Chapter 1 - What is marketing and how it creates value PDF

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Marketing chapter 1 notes. Lecture 1. What is marketing and how it creates values...

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Chapter 1 – Overview of Marketing What is marketing? “Marketing is a set of business practices designed to plan for and present an organization’s products or services in ways that build effective customer relationships.” The marketing plan is broken down into various components—how the product or service will be conceived or designed, how much it should cost, where and how it will be promoted, and how it will get to the consumer. Needs is an item your body requires such as water, food, soap, phone, etc. Wants is something you can live without, but your mind desires it Core aspects of marketing Marketing helps create value, as it is about satisfying customer needs and wants. Marketing requires product, price, place, and promotes decisions. Marketing can be performed by individuals and organizations as it can occur in many settings. Marketing entails an exchange. Build and maintain a loyal customer base. Make a product to satisfy the customers’ needs Marketing is about satisfying customers’ needs and wants: Still, makers of energy bars need to identify who might buy their products: busy people who want a meal replacement; elite athletes who seek high-calorie contents; health-conscious consumers who demand high levels of protein and low sugars; snackers who want a convenient snack and demand great taste, but don't worry about nutrition; and socially conscious buyers who believe that purchasing an organic product gives them a way to help farmers. when we are hungry, we need something to eat. Some people want a energy bar to satisfy that hunger, whereas others want a salad and some soup instead. Of course, needs and wants must be backed by demand, for marketing to be effective. There are many things you may want, and even need. Demand is demonstrated by your ability and willingness to act on those needs and wants. Marketing entails an exchange: you sign up for a free one-month subscription to Crave. You enjoy the first season of game of thrones so much that you purchase an annual subscription to Crave. Your payment information is already in the company’s system. Going forward, Crave's system tracks which shows you watch and creates personalized recommendations for other shows you might enjoy. This example shows how Crave uses the valuable information you provide to facilitate future exchanges and solidify its relationship with you. The buyers give money and their information to the sellers, and they communicate and deliver back to the buyers. Marketing requires marketing mix decisions: - Known as the marketing mix or the 4 p’s: Product, place, price, and promotion - Product: Creating value o consumers perceived this basic commodity as simply water. It came out of a faucet and was consumed for drinking and washing. But, taking a cue from European firms such as Perrier (France) and San Pellegrino (Italy), Canadian brands, such as Nestlé Pure Springs and Montclair, have created products with benefits that consumers find valuable. The same is true of energy bars. Although

originally designed for astronauts in the 1960s, they evolved quickly, starting with PowerBar. It was marketed as a dense nutrition option for marathoners and other extreme athletes who must consume massive amounts of calories to maintain their body mass. As PowerBar flew off the shelves, competitors such as Clif Bar and Balance Bar entered the market. People liked the idea of eating like an elite athlete, even if they were not one. It’s about selling goods, services, and ideas. -

Price: Transacting value o Marketers must determine the price of a product carefully based on the potential buyer’s belief about its value. The key for marketers is determining prices on how much customers are willing to pay so that they are satisfied with the purchase and the seller achieves a reasonable profit.

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Place: Delivering value o Describes activities necessary to get the product from the manufacturer or producer to the right customer when the customer wants it. Locations such as kiosks at the baggage claim in airports or small booths in grocery stores can represent the chains effort to improve its offering on this dimension of the marketing mix or the 4 p’s.

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Promotion: Communicating value o Marketers’ products and services can go unsold if they cannot communicate their value to the customers. Promotion can enhance a product or service value. KIND featured a pride theme in its bar of the month. Its used to inform, persuade and remind potential buyers.

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Treat the 4p’s as a whole. The product or service must satisfy the target customers specific needs and wants, be price appropriately, be available at locations where customers want it. And be promoted in a manner and through media that are consistent with the target consumers.

Marketing can be performed by both individuals and organizations - The process in which businesses sell to consumers is known as business to consumer (B2C) marketing - The process of selling merchandise or services from one business to another is called business to business (B2B) - Consumers have started marketing their products and services to other consumers, which is called consumers to consumers (C2C) marketing - Even though organizations and individuals are engaged in B2B or B2C or C2C, social media has become an integral part of their marketing and communication strategies. Marketing impacts many stakeholders: - Marketing also affects stakeholders, for example, supply chain partners such as wholesalers and retailers, or intermediaries such as transportation or warehousing companies. All these entities market to one another. Manufacturers sell merchandise to retailers, but the retailers often must convince manufacturers to sell to them.

