Marketing: Defined, Explained, Applied Second Edition Michael Levens Walsh College Prentice Hall Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montréal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editorial Director: Sally Yagan Editor in Chief: Eric Svendsen Executive Editor: Melissa Sabella Editorial Project Manager: Kierra Bloom Development Editor: Laura Town Director of Editorial Services: Ashley Santora Editorial Assistant: Elisabeth Scarpa Director of Marketing: Patrice Lumumba Jones Senior Marketing Manager: Anne Fahlgren Marketing Assistant: Melinda Jensen Senior Managing Editor: Judy Leale Sr. Production Project Manager/Supervisor: Lynn Savino Wendel Senior Operations Supervisor: Arnold Vila Operations Specialist: Cathleen Petersen Sr. Art Director/Design Supervisor: Janet Slowik Art Director: Steven Frim Text and Cover Designer: Michael Fruhbeis Cover Art: Shutterstock Manager, Rights and Permissions: Hessa Albader Editorial Media Project Manager: Denise Vaughn MyLab Product Manager: Joan Waxman Media Project Manager: Lisa Rinaldi Full-Service Project Management: Bookmasters, Inc. 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Library of Congress Cataloging-in-Publication Data Levens, Michael. Marketing : defined, explained, applied / Michael Levens.—2nd ed. p. cm. Includes bibliographical references and index. ISBN 978-0-13-217715-3 (pbk. : alk. paper) 1. Marketing. I. Title. HF5415.L47568 2011 658.8—dc22 2010039067 10 9 8 7 6 5 4 3 2 1 ISBN 10: 0-13-217715-3 ISBN 13: 978-0-13-217715-3 Brief Contents | Brief Contents PART 1 2 Explaining Chapter 1 – The Meaning of Marketing Chapter 2 – The Market in Marketing 2 14 Chapter 3 – Planning and Marketing in an Organization Chapter 4 – A Broader Perspective on Marketing Chapter 5 – Global Marketing PART 2 Creating 38 52 68 Chapter 6 – Value for Customers 68 Chapter 7 – A Perspective on Consumer Behavior Chapter 8 – Consumer Insight Chapter 9 – The Brand PART 3 82 96 114 Strategizing 130 Chapter 10 – Segmenting, Targeting, and Positioning Chapter 11 – The Marketing Plan PART 26 4 130 146 Managing 162 Chapter 12 – Product and Service Strategies Chapter 13 – Pricing Strategies 162 178 Chapter 14 – Supply Chain and Distribution Strategies Chapter 15 – Retailing and Wholesaling Strategies 196 210 Chapter 16 – Advertising and Sales Promotion Strategies 224 Chapter 17 – Personal Selling and Direct Marketing Strategies PART 5 Integrating 254 Chapter 18 – The Communications Mix Chapter 19 – The Marketing Mix 254 272 Chapter 20 – Marketing Performance Management 298 Appendix Notes 334 Glossary Index 341 355 284 238 iii iv | Contents Contents Explaining 2 PART 1 Competitive Environment Technological Environment Consumer Markets (Chapters 1–5) Consumer Markets Applied Business Markets 19 19 20 Business Markets Explained Chapter Outline Marketing 2 Business Markets Applied 3 20 21 Business Markets Marketing Explained 3 Marketing Applied Visual Summary Marketing Concept 4 23 Chapter 3 | Planning and Marketing in an Organization........................................26 5 Marketing Concept Explained Marketing Concept Applied 5 Chapter Outline 26 5 Planning Process Marketing Concept 27 5 Planning Process Explained Evolution of Marketing: Early Years Until 1950 Evolution of Marketing: 1950–Present 6 Planning Process Applied 6 Strategic Planning Evolution of Marketing: 1950–Present 27 27 29 7 Strategic Planning Explained Evolution of Marketing: Social Responsibility 7 Strategic Planning Applied Evolution of Marketing: Social Responsibility Marketing Functions 8 9 9 Strategic Planning, BCG Matrix Marketing Planning Internal Marketing Participants 9 External Marketing Participants Marketing Functions Applied 10 32 33 Marketing Planning, SWOT Visual Summary Chapter 2 | The Market in Marketing........14 14 15 Marketing Environment Applied 15 39 Marketing and Society Applied 16 Marketing and Culture Explained 16 Economic Environment 39 39 Marketing and Culture 40 16 Macroenvironment 38 Marketing and Society Explained 15 Microenvironment 34 Marketing and Society 15 Marketing and Culture Applied 17 33 Chapter 4 | A Broader Perspective on Marketing................................................38 Chapter Outline Marketing Environment Explained Macroenvironment 32 Marketing Planning Marketing Planning Applied 10 11 Marketing Environment 30 32 Marketing Planning Explained External Marketing Participants 9 Microenvironment 29 30 Strategic Planning, Teva Balanced Scorecard 31 Marketing Functions Explained Chapter Outline 21 3 Marketing Visual Summary 18 19 Consumer Markets Explained Chapter 1 | The Meaning of Marketing......2 17 Culture 40 40 40 Contents | Consumerism 41 Creating 68 PART 2 Consumerism Environmentalism 42 42 Environmentalism Marketing and the Law 43 (Chapters 6–9) 44 Marketing and the Law Explained Marketing and the Law Applied Regulations 44 Chapter 6 | Value for Customers..............68 44 45 Marketing and Social Responsibility 46 Marketing and Social Responsibility Explained Marketing and Social Responsibility Applied Social Responsibility 46 46 Chapter Outline 68 Customer Value 69 Customer Value Explained Customer Value Applied Customer Satisfaction 47 Corporate Social Responsibility 47 69 69 71 Customer Satisfaction Explained Customer Satisfaction Applied Visual Summary 48 71 71 Measuring Customer Satisfaction 72 Customer Satisfaction Chapter 5 | Global Marketing ..................52 Chapter Outline 52 Global Marketing 53 Global Marketing Applied 53 Global Marketing Environment 72 Customer Lifetime Value 73 73 55 Relationship Marketing 74 75 Customer Relationship Management Explained Customer Relationship Management Applied 57 Customer Identification 58 Customization Legal 59 Global Marketing Environment Applied Global Marketing Processes 76 Loyalty Programs 59 Technology 61 76 76 Visual Summary Global Marketing Processes Explained 75 76 76 Loyalty Programs 59 75 75 75 Customer Differentiation 58 Customer Interaction 78 61 61 Market Selection Market Entry Strategies Chapter 7 | A Perspective on Consumer Behavior ......................................................82 61 62 Global Marketing Strategy Chapter Outline 62 Global Marketing Processes Applied 63 Global Marketing Processes Visual Summary 74 74 Customer Relationship Management 57 Market Selection 74 Relationship Marketing Applied 55 Political Cultural The Value of a Customer Relationship Marketing Explained 55 Global Trade 56 Legal 72 Relationship Marketing 54 Global Marketing Environment Explained Political 72 Customer Retention 73 53 Global Marketing Economic Customer Loyalty Customer Retention Global Marketing Explained Global Trade v 64 82 Consumer Behavior 63 83 Consumer Behavior Explained Consumer Behavior Applied 83 83 vi | Contents Consumer Decision-Making Process 84 Consumer Decision-Making Process Explained Consumer Decision Making Chapter 9 | The Brand............................114 84 Chapter Outline 84 Consumer Decision-Making Process Applied 85 Brand Personal Influence on Decision Making 85 Age and Life Stage Affluence 115 Brand Explained 86 Brand Applied 115 115 Brand 87 Brand Equity Psychological Influence on Decision Making 87 Situational Influence on Decision Making 87 Purchase Environment Digital Environment 116 117 Brand Equity Explained Brand Equity Applied 88 Brand Valuation 88 117 89 Global Brand Equity Consumer Problem Solving Applied Building Strong Brands 91 91 Brand Positioning Brand Sponsorship Licensing 97 Brand Development 97 97 Marketing Research Applied 99 New Brands 99 Marketing Research Managing Brands 99 123 125 Managing Brands Applied 100 Brand Protection 125 125 125 Brand Protection 101 Visual Summary 123 123 Managing Brands Explained 100 Marketing Research, Syndicated Research 122 Brand Extensions Marketing Research Explained Design the Research 122 Line Extensions 99 121 122 Co-Branding Consumer Insight Applied Marketing Research 121 121 Brand Sponsorship 96 120 120 120 Brand Name Selection Chapter 8 | Consumer Insight..................96 119 120 Building Strong Brands Applied 92 Consumer Insight Explained 119 Building Strong Brands Explained 91 Consumer Problem Solving Define the Problem 118 Business-to-Business Brand Equity 91 Consumer Problem Solving Explained Consumer Insight 118 Global Brand Equity Consumer Problem Solving Chapter Outline 118 Brand Equity Groups 90 Visual Summary 117 117 Building Brand Equity Social Influence on Decision Making 88 Subculture 114 126 127 Marketing Research, Ethnographic Research 102 PART 3 Marketing Research, Internet Research Panel Conduct the Research Analyze the Research Strategizing 130 103 105 106 (Chapters 10–11) Address the Problem in a Research Report 106 Marketing Information System 107 Marketing Information System Explained Marketing Information System Applied 107 107 Marketing Information System Visual Summary 109 108 Chapter 10 | Segmenting, Targeting, and Positioning ..........................................130 Chapter Outline Segmentation 130 131 Contents | Segmentation Explained Segmentation Applied Segmentation Base 131 Interior Views LLC Executive Summary 131 Company Description, Purpose, and Goals 133 133 and Goals Demographic Segmentation 133 Psychographic Segmentation Segmentation Base Applied 134 134 151 Forecasting 135 153 Interior Views LLC Forecasting Segmenting International Markets 135 135 Interior Views LLC Marketing Strategy Measurement and Controls 136 136 Visual Summary Undifferentiated Marketing 137 159 Managing PART 4 162 137 138 (Chapters 12–17) Niche Marketing 138 138 Selecting a Target 158 137 Differentiated Marketing Global Targeting Chapter 12 | Product and Service Strategies ..................................................162 138 139 Positioning Explained Positioning Applied Chapter Outline 139 139 Positioning 139 163 Products and Services Explained Products and Services Applied 140 Perceptual Map Levels of Product 140 163 163 164 Levels of a Product 140 Developing a Brand Position Statement 140 Brand Position Statement Visual Summary 162 Products and Services Using a Perceptual Map Selecting a Position 141 Product Classifications 164 164 Product Classifications 165 New Product Development 165 142 New Product Development Chapter 11 | The Marketing Plan..........146 Chapter Outline Business Plan Business Plan Explained 147 147 Business Plan Marketing Plan 148 167 167 Product Portfolio 169 Product Portfolio Explained Product Portfolio Applied 169 169 Product Portfolio 149 Marketing Plan Explained Marketing Plan Applied Product and Service Quality Product Design 168 147 149 149 Executive Summary 149 166 Product-Development Steps—Roles and Requirements Product Design 146 Business Plan Applied 157 137 Undifferentiated Marketing Niche Marketing 157 Marketing Plan 136 Differentiated Marketing 155 Interior Views LLC Measurement and Controls 136 Targeting 153 Marketing Strategy 155 Segmenting International Markets Positioning 151 Interior Views LLC Company Marketing Situation Segmenting Business Markets Targeting Applied 150 150 Marketing Situation Segmenting Business Markets 134 Targeting Explained 149 Interior Views LLC Company Description, Purpose, Segmentation Base Explained Targeting vii Product Life Cycle 169 171 Product Life Cycle Explained Product Life Cycle Applied 171 171 167 viii | Contents Product Life Cycle and Marketing Strategies 172 Channel Strategies Applied Duration of the Product Life Cycle Channel Structure 172 Limitations of the Product Life Cycle Visual Summary 173 Channel Organization 200 Channel Management 174 199 199 200 Channel Strategies Chapter 13 | Pricing Strategies..............178 Chapter Outline 178 Establishing Prices Logistics Applied 179 Establishing Prices Applied 179 Physical Distribution Transportation 182 Warehousing Demand and Price Elasticity Chapter 15 | Retailing and Wholesaling Strategies ..................................................210 184 185 Chapter Outline Retailing Pricing Strategies Applied Retailing Explained 187 Retailing Applied 187 New Product and Service Pricing Strategies 188 New Product and Service Pricing