W I L S O N , J A M I E ISBN 1-323-75008-8 5 0 5 1 B U Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. PART ONE: Understand the Value Proposition Chapter 1 Welcome to the World of Marketing Objective Outline Create and Deliver Value 1.1 Explain what marketing is, the marketing mix, what can be marketed, and the value of marketing. pp. 4–11 MARKETING: WHAT IS IT? p. 4 1.2 Explain the evolution of the marketing concept. pp. 11–15 WHEN DID MARKETING BEGIN? THE EVOLUTION OF A CONCEPT p. 11 W from the 1.3 Understand value perspectivesIof customers, producers, and society. pp. 16–23 1.4 Explain the basics of market planning. p. 24 MARKETING AS A PROCESS p. 24 Check out the Chapter 1 Study Map on page 25. L THE VALUE OF MARKETING AND THE MARKETING OFS VALUE p. 16 O N Meet Michael Baumwoll , A Decision Maker at Twitter I am currently an Account Manager at Twitter. After I graduated from Lafayette College in 2009, my career focused on digital media and advertising with brief stints in entrepreneurship. For the first five years of my professional life, I worked for an advertising technology company with the goal of revolutionizing the digital media landscape. Similar to exchanges like Nasdaq and eBay, this company built a platform that allowed websites (publishers) to auction off their advertising space to the highest advertising bidder. I joined this young, growth startup and quickly learned the robust, technical, and (highly) relationship-driven industry of digital advertising. Working in a fun, supportive, Google-esque culture, I was able to grow personally and ultimately manage relationships with major advertising agencies and their digital media-buying arms, called “trading desks.” I was also lucky enough to manage a small group of coworkers and help them develop their understanding of the advertising landscape, technical skills and—most importantly, to me—themselves, professionally. Simultaneously, I co-founded an iPhone application called BarSocial with the goal of creating a social media platform for nightlife. On the app, users connected with their friends and other bar-hoppers to determine the best places to go out. It was, essentially, Twitter for bars. BarSocial was live in the App Store for more than a year and was briefly featured on Wired.com. I quickly learned the facets of maintaining and building a technology business. Building BarSocial was one of the most exhilarating and challenging experiences I’ve ever had; I’d highly recommend building something of your own if the opportunity presents itself. With a passion for social media, I now have the pleasure of working at one of the world’s most recognized technology companies, Twitter. Twitter is a social media platform that democratizes the world by providing a forum for users to share their experiences and views. Similar to my previous professional experience, Twitter has successfully built a culture designed to help their employees thrive professionally. My role at Twitter is to manage and develop relationships with advertisers and their creative and media agencies. To simplify, I am a Twitter consultant helping to demystify the ever-growing world of Twitter and showcase the power of its advertising solutions to my clients. Courtesy of Michael Baumwoll J A M I E What I do when I’m not working: Business book I’m reading now: What drives me: Watching movies, spending time with my family, and breaking it down on the dance floor. Contagious: Why Things Catch On by Jonah Berger The opportunity to impact the world in my own personal way. My motto to live by: A job-related mistake I wish I hadn’t made: Always focus on developing relationships—new and old. They will be the driving force in your professional and personal growth. Don’t do this when interviewing with me: I avoided speaking up in meetings where I could have contributed value. Be inauthentic My pet peeve: Talking during movies 2 Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 Michael’s Info 5 0 5 1 B U Here’s my problem... Real People, Real Choices Twitter is a public microphone that gives those with a face-to-face encounters. However, some employees are hesitant to voice their handheld device or access to the Internet the ability to concerns and suggestions in such a public forum. Also getting a bunch of busy step up and speak. It gives each of us the opportunity to share our experiences people to give up an hour of their time each week might not go over well with and thoughts 24 hours a day, 7 days a week. As a result, Twitter has become a some people. democratized platform for human expression and thought. Build an internal online tool to allow employees to share, build, Just like the product externally, Twitter’s management team creates an and measure ideas (i.e., a Twitter within Twitter). Like Twitter, the environment that encourages team members to speak up and share ideas. forum would allow any team member to carefully think and craft Employees are constantly reminded of their value and given channels to be creideas he or she could then share with coworkers or with entire Option ative and productive. It’s an internal cultural choice that was made in the early teams. Employees could vote on ideas to showcase demand for an days of Twitter to reflect the founders’ beliefs in transparency and cooperation. idea or product. And we could measure the success of the platform by trackInternally at Twitter, there are multiple ways to share ideas and feeding posts, votes, comments, etc. On the other hand, some employees might be back. There are e-mail chains, discussion boards, water cooler conversations, reluctant to post ideas to the group if everyone votes on the ones they like and feedback forms, and many other methods that allow you to express yourself. don’t like. It’s also not clear that there would be enough demand for merit the Although there are a number of options, it’s (a) difficult to navigate and select time and other resources to build this app that could be devoted to building the right method to share your idea and (b) hard to determine who the ideal Wbusiness for Twitter instead. person is with whom to share it. Share ideas on Twitter to galvanize support and subsequently share I As a member of the sales team, my focus is to understand the needs findings with the Twitter team. This approach would include the exand concerns of my clients and relay that information to the Twitter team. It L ternal Twitter community to help shape Twitter’s product vision. We addition, and just as important, as an involved member of the Twitter com- S could get real-time feedback from potential customers about the Option munity, it’s my responsibility to contribute to building an even stronger product ideas we’re considering and engage them as partners rather than and experience for users. The question then becomes: how do we harness the O just as customers. On the other hand, we wouldn’t be able to share some sensiinnovation within Twitter’s walls and leverage it to solve challenges the team N tive issues with non-Twitter employees. And we couldn’t always be confident faces with employees, consumers, and marketers? And subsequently, how can about the perspectives we get—not everyone necessarily has the experience , and perspective to weigh in on how to run a complex business like ours. we track it? Now, put yourself in Michael’s shoes. Which option would you choose, and why?   Michael considered his Options 1 2 3 J Make a case for the management team to hold weekly meetings A You Choose to discuss ideas and innovations within Twitter. This change would provide a dedicated time for team members to share their opin- M Which Option would you choose, and why? ions, views, and ideas in an hour-long weekly meeting. Employees Option 1 Option 2 Option 3 I Option feel they are part of the process when they help to make decisions for the company. And different teams could interact with one another to come E See what option Michael chose in MyMarketingLabTM up with productive ideas because of this cross-pollination that only comes from ISBN 1-323-75008-8 5 MyMarketingLab™ 0 5 Improve Your Grade! 