Part One Strategic Marketing and Its Environment 1 1 Marketing’s Role in Business and Society

Copyright © Houghton Mifflin Company. All rights reserved. 1–21–2 Chapter Learning Objectives 1.To be able to define marketing 2.To understand several important marketing terms, including target market, marketing mix, marketing exchanges, and marketing environment 3.To be aware of the marketing concept and marketing orientation 4.To understand the importance of building customer relationships 5.To explain the major marketing functions that are part of the marketing management process 6.To recognize the role of marketing in our society

Copyright © Houghton Mifflin Company. All rights reserved. 1–31–3 Chapter Outline Marketing Defined –Customers are the focus –Marketing deals with products, price, distribution, and promotion –Marketing builds satisfying exchange relationships –Marketing occurs in a dynamic environment Understanding the Marketing Concept –Evolution of the marketing concept –Implementing the marketing concept Managing Customer Relationships Value-Driven Marketing

Copyright © Houghton Mifflin Company. All rights reserved. 1–41–4 Chapter Outline (cont’d) Marketing Management The Importance of Marketing in Our Global Economy –Marketing costs consume a sizable portion of buyers’ dollars –Marketing is used in nonprofit organizations –Marketing is important to businesses –Marketing fuels our global economy –Marketing knowledge enhances consumer awareness –Marketing connects people through technology –Socially responsible marketing can promote the welfare of customers and society –Marketing offers many exciting career prospects

Copyright © Houghton Mifflin Company. All rights reserved. 1–51–5 Marketing Defined Stakeholders –Those constituents who have a “stake,” or claim, in some aspect of a company’s products, operations, markets, industry, and outcomes; these include customers, employees, investors and shareholders, suppliers, governments, communities, and others Marketing –The process of creating, pricing, distributing, and promoting goods, services, and ideas to facilitate satisfying exchange relationships with customers and other stakeholders in a dynamic environment

Copyright © Houghton Mifflin Company. All rights reserved. 1–61–6 Components of Strategic Marketing FIGURE 1.1

Copyright © Houghton Mifflin Company. All rights reserved. 1–71–7 Customers Are the Focus Customers –The purchasers of an organization’s products; the focal point of all marketing activities Target Market –A specific group of customers on whom an organization focuses its marketing efforts Large or small customer groups Single or multiple product markets Single or multiple products Local to global markets

Copyright © Houghton Mifflin Company. All rights reserved. 1–81–8 Managing Customer Relationships By offering coffee samples outside of the store, Starbucks practices relationship marketing--it acquires new customers and enhances the profitability of existing customers Reprinted with permission of Starbucks.

Copyright © Houghton Mifflin Company. All rights reserved. 1–91–9 Marketing Deals with Products, Price, Distribution, and Promotion The Marketing Mix –Four marketing activities—product, pricing, distribution, and promotion—that a firm can control to meet the needs of customers within its target market Product Pricing Distribution Promotion Target Market

Copyright © Houghton Mifflin Company. All rights reserved. 1–10 Marketing Mix Variables Product Pricing Distribution Promotion Goods, services, or ideas that satisfy customer needs Decisions and actions that establish pricing objectives and policies and set product prices The ready, convenient, and timely availability of products Activities that inform customers about the organization and its products

Copyright © Houghton Mifflin Company. All rights reserved. 1–11 Music CD Cost Breakdown Source: Warren Cohen, “Wal-Mart Wants $10 CDs,” The Rolling Stone, October 12, 2004,

Copyright © Houghton Mifflin Company. All rights reserved. 1–12 Important Terms Stakeholders –Those constituents who have a “stake,” or claim, in some aspect of a company’s products, operations, markets, industry, and outcomes; these include customers, employees, investors and shareholders, suppliers, governments, communities, and others Marketing –The process of creating, pricing, distributing, and promoting, goods, services, and ideas to facilitate satisfying exchange relationships with customers and other stakeholders in a dynamic environment