Strategies 189 Auction Pricing Strategies 190 Portfolio Pricing Strategies 190 Price Adjustment Strategies 211 Nonstore Retailing 213 Nonstore Retailing Retail Strategies Retail Strategies Explained Retail Strategies Applied Atmospherics Location Chapter 14 | Supply Chain 215 Wholesaling Applied 197 197 Types of Channel Intermediaries 198 Marketing Channels 198 217 217 Wholesaling Types of Wholesalers 217 Merchant Wholesalers Agents and Brokers 217 217 219 Manufacturers’ Branches 199 199 215 217 Wholesaling Explained 197 Channel Strategies Explained 215 Retail Strategies Wholesaling 196 214 215 Retail Price Policy and Distribution Strategies ........................196 Channel Strategies 214 214 215 Promotion Marketing Channels Applied 213 214 Level of Service 191 192 Marketing Channels Explained 211 Merchandise Assortment 214 190 Price Adjustment Strategies Marketing Channels 211 Types of Retailers 188 Online and Storefront Pricing Strategies 189 Auction Pricing Strategies 211 187 Pricing Strategies Chapter Outline 210 187 Pricing Strategies Explained Visual Summary 207 184 184 Legal Requirements Pricing Strategies 204 205 Visual Summary Pricing Practices Explained 204 204 Physical Distribution 205 182 184 Legal Requirements 204 Physical Distribution Applied Demand and Price Elasticity 182 Pricing Practices Applied 203 Physical Distribution Explained 180 Cost-Based Pricing Pricing Practices 202 202 Logistics Systems 179 180 Cost-Based Pricing 202 Logistics Explained Establishing Prices Explained Market Structure Logistics 201 Visual Summary 220 219 Contents | Chapter 16 | Advertising and Sales Promotion Strategies ................................224 Chapter Outline 224 Step 6: Close the Sale Marketing Communications Applied 225 Sales Management 226 Sales Management Process 227 Setting Sales Force Objectives Force 229 229 245 Employee Training Direct Marketing 229 Sales Promotion 230 Direct Marketing Applied Mail Order 231 Sales Promotion Explained Sales Promotion Applied 233 Public Relations Applied 233 249 249 Consumer Privacy Public Relations Explained 249 Direct-Response Advertising 231 Internet Public Relations 249 Direct-Response Advertising 231 Sales Promotion 247 247 248 Telemarketing 231 246 247 Direct Marketing Explained Advertising 244 245 Evaluating the Sales Force Message and Creative Strategy 229 Media Selection 244 Recruiting, Compensating, Training, and Motivating the Sales 228 Advertising Budget 244 244 Developing the Sales Force Strategy Advertising Objectives 228 Visual Summary 250 251 233 Public Relations Sponsorship Visual Summary 244 Sales Management Process Applied 228 Advertising Applied 243 Sales Management Process Explained 227 Advertising Explained 228 Evaluation 243 243 Sales Management 226 242 243 Sales Management Applied Communication Objectives Relationship Building 242 242 Sales Management Explained 225 Communication Objectives 225 Word of Mouth 242 Personal Selling Process 225 Marketing Communications Explained Control and Credibility 242 Step 5: Overcome Objections Step 7: Follow-up Marketing Communications Advertising Step 4: Sales Presentation ix 233 Integrating PART 5 254 234 235 (Chapters 18–20) Chapter 17 | Personal Selling and Direct Marketing Strategies..................................238 Chapter Outline 238 Personal Selling 239 Chapter 18 | The Communications Mix....254 Chapter Outline Personal Selling Explained Personal Selling Applied Integrated Marketing Communications 239 Integrated Marketing Communications Applied 240 Integrated Marketing Personal Selling Process 241 Personal Selling Process Explained Personal Selling Process Applied Step 1: Prospecting 241 Step 2: Preapproach Step 3: Approach 241 242 255 Integrated Marketing Communications Explained 239 Personal Selling 254 Communications 241 255 Communications Mix 256 241 Communications Mix Explained 256 Communications Mix Communications Mix Applied 256 256 255 255 | x Contents Media Types 258 Marketing-Mix Models Media Types Explained Media Types Applied Broadcast Marketing-Mix Models Explained 258 Marketing-Mix Models Applied 258 CPM Print 258 279 279 279 Marketing-Mix Models 280 259 Visual Summary 259 Media Types 281 260 Out-of-Home 260 Chapter 20 | Marketing Performance Digital Media 261 Measurement..............................................284 Digital Media Branded Entertainment 261 Chapter Outline 284 262 Branded Entertainment Marketing Accountability 262 285 Marketing Accountability Explained Media Selection 285 263 Marketing Accountability Media Selection Explained Media Selection Applied Media Planning Media Buying Marketing Accountability Applied 263 Measuring Marketing 264 264 Media Optimization 286 287 Measuring Marketing Explained Measuring Marketing Applied 266 Media Optimization Explained Media Optimization Applied 266 287 287 Measuring Marketing 266 Media Optimization Visual Summary Measuring Advertising 267 288 289 Measuring Advertising Explained 268 Measuring Advertising Applied 289 289 Measuring Advertising Chapter 19 | The Marketing Mix............272 Chapter Outline Marketing Mix 272 273 Marketing-Mix Strategies Applied Within the Marketing Mix Return on Marketing Investment 275 275 Visual Summary 293 293 294 275 276 Marketing-Mix Strategies: Situation 2 276 Marketing-Mix Strategies: Situation 3 276 Marketing-Mix Strategies: Situation 4 277 Marketing-Mix Strategies: Situation 5 277 Marketing-Mix Strategies: Situation 6 277 Appendix Notes Index Interior Views Marketing Plan 334 Glossary 278 293 Return on Marketing Investment Applied Marketing-Mix Strategies: Situation 1 Beyond the 4 Ps 292 Return on Marketing Investment Explained 275 Marketing-Mix Strategies Explained 291 291 Measuring Brand Health 273 Marketing-Mix Strategies 290 291 Measuring Brand Health Applied 273 Marketing Mix Applied Measuring Brand Health Measuring Brand Health Explained Marketing Mix Explained 285 263 341 335 298 About the Author | About the Author Michael Levens is Chair of Business Administration and Marketing at Walsh College. Dr. Levens has previously served as the Head of Consumer Research and Innovation at OnStar, Brand Manager at SAAB, and has held a variety of marketing leadership positions at General Motors. Dr. Levens has extensive global experience working in 25 countries on five continents and also has award-winning entrepreneurial experience with a business start-up, receiving Global 1st Runner-up honors in the 1995 International Entrepreneurial Challenge (MOOT CORP®). Educated in the United States and Australia, Dr. Levens holds a Postdoctoral Qualification in Marketing and Management from the A.B. Freeman School of Business at Tulane University, Ph.D. in Organization and Management (Marketing) from Capella University, M.B.A. from Bond University, and B.S. in Management Systems (Marketing) from Kettering University. His research is focused on affluent consumer behavior and non-traditional bundling strategies. Dr. Levens has conducted more than 100 research projects throughout the world and has presented his research at conferences hosted by the Advertising Research Foundation, American Marketing Association, Association of Marketing Theory and Practice, Automotive Market Research Council, and the Canadian Marketing Association. He regularly provides consulting services to Fortune 100 companies and consults pro bono for major not-for-profits. Dr. Levens is a Fellow of the Chartered Institute of Marketing and has been named to the Fulbright Specialist Roster. He is also active in the American Marketing Association, Detroit Economic Club, and MENSA. Dr. Levens has been appointed to three different boards of directors and presently serves as a Director and Marketing Chair of the Eisenhower Dance Ensemble. xi This page intentionally left blank Marketing: Defined, Explained, Applied Michael Levens 1 chapter Part 1 Part 2 Part 3 Explaining (Chapters 1, 2, 3, 4, 5) Creating (Chapters 6, 7, 8, 9) Strategizing (Chapters 10, 11) Part 4 Part 5 Managing (Chapters 12, 13, 14, 15, 16, 17) Integrating (Chapters 18, 19, 20) The Meaning of Marketing Chapter Overview Everyone has some experience with marketing. Whether or not you have worked in a marketing position in an organization, you have certainly been exposed to advertising, evaluated sales offers, made purchase decisions, and promoted yourself in some capacity, such as applying to a college or university. These, and many other aspects of everyday life, place you in marketing situations. Of course, understanding marketing requires much more than simply recalling and becoming aware of everyday experiences. Understanding marketing requires a familiarity with the strategies that businesses use to create awareness and interest in their products and services. Understanding marketing also requires a familiarity with the processes that consumers knowingly and unknowingly follow when evaluating and making purchase decisions. In addition, understanding marketing requires that you have knowledge of the various activities that marketing comprises, including those tasks that promote and enable transfer of ownership, enable flow of goods from manufacturer to consumer, and help facilitate completion of the first two categories of tasks. Understanding marketing also requires familiarity with disciplines, such as economics and psychology, that have provided context to what is currently known as marketing. This chapter is designed to provide a foundation for your study of marketing by explaining the meaning of marketing. Chapter Outline Marketing pp. 3–4 Objective 1. What is marketing? Marketing Concept pp. 5–8 Objective 2. What is the marketing concept? How has marketing changed? • Evolution of Marketing: Early Years Until 1950 p. 6 • Evolution of Marketing: 1950–Present pp. 6–7 • Evolution of Marketing: Social Responsibility pp. 7–8 Marketing Functions pp. 9–10 • Internal Marketing Participants p. 9 • External Marketing Participants pp. 9–10 2 Objective 3. What are marketing functions? Who performs them? CHAPTER 1 | The Meaning of Marketing MARKETING 3 (pp. 3–4) Marketing is an organizational function and a collection of processes designed to plan for, create, communicate, and deliver value to customers and to build effective customer relationships in ways that benefit the organization and its stakeholders.1 DEFINED EXPLAINED Marketing Marketing is a distinct activity within an organization, generally referred to as the marketing department. Marketing is also a set of tasks, such as assembling, pricing, and promoting, which may or may not be performed by the marketing department, that result in products, services, ideas, and other tangible and intangible items. Those items, in turn, produce profits or achieve some other stated goals for an organization and its stakeholders, including shareholders, employees, or donors. Profits or other organizational goals are achieved by creating value for consumers. The creation of value is the realization of benefits that are at parity or that exceed the cost of products, services, or other items. Customers, such as students, parents, professors, and the rest of society, search for value on a daily basis when making purchase decisions. Marketing has grown from roots in economics, psychology, sociology, and statistics. One important concept that marketing has borrowed from the study of economics is the idea of utility. Utility is the satisfaction received from owning or consuming a product or service. Utility, in a marketing sense, is the value that consumers attach to that marketer’s products or services. Supply and demand for products and services influence price, production costs influence supply, and utility influences demand. The utility that consumers attached to BMW products, and the subsequent increase in demand, influenced the German automaker to add U.S.