1. Marketing’s Value to Consumers, Firms, and Society
Chapter 1
Marketing’s Value to Consumers, Firms, and Society
Chapter One
Marketing’s Value to Consumers, Firms, and Society
For use only with Perreault/Cannon/McCarthy or Perreault/McCarthy texts. © 2009 McGraw-Hill Companies, Inc. McGraw-Hill/Irwin

2. Marketing—What’s It All About?
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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?

3. Things a Firm Should Do in Producing a Bike
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Analyze Needs
Predict Wants
Estimate Demand
Predict When
Summary Overview
By focusing on the many tasks involved in producing a bicycle, it is possible to get a feel for the wider range of marketing activities.
Key Issues
Among the different things a manager must do in producing a bicycle, he/she must:
Analyze the needs of people for various models of bicycles;
Predict the types of bicycles consumers will want and decide which consumers to satisfy;
Estimate the number of bicycle riders and how many bicycles they might buy;
Predict when consumers will want to buy;
Determine where the consumers will be and how to get bicycles to them;
Estimate the price consumers are willing to pay for a bicycle, and if that price will result in a profit for the firm;
Decide what kinds of promotion should be used to inform consumers about the firm and its bicycles;
Estimate the impact of competition from other bicycle producers;
Determine how to provide customer service if a customer has a problem after purchasing a bike.
Discussion Question: How many of these activities are marketing activities?
Determine Where
Estimate Price
Decide Promotion
Estimate Competition
Provide Service

4. Production vs. Marketing
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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

5. 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.
People have to market themselves.
Marketing offers career opportunities.
Organizations exist to satisfy customers; marketing contributes to success.
Discussion Question: How would a knowledge of marketing benefit an accountant? A computer system designer? An attorney? A physician?
 Marketing also 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!
Affects innovation and standard of living

6. Micro View Macro View What Is Marketing? and Set of activities
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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?

7. Emphasis on Whole System Every Economy Needs It
Macro-Marketing
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Emphasis 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:
variation exists among the types of producers that can meet needs;
every consumer has a different set of needs;
system must effectively match consumers and producers.
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

8. 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

9. Who Performs Marketing Functions?
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Producers
Wholesalers
Other
Specialists
Retailers
Transport
Firms
ISP's
Product
Testing
Ad Agencies
Research
Summary Overview
Individuals and organizations perform marketing functions. It is often easiest to think of  producers, such as manufacturers of tangible products and providers of intangible services. However, there are many other marketing performers.
Key Issues
 Consumers:
their needs drive the marketing responses of many organizations;
they provide marketing information to organizations.
 Intermediaries: firms that specialize in trade rather than production and execute tasks related to buying and selling.
 Collaborators: firms that aid in the exchange process and provide marketing functions other than buying and selling.
advertising agencies, marketing research firms;
independent product-testing laboratories;
Internet service providers (ISP’s); transporting firms, etc.
Universal functions of marketing need to be performed by someone.
There can be specialization in the performance of these functions.
Functions can also be shared and shifted among the marketing performers.
Discussion Question: Why doesn’t each of the organizations or individuals in a macro-marketing system perform all of the marketing functions?
Consumers

10. How Decisions are Made in an Economic System
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Command
Economy
Market-Directed Economy
Government officials decide
May work well if:
Simple economy
Little Variety
Adverse Conditions
Adjusts itself
Price is value measure
Freedom of choice
Government’s role limited OR
Summary Overview
Every society needs an economic system: the way an economy organizes to use scarce resources in production and consumption. Depending upon the type of economic system, decisions about resource allocation are made differently.
Key Issues
Command economy (also called “planned” economies):
 government officials make decisions about production and distribution;
 can work well in simple economies or under adverse conditions.
Market-directed economy: individuals govern resource allocation, production and consumption.
Characteristics of market-directed economies include:
 Adjusts itself.
 Price is a measure of value:
consumers pay what they think things are worth;
producers try to meet those price expectations.
 Greatest freedom of choice:
less intervention from government planners;
more choices are available to producers and consumers.
 The role of government is to ensure fairness and the common good.
Discussion Question: What are examples of things government officials compel consumers to buy, even in a largely market-directed economy?