A truly comprehensive and proactive approach to sustainability requires businesses to develop practices and policies around three perspectives: environmental, governance, and social. This means that sustainability practices and policies must be embedded in all facets of the organization, from human resource management to manufacturing, marketing, production, planning, investments, and corporate strategy. Also, sustainability must involve all employees, in all areas and departments. Implementing a comprehensive sustainability program is expensive, and so many businesses tend to do the bare minimum or implement low-cost programs.

The Four orientations of marketing: Product orientation: Focus on developing and distributing innovative products with little concern about whether the products best satisfy customers’ needs. Henry Ford, the founder of Ford Motor Company, who remarked, “Customers can have any colour they want so long as it’s black.” Manufacturers believed that a good product would sell itself, and retail stores typically were considered places to hold the merchandise until a consumer wanted it. Companies with a product orientation generally start out by thinking about the product they want to build; they try selling the product after it is developed rather than starting with an understanding of the customers’ needs and then developing a product to satisfy those needs. Sales orientation: Companies that have a sales orientation basically view marketing as a selling function where companies try to sell as many of their products as possible rather than focus on making products consumers really want. These firms typically depend on heavy doses of personal selling and advertising to attract new customers. Companies with a selling orientation tend to focus on making a sale or on each transaction rather than building long-term customer relationships. They generally believe that if consumers try their products, they will like them. The focus of these companies tends to be on the products or services they have to offer, more than on consumer needs and wants. Profits come from sales volume rather than from repeat business from satisfied customers Marketing orientation: Market-oriented companies start out by focusing on what consumers want and need before they design, make, or attempt to sell their products and services. They believe that customers have choice and make purchase decisions based on several factors, including quality, convenience, and price. Basically, “the customer is king,” and the market is a buyer’s market since consumers wield tremendous power. In this orientation, marketers’ role is to understand and respond to the needs of consumers and to do everything possible to satisfy them. There is a focus on making marketing an integrated process throughout the entire company rather than just in one department. Satisfied customers become long-term loyal customers, contributing to bottom-line profitability. Value-Based orientation: Some marketing firms recognized that there was more to good marketing. To compete successfully, they would have to focus on the triple bottom line: people (consumer needs and wants), profits (long-term profitable relationships with customers and

suppliers), and planet (do all this in a way that is socially and environmentally responsible). Value-based companies provide their customers with greater value than their competitors. Value reflects the relationship of benefits to costs, or what you get for what you give. In a marketing context, customers seek a fair return in goods and/or services for their hard-earned money and scarce time. They want products or services that meet their specific needs or wants and are offered at a price that they believe provides good value. A creative way to provide value to customers is to engage in value cocreation. In this case, customers can act as collaborators to create the product or service. When clients work with their investment advisors, they cocreate their investment portfolios; when Nike allows customers to custom design their sneakers, they are cocreating.

Gathering and sharing information: value-based, market-oriented firm, marketers gather and share information about customers and competitors. Modern marketers rely on sophisticated data analytics to define and refine their approaches to their customers and their markets. companies such as Starbucks, Netflix, and Amazon collect massive amounts of data about how, when, why, where, and what people buy, and then analyze the data to inform their choices. Balancing benefits with costs: Value-oriented marketers constantly measure the benefits that customers perceive against the cost of their offering. They use available customer data to find opportunities to better satisfy their customers’ needs and in turn develop long-term loyalties. Such a value-based orientation has helped Canadian Tire and Walmart outperform other department stores, and WestJet Airlines and Southwest Airlines outperform mainstream carriers. IKEA does not have highly paid salespeople to sell its furniture. It’s simple designs mean customers can easily choose a product and assemble it themselves. Building relationships with customers: Firms focuses on the lifetime value of the relationship; not how much money is made during each transaction. Customer relationship management, a business philosophy and set strategies, programs, and systems that focus on identifying and building loyalty among the firms most valued customers. Firms employ CRM systematically collect information about their customers’ needs and then use that information to target their best customers with the products, service, and special promotions that appear most important to them. Connecting with customers using social media and mobile media: Marketers embrace new technologies, such as social and mobile media and more recently artificial intelligence, to allow them to connect better with their customers and thereby serve their needs more effectively. Businesses take these tools seriously and include them in the development of their marketing strategies. Customers who book hotels using travel agencies become loyal to the agency that gives them the lowest prices, rather than to any hotel brand. So, hotels are using social media and mobile applications to lure customers back to their specific brands by engaging in conversations with them and allowing fans of the page to book their hotel reservations through Facebook. Some hotel chains have mobile applications that allow customers to make changes to their reservations, shift check-in and check-out times, and add amenities or