-based production in Spartanburg, South Carolina, in 1994 and to greatly expand the manufacturing facility in 2006. Over 1.5 million BMWs have been produced in the automaker’s first plant outside of Germany. Consumers are the ultimate adjudicators of utility. If consumers perceive that a particular product or service has utility, then they are inclined to consider purchasing that product or service. A need is a necessity to meet an urgent requirement. A want is a desire for something that is not essential. For instance, a person has a need for food, but a person simply wants ice cream. There are strict definitions for wants and needs. However, businesses often use marketing to transform a want into a perceived need for a particular product or service. Businesses can increase demand, the financial capacity to buy what a person wants, for that business’s brand of products or services through marketing activities such as advertising. A brand is a promise to deliver to consumers specific benefits associated with products or services. The brand can contrast the products or services of one company with the products or services of another company and, through effective marketing, command a perception of greater value that can lead to higher sales revenue and profits. APPLIED Marketing In practice, marketing is much more than simply selling or advertising. Marketing influences you as a consumer through your current and future career choices, and through the economy. Businesses create value through their offerings, communicate that value to consumers, and then deliver value in exchange for money from consumers. Marketing applies to more than just products or services, however. Marketing extends to a variety of tangible and intangible items, including the following: • • • • • • • Products Services People Places Causes Events Ideas Facebook is a social networking utility created in 2004. Currently, Facebook has about 500 million users around the world and allows contacts with friends and colleagues to communicate and share photos, videos, and other links. People register with an e-mail address and join one or more networks based on companies, schools, or regions. In addition to allowing people to connect with each other, the site also has evolved as a marketing tool for individuals and businesses. The Facebook platform allows the hosting of events, such as the 2008 Presidential debates in partnership with ABC News, and also allows advertisements to be placed on networks. Target enjoyed considerable success through its involvement with Facebook. Target took its hip image to Facebook by sponsoring a page identified as the “Dorm Survival Guide.” Target made considerable preparation for the page, including an effort to understand how users interact on Facebook. Based on that insight, discussion groups, decorating tips, and pictures of dorm rooms complemented the product information. 4 PART 1 | Explaining Target’s initial campaign registered over 27,000 users and helped increase sales over 6% from the previous year. Target has continued to partner with Facebook in social media activities. The Target Rounders program uses college-age students to promote the company on Facebook in return for discounts and incentives.2 PHOTO: Lenscap/Alamy Image. EXAMPLE MARKETING The Corvette ZHZ, offered exclusively by Hertz as part of its “Fun Collection” vehicle rental portfolio in the United States, has both product and service characteristics. The vehicle is a product, but the rental is a service. The Hertz Corporation, the world’s largest general-use car rental brand with 8,100 locations in 147 countries, creates value for its customers in a variety of ways. Some of those methods include working with General Motors, manufacturer of the Chevrolet Corvette, to offer a product that Hertz’s competitors do not. Few people might rent the 436-horsepower Corvette ZHZ, but the Hertz vehicle rental portfolio also includes subcompacts to minivans to luxury cars, and those choices are presented to consumers as innovative and contemporary.3 PHOTO: © 2010 Hertz System, Inc. Hertz is a registered service mark and trademark of Hertz System, Inc. >> END EXAMPLE Products include items often used or consumed for personal use, such as shavers or ice cream, and items that are consumed by businesses or used to produce items that are resold, such as raw materials or components. Services include items that are used and not retained by the consumer, for example, a massage or a haircut, and items that are used and not retained by businesses, such as repair or maintenance services. Beyond products and services, many other items can also be marketed. People such as celebrities, athletes, and politicians are engaged in marketing themselves and building their own brands. Similarly, as you build your career, you will constantly be marketing yourself to others. Places, from London to New York, can also be marketed. Place marketing can be designed to accomplish one of a wide variety of objectives, such as introducing potential visitors to a place with which they may not be familiar, reinventing a location to stand for something different from what it is currently known as, or encouraging more frequent visits. Causes, including many not-for-profit organizations such as the Humane Society, museums, and art institutes, are also marketed to potential donors and to those who may use the services of the not-for-profit. Events, such as the Olympics, the Super Bowl, and the World Cup, market themselves, but also serve as marketing platforms for other businesses. Ideas, such as anti-littering campaigns and political views, as well as concepts and messages, are also marketed. CHAPTER 1 | The Meaning of Marketing MARKETING Concept 5 (pp. 5–8) The marketing concept is an organizational philosophy dedicated to understanding and fulfilling consumer needs through the creation of value. DEFINED EXPLAINED Marketing Concept Marketing, as stated earlier, involves the creation of value that results in effective customer relationships. Customer relationships are created when businesses and consumers interact through a sales transaction of a product or service and continue that relationship based on ongoing interaction between the business and the customer. The management of customer relationships, commonly referred to as customer relationship management (CRM), involves those elements of business strategy that enable meaningful, personalized communication between businesses and customers. CRM is composed of activities that are used to establish, develop, and maintain customer relationships. For example, customer-generated reviews can create a feedback mechanism and reinforce a strong relationship between businesses and customers. The understanding and interaction with customers becomes increasingly important as customers have greater access to information about different choices. By implementing CRM, a business is committing to understanding customer lifetime value. Customer lifetime value includes the projected sales revenue and profitability that a customer could provide to a firm. If customer relationships serve as the foundation for marketing activities, then a business is practicing the marketing concept. CRM and associated concepts are discussed in greater detail in Chapter 6. the marketing concept by focusing on fulfilling the expectations of their customers. EXAMPLE MARKETING CONCEPT APPLIED Marketing Concept Although generally considered a contemporary idea, the marketing concept has been used for many years, in practice, if not in name, by businesses trying to distinguish themselves from their competition by focusing on the customer. L.L.Bean founded its business in 1912 by referring to the customer as “ . . . the most important person ever in this office—in person or by mail.” L.L.Bean developed a marketing philosophy based on customer service and marketed a guarantee to provide “ . . . perfect satisfaction in every way.”4 Currently, many businesses, as well as churches, schools, and state and local tourism entities, practice Missouri began an advertising campaign in 2008 with its central message: “Close to home. Far from ordinary.” This message is designed to attract visitors from nearby states. The idea is that visitors will drive to Missouri and experience the wide range of activities available. The message concentrates on the actual experience of travel, and not simply the destination. Practicing the marketing concept, this advertising has targeted specific groups of individuals, including families, young women, and baby boomers. By targeting certain groups, Missouri can create tailored messages that in turn create additional value that surpasses the value that might be obtained by communicating a broader message to the entire population. 6 PART 1 | Explaining Contrast Missouri’s advertising campaign to the Las Vegas advertising campaign. Look at the two ads, and you can see that they appeal to different groups. After Las Vegas moved away from previous advertising as a family destination, the “what happens here, stays here” advertising campaign clearly establishes Las Vegas as an adults-only playground. The campaign focuses on the core benefit of a wide range of adult activities and targets those who place value on those activities. Las Vegas’s advertising campaign even inspired the 2008 movie What Happens in Vegas.5 PHOTO: Missouri Tourism Commission. >> END EXAMPLE Evolution of Marketing: Early Years Until 1950 Sales and marketing activities have existed in varying forms throughout time, from ancient civilizations through the modern era. Traditionally, the marketing emphasis was placed on the production of crafts, agricultural products, and other goods for sale through local markets. Over time, distinctive marks and designs such as cattle brands were associated with these products to distinguish one seller from another. The early years of American marketing included advertisements that were placed in newly created media, such as newspapers and magazines, as well as the formation of the first advertising agency in the United States. In 1704, the Boston News-Letter published the first newspaper advertisement offering items for sale. The advertisement was for real estate on Oyster Bay, Long Island.6 The first American magazine ads were published in Benjamin Franklin’s General Magazine in 1742.7 The first advertising agency was opened in Philadelphia in 1843.8 Sales opportunities in the United States expanded rapidly after the Revolutionary War as individuals moved across the country selling products such as clocks and books.9 These sales roles evolved to salespeople managing orders for newly formed manufacturing companies of the nineteenth century.10 Through the early part of the twentieth century, both marketing and sales activities were designed to support production. Products were often created, and then customers were sought. The production orientation reflects a business focus on efficient production and distribution with little emphasis on any marketing strategy. This period existed roughly from the mid1800s until the 1920s. With the advent of the Great Depression in the late 1920s and early 1930s, and the resulting increase in product inventory, the sales function became a primary activity and was considered synonymous with marketing. A sales orientation reflects a business focus on advertising and personal selling to create demand and move product inventory. This period lasted from the 1930s into the 1950s. Evolution of Marketing: 1950–Present From the 1950s into the 1980s, companies generally focused on the needs and wants of consumers more than they did in prior years. A consumer orientation reflects a business focus on satisfying unmet consumer needs and wants. Also in the 1980s, businesses began to consider not only consumers but also suppliers as sources of value-based relationships. A relationship orientation reflects a business focus on creating value-added relationships with both suppliers and consumers. A value-added relationship is much more than buying and selling. The idea of value-added relationships involves business practices that support long-term relationships. These relationships may incur short-term costs, such as additional customer support and enhanced after-sales service, but are intended to reinforce the value