11. Marketing’s Role Has Changed Over Time
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Simple Trade Era
Focus:
Sell Surplus
Production Era
Focus:
Increase Supply
Summary Overview
As marketing has evolved, its focus has changed from a focus on products to a focus on customer needs. An important point to remember is that some managers have not made it all the way to the final stages of marketing evolution.
Key Issues
 Simple trade era--families trade or sell their output to local distributors.
 Production era--company focuses on production of a few specific products:
no ceiling on demand for the firm's products;
focus on producing more efficiently, selling what it's easy to produce.
 Sales era--competition increases:
finite demand for firm's products and services;
surplus of products for sale;
focus on pushing products via promotion, beating competition.
 Marketing department era--emphasis on coordinating marketing activities in a marketing department.
 Marketing company era--marketing is an overall philosophy:
everyone in the organization is involved in increasing customer satisfaction;
short-run and long-term planning;
guided by the marketing concept.
Discussion Question: Many companies profess to be customer-oriented, but their customer service still leaves a lot to be desired. Why?
Sales Era
Focus:
Beat Competition
Marketing Department Era
Focus:
Coordinate and Control
Marketing Company Era
Long-Run Customer Satisfaction
Focus:

12. The Marketing Concept (Exhibit 1-3)
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Customer
satisfaction
Total company effort
Profit (or another measure of long-term success) as
an objective
The
Marketing
Concept
Summary Overview
The cornerstone of the marketing-oriented company is the marketing concept.
Key Issues
Production orientation--making whatever products are easy to produce and then trying to sell them.
Marketing orientation--designing marketing programs that will meet customer needs.
Marketing concept:
 customer satisfaction guides the whole organization;
 all individuals work together to accomplish this goal
Discussion Question: What can managers do to motivate everyone in the organization to satisfy customer needs?
 requires that the company be profitable.

13. Creating Customer Satisfaction
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Creating Customer Satisfaction
Summary Overview
This ad from Benadryl demonstrates that the firm attempts to create customer satisfaction by giving customers what they need—often ease and convenience.
Key Issues
Benadryl: high quality, expensive.
Not every consumer will be interested in paying for the brand name or ease of use.
Benadryl meets the needs of people who are willing to pay more.
Benadryl has responded to the need for an easier way to deliver its medicine.
The company has also provided easy dosing for its customers’ children.

14. Adopting The Marketing Concept
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Adopting The Marketing Concept
Summary Overview
Adoption of the marketing concept has varied by type of organization, but the concept continues to penetrate organizations of all types.
Key Issues
Consumer product companies were first to accept the marketing concept.
Service industries are catching up.
FedEx 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 FedEx’s ad (serving more European destinations), what challenges will it face in continuing to meet customer needs?
Now Flying To More Places In Europe.

15. The Marketing Concept and Customer Value
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Take Customer’s Point of View
Customer May Not Dwell On Value
Summary Overview
To better understand what it takes to satisfy a customer, it’s useful to  take the customer’s point of view.
Key Issues
Customer value is the difference between the benefits a customer sees from a marketing offering and the costs of obtaining those benefits.
Different customers may see the benefits and costs in different ways.
 The customer may not always dwell on value as a key determinant of buying behavior.
Discussion Question: Can you give examples of firms that provide you with superior customer value? Do other consumers view this value in the same way?
 Where does competition fit?
A firm that offers superior customer value is likely to win customers.
 Customer value builds relationships.
Understanding customer value is especially important when products and services are very similar.
Where Does Competition Fit?
Costs
Benefits
Customer Value Builds Relationships

