What are the core concepts of marketing explain with examples

Core Concepts of Marketing and what are the importance of the core concept of marketing. what is consumer behavior and marketing strategy pdf free download
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Core Concepts of MarketingINTRODUCING MARKETING LEARNING OBJECTIVES As you read the chapter, you should develop an understanding of the following key marketing concepts: • The important role marketing can play in the success of an organization. • Organizations that correctly employ marketing have several common characteristics. • The various kinds of marketing. • the strategic workings of marketing components. ELVIS-ALIVE AND WELL It's Elvis week in Memphis, and all over town they've got banners: '''20 years/Still Rocking.'" Is it just us, or is it weird to wax so upbeat about the twentieth anniversary of a death? You can't help but feel that the world's got the Elvis Presley it wanted: a changeless, ageless object of contemplation and veneration. Elvis Week culminates in an event called Elvis-The Concert 2000 in which the man himself, resurrected by video technology, will sing with his living ex-band mates and the Memphis Symphony Orches­ tra. Who wouldn't secretly prefer this fail-safe digitized spectacle to a weary 62-year-old grinding out "If I Can Dream" one more time? Twenty years ago, no one close to Elvis could have imagined that his fans would spend over 250 million annually on Elvis dolls, plates, key chains, towels, and wigs-to name just a few items. Two years after Elvis's death, his estate was worth less on paper than it owed in taxes. Then, in 1979, Priscilla Presley, Elvis's ex-wife, was named an executor of the estate for her daughter. The family's crown jewels-Elvis's recordings-had been sold off years earlier and Priscilla had just one chance to save the legacy. She gambled that Elvis's name, image, and likeness were worth something. And she turned his home into a roadside attraction to fmance a legal war, fighting for control of all that was Elvis. Priscilla concluded that there was only one way to save Graceland: sell tickets to the hundreds of gawkers who daily pressed their faces against Elvis's gates. Meanwhile, why not sell some gewgaws to the fans that were already buying cheesy trinkets at the strip mall across the street? Buoyed by an initial investment of 560,000, Graceland's doors were opened to the public in 1982. It took 38 days to recoup their investment; 350,000 visitors walked through the house the first year. "I felt I was betraying Elvis," says Priscilla, recalling her decision to enter the amusement business. "Graceland was 12 CHAPTER 1 INTRODUCING MARKETING r http';/ © Elvis Presley Enterprises, Inc. his pride and joy. But it came down to the reality that I had to open it up for my daugh­ ter's future." Today 750,000 people visit Graceland each yar-52% of them under 35, which suggests this is a business with a future. The marsion has upgraded its public facilities many times over the years, but there still are no vending machines on the grounds and the lawns have never been turned into a parking lot. The original 24 acres have been expanded into an 80-acre compound and Priscilla intends to add a hotel to the complex. There are also plans for a casino in Las Vegas-perhaps with an Elvis wedding chapel­ and an international chain of Hard Rock Cafe-style restaurants called Elvis Presley's Memphis. Finally, a staff of ten lawyers is employed full-time by Elvis Presley Enter­ prises simply to protect Elvis's image from interlopers. Sources: Corie Brown, "Look Who's Taking Care of Business," Newsweek, August 18, 1997, p. 62. Karen Schoemer, "Burning Love," Newsweek, August 18, 1997, pp. 58-61. G. Brown, "More Earll' Elvis Unearthed ," The Denver Post, August 15, 1997, p. 9F. Greg Hassell, "King of Trees Rises From Graceland," Houston Chronicle, Dec. 8,1999, p. 11. Duncan Hughes, "Elvis is Back From the Dead Fmancially," Sunday Business, August 15, 1999, p. 23. INTRODUCTION The success of Elvis Presley Enterprises was a result of the insights and courage of Priscilla Presley. Despite her lack of formal training in marketing, she exhibited a creative approachMARKETING: DEFINITION AND JUSTIFICATION 3 toward doing business that will become more and more necessary as the 21 st century con­ tinues. Innovative thinking has become a prerequisite for success in today's global envi­ ronment, which is saturated with near clone products being sold by millions of comparable competitors. The status quo will no longer suffice. The need for constant change paired with clear strategies is now essential. Marketing constitutes just one of the functions available to every business. Along with research, production, finance, accounting, and a myriad of other functions, marketing con­ tributes to the ability of a business to succeed. In many businesses, marketing may be deemed of highest importance; in others, it may be relegated to a lesser role. The very existence of business depends upon successful products and services, which in turn rely on successful marketing. For this reason, every busines person will benefit from even basic marketing knowledge. Moreover, marketing principles have been effectivey applied to several non­ business institutions for more than 30 years. Bankers, physicians, accounting firms, invest­ ment analysts, politicians, churches, architectural firms, universities, and the United Way have all come to appreciate the benefits of marketing. A word of warning: there is a long-standing myth that marketing is easy. After going through this book you may conclude that marketing is interesting, fun, challengingeven vague-but it is not easy. Whether you like numbers or hate numbers, like people or hate people, like doing the same thing every day or like constant change there are opportuni­ ties for you in marketing. MARKETING: DEFINITION AND JUSTIFICATION Defining Marketing Noted Harvard Professor of Business Theodore Levitt, states that the purpose of all busi­ ness IS to "find and keep customers." Furthermore, the only way you can achieve this objec­ tive is to create a competitive advantage. That is, you must convince buyers (potential customers) that what you have to offer them comes closest to meeting their particular need or want at that point in time. Hopefully, you will be able to provide this advantage consis­ tently, so that eventually the customer will no longer consider other alternatives and will purchase your product out of habit. This loyal behavior is exhibited by people who drive only Fords, brush their teeth only with Crest, buy only Dell computers, and have their plumb­ ing fixed only by "Samson Plumbing-On Call 24 hours, 7 days a week." Creating this blind commitment-without consideration of alternatives-to a particular brand, store, per­ son, or idea is the dream of all businesses. It is unlikely to occur, however, without the sup­ port of an effective marketing program. In fact, the specific role of