting and storing • Facilitating functions—standardizing and grading, financing, risk taking, and securing marketing information.

ETHICS AND SOCIAL RESPONSIBILITY: DOING WELL BY DOING GOOD • Ethics—Moral standards of behavior expected in a society. • Most businesspeople follow ethical practices. • Social responsibility—Marketing philosophies, policies, procedures, and actions whose primary objective is to enhance society. • Often takes the form of philanthropy. • Committee to Encourage Corporate Philanthropy gives awards annually to corporations that demonstrate a commitment to social responsibility.