of the product or service, relative to the competition. CHAPTER 1 | The Meaning of Marketing EXAMPLE EVOLUTION OF MARKETING: 1950–PRESENT 7 to employers is designed to address specific needs in automotive, contact center, education, electronic assembly, engineering, finance and accounting, health care, information technology, legal, light industrial, marketing, office, scientific, and security clearance. Kelly’s consulting and outsourcing activity uses the advertising message “If it’s outside your scope, it’s probably within ours.” Value is created for business clients by offering expertise in specific employment fields. PHOTO: © 2008 Kelly Services, Inc. >> END EXAMPLE Evolution of Marketing: Social Responsibility Kelly Services, operating in 37 countries and territories and providing employment to over 750,000 employees annually, provides business services, such as temporary staffing services and outsourcing solutions, and consumer services, such as temporary and full-time job placement. Kelly’s marketing efforts are targeted both to employers and to workers who are unemployed or looking to change careers. Kelly’s “work to live, not live to work” advertising is targeted primarily toward workers and creates value for them by identifying with an individual’s desire to balance work and home life. Kelly’s communication During the last decade, there has been an increased focus on social responsibility, ethics, and accountability in business. The overriding idea is that a person (or business) can make money by focusing on socially responsible marketing activities and abiding by high ethical standards. Social responsibility is the idea that businesses consider society as a whole as one of their stakeholders and that businesses make decisions that take into account the well-being of society. For example, organizations such as the American Marketing Association (AMA) developed standards of ethical behavior for marketers. A major issue that organizations must consider when practicing socially responsible marketing involves how products affect the global environment. Everything from the pollution generated by producing the products, forms of packaging used and their potential for recycling, and the amount of energy used to consume products must be considered. Some organizations adopt operating standards that govern their socially responsible marketing practices, while others choose to financially support causes that benefit society. Many accomplish both by developing green marketing products and supporting cause-marketing activities. Socially responsible marketing can be both altruistic and profitable. A recent study by Cone LLC found that two-thirds of Americans claim that they consider a company’s business practices when making purchase decisions.11 Social responsibility and related concepts are discussed in greater detail in Chapter 4. 8 PART 1 | Explaining EXAMPLE EVOLUTION OF MARKETING: SOCIAL RESPONSIBILITY Pepsi, a PepsiCo brand sold in 200 countries, made a major decision in 2010 by electing not to run its traditional Super Bowl advertisement and, instead, launched a $20 million social responsibility campaign. The Pepsi Refresh Project was designed to provide millions of dollars to fund ideas that will “refresh” the world. Pepsi launched an advertising campaign using television; online sources including Facebook, Twitter, and YouTube; radio; print; and outdoor billboards inviting people, businesses, and nonprofits to submit ideas that would have a positive impact on the world; these ideas were eligible within six categories: Health, Arts & Culture, Food & Shelter, The Planet, Neighborhoods, and Education. Each month, visitors to its Web site voted on the ideas. At the end of the month, finalists were selected to receive grant money—up to $1.3 million. Pepsi’s objective was to create more two-way communication and to establish deeper relationships with its customers than can typically be achieved through more traditional advertising campaigns.12 PHOTO: PepsiCo Inc. >> END EXAMPLE CHAPTER 1 | The Meaning of Marketing MARKETING Functions 9 (pp. 9–10) Marketing functions are activities performed within organizations that create value for specific products or services. DEFINED EXPLAINED Marketing Functions Noted management guru Peter Drucker identified the critical role that marketing performs for business: “Because the purpose of business is to create a customer, the business enterprise has two—and only two—basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business.”13 The process of creating value through uniqueness occurs well before and well after the selling process. Marketing functions can be grouped into three general categories with functions from each category occurring throughout the marketing process. The three categories are the following: • Exchange functions • Physical functions • Facilitating functions Exchange functions are activities that promote and enable transfer of ownership. Examples of exchange functions include buying, selling, and pricing, as well as advertising, sales promotion, and public relations. Physical functions are activities that enable the flow of goods from manufacturer to consumer. Examples of physical functions include assembling, transporting and handling, warehousing, processing and packaging, standardizing, and grading. Facilitating functions are activities that assist in the execution of exchange and physical functions. Examples of facilitating functions include financing and risktaking, marketing information and research, as well as the promise of servicing. Internal Marketing Participants There are many different marketing stakeholders. Those stakeholders within a business or with direct oversight include the following: • Marketing department • Other business departments • Business leadership/board of directors The marketing department performs a primary role in managing marketing functions, including activities such as establishing a product or service portfolio, determining pricing, establishing distribution channels, and creating promotions. These elements compose the most common representation of the marketing mix, referred to as the 4 Ps (Product, Price, Place, and Promotion). The marketing mix is a collection of marketing variables that are managed to achieve the desired sales performance in a target market. In addition, functions such as defining the brand and creating a CRM process are all activities performed by the marketing department. Other business departments, such as finance, use marketing information and contribute to marketing activities in a variety of ways, including securing financing for expanded manufacturing or by providing cost information to marketing to assist in understanding the profitability of marketing decisions. Persons in positions of business leadership, such as the president or chief operating officer, and the board of directors also consume marketing information and make decisions to support or limit marketing activities through resource allocation. External Marketing Participants There are a number of marketing stakeholders that operate outside a business, yet have tremendous influence on marketing activities. They include the following: • • • • • • • Investors Consumers/customers Advertising/PR agency Information providers/marketing research companies Government Partners Competitors Investors can influence marketing ideas through letters to management and through attending shareholder meetings. Recent investor actions have included proposals to practice more socially responsible marketing. Consumers and customers influence marketing through purchase decisions and feedback on survey questions. Advertising and public relations companies assist businesses in understanding consumers and customers, as well as in presenting products and services in the most favorable perspective through the creation of media content. Information providers and marketing research companies collect a wide range of consumer and market information for marketing departments. Whether studying the success of advertising or the product desires of consumers, the collection of information is critical to marketing decisions. 10 PART 1 | Explaining The government primarily influences marketing through legislation or regulation. Partners, other businesses or organizations that already work with or may work with a particular business, influence marketing choices by presenting opportunities to reach more consumers or to share in the cost of marketing activities. Competitors also influence marketing actions by their advertising investment and product launches. Thus, there are many marketing stakeholders, and their collective efforts will ultimately define the level of success a business will realize in their marketing practices. EXAMPLE EXTERNAL MARKETING PARTICIPANTS When people think of marketing research, they tend to think of receiving phone calls during dinner and being stopped at shopping malls to complete surveys. In fact, the marketing research field is far more complex. Gongos Research is a custom marketing research company that has enjoyed rapid growth through the use of technology and innovation such as i˚Communities and metaCommunities. These are private online communities of individuals who have chosen to become active in the communities’ social aspects (such as creating their own discussion groups) and business aspects (such as completing surveys), and are compensated for their involvement. Gongos Research assists a wide range of businesses in many different business sectors, including financial services, automotive, powersports, and consumer products. PHOTO: Courtesy of Gongos Research, Inc. >> END EXAMPLE APPLIED Marketing Functions In practice, some businesses view marketing from a limited perspective by considering it synonymous to sales or advertising. Other businesses understand that marketing performs a broad range of functions, ranging from securing products to servicing products after a sale, and that the marketing activity is connected to all other business functions. Successful businesses generally consider marketing departments as the link between customers and businesses. Marketing departments are in a unique position to identify and communicate customer requirements to other departments within an organization, such as finance, accounting, manufacturing, and business planning. CHAPTER 1 | The Meaning of Marketing Visual Summary Part 1 Part 2 Part 3 Explaining (Chapters 1, 2, 3, 4, 5) Creating (Chapters 6, 7, 8, 9) Strategizing (Chapters 10, 11) Part 4 Part 5 Managing (Chapters 12, 13, 14, 15, 16, 17) Integrating (Chapters 18, 19, 20) Chapter 1 Summary Building on the idea that everyone has some experience with marketing, the concept of marketing and marketing functions was developed and expanded. Marketing involves the creation of value that results in effective customer relationships. Marketing is used for a variety of tangible and intangible items, including the following: • Products • Services • People • Places • Causes • Events • Ideas Marketing functions are the tasks that are applied to the various items that can be marketed. Marketing functions can be grouped into three general categories: • Exchange functions • Physical functions • Facilitating functions A variety of marketing stakeholders either utilize or contribute to marketing activities: • Marketing department • Other business departments • Business leadership/board of directors • Investors • Consumers/customers • Advertising/PR agency • Information providers/marketing research companies • Government • Partners • Competitors value Marketing pp. 3–4 Capstone Exercise p. 13 Marketing is about creating value that leads to effective customer relationships. Marketing Functions pp. 9–10 philosophy Marketing Concept pp. 5–8 The marketing concept is an organizational philosophy built on customer lifetime value. activities Marketing functions are activities that facilitate, promote, or enable transfer of ownership and flow of goods from manufacturer to consumer. 