marketing is to provide assistance in identifying, satisfying, and retaining customers. While the general tasks of marketing are somewhat straightforward, attaching an accept­ able definition to the concept has been difficu't. A textbook writer once noted, "Marketing is not easy to define. No one has yet been able to formulate a clear, concise definition that finds universal acceptance." Yet a definition of some sort is necessary if we are to layout the boundaries of what is properly to be considered "marketing." How do marketing activ­ ities differ from nonmarketing activities? What activities should one refer to as marketing activities? What institutions should one refer to a marketing institutions? Marketing is advertising to advertising agencies, events to event marketers, knock­ ing on doors to salespeople, direct mail to direct mailers. In other words, to a person with a hammer, everything looks like a nail. n reality, marketing is a way ofthinking about busi­ ness, rather than a bundle of techniques. It's ;nuch more than just selling stuff and collect­ ing money. It's the connection between people and products, customers and companies. Like4 CHAPTER 1 INTRODUCING MARKETING organic tissue, this kind of connection-or relationship-is always growing or dying. It can rever be in a steady state. And like tissue paper, this kind of connection is fragile. Cus­ tomer relationships, even long-standing ones, are contingent on the last trung that happened. Tracing the evolution of the various definitions of marketing proposed during the last thirty years reveals two trends: 1) expansion of the application of marketing to non-profit and non-business institutions; e.g., charities, education, or health care; and 2) expansion of the responsibili'jes of marketing beyond the personal survival of the individual firm, to include the betterment of society as a whole. These two factors are reflected in the official Amer­ ican Marketing Association definition published in 1988. "Marketing is the process ofplanning and executing the conception. pricing, promo­ tion, and distribution of ideas, goods, and services to create exchanges that satisfy individual (customer) and organiwtional objectives.'" While this definition can help us better comprehend the parameters of marketing, it does not provide a full picture. Definitions of marketing cannot flesh out specific transac­ tions and other relationships among these elements. The following propositions are offered to supplement this definition and better position marketing within the firm: 1. The overall directive for any organization is the mission statement or some equiv­ alent statement of organizational goals. It reflects the inherent busines philoso­ phy of the organization. 2. Every organization has a set of functional areas (e.g., accounting, production, finance, data processing, marketing) in which tasks t;lat are necessary for the suc­ cess of the organiation are performed. These functional areas must be managed if they are to achieve maximum performance. 3. Every functional area is guided by a philosophy (derived from the mission state­ ment or company goals) that governs its approach toward its ultimate set of tasks. 4. Marketing differ from the other functional areas in that its primary concern is with exchanges that take place in markets, outside the organization (called a transaction). 5. Marketing is most successful when the philosophy, tasks, and manner of imple­ menting available Lechnology are coordinated and complementary. Perhaps an example will clarify these propositions: L.L. Bean is an extremely suc­ cessful mail order company. The organization bases much of its success on its longstand­ ing and straightforward mission statement: "Customer Satisfaction: An L.L. Bean Tradition" (Proposition 1). The philosophy permeates every level of the organization and is reflected in high quality products, fair pricing, convenience, a 100% satisfacion policy and-above all-dedication to customer service (Proposition 2). This philosophy has neces­ sitated a very high standard of production, efficient billing systems, extensive and respon- sive communication networks, computerization, innovative cost controls, and so forth . Moreover, it has meant that all of these functional areas have to be in constant communi­ cation, must be totally coordinated, and must exhibit a level of harmony and mutual respect that creates a positive environment in order to reach shared goals (Proposition 3). The L.L. Bean marketing philosophy is in close harmony with its mission statement. Everything the marketing department does must reinforce and make real the abstract concept of "consumer satisfaction" (Proposition 4). The price-product-quality relationship must be fair. The prod­ uct must advertise in media that reflects trus high quality. Consequently, L.L. Bean adver-MARKETING: DEFINITION AND JUSTIFICATION 5 Pr t Our AD 1.1 The website for L.L. Bean represents the newest form of marketing communication, tises through its direct-mail catalogue and through print ads in prestigious magazines (e.g. , National Geographic). It also has one of the most highly regarded websites (Ad 1.1). Prod­ uct selec:ion and design are based upon extensive research indicating the preferences of their customers Since product delivery and possible product return is critical, marketing must be absolutely sure that both these tasks are performed in accordance with customers' wishes (Proposition 5). While one might argue that the marketing function must be the most important function at L.L. Bean, this is r.ot the case. L.L. Bean is just as likely to lose a customer because of incorrect billing (an accounting function) or a flawed hunting boot (a product function) as it is from a misleading ad (a marketing function). Admitted:y, marketing is often a critical part of a firm's success. Nevertheless, the importance of marketing must be kept in perspective. For many large manufacturers such as Proctor & Gamble, Microsoft, Toyota, and Sanyo, marketing represents a major expen­ diture, and these businesses depend on the effectiveness of their marketing effort. Conversely, for regulated industries (such as utilities, social services, or medical care or small businesses providing a one-of-a-kind product) marketing may be little more than a few informative brochures. There are literally thousands of examples of businesses-many quite small­ that have neither the resources nor the inclination to support an elaborate marketing organ­ ization and strategy. These businesses rely less on research than on common sense. In all these ases . the marketing program is worth the costs only if it fits the organization and facilitates its ability to reach its goals.6 CHAPTER 1 INTRODLCING MARKETING NEWSLINE: PICTURE YOUR MISSION Artist Linda Armantrout, owner of Armantrout Graphic Design and Illustration, works with businesses to help them picture their goals­ literally-through a "pictorial mission statement. " As op;:JOsed to the typical written mission statement that is handed down to employees from management. Armantrout creates a bright watercolor picture of the statement, after receiving input from both employees and managers, The final result is usually a collage of sorts that depicts what is important to the staff and the business-such as clients, products, services, and ethics. The mission statement picture that Armantrout designs is framed and hung at the company to remind employees of their goals. The piC­ torial statements also can be put on coffee mugs, jackets, and desk­ top posters, or turned into screen savers. One of Armantrout's clients, BancOne Leasing Corporation, came up with a colorful image of a globe surrounded by images represent­ ing its clients and services. Drawings of airplanes and buses repre­ sent what the company leases and the globe represents its national presence. Sources: Katie Ford. "Picture Your Goals In Color, " The Denver Business Jour­ nal, March 17-18, 1999, pp. 33A, 35A. Shirleen Holt, "Mission Possible," Busi­ ness Week, August 16. 