1 results using the Pearson MyLabs. Over 10 million students improved their Visit mymktlab.com for simulations,B tutorials, and end-of-chapter problems. U 3 Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 4 PART O N E | U N DE R S TA ND T H E VA LU E P R O PO SI TI O N Chapter 1 1.1 Marketing: What Is It? Marketing. People either love it or hate it. The crazy part of this is that whether they love it or hate it, most folks really do not understand Explain what market- what marketing really is! How about when a Chris Cornell concert in Australia entices fans from Peoria, Illinois, to travel around the globe ing is, the marketing just to scream in ecstasy alongside the Aussies. Is that marketing? mix, what can be When Donald Trump and Hillary Clinton spend millions to get your marketed, and the vote—is that marketing? And then, of course, there are those e-mails value of marketing. that fill your inbox from Amazon.com, suggesting products that might (pp. 4–11) entice you to let go of some hard-earned cash. Yes, these are all examples of marketing. And that’s just scratching the surface. Of course you already know a lot about marketing; it’s been a part of your life from day one. As one of millions Wof consumers, you are the ultimate user of a good or service. Every time you purchase or use your car, your clothes, your lunch at the cafeteria (whether an old-school burger or a Ivegan version), a movie, or a haircut, you are part of the marketing process. In this book, we’ll L tell you why—and why you should care. Indeed, consumers like you (and your humble authors!) are at the center of all marS keting activities. By the way, when we refer to consumers, we don’t just mean individuO a company, government, sorority, or charity, are made up of als. Organizations, whether consumers. N Here’s the key: Marketing is first and foremost about satisfying consumer needs. We like to , say that the consumer is king (or queen), but it’s important not to lose sight of the fact that the seller also has needs—to make a profit, to remain in business, and even to take pride in selling the highest-qualityJproducts possible. Products are sold to satisfy both consumers’ and marketers’ needs; it’s a two-way street. A When you ask people to define marketing, you get many answers. Some people say, M a pushy salesman tries to sell me something I don’t want.” “That’s what happens when Many people say, “Oh, that’s I simple—TV commercials.” Students might answer, “That’s a course I have to take before I can get my business degree.” Each of these responses E has a grain of truth to it, but the official definition of marketing the American Marketing Association adopted in 2013 is as follows: OBJECTIVE consumer The ultimate user of a good or service. marketing Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.1 5 set of institutions, and processes for creating, commuMarketing is the activity, nicating, delivering, 0 and exchanging offerings that have value for customers, clients, partners, and society at large.2 5 The basic idea behind 1 this somewhat complicated definition is that marketing is all about delivering value to everyone whom a transaction affects. That’s a long-winded B explanation. Let’s take it apart to understand exactly what marketing is all about. U “Marketing Is the Activity, Institutions, and Processes . . .” Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 As we will discuss throughout this book, marketing includes a great number of activities—from top-level market planning by the chief marketing officer (CMO) of a big company to the creation of a Facebook page by your university. The importance organizations assign to marketing activities varies a lot. Top management in some firms is marketing oriented (especially when the chief executive officer, or CEO, comes from the marketing ranks), whereas in other companies marketing is an afterthought. Ten percent of the Fortune 100 U.S. CEOs, more than one out of five (21%) of the Financial Times Stock Exchange (FTCE) 100 CEOs in the United Kingdom, and 40 percent of those with consumer and healthcare firms come from a marketing background—so stick with us!3 C H APTER 1 |                  5 In the text we discuss many of the activities of marketing that include: š Better understanding of customer needs through marketing research š Selecting the people or organizations in the market that are your best bets for success š Developing the product š Pricing the product š Getting the product to the consumer We’ll also learn about a variety of institutions that help firms create a better marketing program: š Advertising agencies that firms work with to create and deliver a variety of marketing communication activities including traditional advertising as well as newer digital communications, sales promotion, and research activities š Marketing research firms such as Nielsen that provide data vital to the planning and W implementation of successful marketing programs I L š The Internet and social media S marketing occurs in a š Governments that enforce laws and regulations to make sure fair and ethical manner O š Logistics firms that get the product to the consumer most efficiently N š Retailers that interact directly with the final customer , š The traditional media We also talk about some of the processes marketers use in combination with these institutions to satisfy customer needs—the end-all for all marketing activities. J as Proctor & Gamble Whether it is a giant global producer of consumer products such or a smaller organization such as Eskimo Joe’s of Stillwater, Oklahoma (we’ll talk more A about Eskimo Joe’s in Chapter 12), a marketer’s decisions affect—and are affected by—the M firm’s other activities. Marketing managers must work with financial and accounting ofI budgets, and to deterficers to figure out whether products are profitable, to set marketing mine prices. They must work with people in manufacturing to beE sure that the new iPhone is produced on time and in the right quantities for those avid iPhone fans that camp out in front of Apple stores to get their hands on the new model. Marketers also must work with 5consumers’ needs. research-and-development specialists to create products that meet 0 “. . . for Creating, Communicating, Delivering, 5 and Exchanging: The Marketing Mix . . .” ISBN 1-323-75008-8 1 As we said, marketing is about satisfying needs. To do this, marketers need many tools. The B tools the organization marketing mix is the marketer’s strategic toolbox. It consists of the uses to create a desired response among a set of predefined consumers. U These tools include the product itself, the price of the product, the promotional activities (such as advertising) that introduce it to consumers, and the places where it is available. We commonly refer to the elements of the marketing mix as the Four Ps: product, price, promotion, and place. Although we talk about the Four Ps as separate parts of a firm’s marketing strategy, in reality, product, price, promotion, and place decisions are interdependent. Decisions about any single one of the four are affected by, and affect every other marketing mix decision. For example, what if Superdry (a rapidly growing Japanese apparel company) decides to introduce a leather biker jacket that is higher end than the ones it makes now? If the company uses more expensive materials to make this item, it has to boost the selling price to cover these higher costs; this also signals to consumers that the garment is more upscale. In addition, Superdry would have to create advertising and other promotional strategies to convey a topquality image. Furthermore, the firm must include high-end retailers like Neiman Marcus, marketing mix A combination of the product itself, the price of the product, the promotional activities that introduce it, and the place where it is made available, that together create a desired response among a set of predefined consumers. Four Ps Product, price, promotion, and place. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 6 PART O N E Figure 1.1 | U N DE R S TA ND T H E VA LU E P R O PO SI TI O N Snapshot | The Marketing Mix The marketing mix is the marketer’s strategic toolbox. Product strategies Place strategies Bergdorf Goodman, and Bloomingdale’s in its distribution strategy to ensure that shoppers who seek out high-end items will come across the jacket. Thus, all the pieces in the puzzle we call the marketing mix work together. As Figure 1.1 shows, each P is interconnected with each of the other three Ps. This shows us that the activities of each of the Four Ps must be coordinated with each of the other three Ps. We’ll examine these components of the marketing mix in detail later in this book. For now, let’s briefly look at each of the Four Ps to gain some more insight into their role in the marketing mix. Product What have you spent your money and time to get recently? A W pizza on Friday night, a concert on the weekend, a new tennis Iracket so you can beat all your buddies on the court, maybe Leven a “wonderful” Marketing textbook? These are all products. SA product can be a good, a service, an idea, a place, a person— whatever a person or organization offers for sale in the exchange. O Creating new products is vital to the success and even the life of an organization. The product, one aspect of the marketing mix, N ,includes the design and packaging of a good as well as its physi- The Marketing Mix Price strategies product A tangible good, service, idea, or some combination of these that satisfies consumer or business customer needs through the exchange process; a bundle of attributes including features, functions, benefits, and uses. promotion The coordination of a marketer’s communication efforts to influence attitudes or behavior. cal features and any associated services, such as free delivery. The product is a combination of many different elements, all of J which are important to the product’s success. Think about Promotion your college education—an expensive product. You are buystrategies A ing more than the boring lecture in that chemistry class (or the M awesome lecture in your marketing class). You are also paying for the health center with a weight room, pool and a rock-climbing wall, for the classroom building, and maybe for the I bragging rights of graduating from a “Big Ten” school. E Promotion 5 with advertising, promotion, also referred to as marketing Although we all are familiar communication, includes many 0 different activities marketers undertake to inform consumers about their products and to encourage potential customers to buy these products. 5 Marketing communication takes the form of personal selling, TV advertising, store coupons, billboards, magazine ads, 1 publicity releases, web pages, social media sites, and a lot more. Today marketers are quickly B moving much of their energy and money to devising and implementing digital marketing communications including mobile marketing, location-based U marketing, and, of course, social media marketing. marketing, behavioral digital Place place The availability of the product to the customer at the desired time and location. price The assignment of value, or the amount the consumer must exchange to receive the offering. tion. This P relates to a channel of distribution, which is the series of firms or individuals that facilitates the movement of a product from the producer to the final customer. For clothing or electronics, this channel includes local retailers as well as other outlets, such as retail sites on the web that strive to offer the right quantity of products in the right styles at the right time. Price Price—we all know what price is—it’s the amount you have to pay for the pizza, the concert tickets, the tennis racket, and, yes, this book. Price is the assignment of value, Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 channel of distribution The series of firms or individuals that facilitates the movement of a product from the producer to the final customer. Place refers to the availability of the product to the customer at the desired time and loca- C H APTER 1 |         or the amount the consumer must exchange to receive the offering. Marketers often turn to price to increase consumers’ interest in a product. This happens when they put an item on sale, but in other cases marketers actually try to sell a product with a higher price than people are used to if they want to communicate that it’s high quality or cutting edge. For example, designer clothes and accessories are priced so high that only a few consumers can afford them. Not many of us can afford a Prada Python/Crocodile Arcade-Stripe Frame Satchel Bag priced at $9,600 or a pair of Valentino Rockstud Metallic Leather Mid-Heel Pumps at $1,045. If you can, you probably don’t need to take this course! At the heart of every marketing act—big or small—is something we refer to as an “exchange relationship.” An exchange occurs when a person gives something and gets something else in return. The buyer receives an object, service, or idea that satisfies a need and the seller receives something he or she feels is of equivalent value. Today, most exchanges occur as monetary transactions in which one party surrenders currency (in the form of W cash, check, credit card, or even Bitcoin) in return for a good or a service. But there are also I toward certain goals other kinds of exchanges. A politician, for example, can agree to work in exchange for your vote, city officials may offer you a cleaner environment if you recycle, L and health officials tell you that you can save lives (perhaps your own) if you wash your S hands properly. For an exchange to occur, at least two people or organizationsO must be willing to make a trade, and each must have something the other wants. Both parties N must agree on the value of the exchange and how it will be carried out. Each party also must be free to accept , or reject the other’s terms for the exchange. Under these conditions, a knife-wielding robber’s offer to “exchange” your money for your life does not constitute a valid exchange. In contrast, although someone may complain that a store’s prices are J “highway robbery,” an exchange occurs if he or she still forks over the money to buy something there—even if he A or she still grumbles about it weeks later. To complicate things a bit more, everyone does not always M agree on the terms of the exchange. Think, for example, about movie piracy. That’s what happens when a new I Leonardo DiCaprio blockbuster is available on street corners for a few dollars—or free on E Bit Torrent— before it even opens in theaters. “ . . . Offerings . . .”: What Can We Market? 5 7 exchange The process by which some transfer of value occurs between a buyer and a seller. consumer goods The goods individual consumers purchase for personal or family use. services Intangible products that are exchanged directly between the producer and the customer. Consumer Goods and Services Consumer goods are the tangible products that individual consumers purchase for personal or family use. Services are intangible products that we pay for and use but don’t own. Service transactions contribute more than 75 percent bennymarty/Fotolia ISBN 1-323-75008-8 Is there any limit to what marketers can and will market? Marketing 0 applies to more than just the new iPhone and the Microwavable S’Mores Maker your mother bought you before 5 you came to college. 