1. Marketing’s Value to Consumers, Firms, and Society
Chapter 1
Marketing’s Value to Consumers, Firms, and Society
CHAPTER ONE
Lecture Notes for
Basic Marketing 19e
Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2014 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

2. At the end of this presentation, you should be able to:
1-2
At the end of this presentation, you should be able to:
This slide refers to material on pp. 4.
Know what marketing is and why you should learn about it.
Understand the difference between marketing and macro-marketing.
Know the marketing functions and why marketing specialists—including intermediaries and collaborators—develop to perform them.
Understand what a market-driven economy is and how it adjusts the macro-marketing system.
At the end of this presentation, you should be able to :
Know what marketing is and why you should learn about it.
Understand the difference between marketing and macro-marketing.
Know the marketing functions and why marketing specialists—including intermediaries and collaborators—develop to perform them.
Understand what a market-driven economy is and how is adjusts the macro-marketing system.

3. At the end of this presentation, you should be able to:
1-3
At the end of this presentation, you should be able to:
This slide refers to material on pp. 4.
Know what the marketing concept is—and how it should guide a firm or nonprofit organization.
Understand what customer value is and why it is important to customer satisfaction.
Know how social responsibility and marketing ethics relate to the marketing concept.
Understand the important new terms
At the end of this presentation, you should be able to:
Know what the marketing concept is—and how it should guide a firm or nonprofit organization.
Understand what customer value is and why it is important to customer satisfaction.
Know how social responsibility and marketing ethics relate to the marketing concept.
Understand the important new terms.

4. Marketing—What’s It All About?
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Marketing—What’s It All About?
This slide relates to material on pp. 4.
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More than Selling or Advertising
All Those Bicycles!
More than Selling and Advertising
Summary Overview
Many people are surprised when they realize how many different ideas and activities are included in the term “marketing.”
Key Issues
Most people think that marketing involves selling and advertising.
 Think about a manufacturer of bicycles:
many brand names;
many different bicycles;
many types of bicycles with various features;
prices range from low to very high.
Discussion Question: Why are there so many varieties of bicycles?

5. Production vs. Marketing
1-5
Production vs. Marketing
This slide relates to material on pp. 5.
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Creates Customer Satisfaction
Marketing
Makes sure right goods & services are produced
Summary Overview
Production and marketing are both fundamental economic activities. However, some people misunderstand the relationship between them. Thus, it helps to have a clear picture of how production and marketing interact with each other.
Key Issues
Production involves: making goods or performing services.
Discussion Question: Is it true that a good product is the only thing that makes a business a success? What is needed in addition to the product?
Products do not sell themselves!
 Marketing:
makes sure that the right goods and services are produced;
creates customer satisfaction: the extent to which an organization fulfills a customer’s needs, desires, and expectations.
Discussion Question: If you were buying a bicycle, what needs would you have? How would your desires or wants be different from your needs? What expectations would you have about the bicycle you were purchasing?
Production
Making Goods
Performing Services

6. Marketing Is Important to You
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Marketing Is Important to You
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Important to every consumer!
Summary Overview
Marketing is a pervasive activity. It is something that eventually touches everyone, and it dramatically affects peoples’ daily lives. The principles learned in marketing courses are directly and immediately applicable to students’ daily lives.
Key Issues
 Marketing is important to every consumer.
People bear the costs of marketing via price.
Everyone buys or uses a product or service.
People shop, are exposed to advertising, and provide information to businesses.
 Marketing is important to your job.
Selling your ideas.
Marketing offers career opportunities.
Organizations exist to satisfy customers; marketing contributes to success.
Marketing is important to your next job.
People have to market themselves.
Discussion Question: How would a knowledge of marketing benefit an accountant? A computer system designer? An attorney? A physician?
 Marketing affects innovation and the standard of living.
Stimulates research and innovation.
Creates new/improved products.
Generates a higher standard of living.
Important to your job!
(and your next job, too)
Affects innovation and standard of living