1999, p. F-12. Teri Lammers, ''The Effective and Indispensable Mission Statement," Inc., August. 1999, p. 75. Justification for Study This task of determining the appropriateness of marketing for a particular business or insti­ tution serves as a major justification for learning about marketing. Although marketing has clearly come of age during the decades of the 1970, 1980s, and 1990s, there is still a grat deal of misunderstanding about the meaning and usefulness of marketing. For most of the global public, marketing is still equated with advertising and personal selling. While mar­ keting is both of those, it is also much more. The business community can attrioute a partial explanatior. or this general lack of under­ standing about marketing to the uneven acceptance and adoption of marketing. Some busi­ nesses still exist in the dark ages when marketing was defined as "the sales department will sell whatever the piant produces." Others have advanced a bit further, in that they have a marketing officer and engage in market research, product development, promotion and have a long list of marketing activities. More and more businesses firmly believe that the aim of marketing is to make selling superfluous, meaning that the marketer knows and understands the customer so well that the product or service is already what's wanted and sells itself. This does not mean that marketeis ignore the engineering and production of the product or the importance of;Jfofits. It does suggest, however, that attention to customers-who they are and who they are going to be-is seen to be in the best 10ng-tenn interest of the com­ pany. As a student imerested in business, it is beneficial for you to have an accurate and com­ plete comprehension of the role marketing can and should play in today's business world. There are also several secondary reasons to study marketing. One we have already alluded to in our discussion on definitions: The application of marketing to more nonprofitMARKETING: DEFINITION AND JUSTIFICATION 7 and nonbusiness institutions is growing. Churches, museums, the United Way, the U.S. Armed Forces, politicians, and others are hiring individuals with marketing expertise. This has opened up thousands of new job opportunities for those with a working knowledge of marketing. Even if you are not getting a degree n marketing, knowing abou:: marketing will pay off in a variety of careers. Consider the following individuals: • Paul Moore, an engineer specializing in earth moving equipment, constantly works with product development and sales personnel in order to create superior products. • Christy Wood, a CPA, is a top tax specialist who spends much of her time main­ taining customer relationships, and at least three days month seeking new customers. • Steve Jacobson, a systems analyst and expert programmer, understands that his skills must be used to find the right combination of hardware and software for every one of his customers. • Doris Kelly, a personnel manager, must be skilled at finding, hiring, and training individuals to facilitate her organization's marketing efforts. • Craig Roberts, an ex-Microsoft engineer, has recently started a dot-com company and is in the process of raising capital. There are two final factors that justify the study of marketing for nearly every citizen. First of all, we are all consumers and act:ve participants in the marketing network. Under­ standing the rudiments of marketing will make us better consumers, which in tum will force businesses to do their jobs better. Second, marketing has an impact on society as a whole. Concepts such as trade deficit, embargo, devaluation of a foreign currency, price fixing, decep­ tive advertising, and product safety take on a whole new meaning when we view them in a marketing context. This knowledge should make you a more enlightened citizen who under­ stands what such social and political issues mean to you and to our society. Marketing capsules summarize the information throughout this text. Characteristics of a Marketing Organization As noted earlier, the application of marketing in a particular organization varies tremen­ dously, ranging from common-sense marketing to marketing departments with thousands of staff members and multimillIOn-dollar budgets. Yet both may have a great deal in com­ mon in respect to how they view the activity called marketing. We refer to these common characteristics as the Cs of Marketing . They are your clues that a business understands marketing. MARKETING CAPSULE 1. 1. The purpose of marketing is to help find and keep cus­ 4. The primary reasons for studying marketing are: tomers by creating a competitive advantage. a. It is important to assess the role marketing should play in the firm. 2. Marketing, one of severai functions operating in an organ­ b. Marketing offers growing career opportunities. ization, is directed by the mission statement of the organ­ c. Marketing enhances our chances of becoming more ization and provides certain tools to reach objectives. effective consumers and citizens. 