11 12 PART 1 | Explaining Chapter Key Terms Marketing (pp. 3–4) Marketing is an organizational function and a collection of processes designed to plan for, create, communicate, and deliver value to customers and to build effective customer relationships in ways that benefit the organization and its stakeholders. (p. 3) Opening Example (pp. 3–4) Example: Marketing (p. 4) Key Terms (p. 3) Brand is a promise to deliver specific benefits associated with products or services to consumers. (p. 3) Demand is the financial capacity to buy what one wants. (p. 3) Need is a necessity to meet an urgent requirement. (p. 3) Utility is the satisfaction received from owning or consuming a product or service. (p. 3) Value is the benefits that exceed the cost of products, services, or other items. (p. 3) Want is a desire for something that is not essential. (p. 3) Customer relationship management (CRM) is the activities that are used to establish, develop, and maintain customer relationships. (p. 5) Customer relationships are created when businesses and consumers interact through a sales transaction of a product or service and continue based on ongoing interaction between the business and the consumer. (p. 5) Production orientation reflects a business focus on efficient production and distribution with little emphasis on any marketing strategy. (p. 6) Relationship orientation reflects a business focus on creating value-added relationships with suppliers and consumers. (p. 6) Example: Evolution of Marketing 1950–Present (p. 7) Sales orientation reflects a business focus on advertising and personal selling to create demand and move product inventory. (p. 6) Marketing Functions (pp. 9–10) Marketing functions are activities performed both by consumers and by businesses involved in value creation for specific products or services. (p. 9) Example: External Market Participants (p. 10) Key Terms (p. 9) Marketing Concept (pp. 5–8) Marketing concept is an organizational philosophy dedicated to understanding and fulfilling consumer needs through the creation of value. (p. 5) Example: Marketing Concept (pp. 5–6) Example: Social Responsibility (p. 8) Key Terms (pp. 5–7) Consumer orientation reflects a business focus on satisfying unmet consumer needs and wants. (p. 6) Customer lifetime value is the present value of all profits expected to be earned from a customer over the lifetime of the customer’s relationship with a company. (p. 5) 4 Ps are the most common classification of a marketing mix and consist of product, price, place, and promotion. (p. 9) Exchange functions are activities that promote and enable transfer of ownership. (p. 9) Facilitating functions are activities that assist in the execution of exchange and physical functions. (p. 9) Physical functions are activities that enable the flow of goods from manufacturer to consumer. (p. 9) CHAPTER 1 | The Meaning of Marketing 13 Capstone Exercise One aspect of marketing is the art of making people want something that they may not need. Of course, as a socially responsible marketer, we are not advocating that you mislead people with your promotions or advertising. The key is to understand what people want versus what they need. Your personal wants and needs change, depending on your economic position, your age, your gender, and where you live. 1. Write one sentence describing a need, and write one sentence describing a want. 2. Make a list of 10 items that you want and 10 items that you need. 4. Ask someone who is at least 10 years older or younger than you to make the same list, and then compare the two lists. What are the differences? What are the reasons for those differences? If you had more or less money, would your list change? 5. Think about what would be on your list if you lived in another country. What about if you lived in the Sudan in Africa, versus if you lived in France in Europe? 6. The key to this exercise is try to understand why some of the things you think you need are really things you want. Why are things that are really wants on your needs list? 3. Compare your list with the list of someone of the opposite gender. Can you explain the differences? Application Exercise Use the following marketing concepts in this chapter to tackle and solve a marketing problem: value, utility, the marketing concept, want, and need. First, start by thinking about health care products. Health care, in general terms, is the treatment and prevention of illness. There are many products available in grocery stores, drug stores, discount stores, etc., within this category for us to consider purchasing. The Marketing Problem Choose a product in the health care category after considering the following situation. You feel you may be catching a cold and stop by your local store to check out the products in their heath care section. The Problem Describe a product that helps relieve cold symptoms in the health care category. What is the product’s value? Utility? What prompted you to buy it, a want or a need? The Solution Complete the following Problem/Solution brief using your product in the health care category, chapter concepts, and college resources. 1. From the Marketing Manager’s Point of View a. Problem Definition b. Analysis c. Product’s Value d. Target Market e. Solution 2. From the Consumer’s Point of View a. Problem Definition b. Analysis c. Product’s Value d. Is Product a Want or Need? e. Solution Resources: Marketing Defined, Explained, Applied 2e, Michael Levens The College Library Retail or Online Field Trip Assigned Reading—Brand Week, Advertising Age, WSJ, scholarly publications, category trade journals Blog your problem from either point of view, gather responses/posts (www.blogger.com/start) 2 chapter Part 1 Part 2 Part 3 Explaining (Chapters 1, 2, 3, 4, 5) Creating (Chapters 6, 7, 8, 9) Strategizing (Chapters 10, 11) Part 4 Part 5 Managing (Chapters 12, 13, 14, 15, 16, 17) Integrating (Chapters 18, 19, 20) The Market in Marketing Chapter Overview In the previous chapter the concepts of marketing and marketing functions were presented and developed, based on the idea that everyone has at least some experience with marketing. This chapter expands those comments by considering the elements of the marketing environment. In addition, consumer markets are discussed as well as business markets. Chapter Outline Marketing Environment pp. 15–18 • Microenvironment pp. 15–16 Objective 1. What are the components of the marketing environment? How do those elements affect marketing strategy? • Macroenvironment pp. 16–18 Consumer Markets p. 19 Objective 2. What are consumer markets? Business Markets pp. 20–22 Objective 3. How are business markets similar to consumer markets? How are they different? 14 CHAPTER 2 | The Market in Marketing MARKETING Environment 15 (pp. 15–18) The marketing environment is a set of forces, some controllable and some uncontrollable, that influence the ability of a business to create value and attract and serve customers. DEFINED EXPLAINED Microenvironment Marketing Environment The microenvironment includes those forces close to a company, yet outside its internal environment, that influence the ability of a business to serve its customers.1 The microenvironment comprises entities such as customers, suppliers, competitors, and other businesses that assist or influence a business’s ability to sell, distribute, promote, and develop products or services. A tool that helps determine where power exists in the microenvironment of a business is Porter’s Five Forces of Competitive Position Model.2 The Porter analysis can assist a business with understanding the potential for new product development, the attractiveness of a particular market segment, or the potential to reduce costs of supply or distribution, among many other applications. The central concept of the Five Forces of Competitive Position Model is that five forces determine the power in a business’s microenvironment. Those forces are the following: Businesses strive to create value that leads to productive customer relationships. Many factors influence value creation and the nature of customer relationships, including factors that are internal to the business and factors that are external to the business. The internal environment of a business involves all those activities, including marketing, that occur within the organizational functions in a business. Internal marketing is the implementation of marketing practices within an organization to communicate organizational policies and practices to employees and internal stakeholders. The topics of internal marketing efforts are the business’s resources, including human and financial capital, as well as intangible assets, such as brands or patents. These factors represent many of the elements that can influence changes within a business. The external environment of a business involves all activities, such as supplier and customer actions, that occur outside the organizational functions of a business. External marketing is the implementation of marketing practices directed outside the business to create value and to form productive customer relationships. External marketing influences the external environment in distinct areas, including the microenvironment and the macroenvironment, which can either enhance or diminish the ability of a business to create value for its customers. • • • • • Threat of new entrants Bargaining power of suppliers Bargaining power of customers Threat of substitute products Competitive rivalry within an industry APPLIED Marketing Environment In practice, businesses typically concentrate their efforts on developing strategies that assist in managing the microenvironment. The increasing sophistication of methods to gather marketing research information, from checkout scanner data to purchase transaction databases, allows for quicker responses to changes in the microenvironment. More companies are realizing the importance of internal marketing to employees and internal stakeholders. Such internal marketing communicates the values and expectations of the business and creates business proponents in the marketplace when the employees interact with others. Many companies are also engaged in lobbying the U.S. government and governments of other countries to influence the macroenvironment. Businesses, however, typically do not directly influence the macroenvironment. The Health Care and Education Reconciliation Act was signed into law by President Barack Obama on March 30, 2010. Building on its predecessor, the Patient Protection and Affordable Care Act, the health care initiative affected both consumers and businesses in a variety of ways. Coverage is expanded over several years to 32 million Americans who were uninsured at the time of the bill signing. Some other elements of the law include the creation of state-based health care exchanges for the uninsured and self-employed, families with income under a particular level are subsidized, Medicare prescription drug assistance is provided, Medicaid coverage is expanded, insurance companies are forbidden from denying coverage to certain groups of individuals such as children and individuals with 16 PART 1 | Explaining pre-existing conditions, and most individuals are mandated to purchase insurance. The implications are extensive. Demand for medical services and hospitals will most likely increase. The HMO industry will most likely be negatively impacted through increased competition and governmental mandates. Individuals may also have new or different choices as the law is implemented. There will be a variety of exchanges of information, and marketing activities, among the government, individuals, insurance companies, health care providers, and many other entities impacted by this law.3 PHOTO: Pincasso/Shutterstock. The threat of new entrants can influence a business’s level of power in an industry by the existing barriers to entry. Strong barriers to entry, such as intellectual property or economies of scale, provide a company power to resist new entrants. Suppliers can assert power if they are the only one