7. How Should We Define Marketing?
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How Should We Define Marketing?
This slide relates to material on pp. 7-8.
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Micro View
Set of activities
Performed by individual organizations
Macro View
Social process
Matches supply with demand
and
Summary Overview
Marketing is more than selling and advertising, but it also possible to define marketing too broadly. In defining marketing, there are really two alternative views—a micro view and a macro view.
Key Issues
The micro view of marketing includes activities that:
anticipate customer needs;
direct flows of goods and services to customers;
are performed by individual organizations.
 The macro view of marketing includes a social process that:
accomplishes the objectives of society;
effectively matches supply and demand;
is concerned with how marketing activities affect society, and vice versa.
Discussion Question: Why is it important for marketers to understand both the micro and macro views of marketing?

8. Identify Customer Needs
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Identify Customer Needs
This slide relates to material on p. 7.
Summary Overview
Marketing stimulates new ways to identify customers’ needs.
Key Issues
Creative marketing managers are always looking for innovative ideas for products that really meet customers’ needs.
This ad for Help Remedies offers a dirt-simple solution that many customers were looking for.
Marketers must look for new ideas to stay ahead of competition.
Discussion Question: Can you think of other industries or product/service categories in which marketers have been particularly innovative over the past few years? What are some of these innovations? Why are these industries more innovative? Students might note that innovation is more common where there is more competition, consumer needs are rapidly changing, or new technology changes costs.

9. Marketing Profit and Nonprofit More than Persuasion Key
1-9
Marketing
This slide relates to material on pp. 7-8.
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Profit and Nonprofit
More than Persuasion
Key
Characteristics
Summary Overview
Managerial marketing is done by organizations; beyond that general definition, there are several specific aspects of marketing that marketers should consider.
Key Issues
Marketing:
 applies to both profit and nonprofit organizations;
more than persuasion.
Discussion Question: What are some of the marketing activities other than persuasion?
 begins with customer needs – not the production process;
 does not do it alone or take the place of other business activities;
 involves exchanges – consumers exchange something of value to acquire something of value;
 builds a relationship with the customer that will lead to repeat purchase.
Begins with Needs
Builds Relationships
Involves Exchanges
Doesn’t Go It Alone

10. Emphasis Is on Whole System
1-10
Macro-Marketing
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Emphasis Is on Whole System
Every Economy Needs It
Key
Characteristics
Summary Overview
 Macro-marketing’s emphasis is on how the whole marketing system works.
Key Issues
 Every economy needs a macro-marketing system, because:
it helps to match supply and demand;
different producers in a society have different objectives, resources, and skills;
every consumer has a different set of needs;
system must effectively match consumers and producers.
 Functions of an effective macro-marketing system:
delivering the goods and services that consumers want and need;
getting products to them at the right time, in the right place, and at a price they’re willing to pay;
keeping the consumers satisfied after the sale, and bringing them back to purchase again when they are ready.
Discussion Question: Which countries’ macro-marketing systems might be viewed by Americans as unfair or ineffective? Which countries’ citizens might think that the American macro-marketing system is unfair or ineffective? Try to think of specific mismatches between customer needs and the outputs of producers.
Matches Producers and Consumers

11. Separation Between Producers and Consumers
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Separation Between Producers and Consumers
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Economies of Scale - Lower Unit Cost
UnitCost $
Summary Overview
Marketing is needed to overcome the difference between maximizing production efficiency and the preferences people have for consuming products and services.
Key Issues
 Economies of scale lower cost.
As production increases, the cost of each unit of the product decreases.
Marketing helps companies find more outlets for products.
Discussion Question: How does marketing find more outlets (consumers) for products?
 Effective marketing links producers and consumers.
Consumers’ needs and patterns of consumption differ from how production facilities operate effectively.
Marketing activities create more efficient links between consumers and producers.
Marketing functions narrow the gap.
The universal marketing functions helps to narrow the gap.
How these functions are performed and by whom may differ among economic systems.
Output
Producers
Consumers
Marketing
Functions
Marketing Bridges the Gap!