3. The value of marketing must be kept in perspective: it must contribute to the growth of the firm.8 CHAPTER 1 INTRODUCING MARKETING Consumer Content What makes the existence of any organization possible is that there are a significant num­ ber of people who need the product or service offered by that organization. As soon as that group becomes too small, or the need no longer exists, or some other organization can sat­ isfy that need better, the organization will be eliminated. That is the way of a free economy. Thus, a politician doesn't get re-elected, an inner-city church closes its doors, the money needed to cure AIDS is not allocated, and the Vail Ski Resort files for bankruptcy. In the case of business organizations, and marketing organization:.: in particular, the people with the needs are called consumers or customers. In marketing, the act of obtain­ ing a desired object from someone by offering something of value in return is called the exchange process. Moreover, the exchange between the person with the need (who gives money or some other personal resource) and the organization selling this need-satisfying thing (a product, service, or idea) is inherently economic, and is called a transaction. There tends to be some negotiation between the parties. Individuals on both sides attempt to max­ imize rewards and minimize costs in their transactions so as to obtain the :'nost profitable outcomes. Ideally, all parties achieve a satisfactory level of reward. In each transaction, there is an underlying philosophy in respect to how the parties perceive the exchange. Sometimes deception and lying permeate the exchange. Other exchanges may be characteri zed as equitable, where each party receives about the same as the other-the customer's need is satisfied and the business makes a reasonable profit. With the emergence of the Internet and e-comrnerce during the 1990s, the nature of the exchange for many businesses and customers has changed dramaticall y. Today's consumers have access to far more and far better information. They also have many more choices. Businesses must provide a similar level of information and must deal with new competitors that are quicker, smarter, and open 24 hours a day. An organization that employs marketing correctly knows that keeping customers informed is easier if they keep in constant contact with the customer. This does not neces­ sarily mean that they write and call regularly, although it could. Rather, it more likely means that a marketing organization knows a great deal about the characteristics, values, inter­ ests, and behaviors of its customers, and monitors how these factors change over time. Although the process is not an exact science, there is sufficient evidence that marketers who do this well tend to succeed. When thi attempt to know as much about the consumer as possible is coupled with a decision to base all marketing on this information, it is said that the organization is consumer­ oriented or has adopted the marketing concept. It means working back from the customers' needs, rather than forward from the factory 's capabilities. Both historically and currently, many businesses do not folow the marketing con­ cept. Companies such as Texas Instruments and Otis Elevator followed what has been labeled a production orientation, where the focus is on technology, innovation, and low produc­ tion costs. Such companies assume that a technically superior or less expensive product sells itself. There are also companies, such as Amway, where sales and marketing are essen­ tially the same thing. This sales orientation assumes that a good salesperson has the capa­ bility to sell anything. Often, this focus on the selling process may ignore the consumer Of view the consumer as someone to be manipulated. Insightful businesses acknowledge the importance of production and sales, but realize that a three-step process is most effective: (1) continuously collect information about customers' needs and competitors' capabilities; (2) share the information across departments; and (3) use the information to create a com­ petitive advantage by increasing value for customers. This is true marketing.MARKETING: DEFINITION AND JUSTIFICATION 9 Company Capabilities All marketing organizations try to objectively compare their existing capabilities with their ability to meet the consumer's needs now and in the future. Moreover, when deficiencies are found, a good marketing organization must be willing to make changes as quickly as possible. When Toyota realized that their products were not connecting with consumers aged 35 and younger, it decided to take direct action. In 1999, it gathered eight people in their 20s and 30s from around the company into a new, ethnically diverse marketing group called "genesis." Their first assignment was to launch three cars meant to pull in younger buyers: the entry-level ECHO subcompact, a sporty new two-door Celica, and the MR2 Spyder, a 2 racy convertible roadster. Although assessing company capabilities often begins in the marketing area, all the business functions must be assessed. Do we have the technical know-how to produce a com­ petitive product? Do we have the plant capacity? Do we have the necessary capital? Do we have good top management? A "no" to any of these questions may stymie the marketing effort. Conversely, a strong advantage in cost control or dynamic leadership may provide the company with a competitive marketing advantage that has little to do with marketing, but everything to do with the business succeeding. Communication Few doubt that the secret of success in any relationship is communication. This is espe­ cially true in a marketing relationship, where the attitude of both parties is frequently skep­ tical, the nature of the contact is hardly intimate, and the message delivery system tends to be impersonal and imprecise. It's because of these factors that communication plays such an important role in a marketing organization. Marketers know that consumers are constantly picking up cues put out by the organ­ ization, or about the organization, that they use to form attitudes and beliefs about the organ­ ization. Many of these message-laden cues are controlled by the organization, including factors such as product design, product quality, price, packaging, outlet selection, adver­ tising, and the availability of coupons. In this case, marketers follow basic communication principles that are discussed throughout this book. Most notably, there is a constant attempt to make sure that all of these elements deliver a consistent message, and that this message is understood and interpreted in the same way by the various consumers. On the other hand, there are many message-laden cues that are not under the control of the marketer, yet may be more powerful in the minds of consumers, and that must be anticipated and dealt with by the marketers. A recent report that United Air Lines had the worst customer satisfaction scores created a downturn in both United's stock and customer reservations. Although there are many sources delivering such information, the three most prominent are employees, competitors, and the media. Employees, from the president on down, are all considered representatives of the organ­ ization for which they work. Consumers often assume that the behavior, language, or dress of an employee is an accurate reflection of the entire organization. Making employees­ and possibly even former employees-positive ambassadors of the organization has become so important that a new term has emerged-internal marketing. Competitors say a great deal about one another, some truths, some boldface lies. A marketing organization must be cognizant of this possibility and be prepared to respond. The automobile industry has used comparison messaging for over thirty years. Coke and Pepsi have been attacking and counter-attacking for about the same length of