16. Interactive Exercise: Customer Value
The objective of this exercise is to show a graphical example illustrating the concept of customer value, using eight different brands of vacuum cleaners. They are positioned against each other based on: (a) the benefit ratings they received as a result of an independent lab test, and (b) their retail prices.
Working through the exercise, the students will learn:
How to use the available information to compute a price index and benefit index for each brand;
How to compute a customer value index for each brand;
How the judgments about value differ depending on the type of index used and the total number of brands considered.
For complete information and suggestions on using this Interactive Exercise, please refer to the “Notes on the Interactive Exercise” section for this chapter in the Multimedia Lecture Support Package to Accompany Basic Marketing. That same information is available as a Word document in the assets folder for the PowerPoint file.
© 2009 McGraw-Hill Companies, Inc., McGraw-Hill/Irwin

17. Price
Benefit Rating
Price Index
Benefit Index
Value Index
Dirt Devil 90 58 GE
110
Oreck
380
Kenmore
199 66
Hoover
300 75
Kirby
990
Average
344.83
63.5

18. Putting It All Together (Exhibit 1-6)
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Total Company Effort to Satisfy Customers
Total Company Effort to Satisfy Customers
Offer Superior Customer Value
Build Profitable Customer Relationships
Summary Overview
This model summarizes the important ideas presented to this point.
Key Issues
In a firm that has adopted the marketing concept, everyone focuses on customer satisfaction.
The organization offers superior customer value.
 Value, in turn, helps attract customers and  keeps them satisfied after they buy.
 This satisfaction then leads to repeat purchase and  most likely purchases of other products offered by the firm.
 In this way, the firm builds profitable relationships with its customers.
Discussion Question: If a firm’s customers are already satisfied with the firm’s offerings, why does the firm need to look for new and better ways to provide customer value?
Adopting the marketing concept is a “win-win” situation for marketers and consumers!
Increase Sales to Customers
Attract
Customers
Retain Customers
Satisfy
Customers

19. The Marketing Concept Applies in Nonprofit Organizations
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Support and “Satisfied Customers”
Newcomers to Marketing
The Bottom Line ?
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.
 The marketing concept provides a focus on what is really needed.
Marketing Concept Provides Focus
May Not Be Organized for Marketing

20. Government Marketing Summary Overview
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Government Marketing
Summary Overview
Adoption of the marketing concept has brought focus to the U.S. Postal Service, a government agency, in the face of increased competition from more traditional profit-oriented delivery and transportation service firms.
Key Issues
The United States Postal Service is promoting its services:
to firms that are trying to target personalized communications;
to help develop closer customer relationships.
Discussion Question: What obstacles will the Postal Service have to overcome in persuading businesses to use the Postal Service as the vehicle for direct mail promotional campaigns? Are these obstacles related to the differences between profit and nonprofit organizations?

21. 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 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.
 “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 Needs Be Satisfied?
What if Profits Suffer?
The Marketing Concept Guides Ethics

22. You should now be able to:
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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.
You should now 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.

23. You should now be able to:
This slide refers to material on page 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.
You should now be able to:
Know what the marketing concept is--and how is 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.

24. Key Terms Production Buying Customer satisfaction Selling Transporting
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Production
Customer satisfaction
Innovation
Marketing
Pure subsistence economy
Macro-marketing
Economies of scale
Universal functions of marketing
Buying
Selling
Transporting
Storing
Standardization and grading
Financing
Risk-taking
Market information
Intermediary
Summary Overview
These are key terms you should be familiar with based upon the material in this presentation.
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 and 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: looking for and evaluating goods and services.
Selling: promoting the product (includes the use of personal selling, advertising, and other direct and mass selling methods) .
Transporting: the movement of goods from one place to another.
Storing: holding goods until customers need them.
Standardization and grading: sorting products according to size and quality.
Financing: provides 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: 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.

25. Key Terms Marketing company era Collaborators Marketing concept
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Marketing company era
Marketing concept
Production orientation
Marketing orientation
Customer value
Micro-macro dilemma
Social responsibility
Marketing ethics
Collaborators
E-commerce
Economic system
Command economy
Market-directed economy
Simple trade era
Production era
Sales era
Marketing department era
Summary Overview
These are additional key terms.
Key Issues
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 application 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.
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 product—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 product and then try to sell them.
Marketing orientation: means trying to carry out the marketing concept (try to offer customers what they need).
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.