Chapter 1: Customer-Driven Marketing

Learning Objectives

  1. Explain how marketing creates utility through the exchange process.
  2. Contrast marketing activities during the four eras in the history of marketing.
  3. Define the marketing concept and its relationship to marketing myopia.
  4. Describe the characteristics of not-for-profit marketing.
  5. Describe the five types of nontraditional marketing.
  6. Outline the changes in the marketing environment due to technology.
  7. Explain the shift from transaction-based marketing to relationship marketing.
  8. Identify the universal functions of marketing.
  9. Demonstrate the relationship between ethical business practices and marketplace success.

Online Student Resources

Downloadable PowerPoint slides http://www.swlearning.com/marketing/boone/cont_11e/student_resources.html choose Chapter 1

eLecture (Narrated PowerPoint Slideshow) http://www.swlearning.com/marketing/webtutor/boone_cm_11e/electure/ch01

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Quiz Bowl http://www.swlearning.com/marketing/webtutor/boone_cm_11e/quizbowl/part01/ (Chp1-4)

Video Case http://www.swlearning.com/marketing/webtutor/boone_cm_11e/video_cases/ch01.html

Chapter Outline

You may want to use the following as a guide in taking notes.

  1. Chapter Overview - Customer loyalty is the watchword of twenty-first century marketing.

Sophisticated technology creates new products and demands new approaches to marketing existing products. Company size and type aren’t important - it’s the ability to serve the needs of customers and reaction time that determines a firm’s success.