or one of a few businesses that can provide a particular product or service. Buyers (or customers) can also exert power on a business through the number and nature of buyers. The more buyers that are available, the less important an individual buyer is to a business. The fewer buyers that are available, the more power they can project. In some cases, one buyer, such as Walmart, is so large that it constitutes a significant percentage of total purchases from a business. The threat of substitutes can reduce the power of a business if many substitutes exist for a particular product or service. If a product exists that is tied to another product, such as certain technical computer software, there is less threat from substitutes. The nature of the rivalry among existing industry competitors influences the balance of power in the industry. Any change in status, whether it be the quantity and size of competing businesses, their portfolio, or their financial position, will influence the power any one business can exert on the industry. referred to as telematics, is a combination of telecommunications and informatics/computer science. It consists of a mobile phone, onboard computer, sensors, and a Global Positioning System beacon. The product is available at no charge for a specific duration when an eligible new vehicle is purchased. After an initial period the service is subscription-based priced at approximately $200 annually. While unique to certain vehicles, many of the OnStar services have substitute products available. A mobile telephone could be considered a substitute for the OnStar hands-free calling service, a roadside service such as the American Automobile Association could be considered a substitute for OnStar’s roadside assistance, and a portable navigation system could be considered a substitute for OnStar’s Turn-by-Turn Navigation. The value that customers attribute to substitute products, including considerations such as switching costs, ease of use, and capability, influences the value that the customers attribute to the bundle of OnStar services.4 PHOTO: dundanim/Shutterstock >> Macroenvironment The macroenvironment includes societal forces that are essentially uncontrollable and influence the microenvironment of a business. Part of the external environment of a business, the macroenvironment contains the following variety of sub-environments: • • • • • • Economic Social and cultural Competitive Legal Political Technological EXAMPLE EXAMPLE END EXAMPLE MACROENVIRONMENT MICROENVIRONMENT OnStar, a subsidiary of General Motors (GM) that provides subscription-based communication, tracking, diagnostic, navigation, emergency response, and other convenience services, is available on most GM vehicles and a few non-GM models. The product, A legislative change can create challenges for some businesses, and opportunities for others. As a result of a 2010 law requiring newly manufactured diesel-fueled trucks to meet new environmental emission standards, a New Jersey–based motor oil and fluid manufacturer and supplier, Prime Lube, looked to Europe, CHAPTER 2 | The Market in Marketing which has been dealing with similar standards since early 2000, for potential partners. Prime Lube became one of the first U.S. distributors of the German product BlueSky Diesel Exhaust Fluid, and began manufacturing it in the United States in July 2010. BlueSky is injected into the catalytic converter of a truck in a mist form where it interacts with nitrous oxide, the black soot that is released from most diesel exhaust systems, and converts it to water and carbon dioxide. The result is close to zero emissions. Prime Lube took advantage of a change in the macroenvironment to secure a new product that solves challenges for its customers before its competitors could do so.5 PHOTO: Jack Cronkhite/Shutterstock. >> END EXAMPLE Economic Environment As mentioned, one of the components of the macroenvironment is the economic environment. The economic environment includes factors that influence consumer purchase ability and buying behavior. Inflation rates, income levels, and unemployment levels all contribute to the economic environment. Inflation is an increase in the price of a collection of goods that represents the overall economy. As inflation increases, prices of items such as gasoline, food, and health services generally rise, and, if average income does not keep pace, products and services can become too expensive for consumers. The result is that demand generally decreases either voluntarily or involuntarily. Income levels are average consumer earnings used to approximate national earnings. Changes in income inversely relate to changes in demand. Unemployment levels are the number of unemployed persons divided by the aggregate labor force. Increases in unemployment reduce the ability of individuals to purchase products and services. EXAMPLE 17 ECONOMIC ENVIRONMENT The American Recovery and Reinvestment Act (ARRA) of 2009 included a number of either new or expanded tax benefits on expenditures to reduce energy use or create new energy sources. ARRA provided for a uniform credit of 30% of the cost of qualifying improvements up to $1,500. Expiring on December 31, 2010, the law sharply increased demand, during a very difficult economic time, for a wide range of products such as insulation, energyefficient exterior windows and doors, and energy-efficient heating and air conditioning systems as well as contractor services.6 PHOTO: Christina Richards/Shutterstock. >> END EXAMPLE Competitive Environment The competitive environment includes factors that relate to the nature, quantity, and potential actions of current and potential competitors. Changes in the context of competitors contribute to the competitive environment. If a business operates with a small number of competitors, there are fewer requirements to react to a competitive action and more time to make strategic decisions. In a competitive market, however, many more factors can impede a business from taking the actions that it wants to take. For example, if maintaining margins on products is important to generate money to fund important new product development, then a competitor’s aggressive move to reduce price could hurt that business strategy. Maintaining margins would take second place to a need to respond to maintain market position. Social and Cultural Environment The social and cultural environment includes factors that relate marketing to the needs and wants of society and culture. Changes in various types of demographics contribute to the social and cultural environment. Demographics are characteristics of human population that are used to identify markets. These characteristics include elements such as age, race, and household structure. As consumers age, levels of income generally increase and life stages change. The result is differing product and service demands. Businesses must carefully track changes such as age to make sure their portfolio continues to provide value to a market of relevant size. The United States is becoming an increasingly diverse market. As population segments such as Hispanics, Asian Americans, and African Americans increase, product and service requirements and different advertising methods change to reach diverse audiences. Household structure is also changing. There are more single-family households because people wait to marry later in life or not at all. The quantities and types of products and services produced need to reflect these realities. EXAMPLE COMPETITIVE ENVIRONMENT The 1972 launch of Pong, a video game that looked like video table tennis, is credited as greatly expanding the video game market. Pong first appeared in arcades, but Atari launched a home version in 1974. Atari’s home version was a console-based game system that used cartridges and was wildly successful. In the early 1980s, competition from PC manufacturers and other video game manufacturers began eroding Atari’s market share. A lack of product investment and oversupply of inventory, among other factors, caused a dramatic decline in Atari’s fortunes. Atari struggles to this day. In contrast, Nintendo entered the U.S. market in the early 1980s with its proprietary console, the Nintendo Entertainment System. Nintendo had to convince resellers to stock its product in light of Atari’s problems. Nintendo reduced the risks of resellers 18 PART 1 | Explaining by agreeing to take back products that did not sell. Nintendo carefully controlled its inventory and focused on building quality products. It built a strong market presence and used that presence to influence resellers to stock a higher share of its products than those of competitors. Nintendo enjoyed great success with this strategy and continues that success today with its Wii system, among other products. Social movements, either a new political party or cause, can also create trends such as interest in “green” or “fair trade” products. Whether protesting in cities or funding advocacy advertisements, these causes can have tremendous influence on consumer attitudes and interest in products or services. PHOTO: ST Images/Alamy Images. The technological environment includes factors that influence marketing based on scientific actions and innovation. Changes in consumer perspectives on scientific activities and new discoveries contribute to the technological environment. Policies on cloning, stem cell research, or other controversial topics influence marketing opportunities. Funding is either made available or is restricted based on consumer perspectives that are often translated into legal framework. New discoveries, such as fiber-optic cable and hybrid vehicle propulsion systems, create marketing opportunities where businesses can take advantage of creating value in a way that competitors cannot. Consumption patterns could change based on the significance of the product or service. >> END EXAMPLE Legal Environment The legal environment includes factors that provide rules and penalties for violations, and is designed to protect society and consumers from unfair business practices and to protect businesses from unfair competitive practices. Changes in legislation and regulations contribute to the legal environment. There are many different categories of legislation, including trade practices (fair trade), business competition, product safety, environmental protection, consumer privacy, fair pricing, packaging, and advertising disclosure and restrictions. Regulatory agencies include the Federal Communications Commission (FCC), an agency responsible for regulating interstate and international communications by television, satellite, cable, radio, and wire; the U.S. Consumer Product Safety Commission (USCPSC), an agency responsible for protecting consumers from unreasonable risks of serious injury from over 15,000 types of consumer products; and the Food and Drug Administration (FDA), an agency within the Department of Health and Human Services that has nine different centers, ranging from radiological health to food safety. In addition to national governmental legislation and regulations, there are also state and local legal requirements. The legal environment can become even more complicated as businesses increase global activities and must deal with foreign governments’ legal environments that are different from those within the United States. Political Environment The political environment includes factors that select national leadership, create laws, and provide a process for discourse on a wide range of issues. Changes in form of government and scope and type of social movements contribute to the political environment. A federal system of government, where a central government performs specific duties such as national defense and state and local governments have limited autonomy, is practiced in the United States. However, some countries, such as North Korea, are dictatorships. Everything in those countries, including commercial practices, is controlled by the government. The implications for businesses are