Mktch 1 - Lecture notes Chapter 1 PDF

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Chapter 1 MKT notes...

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 Discrepancies of quantity and discrepancies of assortment complicate exchange between producers and consumers. o Production sector: Specialization and division of labor result in heterogeneous supply capabilities. o Consumption sector: Heterogeneous demand for different goods and services and when and where they need to be to satisfy needs and wants. o Discrepancies of quantity: Producers prefer to produce and sell in large quantities. Consumers prefer to buy and consume in small quantities. o Discrepancies of assortment: Producers specialize in producing a narrow assortment of goods and services. Consumers need a broad assortment. o Spatial separation: Producers tend to locate where it is economical to produce, while consumers are located in many scattered places. o Separation in time: Consumers may not want to consume goods and services at the time producers would prefer to produce them, and time may be required to transport goods from producer to consumer. o Separation of information: Producers do not know who needs what, where, when, and at what price. Consumers do not know what is available from whom, where, when, and at what price. o Separation in values: Producers value goods and services in terms of costs and competitive prices. Consumers value them in terms of satisfying needs and their ability to pay. o Separation of ownership: Producers hold title to goods and services that they themselves do not want to consume. Consumers want goods and services that they do not own.  Marketing is needed to overcome the difference between maximizing production efficiency and the preferences people have for consuming products and services. o Economies of scale  lower cost.  As production increases, the cost of each unit of the product decreases.  Marketing helps companies find more outlets for products. o Effective marketing links producers and consumers.  Consumers’ needs and patterns of consumption differ from how production facilities operate effectively.  Marketing activities create more efficient links between consumers and producers. o Marketing functions narrow the gap.  The universal marketing functions (buying, selling, transporting, storing, standardization and grading, financing) help to narrow the gap.  How these functions are performed and by whom may differ among economic systems.  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. o Buying: Looking for and evaluating goods and services. o Selling: Promoting the product to prospective buyers. o Transporting: Moving the goods from place to place. o Storing: Holding an inventory of goods until needed by customers. o Standardization and grading: Sorting products by size and quality. o Financing: providing necessary cash and credit to produce, transport, store, promote, sell, and buy products. o Risk taking: bearing the uncertainties that are part of the marketing process. o Market information function: the collection, analysis, and distribution of all the information needed to plan, implement, and control marketing activities.  Effective marketing provides consumers with a variety of ways to meet their unique needs. Most companies have few locations but would like to purchase world-wide.

 Marketing helps to bring producers and consumers together.  Individuals and organizations perform marketing functions. o It is often easiest to think of Producers, as manufacturers of tangible products and providers of intangible services. However, there are many other marketing performers. o Intermediaries (wholesalers, retailers, other specialists): Firms that specialize in trade rather than production and execute tasks related to buying and selling. o Collaborators (transport firms, ISP’s, product testing firms, ad agencies, research): 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, communication companies, financial institutions  There can be specialization in the performance of these functions. o New specialists develop to fill market needs to make exchanges more efficient or effective. o Every society needs an economic system: the way an economy organizes to use scarce resources in production and consumption. Decisions about resource allocation are made differently depending on the type of economic system. o Command economy (also called “planned” economy):  Government officials make decisions about production and distribution;  Can work well:  In simple economies  When the variety of goods and services is small  Under adverse conditions. o Market-directed economy: individuals govern resource allocation, production and consumption.  Characteristics of market-directed economies include: o Adjusts itself. o Price is a measure of value:  Consumers pay what they think things are worth;  Producers try to meet those price expectations. o Greatest freedom of choice:  Less intervention from government planners;  More choices are available to producers and consumers. o The role of government is to ensure fairness and the common good. o Public interest groups and consumers spread the word  In many Western economies, public interest groups and consumers provide an additional check on a market-directed economy.  The American economy and most other Western economies are mainly market-directed— but not completely. Society assigns supervision of the system to the government. o Government tries to be sure that property is protected, contracts are enforced, individuals are not exploited, no group unfairly monopolizes markets, and producers deliver the kinds and quality of goods and services they claim to be offering. o The effectiveness and fairness of a particular macro-marketing system must be evaluated in terms of that society’s objectives. o All nations don’t share the same objectives. o Whether a system is judged “fair” or “effective” depends on the objectives of the society. o Early “producers for the market” made products that were needed by themselves and their neighbors.  Simple trade era - when families traded or sold their “surplus” output to local distributors.  Production era - when a company focuses on production of a few specific products—perhaps because few of these products are available in the market.