  1. What is Marketing?
    1. Production and marketing of goods and services is the essence of economic life in any society.
      1. Utility is the want-satisfying power of a good or service. Its four forms are utility of form, time, place, and possession.
      2. Marketing creates utility of time, place, and possession.
      3. ALL organizations must create utility to survive.
      4. Professors Guiltinan and Paul advocate "creating a customer" by identifying needs, determining the needs the organization can profitably serve, and developing an offering that people will buy to satisfy those needs.
    2. A Definition of Marketing -- Marketing is the process of planning and executing the conception, pricing, distribution, and promotion of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives.
      1. The definition used here reflects the expanded concept of marketing that assumes that marketing will be conducted ethically and will effectively serve the interests of society and the organization.
      2. The customer, client, or public determines the nature of the marketing program.
      3. Emphasis is placed on creating and maintaining long-term relationships with customers and suppliers.
    3. Today’s Global Marketplace provides a worldwide customer base of 6 billion people.
      1. International agreements are increasing the volume of international trade.
      2. Electronic commerce brings formerly isolated locations into the world marketplace.
      3. Modern nations are interdependent because none can produce everything it needs.
      4. Services, including skilled labor and technology, are marketable internationally.
      5. The U.S. is an attractive market for foreign firms because of its size and wealth.
      6. Domestic strategies may need modification to work in the international sphere.
  2. Four Eras in the History of Marketing
    1. The Production Era -- Before 1925, most firms were oriented toward production as a goal.
      1. The prevailing attitude was that a quality product would sell itself.
      2. Emerson’s "better mousetrap" concept -- though flawed -- was the guiding philosophy of the era.
      3. Neglected was the realization that a product must fill a marketplace need.
    2. The Sales Era -- Output increases, manufacturers seek customers for their goods, and personal selling and advertising are viewed as means to overcome sales resistance.
      1. The basic assumption of this era was that customers would resist buying products not deemed essential and that selling and advertising were the keys to convincing hem to buy.
      2. Once again, marketers overlooked the idea that selling is only one part of the marketing task.
    3. The Marketing Era - A new point of view appears as organizations develop a company-wide consumer orientation
      1. At the end or World War II, a shift in market conditions from a seller’s market - one in which there were more buyers than goods and services available to them - to a buyer’s market - one in which there were more goods and service available that people who wanted them - occurred.
      2. Marketing takes its place as a leading player in product planning.
      3. Firms embrace the marketing concept - a company-wide consumer orientation designed to discover and satisfy consumer wants and needs.
      4. The strength of a firm’s market orientation relates directly to market success.
    4. The Relationship Era -- Firms learn to focus on establishing and maintaining long-term relationships with customers and suppliers
      1. The concept of relationships rather than simple exchanges becomes central to marketing thinking.
      2. Long-term, value-added relationships with customers and suppliers create strategic alliances that benefit everyone.
    5. Converting needs to wants is achieved by focusing on the benefits resulting from the acquisition of goods and services
      1. The need for clothing is translated into a market for designer clothing.
      2. "User-friendly" software and low prices make computers accessible to "non-techies"
      3. Firms adopting the marketing concept focus on solving consumer problems.
  3. Avoiding Marketing Myopia -- Recognizing the Scope of One’s Business.
    1. There have been mis-steps along the way to general use of the marketing concept. Levitt identified marketing myopia as management’s failure to recognize the scope of its business.
      1. Firms should define their goals broadly and in terms of satisfying consumer needs.
      2. AT&T isn’t a telephone company - it’s a communications firm.
  4. Extending the Traditional Boundaries of Marketing - For-profit and Not-for-profit organizations can both successfully apply the marketing concept.
    1. Marketing in public-sector and private-sector not-for-profit organizations
      1. Not-for-profit organizations are big business - there are more than 1 million of them employing over 15 million people.
      2. Not-for-profits are present in both the public and the private sectors.
      3. The private sector has even more not-for-profits than does the public.
      4. Adopting the marketing concept often means partnering between a not-for-profit and a for-profit firm.
    2. Characteristics of not-for-profit marketing
      1. Not-for-profit organizations lack an orientation toward "the bottom line" - the profitability that is so important to for-profit firms. On the other hand, they need just as much money to do the things they do as do for-profits.
      2. Recent history has not-for-profits developing more cost-effective ways to render their services and better ways to compete for donor dollars.
      3. Not-for-profits differ from for-profits in having multiple "publics" - typically at least their clients and sponsors, but sometimes others as well.
      4. Not-for-profits’ customers often have less control over the organization’s destiny than do customers of profit-making firms.
      5. Sometimes resource contributors attempt to interfere with not-for-profit marketing programs to advance their own agendas.
    3. Nontraditional marketing -- marketing persons, places, causes, events, and organizations
      1. Person marketing involves attempting to cultivate the attention, interest, and preferences of a target market toward a celebrity or authority figure.
        1. Professional athletes are major endorsers of products and services.
        2. Jimmy Buffett is an example of how a "semi-celebrity" can achieve fame.
      2. Place marketing is the attempt to attract customers to a particular place, such as a city, state, country, or other attraction.
      3. Cause marketing refers to the identification and marketing of a social issue, cause, or idea to selected target markets.
        1. Fairly common is linkage between a profit-seeking firm and a cause, such as Coca-Cola’s relationship with Tiger Woods’ annual fund raiser for his foundation supporting youth organizations
      4. Event marketing refers to marketing of sporting, cultural, and charitable activities to selected target markets.
      5. Organization marketing is the attempt to influence others to accept the goals of, receive the services of, or contribute in some way to an organization.
  5. Critical Thinking and Creativity - Source of New Concepts and Ideas
    1. Critical thinking is the process of determining the authenticity, accuracy, and worth of information, knowledge, claims, and arguments.
      1. Critical thinking by Director of the Mint Philip N. Diehl resulted in a move to make the stodgy old organization more like a profit-seeking business.
    2. Creativity is an activity that produces original ideas or knowledge, frequently by testing combinations of concepts or data to produce unique results.
      1. Age is no barrier to creativity.
  6. The Technology Revolution in Marketing
    1. Technology is the business application of knowledge based on scientific discoveries, inventions, and innovations
      1. Interactive multimedia technologies have revolutionized the way we store, distribute, retrieve, and distribute data.
    2. Interactive marketing includes buyer-seller communications in which the customer controls the amount and type of information received from a marketer.
      1. Interactive marketing allows the customization of communication.
      2. Online auctions and name-your-price vendors are major uses of interactive marketing.
    3. The Internet is a global network that includes some 50,000 networks around the globe that lets anyone with a personal computer send and receive text and images practically anywhere.
      1. The World Wide Web (WWW) is an interlinked collection of information sources within the larger Internet.
      2. The Web offers advantages over traditional media of speed of communication, interactivity, ease of navigation, currency of information, and multimedia capabilities.
    4. Broadband technology is an always-on Internet connection operating at a very high rate of speed that can deliver large amounts of data at once, making online marketing even faster and easier.
    5. Wireless Internet connections eliminate the need for a physical connection between computer and connector, increasing the mobility of access to the Internet.
    6. Interactive television is, as the name implies, a package that allows viewers to interact with programs or commercials by using their remote controls.
    7. Marketers use the Web in four general ways
      1. Virtual storefronts allow customers to view and order merchandise.
      2. Interactive brochures provide company and product information.
      3. Online newsletters provide current news, industry information, and contacts and links for internal and external customers.
      4. The Web is a customer service tool through which one can order catalogs, access lists of frequently asked questions, place orders, and question the company.
      5. The key to success in cyberspace is convincing potential customers to visit one’s site.
      6. More firms have failed in marketing efforts on the Net than have succeeded.
  7. From Transaction-Based Marketing to Relationship Marketing
    1. The traditional view of marketing is being replaced by a different view
      1. Traditional - transactions-based - marketing focus on attracting customers, closing deals.
      2. Relationship marketing is oriented toward creating and maintaining long-term, cost-effective relationships with customers and suppliers.
      3. Relationship marketing expands the definition of the terms customer and supplier to include people within the firm.
      4. Ultimately, the objective is to convert indifferent customers into loyal ones, generating repeat sales.
    2. Developing Partnerships and Strategic Alliances.
      1. A strategic alliance is a business-to-business partnership between supplier and customer that creates a competitive advantage for both.
      2. The use of strategic alliance is not limited to for-profit organizations.
  8. Costs and Functions of Marketing -- It costs money to produce utility
    1. The exchange functions
      1. Buying has a number of implications for marketers, both in terms of their customers and themselves.
      2. Selling, the "other half" of the exchange process, involves advertising, sales promotion, and personal selling as tools to effect its success.
    2. The physical distribution functions
      1. Transporting creates utility of place by getting products where they are wanted.
      2. Storing involves warehousing goods until they are needed.
    3. The facilitating functions
      1. Standardizing and grading reduce the need for purchasers to inspect every item they buy to assure that it meets their specifications.
      2. Financing provides buyers with access to funds to pay for inventories between time of purchase and time of sale. Marketers at all levels of distribution may provide such services.
      3. Risk-taking is an inherent function of business which recognizes the uncertainties involved in being in the marketplace.
      4. Securing marketing information meets the need for decision-oriented input about customers.
  9. Ethics and Social Responsibility: Doing Well by Doing Good
    1. Most firms adhere to an ethical code, but there have been transgressions in recent years.
    2. Ethics training may help in improving behavioral standards, but sometimes public or media pressure is the most persuasive tool.
    3. High ethical standards never hurt, often producing improved customer relationships, employee loyalty, marketplace success, and improved financial performance.

 

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