12. Marketing Facilitates Production and Consumption (Exhibit 1-1)
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Marketing Facilitates Production and Consumption (Exhibit 1-1)
This slide relates to material on pp. 9.
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Production Sector
Spatial Separation
Separation in Time
Separation of Information
Separation in Values
Separation of Ownership
Marketing needed to overcome discrepancies and separations
Discrepancies of Quantity
Discrepancies of
Assortment
Summary Overview
Discrepancies of quantity and discrepancies of assortment complicate exchange between producers and consumers.
Key Issues
Production sector: Specialization and division of labor result in heterogeneous supply capabilities.
Consumption sector: Heterogeneous demand for different goods and services and when and where they need to be to satisfy needs and wants.
Discrepancies of quantity: Producers prefer to produce and sell in large quantities. Consumers prefer to buy and consume in small quantities.
Discrepancies of assortment: Producers specialize in producing a narrow assortment of goods and services. Consumers need a broad assortment.
Spatial separation: Producers tend to locate where it is economical to produce, while consumers are located in many scattered places.
Separation in time: Consumers may not want to consume goods and services at the time producers would prefer to produce them, and time may be required to transport goods from producer to consumer.
Separation of information: Producers do not know who needs what, where, when, and at what price. Consumers do not know what is available from whom, where, when, and at what price.
Separation in values: Producers value goods and services in terms of costs and competitive prices. Consumers value them in terms of satisfying needs and their ability to pay.
Separation of ownership: Producers hold title to goods and services that they themselves do not want to consume. Consumers want goods and services that they do not own.
Consumption Sector

13. Universal Functions of Marketing
1-13
Universal Functions of Marketing
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Buying
Selling
Marketing
Functions
Market
Information
Transporting
Summary Overview
The universal marketing functions help the macro-marketing system overcome separations and discrepancies between those wishing to participate in an exchange. The fulfillment of these functions in a particular country or culture varies widely, but all the functions are needed in any macro-marketing system.
Key Issues
Buying: looking for and evaluating goods and services.
Selling: promoting the product to prospective buyers.
Transporting: moving the goods from place to place.
Storing: holding an inventory of goods until needed by customers.
Standardization and grading: sorting products by size and quality.
Discussion Question: Can you think of products that have to be sorted or evaluated before you can purchase them? Hint: think about agriculture.
Financing: providing necessary cash and credit to produce, transport, store, promote, sell, and buy products.
Risk taking: assuming responsibility for uncertainties.
Discussion Question: What are some examples of the risks taken in business enterprise?
Market information: the collection, analysis, and distribution of all the information the marketer needs to plan, implement, and control need-satisfying marketing activities.
Risk Taking
Storing
Financing
Standardization
& Grading

14. Marketing’s Role Has Changed a Lot Over the Years
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Marketing’s Role Has Changed a Lot Over the Years
This slide relates to material on p. 16.
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Simple Trade Era
Focus:
Sell Surplus
Production Era
Focus:
Increase Supply
Summary Overview
Early “producers for the market” made products that were needed by themselves and their neighbors.
Key Issues
Simple trade era — a time when families traded or sold their “surplus” output to local distributors.
Production era — a time when a company focuses on production of a few specific products—perhaps because few of these products are available in the market.
Sales era — a time when a company emphasizes selling because of increased competition.
Marketing department era — a time when all marketing activities are brought under the control of one department to improve short-run policy planning and to try to integrate the firm’s activities.
Marketing company era — a time when, in addition to short-run marketing planning, marketing people develop long-range plans—sometimes five or more years ahead—and the whole company effort is guided by the marketing concept.
Sales Era
Focus:
Beat Competition
Marketing Department Era
Focus:
Coordinate and Control
Marketing Company Era
Long-Run Customer Satisfaction
Focus:

15. 1-15
Some Differences in Outlook between Adopters of the Marketing Concept… (Exhibit 1–4)
This slide relates to material on p. 19.
Topic
Marketing Orientation
Production Orientation
Attitudes toward customers
Customer needs determine company plans.
They should be glad we exist, trying to cut costs and bringing out better products.
Product offering
Company makes what it can sell.
Company sells what it can make.
Role of marketing research
To determine customer needs and how well company is satisfying them.
To determine customer reaction, if used at all.
Interest in innovation
Focus is on locating new opportunities.
Focus is on technology and cost cutting.
Summary Overview
Adoption of the marketing concept has varied by type of organization, but the concept continues to penetrate organizations of all types. Exhibit 1-4. It shows some differences in outlook between adopters of the marketing concept and typical production-oriented managers. As the exhibit suggests, the marketing concept forces the company to think through what it is doing—and why.

16. 1-16
Some Differences in Outlook between Adopters of the Marketing Concept… (Exhibit 1–4)
This slide relates to material on p. 19.
Topic
Marketing Orientation
Production Orientation
Customer service
Satisfy customers after the sale and they’ll come back again.
An activity required to reduce consumer complaints.
Focus of advertising
Need-satisfying benefits of goods and services.
Product features and how products are made.
Relationship with customer
Customer satisfaction before and after sale leads to a profitable long-run relationship.
Relationship ends when a sale is made.
Costs
Eliminate costs that do not give value to customer.
Keep costs as low as possible.
Key Issues
Consumer product companies were first to accept the marketing concept.
Service industries are catching up.
Redneck Bank is an example of a service firm adopting the marketing concept.
It is easy for firms to slip back into a production orientation. It is often difficult to:
keep up with changing customer needs;
beat aggressive competitors to the punch;
find the right focus;
offer customers superior value.
Discussion Question: Considering Redneck Bank’s ad, what challenges will it face in continuing to meet customer needs?

17. The Marketing Concept Applies in Nonprofit Organizations
1-17
The Marketing Concept Applies in Nonprofit Organizations
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Newcomers to Marketing
Will “Satisfied Customers” Offer Support?
Characteristics of Nonprofit Organizations
Summary Overview
The marketing concept is also applicable to nonprofit organizations such as museums, libraries, charities, and political parties.
Key Issues
Nonprofit organizations are relative newcomers to marketing.
Nonprofit organizations often have a different idea of support and “satisfied customers” than do business firms.
Nonprofits often exist to accomplish a goal unrelated to traditional customer satisfaction.
Many nonprofits raise money from non-customer groups and then spend it on other “customers”.
They may not have a traditional “bottom line” economic measure of success.
Discussion Question: What is the “profit” for a political party? A library? A museum? A symphony orchestra? A blood bank?
Nonprofit organizations may not be organized for marketing.
May Not Be Organized for Marketing
The Bottom Line?

18. The Marketing Concept, Social Responsibility, and Marketing Ethics
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The Marketing Concept, Social Responsibility, and Marketing Ethics
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Micro - Macro
Dilemma
Group Needs
Individual Needs
Summary Overview
Organizations implement the marketing concept in the broader context of society. There are times when the society’s needs conflict with the needs of a particular individual or group, creating the micro-macro dilemma.
Key Issues
Social responsibility—an obligation to improve the organization’s positive effects on society.
Businesses must strive to reach acceptable balances.
“Should all consumer needs be satisfied?”
Some products that many people use are not good for them.
Marketers must rely on legal and ethical standards in making decisions.
“Do all marketers act responsibly?”
Sometimes firms or individuals advance their own short-term interests at the expense of customers.
When products are complicated, consumers may be vulnerable to unscrupulous sellers.
“What if profits suffer?”
Some marketers are adopting a longer-term view.
Customer satisfaction goes beyond fulfilling an immediate need.
Discussion Question: It is possible for an organization to be truly consumer-oriented and intentionally act in an unethical manner? Why or why not?
The marketing concept guides marketing ethics:
focuses the organization on the needs of consumers;
many organizations have developed codes of ethics;
marketers should take criticisms of marketing seriously.
Social Responsibility
Should All Consumer Needs Be Satisfied?
Do All
Marketers Act Responsibly?
What if Profits Suffer?
The Marketing Concept Guides Ethics