time. Negative polit­ ical messages appear to be very effective, even though few politicians admit to the strategy.10 CHAPTER 1 INTRODUCING MARKETING Finally, the media (editors and reporters working for newspapers, TV and radio sta­ tions, and magazines) looms as one of the greatest communication hurdles faced by mar­ keters, In a large marketing organization, the responsibility of communicating with the media is assigned to a public relations staff Public relations people write press release stories about their organization that they hope the media will use, If the press releases are not used, the marketer attempts to ensure that whatever the media says about the organization is accu­ rate and as complementary as possible. For smaller companies, dealing with the media becomes everyone's responsibility, Many businesses now face a new media, the Internet: chat rooms, websites, and propaganda campaigns intended to destroy a business have become commonplace, Companies that are willing to focus on communication as a means of doing business engage in relationship marketing-a type of marketing that builds long-standing positive relationships with customers and other important stakeholder groups, Relationship marketing identifies "high value" customers and prospects and bonds them to the brand through personal attention , Competition We have already mentioned the importance that competition plays in a marketing organi­ zation, At a minimum, marketing companies must thoroughly understand their competi­ tors' strengths and weaknesses. This means more than making sweeping generalizations about the competitors. It means basing irtelligent marketing decisions on facts about how competitors operate and determining how best to respond. Often the identificatior. of competitors is fairly straightforward. It is the supermar­ ket on the next block, or the three other companies that manufacture replacement wind­ shields. There are instances, however, when the identification of a competitor is not clear. Marketing expert iheodore Levitt coined the term "marketing myopia" several years ago to describe companies that mis-identify their competition,3 Levitt argued, for example, that the mistake made by the passenger train industry was to restrict their competition to other railroads instead of all mass transit transportat;on alternatives, including automobiles, air­ lines, and buses, Today we see the same mistake being made by companies in the enter­ tainment industry (movie theaters, restaurants, and resorts), who assume that their only competition is like-titled organizations. Since practically no marketer operates as a monopoly, most of the strategy issues con­ sidered by a marketer relate to competition, Visualize a marketing strategy as a huge chess game where one player is consta;1tly making his or her moves contingent on what the other player does. Some partners, like Coke and Pepsi, McDonald's and Burger King, and Ford and General Motors, have been playing the game so long that a stalemate is often the result. In fact, the relative market share owned by Coke and Pepsi hasn't changed by more than a percentage or two despite the billions of dollars spent by each on marketing, The desire of companies to accurately gauge competitors has led to the growing pop­ ularity of a separate discipline-competitive intelligence, This field involves gathering as much information about competitors through any means possible, usually short of break­ ing the law, More is said about this process in the Integrated Marketing (1M) box that follows, Cross-Functional Contact One of the first mistakes an organization might make is to allow the various functional areas to become proprietary, Whenever a marketing department considers itself most important to the success of the organization and self-sufficient without need for accounting, manu­ facturing, or human resources, it ceases to be a reliable marketing group, True marketers know tha they cannot be any better than their weakest link. Lack of understanding and trust between marketing and manufacturing, for instance, could mean that a product sold by mar-MARKETING: DEFINITION AND JUSTIFICATION 11 keting is not delivered when promised or with the right features. Marketers should con­ sider their peers in engineering, who rnjght not be able to produce an ambitious product requested by marketing at the cost desired. Likewise, human resources might not be able to locate the individ'lal "with ten years of experience in package goods marketing" requested by the marketing manager. The point is that marketing is far more likely to be successful if its staff relate intel­ ligently and honestly with members of the other functional areas. In some organizations, the walls of parochialism have been standing so long that tearing them down is almost impos­ sible. Nevertheless, creating inter-departmenta: connections is critical. With downsizing and other cost-cutting activities prevalent during the last decade, the need for inter-related and harmonious business functions has become even more impor­ tant. In the field of marketing, the term integrated marketing has been coined, suggesting that individuals working in traditional marketing departments are no longer specialists, but must become knowledgeable about all the elements of the business that currently or poten­ tially have an impact on the success of marketing. At the corporate level, all managers should share a corporate vision, and there should be an organizational structure that makes it pos­ sible for departments or divisions to share information and participate in joint planning. This approach represents the direction in which many companies are moving, includ­ ing giants like Kraft and Disney. To be truly integrated, though, every decision at each level of the business should support decisions made at all the other levels. To illustrate, let's say that the corporate goal is to maximize profit. A marketing plan objective to increase sales by marketing new products matches the goal. The previous 1M box also illustrates this point. Community Contact Most marketers are curious; they enjoy observing and noting what's happening in their com­ munity. Although the word "community" usually denotes a city, town, or neighborhood, we use the word here in a much broader sense. "Community" refers to the environment in INTEGRATED MARKETING • SPYING TO STAY COMPETITIVE Most corporate detectives avoid terms like spying and espi­ spectrum, business sleuths do everything from prowling trade­ onage, preferring the more dignified label "competitive intel­ show floors to combing through rivals' web sites and patent ligence," but whatever they call it, snooping on business rivals office filings. They keep their ears open in airports and aboard has become an entrenched sub-industry. flights. But sometimes they go further. They take photographs Nearly every large U.S. company has an intelligence office of competitive factories, and, increasingly, they rely on new of some kind. Some, like Motorola, Inc., have units sprinkled data-mining software that permits them to scan the Internet in almost all of their outposts around the world. Their assign­ at high speeds for snippets about their rivals. ment is to monitor rivals, sniff out mergers or new technolo­ gies that might affect the bottom line, even to keep tabs on Sources: Neil King, Jr. and Jess Bravin, "Call It Mission Impossi­ ble Inc.