significant, because investment may be restricted when high levels of risk exist. Technological Environment EXAMPLE TECHNOLOGICAL ENVIRONMENT Even existing technology, when utilized in a different context, can create unique customer value. Domino’s Pizza Tracker allows customers to follow the progress of their pizza from order through delivery via a Web interface. The interactive tool uses a customer phone number to identify status as the pizza passes through five distinct stages: Order Placed, Prep, Bake, Quality Check, and Out for Delivery. Advancing mobile technology will create further opportunities for Domino’s and other pizza companies as well as companies involved with manufacturing and suppliers of other products and services.7 PHOTO: Rena Schild/Shutterstock. >> END EXAMPLE CHAPTER 2 | The Market in Marketing Consumer MARKETS 19 (p. 19) Consumer markets are the end user of the product or service and include individuals and households that are potential or actual buyers of products and services.8 DEFINED EXPLAINED Consumer Markets Both macroenvironments and microenvironments influence, through factors such as demand and supply, consumers and businesses as they make purchase decisions. U.S. consumer buying power exceeds $10 trillion.9 Over one-third of that buying power comes from the California, Texas, New York, and Florida consumer markets.10 Consumer markets exist with respect to the product or service being marketed and can be considered as broad as the population of an entire country for certain food products, or as small as the limited number of people who can afford to be space tourists. Consumer products are products that directly fulfill the desires of consumers and are not intended to assist in the manufacture of other products.11 Consumers make purchase decisions in consumer markets by assessing the utility of the products and services offered. A consumer’s surplus occurs when a consumer purchases a product or service at a price less than the utility of the product or service.12 This surplus reflects a marketer’s missed opportunity to charge more for products or services and reflects an advantage to consumers. However, a significant disparity between purchase price and perceived utility may cause consumers to question what might be wrong with the product or service to warrant such a discount. Ultimately, marketing links production and consumption in the consumer market. APPLIED Consumer Markets In practice, purchase decisions in consumer markets are influenced heavily by the marketing and promotion of brands. Brands are used to convey value to consumers and conveying this value is accomplished through a wide range of marketing activities, including advertising and sales promotion. Marketing can be used to influence perceptions of utility and present one brand of product or service as different from another. Certain consumer markets, such as the market for shampoo and other personal care products, are saturated with brands, while others, such as the market for ultra luxury yachts, are served by few brands. Regardless of the number of competitors, each brand strives to be unique, as opposed to its competition, while remaining relevant to its consumer market. 20 PART 1 | Explaining Business MARKETS (pp. 20–22) Business markets include individuals and organizations that are potential or actual buyers of goods and services that are used in, or in support of, the production of other products or services that are supplied to others.13 DEFINED EXPLAINED Business Markets Similar to consumers, businesses purchase many products and services to fulfill needs. Products and services are used to create other products and services. Products and services also are consumed by the business through the course of its normal operations. Participants in the business market include manufacturers, some of which may also sell directly to consumers, intermediaries, and entities that wholesale products. Participants also include business customers, for example, other businesses, institutions such as churches and universities, and governments, both United States and foreign. Businesses can be classified by several systems, including the North American Industrial Classification System (NAICS), which classifies businesses operating in the United States, Canada, and Mexico into groups based on their activities. For example, paging services are classified as 513321. The first two numbers represent the sector, in this case information. The third digit represents the subsector of broadcasting and telecommunications. The fourth digit represents the industry group of telecommunications. The fifth digit represents the industry of wireless communication carriers, except satellite, and the sixth digit represents the U.S. paging industry. Business-to-business, also referred to as B2B, involves the sale of products and services from one business to another. Businesses involved in B2B sales range in size from one-person small businesses to large multinational companies. Although different in size, firms operating in business markets face market characteristics that are similar to those businesses that operate in consumer markets. Compared to consumer markets, business markets generally are organized by similar geographic locations, such as automotive parts manufacturers clustering in southeastern Michigan. B2B marketers tend to work with fewer but considerably larger customers than do consumer marketers. The consumer market does influence demand in the B2B market. Derived demand is the demand for a product or service that results from the demand for another product or service. Consider the situation of a dress where the raw material, cotton, is spun, weaved, tailored, shipped, and sold to consumers. The demand for dresses and other cotton products increases the demand for cotton. Demand for business products and services can be created from a variety of circumstances, including the demand for a complementary product or service, shortages in inventory stock for manufacturing, or dramatic changes in market economic conditions. Just as with consumer products, demand for business products can be responsive to price changes or may experience few effects from price changes, based on the nature of the product, such as price range and number of competitors. Demand can also be influenced by the circumstances of the buying situation. There are three major classifications, or buyclasses, of business buying situations.14 These include the following: • New tasks—A first-time or unique purchase decision that requires extensive effort. An example of this is when ACME publishing company buys a printing press to print its own books rather than work through its vendor. • Modified rebuy—A buyer decides to consider alternative sources for the company’s purchasing requirements. For example, ACME publishing company asks for bids from other print vendors rather than stay with its current vendor. • Straight rebuy—A buyer decides to continue the existing procurement relationship and does not see any reason to search for additional information to assist in the purchase process. For example, ACME publishing company continues to print its books with the same vendor that it has used for the past five years. Compared to consumer marketing, B2B markets tend to have more individuals in the buying process, the process tends to be formal, and business relationships tend to be longer-term. A buying center is the collection of individuals who perform specific roles in the procurement process. There are six specific roles performed by individuals in the buying center:15 • The INITIATOR is the first to identify the need to buy a particular product or service to solve an organizational problem. • INFLUENCERS are those who assist in developing evaluation criteria and whose views influence the buying center’s buyers and deciders. • The BUYER holds the formal authority to choose the supplier and to arrange terms of condition. CHAPTER 2 | The Market in Marketing • The DECIDER ultimately approves all or any part of the entire buying decision—whether to buy, what to buy, how to buy, and where to buy (in routine purchasing situations the buyer is often the decider). • USERS consume or utilize the product or service. • The GATEKEEPER controls the flow of information to decision makers and influencers. Depending on the type of buying situation, some or all of the steps in the buyer purchase process are conducted. There are eight distinct steps, or phases, in the buyer purchase process (see Figure 2.1).16 A decision a business must make when determining how to fulfill a purchasing need is whether to make, buy, or lease the product. A business may choose to produce a product if the company has the capability and capacity to do so. There may also be a strategic reason to manufacture certain items instead of externally sourcing them. Examples could include a government not wanting to externally source critical military components for security reasons or an automaker not FIGURE 2.1 Steps in the Buyer Purchase Process 1. Recognition of the organizational problem or need 2. Determination of the characteristics of the item and quantity needed 3. Description of the characteristics of the item and the quantity needed wanting to externally source its powertrain components so as to retain a competitive uniqueness. A business may also decide to purchase the product from a supplier. Reasons for sourcing a product from a supplier could include cost advantages or a lack of technical expertise for that specific product. A business could also lease a product. If a particular product is exposed to rapid technological change or requires regular servicing or other support, a leasing option might be most appropriate. APPLIED Business Markets Successful marketing to either business or consumer markets requires an understanding of customers and what creates value for those customers. Business uniqueness is important for businesses selling to either consumer or business markets. While branding is important in business and consumer markets, the nature of the purchasing process in B2B requires particular attention to the buying process. Structured processes, such as those required to secure government or institutional business, require a level of sophistication in the processes of particular entities. Personal relationships are another critical factor in B2B because far fewer customers account for a greater percentage of total sales. Most personal relationships would be cost prohibitive in business-toconsumer (B2C) markets. Some businesses, such as private equity groups, are purchasing a wide range of related businesses, including suppliers and manufacturers. Different elements of the operations of these businesses are being combined and managed to extract greater profitability from the value chain. Other businesses are forming partnerships with their suppliers to manage cost exposure and to keep suppliers financially viable. This is because many companies have single sources of supply due to economies of scale and business conditions could dramatically change, which would cause incredible financial pressure on suppliers and their customers. 