Copyright © Houghton Mifflin Company. All rights reserved. 1–13 Important Terms Customers –The purchasers of organizations’ products; the focal point of all marketing activities Target Market –A specific group of customers on whom an organization focuses its marketing efforts The Marketing Mix –Four marketing activities—product, price, distribution, and promotion—that a firm can control to meet the needs of customers within its target market

Copyright © Houghton Mifflin Company. All rights reserved. 1–14 Important Terms Product –Goods, services, or ideas that satisfy customer needs Pricing –Decisions and actions that establish pricing objectives and policies and set product prices Distribution –The ready, convenient, and timely availability of products Promotion –Activities that inform customers about the organization and its products

Copyright © Houghton Mifflin Company. All rights reserved. 1–15 Satisfying Exchange Relationships Exchange –The provision or transfer of goods, services, or ideas in return for something of value FIGURE 1.2

Copyright © Houghton Mifflin Company. All rights reserved. 1–16 Conditions for Exchange Exchange Conditions –Two or more participants have something of value that the other party desires. –Exchange provides mutual benefit/satisfaction. –Each party has confidence in the exchange value of the other party’s offering. –Each party must meet the expectations of the exchange to become trusted by the other parties.

Copyright © Houghton Mifflin Company. All rights reserved. 1–17 Marketing Occurs in a Dynamic Environment Marketing Environment –The competitive, economic, political, legal and regulatory, technological, and sociocultural forces that surround the customer and affect the marketing mix FIGURE 1.1

Copyright © Houghton Mifflin Company. All rights reserved. 1–18 Understanding the Marketing Concept Marketing Concept –A philosophy that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals –Customer satisfaction Analysis of customers’ current and long-term needs Analysis of competitors’ capabilities Integration of firm’s resources

Copyright © Houghton Mifflin Company. All rights reserved. 1–19 The Evolution of the Marketing Concept Production Orientation Sales Orientation Marketing Orientation Late 19th century: efficient production of goods allowed firms to meet strong customer demand. Mid-1920s–early 1950s: weakened demand required that products would have to be “sold” (personal selling, advertising, and distribution became the focus). Early 1950s–2000s: adopting a customer focus means a commitment to researching and responding to customer needs. FIGURE 1.3

Copyright © Houghton Mifflin Company. All rights reserved. 1–20 Implementing the Marketing Concept Becoming marketing oriented requires –establishing an information system to discover customers’ needs and using the information to create satisfying products. –coordinating all marketing activities by restructuring the organization. –obtaining the support of all managerial and staff levels in the organization.

Copyright © Houghton Mifflin Company. All rights reserved. 1–21 Managing Customer Relationships Relationship Marketing –Establishing long-term, mutually satisfying buyer-seller relationships allowing for cooperation and mutual dependency Increased value of customer (loyalty) over time results in increased profitability.

Copyright © Houghton Mifflin Company. All rights reserved. 1–22 Customer Relationship Management (CRM) Using information about customers to create marketing strategies that develop and sustain desirable customer relationships –Identifying buying-behavior patterns of customers –Using behavioral information to focus on the most profitable customers

Copyright © Houghton Mifflin Company. All rights reserved. 1–23 Important Terms Exchange –The provision or transfer of goods, services, or ideas in return for something of value Marketing Environment –The competitive, economic, political, legal and regulatory, technological, and sociocultural forces that surround the customer and affect the marketing mix Marketing Concept –A philosophy that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals

Copyright © Houghton Mifflin Company. All rights reserved. 1–24 Important Terms Marketing Orientation –An organizationwide commitment to researching and responding to customer needs Relationship Marketing –Establishing long-term, mutually satisfying buyer- seller relationships allowing for cooperation and mutual dependency Customer Relationship Management (CRM) –Using information about customers to create marketing strategies that develop and sustain desirable customer relationships