-Corporate Spying Firms Thrive," The Wall Street Jour­ morale at client companies. A veteran of the Central Intelli­ nal, Monday, July 3, 2000, pp. B1, B4; Norm Brodsky, "The First gence Agency formed Motorola's intelligence unit, viewed Step," Inc., August, 2000, pp. 37-38; "Spy Practice," Sunday as a model in the business, in 1982. Times (London), July 23, 2000, p. 89; "Competitive Intelligence is Corporate intelligence relies on a slew of tools-some Not COIporate Espionage;' Financial News, June 30, 2000, p. A6. sophisticated, many quite basic. On the simpler end of the12 CHAPTER 1 INTRODUCING MARKETING which he marketer operates. For Esther and Jim Williams, who operate an A&W drive-in in Mattoon, Illinois, community is quite small. For Verizon Communication, community encompasses practically the entire world, extending even to outer space. Regardless of the scope of the marketer's community, maintaining contact with it is essential. Contact could mean reading the local newspaper and listening to the local gossip. Or it could mean subscribing to information releases of several marketing research firms that monitor world events 24 hours a day. every day Either might do the job, although the differences in financial costs would be great. In Chaper 3 we discuss some of the more important trends in the world community. Esther and jim would find this discussion inter­ esting, but not very useful. U:timately, to be considered a responsible ci izen in the environments in which it oper­ ates, marketers have the ongoing task of engaging in only pro-societal activities and con­ ducting business in an ethical manner. There are many marKeting companies that donate millions of dollars or land to communities, clean lakes and rivers, revamp deteriorating neigh­ borhoods, give free product to the needy, manage recycling activities, and so forth. There is no doubt that the need for marketing to continue such activities will increase. The Role of Marketing in t he Firm: A Basis for Classification Marketing is an individualized ano highly creative process. Despite the availability of high­ powered compuL ers and sophisticated software capable of analyzing massive amounts of data, marketing is till more of an art rather than a science. Each business must customize its marketing efforts in response to its environment and the exchange process. Consequently, no two marketing strategies are exactly the same. This requirement of marketing to play slightly different roles, depending upon some set of situational criteria, has in tum provided us with a division of marketing into a num­ ber of different categories. This is not to imply, however, that there aren't general market­ ing principles that work in most businesses-there are. There is a right and wrong way to design a package. There are certain advertising strategies that tend to work more often than others. Rather, we are saying that because of certain factors, a busines's approach toward marketing and the ensuing trategy will require some modification from the basic plan. Shown in Table 1.1 arc the most common types of marketing categories. Since these various types ofmarketing will be discussed throughout this text, a brief introduction is provided at this point. Macromarketing Versus Micromarketing The division of marketing into macromarketing and micromarketing is a fairly recent one. Initially, the division was a result of the controversy concerning the responsibility of mar­ keting. Should marketing be limited to the success of the individual firm, or should mar­ keting consider the economic welfare of a whole society? Accepting the later, or "macro," point of view dramatically changes the way marketing is carried out. In this light, every marketing decision must be evaluated with regard to how it might positively or negatively affect each person and institution operating in that society. In 1982, Bunt and Burnett sur­ veyed the academic community in order to define more precisely the distinction between 4 macro- and mircomarketing. Their findings suggest that the separation depends upon "what is being studied," "whether it is being viewed from the perspective of society or the firm," and "who receives the consequences of the activity." Examples of macromarketing activi­ ties are studying the marketing systems of different nations, the consequences on society of certain marketing actions, and the impact of certain technologies on the marketing trans-MARKETING: DEFINITION AND JUSTIFICATION 13 the face of Charles Dubin-choir singer, moviegoer and medicines have helped reduce the number of Jeaths by half. TV director. Four years il(). Charles had "a funny New medicinesare also h'"'in to keep more patientsout of (et llo in h. chest." When Charles heard the ,"'ortl "heart the hospital by controlling l\lhrilik C(JnJlliwn thn leadto heart ,d ilSC:(\, such as high blood t-'ft'\Jrc and hrh cholesterol. ",lli,ise'" from his kt(lvr. he feared losing his indt:l\JI"e and his ability l(. t:no' life fully. But. to effective Ptl lmmc t:ll i-e,;ll company researchers are wo.rk i (\ hard to medicines. today he's enjoying n aet i \'C' (iret\ t. And, discover bft:(lkduHl jl,'hs. that will help make many illness with his new healither lifestyle. Charles is also doing his part and di:il.:; Ihin of the past andhri more l):j(U':f\l new to keep his heart in hfX Heart disease is the k'adifl ll\l."A.: hope for a better tom'fnlW. , ml)f people tic Charles tl(death arnt1-n Americans. But in the last .30 years, modern can get on wil h living and go on wit h the h(I\V. Amer Ica's Pharmaeutia l Companies I.,·dfng the way in the search (or cures AD 1.2 The pharmaceutical ;ndustry tries to maintain contact with consumers. action. The use of scanners in supermarkets and automatic teller machines in banking illus­ trates the last example. Micromarketing examples include determining how Nikon Steel should segment its market, recommending how National Jewish Hospital should price their products, and evaluating the success of the "Just Say No" anti-drug campaign. Service Marketing Versus Goods Marketing The distinction between services and goods products is not always clear-cuL In general, service products tend to be intangible, are often consumed as they are produced, are difficult14 CHAPTER 1 INTRODUCING MARKETING AD 1.3 Hot dogs are goods products and, as such, are marketed differently. to standardize because they require human labor, and may require the customer to partic­ ipate in the creation of the service product. Goods products tend to be just the opposite in terms of these criteria. Consequently, marketers