1 Some of the best marketers come from the ranks of services companies such as American Express or not-for-profit B organizations like Greenpeace. Politicians, athletes, and perU formers use marketing to their advantage (the Kardashians have figured it out). Ideas such as political systems (democracy, totalitarianism), religion (Christianity, Islam), and art (realism, abstract) also compete for acceptance in a “marketplace.” In this book, we’ll refer to any good, service, person, place, or idea that we can market as a product, even though what you buy may not take a physical form.          A robbery is NOT a valid exchange. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 8 PART O N E | U N DE R S TA ND T H E VA LU E P R O PO SI TI O N of the gross domestic product (GDP) in the U.S. and other developed countries.4 Marketers need to understand the special challenges that arise when they market an intangible service rather than a tangible good.5 Because both goods and services are products, it’s more accurate to say “goods and services” rather than “products and services.” Business-to-Business Goods and Services Business-to-business marketing is about the exchange of goods and services Brass Agency from one organization to another. Although we usually think of marketing in terms of the piles of consumer goods that beg for our dollars every day, the reality is that businesses and other organizations buy a lot more stuff than consumers do. They purchase these industrial goods for further processing or to use in their own business operations. For example, automakers buy tons of steel to use in the manufacturing process, and they buy computer systems to track manuW facturing costs and other information essential to operations. I growth of e-commerce isn’t just about things people buy for Similarly, the themselves—books, L CDs, cars, and so forth—on the Internet. Just like in the offline world, much of the real online action is in the area of business-to-business S marketing. O N As we noted previously, you don’t have to be a businessperson to use marketing principles. Many, not-for-profit organizations (also known as nongovernmental Not-for-Profit Marketing This British fence company offers to exchange money for the guarantee of privacy. business-to-business marketing The marketing of goods and services from one organization to another. industrial goods Goods that individuals or organizations buy for further processing or for their own use when they do business. organizations [NGOs]), including museums, zoos, and even churches, practice the marketing concept to survive. Local governments adopt marketing techniques to atJ tract new businesses and industries to their counties and cities. Even states are getting into the act: We’ve known for A a long time that IxNY, but recently Kentucky and Oregon hired advertising agencies to develop M statewide branding campaigns (the official state motto of Oregon is now “Oregon. We love dreamers.”).6 I EMarketing Idea, Place, and People Marketing principles also encourage people to endorse ideas or to change their behaviors in positive ways. Many organizations work hard to “sell” everything from fatherhood 5 involvement to shelter-pet adoption to stopping teen bullying. We are all familiar with 0 tourism marketing that promotes wonderful places with slogans such as, “Smile! You are in Spain! or “Live your myth in Greece.” 5 You may have heard the expression “Stars are made, not born.” There’s a lot of truth 1 to that. Adele may have a killer voice and Chris Davis may have a red-hot baseball bat, but Btalent alone doesn’t make thousands or even millions of people Ubuy CDs or stadium seats. Some of the same principles that go into “creating” a celebrity apply to you. An entertainer—whether Miranda Lambert, Selena Gomez, or Drake—must “package” his or her talents, identify a market that is likely to be interested, and work hard to gain exposure to these potential customers by appearing in the right musical venues. In the same way, everyday people like you “package” themselves when they create a great social media profile. And this person-marketing perspective is more valid than ever— now that almost everyone can find “15 minutes of fame” on a website, a blog, or a YouTube video. We even have a new word—microcelebrity—to describe those who are famous, not necessarily to millions of people but certainly to hundreds or even thousands who follow their comings and goings on Today, almost anyone can have their “15 minutes of fame” online. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 faithie/123RF e-commerce The buying or selling of goods and services electronically, usually over the Internet. C H APTER 1 |                  9 Facebook, Flickr, or Twitter. Whether it’s the guy who sang the “Bed Intruder Song,” Boxxy, Gary the Goat, “Alex from Target,” or even Grumpy Cat, the Internet churns out hundreds of temporarily famous people who probably won’t be remembered for long. “ . . . Value for Customers . . .” Most successful firms today practice the marketing needs and then provide products that satisfy those needs to ensure the firm’s long-term profitability. Practicing the marketing concept is, of course, more complex and requires that marketers understand the most basic elements of successful marketing. These elements—needs, wants, benefits, demand, a market, and a marketplace—are listed and explained in Table 1.1. ISBN 1-323-75008-8 Table 1.1 | Value for Customers W I L brand illustrates how the condiment satisfies a simple need. This Italian ketchup S not-for-profit organizations (also known as nongovernmental O organizations [NGOs]) Organizations with charitable, educational, N community, and other public service goals that , buy goods and services to support their functions Term Definition In Practice and to attract and serve their members. Need The difference between a consumer’s actual state and some ideal or desired state If the difference is big J enough, the consumer is motivated to take action to satisfy A hungry, you buy a the need. When you’re snack. If you’re not happy with your hair, M you get a new hairstyle. marketing concept A management orientation that focuses on identifying and satisfying consumer needs to ensure the organization’s long-term profitability. Want A desire for a particular product we use to satisfy a need in specific ways that are culturally and socially influenced If two students areIhungry, the first student may be a health nut Ewho fantasizes about gulping down a big handful of trail mix, whereas the second person may lust for a greasy cheeseburger and fries. The first 5 student’s want is trail mix, whereas the second student’s want 0 is fast food (and some antacid for dessert). need The recognition of any difference between a consumer’s actual state and some ideal or desired state. 5 want The desire to satisfy needs in specific ways that are culturally and socially influenced. Benefit A product delivers a benefit when it satisfies a need or want. After several years when sales were down, McDonald’s responded 1 to the number-one request of its customers, breakfast all day. B The new program attracted lapsed customers back and increased U lunch business.7 benefit The outcome sought by a customer that motivates buying behavior that satisfies a need or want. Demand Consumers’ want for a product coupled with the means to obtain it. Demand for a snappy red BMW convertible includes the people who want the car minus those who can’t afford to buy or lease one. demand Customers’ desires for products coupled with the resources needed to obtain them. Market All the consumers who share a common need that can be satisfied by a specific product and who have the resources, willingness, and authority to make the purchase. The availability of scholarships, government aid, and loans has increased the market for college education as more students can afford an education. Marketplace Location where buying and selling occurs Today the exchange may be face-to-face, or through a mail-order catalog, a TV shopping network, an eBay auction, or a phone app. market All the customers and potential customers who share a common need that can be satisfied by a specific product, who have the resources to exchange for it, who are willing to make the exchange, and who have the authority to make the exchange. marketplace Any location or medium used to conduct an exchange. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. UAB-Milk Agency concept—that is, marketers first identify consumer Reynaldo Vasconcelos/Newzulu/Alamy Live News 10 PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N For example, you may need transportation but want a new Mazda MX-5 Miata convertible. The Miata will not only get you from Point A to Point B; it also will provide the benefit of a cool image. Unfortunately, it’s possible that Mazda can’t count you in their estimates of demand or the size of the market for the MX-5 because you can’t afford such an expensive car. In that case you need to check out a different marketplace, a used car lot. Of course, marketplaces continue to evolve. Increasingly consumers, especially younger ones, would rather rent than purchase the products they use. One of the biggest changes is in the domain of car sales, which are plummeting among newer drivers. Innovative start-ups like Zipcar figured out that many people, especially those who live in urban areas, would rather rent a ride by Uber and other ride-sharing services are disrupting the transportation marketplace. the hour instead of dealing with the hassles of car loans and huntW ing for parking spots when they weren’t using their cars. Now rentrepreneurs I waters. Volkswagen’s Quicar project rents cars in Hanover, the big guys are testing the Enterprising consumers who make money by Germany, whereas BMW renting out their possessions when they aren’t Lcontinues its international expansion of the DriveNow electric using them. vehicle car-sharing program from Europe to the U.S. S A second change in the transportation marketplace is ride-sharing. Uber has becollaborative consumption O based on this concept. Uber drivers use their own cars and come a global phenomenon A term used to refer to the activities practiced by rentrepreneurs. work when they want to. N Customers prefer Uber to traditional taxis; many say that Uber drivers treat you better than taxi drivers and because they use their own cars you utility , The usefulness or benefit that consumers receive aren’t as likely to find a “science project” in the back seat.8 from a product. Millions of enterprising consumers in turn are becoming rentrepreneurs as they make money J by renting out their stuff when they aren’t using it; they’re offering everything from barbecue grills and power tools to Halloween cosA tumes and who knows what else on sites like Zilok in France and Craigslist in MSome analysts refer to this mushrooming trend as collaborathe United States. tive consumption. I E Marketing Creates Utility Marketing transactions create utility, which refers to the usefulness or benefit 5 we receive when we use a good or service. When it ensures that people have 0 they want, where and when they want it, the marketing the type of product system makes our 5 lives easier. Utility is what creates value. Marketing processes create several different kinds of utility to provide value to consumers: 1 B Maisant Ludovic/Hemis/Alamy Stock Photo š Form utility is the benefit marketing provides by transforming raw materials into finishedUproducts, as when a dress manufacturer combines silk, thread, and zippers to create a bridesmaid’s gown. š Place utility is the benefit marketing provides by making products available where customers want them. The most sophisticated evening gown sewn in New York’s garment district is of little use to a bridesmaid in Kansas City if it isn’t shipped to her in time. š Possession utility is the benefit marketing provides by allowing the consumer to own, use, and enjoy the product. The bridal store provides access to a range of styles and colors that would not be available to a woman outfitting a bridal party on her own. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 Rent the Runway is a service started by two recent business school grads. It rents high-end dresses from designers like Diane Von Furstenberg, for about one-tenth of the cost of buying the same garment in a store. A woman can rent a dress for four nights; it’s shipped directly to her doorstep much like a Netflix video. The customer returns the dress in a prepaid envelope and the rental price includes the cost of dry cleaning. Place utility at work! š Time utility is the benefit marketing provides by storing products until they are needed. Some women rent their wedding gowns instead of buying them and wearing them only once (they hope!). C H APTER 1 |                  11 As we’ve seen, marketers provide utility in many ways. Now, let’s see how customers and others “take delivery” of this added value. Value for Clients and Partners Value for Society at Large W I L S O N , Is it possible to contribute in a positive way to society and the earth and still contribute to your paycheck? Target, one of the nation’s largest retailers, seems to think so. The company announced in its 2012 corporate responsibility report that two of its top five priorities are environmental sustainability and responsible sourcing. For example, one goal Target set is to ensure that the J seafood sold in its stores is 100 percent sustainable A (caught without negatively impacting ecosystems) M and traceable (fish can be traced through the supply chain from point of harvest to final product). I Also, the retailer gives back to its customers and E helps them save money. Through its reusable-bag Green marketing in action. program, Target has returned more than $7 million to customers (those who bring their reusable bags save five cents 5 per bag off their bill). And more than half of the chain’s apparel line is labeled “machine wash cold,” meaning 0 lowering customers’ customers reduce energy when they wash their clothes (thereby electricity bills).9 5 1.2 OBJECTIVE ISBN 1-323-75008-8 Explain the evolution of the marketing concept. 1 B U Marketing Dart Container Corporation Marketing doesn’t just meet the needs of consumers—it meets the needs of diverse stakeholders. The term stakeholders refers to buyers, sellers, or investors in a company, community residents, and even citizens of the nations where goods and services are made or sold—in other words, any person or organization that has a “stake” in the outcome. Thus, marketing is about satisfying everyone involved in the marketing process. stakeholders Buyers, sellers, or investors in a company; community residents; and even citizens of the nations where goods and services are made or sold; in other words, any person or organization that has a “stake” in the outcome. When Did Begin? The Evolution of a Concept Now that we have an idea of how the marketing process works, let’s take a step back and see how this process worked (or didn’t work) in (pp. 11–15) “the old days.” Although it just sounds like common sense to us, believe it or not, the notion that businesses and other organizations succeed when they satisfy customers’ needs actually is a pretty recent idea. Before the 1950s, organizations only needed to make products faster and cheaper to be successful. Let’s take a quick look at how the marketing discipline has developed since then. Table 1.2 tells us about a few of the more recent events in this marketing history. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 12 PA RT O N E Table 1.2 | | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N Marketing’s “Greatest Hits” Year Marketing Event 1961 Procter & Gamble launches Pampers. 1964 Blue Ribbon Sports (now known as Nike) ships its first shoes. 1971 Cigarette advertising is banned on radio and TV. 1980 Ted Turner creates CNN. 1981 MTV begins. 1985 New Coke is launched; old Coke rebranded as Coca-Cola Classic is brought back 79 days later. 