Copyright © Houghton Mifflin Company. All rights reserved. 1–25 Value-Driven Marketing Value –A customer’s subjective assessment of benefits relative to the costs in determining the worth of a product Customer value = customer benefits – customer costs –Customer benefits Anything desired by the customer that is received in an exchange –Customer costs Anything a customer gives up in an exchange for benefits –Monetary price of the benefit –Search costs (time and effort) to locate the product –Risks associated with the exchange

Copyright © Houghton Mifflin Company. All rights reserved. 1–26 Marketing Management –The process of planning, organizing, implementing, and controlling marketing activities to facilitate exchanges effectively and efficiently –Effectiveness The degree to which an exchange helps an organization achieve its objectives –Efficiency The process of minimizing the resources an organization must spend to achieve a specific level of desired exchanges

Copyright © Houghton Mifflin Company. All rights reserved. 1–27 Marketing Management (cont’d) Planning –Assessing opportunities and resources –Determining marketing objectives –Developing a marketing strategy and plans for implementation and control How, when and by whom are marketing activities performed? Organizing –Developing the internal structure of the marketing unit Functions, products, regions, customer types

Copyright © Houghton Mifflin Company. All rights reserved. 1–28 Marketing Management (cont’d) Implementation –Coordinating marketing activities –Motivating marketing personnel –Developing effective internal communications within the unit Control –Establishing performance standards –Comparing actual performance to established standards –Reducing the difference between desired and actual performance

Copyright © Houghton Mifflin Company. All rights reserved. 1–29 Effective Marketing Control Process Provides for quick detection of differences in planned and actual performance Accurately monitors activities and is flexible enough to accommodate changes Incurs low process costs relative to the costs of a “no-control” situation Is understandable by both managers and subordinates

Copyright © Houghton Mifflin Company. All rights reserved. 1–30 Important Terms Value –A customer’s subjective assessment of benefits relative to the costs in determining the worth of a product Customer Benefits –Anything desired by the customer that is received in an exchange Customer Costs –Anything a customer gives up in an exchange for benefits

Copyright © Houghton Mifflin Company. All rights reserved. 1–31 Important Terms Marketing Management –The process of planning, organizing, implementing, and controlling marketing activities to facilitate exchanges effectively and efficiently Effectiveness –The degree to which an exchange helps an organization achieve its objectives Efficiency –The process of minimizing the resources an organization must spend to achieve a specific level of desired exchanges

Copyright © Houghton Mifflin Company. All rights reserved. 1–32 The Importance of Marketing in Our Global Economy Marketing costs consume a sizable portion of buyers’ dollars Marketing is used in nonprofit organizations Marketing is important to business Marketing fuels our global economy

Copyright © Houghton Mifflin Company. All rights reserved. 1–33 The Importance of Marketing in Our Global Economy (cont’d) Marketing knowledge enhances consumer awareness Marketing connects people through technology Socially responsible marketing can promote the welfare of customers and society Marketing offers many exciting career prospects

Copyright © Houghton Mifflin Company. All rights reserved. 1–34 Marketing is Used in Nonprofit Organizations The World Wildlife Fund supports the protection of endangered species. Reprinted with permission of World Wildlife Fund.

1–35 Average Starting Salaries for College Grads DegreeStarting % Salary Increase Computer science$49, Information science$42, Management information systems$41, Accounting$41, Economics/finance$40, Business administration$38, Marketing$34, Source: Deshundra Jefferson, “Most Lucrative College Degrees,” CNN/Money, September 21, 2004,

Copyright © Houghton Mifflin Company. All rights reserved. 1–36 After reviewing this chapter you should: 1.Be able to define marketing. 2.Know the meaning of important marketing terms, including target market, marketing mix, marketing exchanges, and marketing environment. 3.Be aware of the marketing concept and marketing orientation. 4.Understand the importance of building customer relationships. 5.Be able to explain the major marketing functions that are part of the marketing management process. 6.Recognize the important role of marketing in our society.