of service products usually employ a marketing strategy quite different from that of goods marketers. For example, a local family physician creates tangibility by oroviding an environment. waiting room. examination rooms, diplomas on the walls, that convinces patients that they are receiving good health care. Conversely, coffee producers create iiltan­ gibility in order to appear different from competitors. :-his is done through colorful pack-MARKETING: DEFINITION AND JUSTIFICATION 15 TABLE 1.1 Kinds of Marketing CLASSIFICATION EXAMP LE FACTORS Macromarketing The devaluation of the yen Emphasis of study Micromarketing A pricing strategy for Perspective, receiver of Wal-M art consequences Goods marketing Nabisco International Tangibility, standardization, Service marketing Chase Manhattan Bank storage, production, involvement For-profit marketing Otis Elevator Concerns for profits Nonprofit marketing New York Museum of Art Tax status Mass marketing Sony Nature of contact, Direct marketing Time magazine information, Internet marketing trip.com process for purchasing and delivery Local marketing Imperial Garden Restaurant Proximity of customers, Regional marketing Olympia Brewery geographic area, National marketing American Red Cross extent of distribution, International marketing Ford Motor Company network, marketing Global marketing variation commitment to Owest country Consumer goods marketing Nature of customer Kraft Foods Business-to-business Product function IBM marketing aging and advertisements showing people who are successful because they start each day with a cup or two or ten of Starbuck's coffee. For-profit Marketing Versus Nonprofit Marketing As the terms connote, the difference between for-profit and nonprofit marketing is in their pri­ mary objective. For-profit marketers measure success in terms of profitability and their abil­ ity to pay dividends or pay back loans. Continued existence is contingent upon level of profits. Nonprofit institutions exist to benefit a society, regardless of whether profits are achieved. Because of the implicit objectives assigned to nonprofits, they are subject to an entirely different additional set of laws, notably tax laws. While they are allowed to gen­ erate profits, they must use these monies in specific way in order to maintain their non­ prufit status. There are several other factors that require adjustments to be made in the marketing strategies for nonprofits. M ass Marketing, Direct Marketing, and Internet Marketing Mass marketing is distinguished from direct marketing in terms of the distance between the manufacturer and the ultimate user of the product. Mass marketing is characterized as having wide separation and indirect communication. A mass marketer, such as Nike, has16 CHAPTER 1 INTRODUCING MARKETING very little direct contact with its customers and must distribute its product through various retail outlets alongside its competitors. Communication is impersonal, as evidenced by its national television and print advertising campaigns, couponing, and point-of-purchase dis­ plays. The success of mass marketing is contingent on the probability that within the huge audience exposed to the marketing strategy.. there exist sufficient potential customers inter­ ested in the product to make he strategy worthwhile. Direct marketing establishes a somewhat personal relationship with the customer by first allowing the customer to purchase the product directly from the manufacturer and then communicating with the customer on a first-name basis. This type of marketing is experi­ encing tremendous growth. Apparently, marketers have tired of the waste associated with mass IParketing and customers want more personal attention. Also, modem mechanisms for coliecting and processing accurate mailing lists have greatly increased the effectiveness of direct marketing. Catalogue companies (Spiegel, J.e. Penney), telecommunications com­ panies (Sprint), and direct mail companies (Publishers Clearing House) are example of direct marketers. A modified type of direct marketing is represented by companies that allow ordeling of product by calling a toll-free number or mailing in an order card as part of an advertisement. Although (officially), Intemet marketing is a type of direct marketing, it has evolved so quickly and demanded the attention of so many companies that a separate section here is 'varranted. Essentially, Intemet technology (which changes by the moment) has created a new way of doing business. In the Internet age, the way consumers evaluate and follow through on their purchase decisions has changed significantly. "Call now" is no longer an effective pitch. Consumers have control over how, when, and where they shop on the Inter- .. Sign up for FREE one-hour 01 from Sprint IP to data 9Ddnt Byslness DSL Solutions: AD 1.4 An example of Internet marketing.MARKETING: DEFINITION AND JUSTIFICATION 17 net. The Internet has all but eliminated the urgency of satisfying the need when the oppor­ tunity is presented. Internet marketing will be discussed in detail in a later chapter. Local, Regional, National, International, and Global Marketers As one would expect, the size and location of a company's market varies greatly. Local marketers are concerned with customers that tend to be clustered tightly around the mar­ keter. The marketer is able to learn a great deal about the customer and make necessary changes quickly. Naturally, the total potential market is limited. There is also the possibil­ ity that a new competitor or environmental factor will put a local marketer out of business. Regional marketers cover a larger geographic area that may necessitate multiple pro­ duction plants and a more complex distribution network. While regional marketers tend to serve adjoining cities, parts of states, or entire states, dramatic differences in demand may still exist, requiring extensive adjustments in marketing strategy. National marketers distribute their product throughout a country. This may involve multiple manufacturing plants, a distribution system including warehouses and privately owned delivery vehicles, and different versions of the marketing "mix" or overall strategy. This type of marketing offers tremendous profit potential, but also exposes the marketer to new, aggressive competitors. International marketers operate in more than one country. As will become clear later in this book, massive adjustments are normally made in the marketing mix in various coun­ tries. Legal and cultural differences alone can greatly affect a strategy's outcome. As the U.S. market becomes more and more saturated with U.S.