2004 Online sales in the U.S. top $100 billion. 2010 Apple launches the iPad; sells 300,000 of the tablets on the first day and 1 million iPads in 28 days—less than half of the 74 days it took to sell 1 million iPhones. Consumers watch more than 30 billion videos online per month. 2014 Facebook spends $2 billion to buy Oculus Rift, a manufacturer of virtual reality headsets, as it signals the next frontier for W social networks. I L Sources: Patricia Sellers, “To Avoid Trampling, Get Ahead of the Mass,” Fortune!"#%'*+/ :!#< %=>#?+#@!?" %JQ+??+%#XYZ# S />[[\\\*%]]=+]"*%]["%=^[_`*/]?* O The Production Era N We think about the history of marketing as moving through four distinct eras, summa, rized in Table 1.3 and briefly described here. Many people say that Henry Ford’s Model T 2016 Microsoft buys LinkedIn for $26.1 billion. production orientation A management philosophy that emphasizes the most efficient ways to produce and distribute products. changed America forever. From the start in 1908, when the “Tin Lizzie,” or “flivver” as the T was known, sold for $825, J Ford continued to make improvements in production Ford’s focus illustrates a production orientation, which works best in a seller’s market A when demand is greater than supply because it focuses on the most efficient ways to proM duce and distribute products. The Sales Era selling orientation A managerial view of marketing as a sales function, or a way to move products out of warehouses to reduce inventory. I E When product availability exceeds demand in a buyer’s market, businesses may engage in the “hard sell,” in which salespeople aggressively push their wares. This selling orientation means that management views 5 marketing as a sales function, or a way to move products out of warehouses so that inventories don’t pile up. The selling orientation gained in popu0 larity after World War II and prevailed well into the 1950s. But consumers as a rule don’t like to be pushed, and the5 hard sell gave marketing a bad image. Companies that still follow 1 a selling orientation tend to be more successful at making onetime sales rather than at building repeat business. We are most likely to find this focus among B companies that sell unsought goods—products that people don’t tend to buy without some U of us aren’t exactly “dying” to shop for cemetery plots, so some prodding. For example, most encouragement may be necessary to splurge on a final resting place. Even in these categories, however, we still may find that competitors try to stay on top of consumers’ evolving needs. That’s why we see the rise in popularity of eco burials that avoid embalming and encourage cremation and also online funerals that stream images of the loved one on the Internet. The Relationship Era Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 customer orientation A business approach that prioritizes the satisfaction of customers’ needs and wants. At Plaza Fiesta outside Atlanta, Georgia, Hispanic customers are in for a treat: Instead of shopping at a mall, it’s more like they’re visiting a traditional Mexican village. With a bus station for ease of access, services like hairdressers or a doctor’s office, and live music on Sundays, customers come for the experience, not just the shopping.10 Plaza Fiesta found that it pays to have a customer orientation. As the world’s most successful firms began to adopt a customer orientation, marketers had a way to outdo the competition, and firms began to develop more of an appreciation C H APTER 1 |         Table 1.3 Era Description Example Production Era Consumers have to take whatever is available marketing plays a relatively insignificant role. Henry Ford’s Model T sold for less than $575 and owned 60% of the market. Sales Era When product availability exceeds demand in a buyer’s market. Management views marketing as a sales function, or a way to move products out of warehouses so that inventories don’t pile up. The selling orientation gained in popularity after World War II \/#%"}\!=']!#'/!'~# satisfied and companies needed %"??]%=* Kakigori Studio/Fotolia; wannasak saetia/Shutterstock; Dawn Hudson/Shutterstock marcojavier/DigitalVision Vectors/Getty Image HitToon/Shutterstock Businesses W engage in the “hard sell,” in which salespeople aggressively push I their wares. Relationship Era L Firms have a customer orientation that S satisfies customers’ needs and wants. O N , Triple-Bottom Line Era Business emphasizes the need to maxiJ ]+/=%]%##"> A bottom line 1. The financial Mbottom line 2. The social 3. The environmental bottom line I E 5 0 5 for the ways they could contribute to profits. Companies increasingly concentrated on improving the quality of their products. By the early 1990s, many 1 in the marketing community followed a total quality management (TQM) approach, which is a management phiB losophy that involves all employees from the assembly line onward in continuous product quality improvement. We’ll learn more about TQM in Chapter 9. U The Triple-Bottom-Line Orientation More recently, organizations began to wake up to the idea that making monetary profit is important, but there’s more to think about than just the financial bottom line. Instead, they began to focus on a triple-bottom-line orientation.11 This new way of looking at business emphasizes the need to maximize not just one, but three components: ISBN 1-323-75008-8 13 The Evolution of Marketing Vira Honcharenko/Shutterstock Icon |          1. The financial bottom line: Financial profits to stakeholders 2. The social bottom line: Contributing to the communities in which the company operates Organizations research customer needs and develop products to meet the needs of various groups. Companies try to create financial profits for stakeholders, contribute to the communities in which the company operates, and engage in sustainable business practices that minimize damage to the environment or that even improve it. total quality management (TQM) A management philosophy that focuses on satisfying customers through empowering employees to be an active part of continuous quality improvement. triple-bottom-line orientation A business orientation that looks at financial profits, the community in which the organization operates, and creating sustainable business practices. 3. The environmental bottom line: Creating sustainable business practices that minimize damage to the environment or that even improve it One result of this new way of long-term thinking is the societal marketing concept. It states that marketers must satisfy customers’ needs in ways that also benefit society while societal marketing concept A management philosophy that marketers must satisfy customers’ needs in ways that also benefit society and deliver profit to the firm. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N bawinner/Fotolia 14 Habitat for Humanity does well by doing good. sustainability A product design focus that seeks to create products that meet present consumer needs without compromising the ability of future generations to meet their needs. green marketing A marketing strategy that supports environmental stewardship, thus creating a differential benefit in the minds of consumers. accountability A process of determining just how much value an organization’s marketing activities create and their impact on the bottom line. return on investment (ROI) The direct financial impact of a firm’s expenditure of a resource, such as time or money. they still deliver a profit to the firm. A similar important trend now is for companies to think of ways to design and manufacture products with a focus on sustainability, which we define as “meeting present needs without compromising the ability of future generations to meet their needs.”12 One way to think about this philosophy is “doing well by doing good.” Many big and small firms alike practice sustainability through their efforts that include satisfying society’s environmental and social needs for a cleaner, safer environment. Adidas is one of the world’s most admired companies when it comes to sustainability. In 2015, Adidas was ranked No. 3 of the Global 100 Most Sustainable Corporations. Adidas’s sustainability initiatives come from its “open source” program comprised of searching for ideas from variW ous stakeholders. One Adidas open source partner, Parley I goal of getting plastic out of the ocean. Beginning in 2016, for the Oceans, has a primary Adidas integrated materials L made from ocean plastic waste into its products.13 Sustainability applies to many aspects of doing business, including social and ecoS nomic practices (e.g., humane working conditions and diplomacy to prevent wars that O deplete food supplies, atmospheric quality, and of course, lives). One other crucial pillar of sustainability is theN environmental impact of the product. Green marketing means developing marketing strategies that support environmental stewardship by creating an , environmentally founded differential benefit in the minds of consumers. Green marketing is one aspect of a firm’s overall commitment to sustainability. In addition to building J long-term relationships and focusing on social responsibility, triple-bottom-line firms place a much greater focus on accountability—measuring just how A much value an organization’s marketing activities create. This means that marketers at these M about the true value of their efforts and their impact on the organizations ask hard questions bottom line. These questions I all boil down to the simple acronym of ROI (return on investment) or, specifically for marketing, ROMI (return on marketing investment). Marketers now realize that if they want toE assess just how much value they create for the firm, they need to know exactly what they are spending and what the concrete results of their actions are. You will learn more about ROMI in Chapter 3. 5 However, it’s not always so easy to assess the value of marketing activities. Many times, 0 objectives using vague phrases like “increase awareness of managers state their marketing our product” or “encourage 5 people to eat healthier snacks.” These goals are important, but their lack of specificity makes it pretty much impossible for senior management to determine 1 marketing’s true impact. Because management may view these efforts as costs rather than B often are among the first to be cut out of a firm’s budget. investments, marketing activities To win continued supportU for what they do (and sometimes to keep their jobs), marketers in triple-bottom-line firms do their best to prove to management that they generate measurable value by aligning marketing activities with the firm’s overall business objectives.14 MillerCoors believes that a critical part of implementing accountability is that finance people respect marketing people for their knowledge and vice versa. The company has made this possible by developing a closer bond between the two groups. The CFO and CMO have adjacent offices and finance people have been dispersed among their marketing counterparts.15 Although no one can really predict the future, most agree that in the years ahead we will see an acceleration of the most important factors that marketers think about today. These predictions include: Good content, big data, mobile marketing, marketing metrics, customer interaction, and the demand for companies to do good even as they do well.16 Let’s briefly dive in and see what these terms mean. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 What’s Next in the Evolution of Marketing? C H APTER 1 |         Mobile marketing, interacting with consumers via mobile phones, tablets, and wearable screens such as smart watches, will be one of the prime factors in marketing’s future. Not only will these small screens allow for more personalized relationships with customers but the growth of mobile screens in developing countries will exponentially increase the number of potential customers. Customers’ demand for good content will continue to dominate online marketing. Usergenerated content (also known as consumer-generated content), in which consumers engage in marketing activities such as creating advertisements, will grow and overtake the importance of branded content. Branded content has been an important communication strategy for a number of years. It is produced by a brand and may even indicate the brand is the sponsor but still presents itself as something other than an attempt to sell a product. The Lego Movie was a great example of branded content. Despite the claims that the movie was not created to sell Legos, the company did have a major say-so in decisions about details of the movie. Consumers’ use of online reviews, blogs, and social media will require more than ever W that brands create a positive image with every customer and in any place that the company I branding will increastouches him or her whether online or offline. All of this means that ingly become a two-way conversation allowing consumers to have La greater voice. Because this increases the ability of marketers to track consumer behavior, they will be able to proS vide a more personalized brand communication experience. O than ever. Customers Firms that do well by doing good will become more important will continue the current trend of rewarding brands that do good N and punishing those that do not. Corporate citizenship, also called corporate social responsibility, refers to a , firm’s responsibility to the community in which it operates and to society in general. In the future, good corporate citizenship will become a major marketing function. The ability to effectively interpret the increasing volume of J consumer data will actually improve consumer lives. Although the primary purpose of consumer big data is to A increase the ability of marketers to create better products to improve customer service, the M traffic. Ever wonuse of that same data can provide better health care and even improved der why there are two or three Starbucks’ locations only a block I away from each other? Starbucks’ uses big data that includes street traffic analysis and demographic information E dive into big data to find new store locations that will be successful.17 We’ll do a deeper in Chapter 5. ISBN 1-323-75008-8 5 Ripped from the Headlines 0 5 /+!?[@Z"!+#!~? +"+%#" 1 in the Real World B How much time do you spend using your smartphone and your tablet each day? Are you one of the millions of college students who pulls U out your smartphone to read your email, check your Facebook page, or play a game before class begins? What about during class (never!)? If so, you may be one of the millions of college students who are addicted to their small screens. Nearly three-quarters of Americans (71%) sleep with their smartphones, and 3 percent actually hold them all night long while they’re in Dreamland. And, get this: More than 1/3 of respondents to a recent survey said their phones are the first thing on their minds when they wake up (only 10 percent said their significant other was).18 Of course, it isn’t just college students who are addicted to their phones and tablets. Children have traded in their Barbie dolls, Hot Wheels, and Ninja Turtles for small screens as well. The problem is that young children, teens, and adults can rapidly become screen addicts.          