 Sales era - when a company emphasizes selling because of increased competition.  Marketing department era - 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 - 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.  The cornerstone of the marketing-oriented company is the marketing concept. o Production orientation - making whatever products are easy to produce and then trying to sell them. o Marketing orientation - trying to carry out the marketing concept. Offering customer what they need.  Marketing concept: o Customer satisfaction guides the whole organization; o The whole company works together to satisfy customers;  Requires that the company be profitable o Some organizations consider the triple bottom line which measures an organization’s economic, social, and environmental outcomes  Consumer product companies were first to accept the marketing concept. o Service industries are catching up. o 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.  To better understand what it takes to satisfy a customer, it’s useful to take the customer’s point of view.  Customer value is the difference between the benefits a customer sees from a marketing offering and the costs of obtaining those benefits. o Different customers may see the benefits and costs in different ways. o The customer may not think about it very much. o Where does competition fit? o Build relationships with customer value.  A consumer is likely to be more satisfied when the customer value is higher—when benefits exceed costs by a larger margin. On the other hand, a consumer who sees the costs as greater than the benefits isn’t likely to become a customer.  In a firm that has adopted the marketing concept, everyone focuses on customer satisfaction. o The organization offers superior customer value. o Value, in turn, helps attract customers and  keeps them satisfied after they buy. o This satisfaction then leads to repeat purchase and  most likely purchases of other products offered by the firm. o In this way, the firm builds profitable relationships with its customers.  Adopting the marketing concept is a “win-win” situation for marketers and consumers!  The marketing concept is also applicable to nonprofit organizations such as museums, libraries, charities, and political parties. o Nonprofit organizations are relative newcomers to marketing. o 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”.

o They may not have a traditional “bottom line” economic measure of success. o Nonprofit organizations may not be organized for marketing.  What is good for some producers and consumers may not be good for society. o Environmental organizations try to promote preservation of the environment as a societal goal. o Many people in New York City buy bottled water despite the city providing citizens with good tasting, safe tap water.  Inefficient use of resources and transporting millions of plastic bottles end up in landfills where they leach chemicals into the soil.  Organizations implement the marketing concept in the broader context of society. There are times when the society’s needs conflict with the needs of an individual or group, creating the o micro-macro dilemma.  Society’s needs must be considered.  Social responsibility: an obligation to improve the organization’s positive effects on society and reduce its negative effects.  Should all consumer needs be satisfied?  Some products that many people use are not good for them.  Marketers must rely on legal and ethical standards in making decisions.  Do all marketers act responsibly?  Sometimes firms or individuals advance their own short-term interests at the expense of customers.  When products are complicated, consumers may be vulnerable to unscrupulous sellers.  What if it cuts into profits?  Some marketers are adopting a longer-term view.  Customer satisfaction goes beyond fulfilling an immediate need.  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.  Marketing activity is especially open to criticism because it is the part of business most visible to the public. o Advertising is everywhere, and it’s often annoying, misleading, or wasteful. o Quality of products is poor and often they are not even safe. o There are too many unnecessary products. o Retailers add too much to the cost of distribution and just raise prices without providing anything in return. o Marketing serves the rich and exploits the poor. o Marketers overpromise service, and when a consumer has a problem, nobody cares. o Marketing creates interest in products that pollute the environment. o Private information about consumers is collected and used to sell them things they don’t need. o Marketing makes people too materialistic and motivates them toward “things” instead of social needs. o Easy consumer credit makes people buy things they don’t need and can’t afford.  Key Terms: o 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. o Universal functions of marketing: buying, selling, transporting, storing, standardization and grading, financing, risk taking, and market information.

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Buying function: looking for and evaluating goods and services. Selling function: promoting the product. Transporting function: the movement of goods from one place to another. Storing function: holding goods until customers need them. E-commerce: exchanges between individuals or organizations—and activities that facilitate these exchanges—based on applications of information technology. Command economy: government officials decide what and how much is to be produced and distributed by whom, when, to whom, and why. Marketing concept: means an organization aims all its efforts at satisfying its customers—at a profit. Micro-macro dilemma: what is “good” for some firms and consumers may not be good for society as a whole. Marketing ethics: the moral standards that guide marketing decisions and actions....