-made products, the continued expan­ sion into foreign markets appears inevitable. Global marketing differs from international marketing in some very definite ways. Whereas international marketing means a company sells its goods or services in another country, it does not necessarily mean that the company has made any further commitments. Usually the product is still manufactured in the home country, sold by their people, and the profits are taken back to that country. In the case of Honda Motors, for example, it means building manufacturing plants in the U.S., hiring local employees, using local distribution systems and advertising agencies, and reinvesting a large percentage of the profits back into ' the U.S. Consumer Goods Marketing and Business-to-Business (Industrial) Marketing Consumer goods marketers sell to individuals who consume the finished product. Business­ to-business marketers sell to other businesses or institutions that consume the product in tum as part of operating the business, or use the product in the assembly of the final prod­ uct they sell to consumers. Business-to-business marketers engage in more personal sell­ ing rather than mass advertising and are willing to make extensive adjustments in factors such as the selling price, product features, terms of delivery, and so forth. For the consumer goods marketer, the various marketing components are relatively fixed. In addition, consumer goods marketers might employ emotional appeals and are faced with the constant battle of getting their product into retail outlets. Strategic Components of Market ing A necessary and useful starting point for the study of marketing is consideration of the man­ agement process. The management of marketing serves as the framework for the process of marketing. Marketing management also serves as a central link between marketing and18 CHAPTER 1 INTRODUCING MARKETING the societal level and everyday consumption by the general public. Although there are many variations of the marketing process, the one shown in Figure 1.1 will be employed in this book. Our process begins with corporate-level considerations, which dictate the direction the entire organization will take. The three corporate-level coniderations listed here (mis­ sion, objectives, and strategy) are more precisely basic management topics, but are addressed in passing in the following sections. FuncnonaLevelConsideranons If a marketing firm is to adopt the customer-centered orientation discussed earlier, it must also extend this philosophy to the other functions/institutions with which it must interact. These functions, and the institutions that perform the functions can be categorized as non­ marketing institutions and marketing institutions. Nonmarketing institutions can exist within the organization or outside the organiza­ tion. The former inciude accounting, financial planning, human resources, engineering, man­ ufacturing, research and development, and so on. Marketing must be familia; with the capabilities of each of hese functions and plan accordingly. Establishing and maintaining rapport with leaders in these other functional areas is a challenge for every marketer. Non­ marketing institutions outside the firm facilitated the marketing process by providing experl­ ise in areas not directly related to marketing. Examples include financial institutions that lend marketers necessary funds ; regulatory institutions that pass laws to allow marketers to perform an activity; and the press, which tells the public about the activities of the marketer. The M arketing Plan To a great extent, the same sequence of activities performed at the corporate level is repeated at the marketing level. The primary difference is that the marketing plan is directly influ­ enced by the corporate plan as well as tne role of the other functions within the organiza­ tion. Consequently, the marketing plan must always involve monitoring and reacting to changes in the corporate plan. Apart from this need to be flexible to accommodate the corporate plan, the market­ ing plan follows a fairly standardized sequence. The marketing plan begins with a mission. of the organization. What does it stand for? How does A mission reflects the general values it define integrity? How does it view the people it serves? Every organization has an explicit MARKETING CAPSULE • The characteristics of a marketing organization include: 6. Attempts at familiarity with the community 1. Maintenance of contact with consumers The types of marketing: 2. Objective comparison of existing capabilities with ability 1. Macromarketing and rnicromarketing to meet present and future consumer needs 2. Service marketing and goods marketing 3. Maintenance of a consistent message from all marketing 3. For-profit marketing and nonprofit marketing elements to all consumer groups 4. Mass marketing, direct marketing, and Internet marketing 4. Thorough understanding of streng lhs and weaknesses of 5. Local. regional, national, and international marketing competitors 6. Consumer goods marketing and business-to-business 5. Understanding of the capabilities of other nonmarketing marketing functionsMARKETING: DEFINITION AND JUSTIFICATION 19 Mission Objectives Strategy Human resources Mission Situation analysis Objectives Strategy Implementation Budgeting Evaluation FIGURE 1.1 The marketing process or implicit mission. The corporate mission might contain words such as "quality," "global," "profitability," and "sacrifice." The marketing-level mission should extend the corporate mis­ sion by translating the latter into a marketing context. For example, a corporate mission that focuses on technology might be accompanied by a production-oriented marketing mis­ sion. A corporation that stresses stockholders/dividends may result in a sales-orientation in marketing. A corporate mission that concentrates on value or quality reflects a consumer­ oriented marketing mission. Once the mission is established, the situation analysis follows. A marketing plan's situation analysis identifies factors, behaviors, and trends that have a direct bearing on the marketing plan. Much of this informatior. is usually collected simul­ taneously with the corporate information. However, collecting information about potential and actual customers tends to be the concern of marketers. This is an ongoing activity and represents a great deal of the marketer's time and money. (Chapter 2 describes the process of narketing research.) The situation analysis helps produce a relevant set of marketing objectives. At the corporate level, typical objectives include profitability, cost savings, growth, market share improvement, risk containment, reputation, and so on. All these corporate objectives can imply specific marketing objectives. "Introducing a certain number of new products usu­ ally" may lead marketers to profitability, increased market share, and movement into new markets. Desire to increase profit margins might dictate level of product innovation, qual­ ity of materials, and price charged. The Marketing Mix Once the objectives are established, the marketer must decide how to achieve these objec­ tives. This produces a set of general strategies that must be refined into actionable and achiev­ able activities. The marketing mix-product, price, promotion, and distribution-represents

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