4. Search for and qualification of potential sources EXAMPLE 5. Acquisition and analysis of proposals 6. Evaluation of the proposals and selection of suppliers 7. Selection of an order routine 8. Performance feedback and evaluation 21 BUSINESS MARKETS 22 PART 1 | Explaining Since being founded over 80 years ago, Caterpillar has grown to be the world’s largest maker of construction and mining equipment, diesel and natural gas engines, and industrial gas turbines. Caterpillar manufactures more than 300 products in 23 countries and serves customers in 200 countries. Caterpillar considers itself a leader in building the world’s infrastructure with three primary business lines: machinery, engines, and financial products. Selling directly to other businesses involved in building infrastructure, Caterpillar creates value for its customers through its primary business lines but also offers equipment rental, remanufacturing, and logistics services. Having a wide range of products and services is critical to Caterpillar’s success with its business customers.17 PHOTO: Dmitry Kalinovsky/Shutterstock. >> END EXAMPLE CHAPTER 2 | The Market in Marketing Visual Summary Part 1 Explaining (Chapters 1, 2, 3, 4, 5) Part 2 Part 3 Creating (Chapters 6, 7, 8, 9) Strategizing (Chapters 10, 11) Part 4 Part 5 Managing (Chapters 12, 13, 14, 15, 16, 17) Integrating (Chapters 18, 19, 20) Chapter 2 Summary Building on the concept of marketing and the marketing function, the marketing environment was introduced, as were consumer and business markets. The marketing environment is a set of forces, some controllable and some uncontrollable, that influence a business’s ability to create value and attract and serve customers. Many factors influence value creation and the nature of customer relationships in the marketing environment. Some of those influential factors are internal to the business, while others are external. The internal environment of a business involves all activities, including marketing, that occur within the organizational functions in a business. The external environment of a business involves all activities that occur outside the organizational functions of a business. The external environment can be divided into the microenvironment and the macroenvironment. The central concept of the Five Forces of Competitive Position Model is that five forces determine the power in a business’s microenvironment. The macroenvironment includes societal forces that are essentially uncontrollable and influence the microenvironment of a business. Consumer markets include individuals and households that are potential or actual buyers of products and services that assist in further production only indirectly or incidentally, if at all. Business markets include individuals or organizations that are potential or actual buyers of goods and services that are used in, or in support of, the production of other products or services that are supplied to others. Business markets generally are organized by similar geographic locations, are influenced by consumer market demand, exist in fewer numbers, involve more individuals in the buying process, and are subject to a more formal buying process than are consumer markets. forces Marketing Environment pp. 15–18 The marketing environment includes controllable and uncontrollable forces that affect the way a marketer attracts and serves customers. Capstone Exercise p. 25 Business Markets pp. 20–22 Consumer Markets p. 19 end user enable Customer markets include potential or actual end users of products and services. Business markets include buyers of products and services that enable the production of other products or services that are supplied to others. 23 24 PART 1 | Explaining Chapter Key Terms Marketing Environment (pp. 15–18) Marketing environment is a set of forces, some controllable and some uncontrollable, that influence the ability of a business to create value and attract and serve customers. (p. 15) Opening Example (pp. 15–16) Key Terms (pp. 15–18) Competitive environment includes those factors that relate to the nature, quantity, and potential actions of competitors. (p. 17) Example: Competitive Environment (pp. 17–18) Demographics are characteristics of human population used to identify markets (p. 17) Economic environment includes those factors that influence consumer purchase ability and buying behavior (p. 17) External environment of a business involves all those activities that occur outside the organizational functions of a business (p. 15) External marketing is the implementation of marketing practices directed outside the business to create value and to form productive customer relationships. (p. 15) Income levels are average consumer earnings used to approximate national earnings. (p. 17) Inflation is an increase in the price of a collection of goods that represent the overall economy. (p. 17) Internal environment of a business involves all those activities that occur within the organizational functions in a business. (p. 15) Internal marketing is the implementation of marketing practices within an organization to communicate organizational policies and practices to employees and internal stakeholders. (p. 15) Legal environment includes those factors that provide rules, and penalties for violations, designed to protect society and consumers from unfair business practices and to protect businesses from unfair competitive practices. (p. 18) Macroenvironment includes societal forces that are essentially uncontrollable and influence the microenvironment of a business. (p. 16) Example: Macroenvironment (pp. 16–17) Microenvironment includes those forces close to a company, yet outside its internal environment, that influence the ability of a business to serve its customers. (p. 15) Political environment includes factors that select national leadership, create laws, and provide a process for discourse on a wide range of issues. (p. 18) Social and cultural environment includes factors that relate marketing to the needs and wants of society and culture. (p. 17) Technological environment includes factors that influence marketing, based on scientific actions and innovation. (p. 18) Unemployment levels are the number of unemployed persons divided by the aggregate labor force. (p. 17) Consumer Markets (p. 19) Consumer markets include individuals and households that are potential or actual buyers of goods and services that assist in further production only indirectly or incidentally, if at all. (p. 19) Key Terms (p. 19) Consumer products are products that directly fulfill the desires of consumers and are not intended to assist in the manufacture of other products. (p. 19) Consumer’s surplus occurs when a consumer purchases a product or service at a price less than the utility of the product or service. (p. 19) Business Markets (pp. 20–22) Business markets include individuals and organizations that are potential or actual buyers of goods and services that are used in, or in support of, the production of other products or services that are supplied to others. (p. 20) Example: Business Markets (pp. 21–22) Key Terms (p. 20) Business-to-business, also referred to as B2B, involves the sales of products and services from one business to another. (p. 20) Example: Business Markets (pp. 21–22) Buyclasses are major classifications of business buying situations. (p. 20) Buying center is the collection of individuals that perform specific roles in the procurement process. (p. 20) Derived demand is the demand for a product or service that results from the demand for another product or service. (p. 20) North American Industrial Classification System (NAICS) classifies businesses operating in the United States, Canada, and Mexico into groups based on their activities. (p. 20) CHAPTER 2 | The Market in Marketing 25 Capstone Exercise This chapter’s exercise is based on a model that allows you to assess the structure of any industry. The methodology was developed by Michael Porter and is called the Five Forces of Competitive Position. The Five Forces include the following: • • • • • Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitutes Rivalry among competitors The Five Forces provide a way to understand the business models of industries. How competitive is the industry? What does it take to succeed? How easy is it to get into the business? How does the industry make money? Taken together, these answers give you a way to understand the likelihood of success and the potential for profit in this industry. It is important to understand the key factors to be successful. Those key factors also help determine whether or not a certain industry could be successful. To fully understand this process, take a look at the home improvement industry. Two big competitors, Home Depot and Lowe’s, dominate this industry. Each has a large piece of the market. Other smaller stores have joined forces in horizontal channels like True Value and Ace Hardware. The do-it-yourself market has driven demand in recent years, but will growth be maintained? Take a look at Home Depot Inc. Do some research. Investigate its retail organization (Home Depot), its wholesale distribution organization (HD Supply), and its catalog sales channel (Home Decorator). Using Porter’s Five Forces of Competitive Position summarize the business structure of the home improvement industry, in general, and Home Depot Inc., specifically. Explain how you think Home Depot Inc. uses these three major business units (separately and in combination) to improve its competitive advantage. Application Exercise Use the following marketing concepts in this chapter to tackle and solve a marketing problem: marketing environment, macroenvironment, social and cultural environment, value. First, start by thinking about a category of produce that is organic and locally grown. In general terms, organic foods are made in a way that limits or excludes the use of synthetic materials during production, and local connotes within close distribution from farm to store. We are beginning to see many products available in grocery stores, farm stands, and large mass merchandisers within this category for us to consider purchasing. The Marketing Problem Choose a product in the organic or local produce category, and then choose a brand in that category after considering the following situation. You are new to the category and can’t decide if you believe in the macroenvironmental food trends regarding the positive benefits of buying and consuming organic, local produce. The Problem Describe produce that clearly says it is organic or locally grown on its packaging or signage. What is the product’s value? What are the controllable and uncontrollable forces that influence value? What is the social or cultural environment that supports or disrupts purchasing this produce? The Solution Complete the following two Problem/Solution briefs using your product and brand in the organic local produce category, chapter concepts, and college resources. 1. From the Marketing Manager’s Point of View a. The Problem Definition b. Analysis c. The Product’s Value d. Solution 2. From the Consumer’s Point of View a. The Problem Definition b. Analysis c. The Product’s Value d. Determine If This Is a Want or a Need e. Solution Resources: Marketing Defined, Explained, Applied 2e, Michael Levens The College Library Retail or Online Field Trip Assigned Reading—Brand Week, Advertising Age, WSJ, scholarly publications, category trade journals Blog your problem from either point of view, gather responses/posts (www.blogger.com/start) 3 chapter Part 1 Part 2 Part 3 Explaining (Chapters 1, 2, 3, 4, 5) Creating (Chapters 6, 7, 8, 9) Strategizing (Chapters 10, 11) Part 4 Part 5 Managing (Chapters 12, 13, 14, 15, 16, 17) Integrating (Chapters 18, 19, 20) Planning and Marketing in an Organization Chapter Overview In the initial chapters, you considered marketing, marketing functions, and the marketing environment. This chapter expands those concepts by considering the marketing functions within an organization. The marketing activity plays a pivotal role in connecting consumers to businesses by developing an understanding of customer requirements. Marketing also performs a critical function within businesses to concentrate every business activity on generating desired financial results based on fulfilling consumer requirements. The concept of marketing in an organization is considered through exploring the planning process and how businesses manage marketing planning. Chapter Outline Planning Process pp. 27–28 Strategic Planning pp. 29–31 Marketing Planning pp. 32–33 26 Objective 1. How do businesses manage systems to achieve their goals? Objective 2. How do organizations determine their overall goals? Objective 3. How do businesses connect to the environment in which they function? CHAPTER 3 | Planning and Marketing in an Organizat...
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