services to their stays. The hotels know a lot about their customers, because they collect information about their previous visits, including the type of room they stayed in, their preferences (from pillows to drinks consumed from the minibar), and the type of room service they prefer. Numerous restaurant chains are exploiting location-based social media applications. By using location-based apps, customers can find restaurants that cater to their specific dietary requirements or find restaurants highly rated by Yelp users nearby. The result is that users are driving the way in which brands and stores are interacting with social media. Marketing expands firms’ global presence: Global manufacturers and retailers continue to make inroads into the Canadian market. Companies such as Honda, Sony, and Heineken sell as well in Canada as they do in their home countries. Sweden’s fashion retailer H&M operates in 38 countries, including Canada. Its upscale competitor, Spain’s Zara, operates in more than 90 countries, including Canada. Starbucks even adjusted its menu to meet customer wants in the Japanese market more effectively. How does marketing contribute to a company’s successful global expansion? Understanding customers is critical. Without the knowledge that can be gained by analyzing new customers’ needs and wants on a segment-by-segment, region-by-region basis—one of marketing’s main tasks—it would be difficult for a firm to expand globally. Marketing is pervasive across marketing channel members: Firms typically do not work in isolation. Manufacturers buy raw materials and components from suppliers, which they sell to retailers or other businesses after they have turned the materials into their products Every time materials or products are bought or sold, they are transported to a different location, which sometimes requires that they be stored in a warehouse operated by yet another organization. The group of firms and set of techniques and approaches firms use to make and deliver a given set of goods and services is commonly referred to as a supply chain. Excellent supply chains effectively and efficiently integrate their supply chain partners— suppliers, manufacturers, warehouses, stores, and transportation intermediaries—to produce and distribute goods in the right quantities, to the right locations, and at the right time. Marketing enriches society: Should marketing focus on factors other than financial profitability, such as good corporate citizenry? Many of Canada’s best-known corporations seem to think so, because they encourage their employees to participate in activities that benefit their communities and invest heavily in socially responsible actions and charities. When World Wildlife Fund (WWF) launched its “Spring Things” campaign to promote workplace giving toward environmental conservation, HP Canada was one of 40 organizations that championed the cause. The campaign resulted in a tenyear collaboration that engaged employees and raised almost $400,000 in the first year. Canadian companies recognize that a strong social orientation is in both their and their customers’ best interests. It shows the consumer that the firm can be trusted with their business. Also, investor’s view firms that operate with high levels of corporate responsibility and ethics as safe investments. Similarly, firms have come to realize that good corporate citizenship through socially responsible actions should be a priority because it will help their bottom line in the long run. In a world where consumers constantly hear about negative examples of ethics, the need for companies to live up to their ethical promises becomes even more important.

Marketing can be entrepreneurial: Marketing plays a major role in the success of large corporations, and it is also at the centre of the successes of numerous new ventures initiated by entrepreneurs, or people who organize, operate, and assume the risk of a business venture. Key to the success of many such entrepreneurs is that they launch ventures that aim to satisfy unfilled needs. Great and distinguished entrepreneurs have a vision of how certain combinations of products and services can satisfy unfilled needs. They find and understand a marketing opportunity (i.e., the unfilled need), conduct a thorough examination of the marketplace, and develop and communicate the value of their products and services to potential consumers...