19. Key Terms production customer satisfaction innovation marketing
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Key Terms
This slide refers to boldfaced terms appearing in Chapter 1.
production
customer satisfaction
innovation
marketing
pure subsistence economy
macro-marketing
economies of scale
universal functions of marketing
buying function
selling function
transporting function
storing function
standardization and grading
financing
risk taking
market information function
intermediary
collaborators
e-commerce
economic system
Summary Overview
These are additional key terms.
Key Issues
Production: making goods or performing services.
Customer satisfaction: the extent to which a firm fulfills a customer’s needs, desires, and expectations.
Innovation: the development and spread of new ideas, goods, and services.
Marketing: the performance of activities that seek to accomplish an organization’s objectives by anticipating customer or client needs and directing a flow of need satisfying goods and services from producer to customer or client.
Pure subsistence economy: when each family unit produces everything it consumes—there is no need to exchange goods and services and no marketing is involved.
Macro-marketing: a social process that directs an economy’s flow of goods and services from producers to consumers in a way that effectively matches supply and demand and accomplishes the objectives of society.
Economies of scale: as a company produces larger numbers of a particular product, the cost of each unit of the product goes down.
Universal functions of marketing: buying, selling, transporting, storing, standardization and grading, financing, risk taking, and market information.
Buying function: looking for and evaluating goods and services.
Selling function: promoting the product.
Transporting function: the movement of goods from one place to another.
Storing function: holding goods until customers need them.
Standardization and grading: sorting products according to size and quality.
Financing: the necessary cash and credit to produce, transport, store, promote, sell, and buy products.
Risk taking: bearing the uncertainties that are part of the marketing process.
Market information function: the collection, analysis, and distribution of all the information needed to plan, carry out, and control marketing activities, whether in the firm’s own neighborhood or in a market overseas.
Intermediary: someone who specializes in trade rather than production—plays a role in the exchange process.
Collaborators: firms that facilitate or provide one or more of the marketing functions other than buying or selling.
E-commerce: exchanges between individuals or organizations—and activities that facilitate these exchanges—based on applications of information technology.
Economic system: the way an economy organizes to use scarce resources to produce goods and services and distribute them for consumption by various people and groups in the society.

20. Key Terms command economy market-directed economy simple trade era
1-20
Key Terms
This slide refers to boldfaced terms appearing in Chapter 1.
command economy
market-directed economy
simple trade era
production era
sales era
marketing department era
marketing company era
marketing concept
production orientation
marketing orientation
triple bottom line
customer value
micro-macro dilemma
social responsibility
marketing ethics
Summary Overview
These are additional key terms.
Key Issues
Command economy: government officials decide what and how much is to be produced and distributed by whom, when, to whom, and why.
Market-directed economy: the individual decisions of the many producers and consumers make the macro-level decisions for the whole economy.
Simple trade era: a time when families traded or sold their “surplus” output to local distributors.
Production era: a time when a company focuses on production of a few specific products—perhaps because few of these products are available in the market.
Sales era: a time when a company emphasizes selling because of increased competition.
Marketing department era: a time when all marketing activities are brought under the control of one department to improve short-run policy planning and to try to integrate the firm’s activities.
Marketing company era: a time when, in addition to short-run marketing planning, marketing people develop long-range plans—sometimes five or more years ahead—and the whole company effort is guided by the marketing concept.
Marketing concept: means an organization aims all its efforts at satisfying its customers—at a profit.
Production orientation: when managers make whatever products are easy to produce and then try to sell them.
Marketing orientation: means trying to carry out the marketing concept (try to offer customers what they need).
Triple Bottom Line: measures an organization’s economic, social, and environmental outcomes
Customer value: the difference between the benefits a customer sees from a market offering and the costs of obtaining these benefits.
Micro-macro dilemma: what is “good” for some firms and consumers may not be good for society as a whole.
Social responsibility: a firm’s obligation to improve its positive effects on society and reduce its negative effects.
Marketing ethics: the moral standards that guide marketing decisions and actions.