15 mobile marketing Interacting with consumers via mobile devices (i.e., phones, tablets, and wearable screens such as smart watches). user-generated content (also referred to as consumer-generated content) Marketing content and activities created by consumers and users of a brand such as advertisements, online reviews, blogs, social media, input to new product development or serving as wholesalers or retailers. online reviews, blogs, and social media. branded content Marketing communication developed by a brand to provide educational or entertainment value rather than to sell the brand in order to develop a relationship with consumers; may indicate the brand is the sponsor. corporate citizenship Also referred to a corporate social responsibility, refers to a firm’s responsibility to the community in which they operate and to society in general. screen addicts Consumers who spend so much time on smartphones, tablets, and computers that it interferes with more normal activities and productivity. growth hacker Experts who work on apps and sites to better hook consumers and keep them coming back and staying longer.            their physical and mental health, just as addiction to alcohol or drugs.                "    iPad generation is active enough to be healthy.19 And the tech companies continue to work to increase the amount of time consumers, young and old, spend on smartphones and tablets. The industry term for experts who work on apps and sites to better hook consumers, keep them coming back and staying longer is growth hackers.20 There are some company leaders and designers who would like to do things difETHICS CHECK: ferently, but there are greater incentives to Should companies continue growth hacking. Is this unethical? try to increase the Should industry leaders, as good corporate amount of time citizens, work to inhibit Internet addiction? consumers spend with Should they develop apps to send an alert their small screens? to users when they stay too long or provide some other means to stop addiction? YES NO Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 16 PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N 1.3 The Value of Marketing and the Marketing of Value OBJECTIVE We said that marketing is all about delivering value to everyone who is affected by a transaction. That includes the customer, the seller, and society at large. How do customers decide how much value they will get from a purchase? One way to look at value is to think of it simply as a ratio of benefits to costs—that is, customers “invest” their precious time and money to do business with a firm, and they expect a certain bundle of (pp. 16–23) benefits in return. Let’s look at value from the different perspectives of the parties that are involved in an exchange: the customers, the sellers, and society. Understand value from the perspectives of customers, producers, and society. value proposition A marketplace offering that fairly and accurately sums up the value that will be realized if the good or service is purchased. W I Value from the Customer’s Perspective L Think about something you would like to buy, say, a new pair of shoes. You have narrowed the choice down to several S options. Your purchase decision no doubt will be affected by the ratio of costs versus benefits for each type of shoe. When you buy a pair of shoes, you O consider the price (and other costs) along with all the other benefits (utilities) that each N competing pair of shoes provides you. Marketers communicate these benefits to the customer in the form of a value proposition, , which is a marketplace offering that fairly and accurately sums up the value that the customer will realize if he or she purchases the product. The value proposition includes the whole bundle of benefits J the firm promises to deliver, not just the benefits of the product itself. For example, although A most people probably won’t get to their destination sooner if they drive a BMW versus a Mercedes-Benz or Audi, many die-hard loyalists swear by their M favorite brand. I are largely marketed in terms of their images—meaning the These archrival brands images their respective marketing communication firms have carefully crafted for them E with the help of slickly produced commercials, YouTube videos, and millions of dollars. When you buy a BMW, you do more than choose a car to get you around town, you may 5 the type of person you are or wish you were. In addition to also make a statement about providing a luxury ride or0superior maintenance services, that statement also is part of the value the product delivers to you. The challenge to the marketer is to create a killer value 5 proposition. A big part of this challenge is to convince customers that this value proposi1 might choose from competitors. tion is superior to others they B Value from the Seller’s Perspective U Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 We’ve seen that marketing transactions produce value for buyers, but how do sellers experience value, and how do they decide whether a transaction is valuable? One answer is obvious: They determine whether the exchange is profitable to them. Has it made money for the company’s management, its workers, and its shareholders? That’s an important factor, but not the only one. Just as we can’t measure the value of an automobile from the consumer’s perspective only in terms of basic transportation, value from the seller’s perspective can take many forms. For example, in addition to making a buck or two, many firms measure value along other dimensions, such as prestige among rivals or pride in doing what they do well. The online shoe retailer Zappos’s top-core value is to “Deliver WOW through service.” Some organizations by definition don’t even care about making money, or they may not even be allowed to make money. Nonprofits like C H APTER 1 |         Greenpeace, the Smithsonian Institution, or National Public Radio regard value in terms of their ability to motivate, educate, or delight the public. In recent years, many firms have transformed the way they do business. They now regard consumers as partners in the transaction rather than as passive “victims.” That explains why it’s becoming more common for companies to host events (sometimes called brandfests) to thank customers for their loyalty. For example, Jeep builds strong bonds with its Jeep 4 * 4 owners when it holds several off-road adventure weekends every year. These Jeep Jamborees are where other Jeep owners get to challenge the limits of their 4 * 4s on off-road trails and commune with fellow brand loyalists.21 Jeep’s cultivation of its 4 * 4 enthusiasts reflects an important lesson the company understands very well: It is more expensive to attract new customers than it is to retain current ones. This notion has transformed the way many companies do business, and we’ll repeat it several times in this book. However, there is an important exception to the rule: In recent years, companies have been working harder to calculate the true value of W their relationships with customers by asking, “How much is this customer really worth I and human effort to to us?” Firms recognize that it can be costly in terms of both money do whatever it takes to keep some customers loyal to the company. L Often these actions pay off, but there are cases in which keeping a customer is a losing proposition. S Companies that calculate the lifetime value of a customer look at how much profit they Opurchase he or she will expect to make from a particular buyer, including each and every make from them now and in the future. To calculate lifetime value, Ncompanies estimate the amount the person will spend and then subtract what it will cost to maintain this relationship. , The Metrics Moment box illustrates one approach to how marketers measure customer value. ISBN 1-323-75008-8 Provide Value through Competitive Advantage          17 brandfests Events that companies host to thank customers for their loyalty. lifetime value of a customer The potential profit a single customer’s purchase of a firm’s products generates over the customer’s lifetime. J Firms of all types seek to gain a competitive advantage—an edge over its competitors A that allows it to have higher sales, higher profits, more customers—in short to enjoy M comes from either a greater success year after year. In general, a competitive advantage cost advantage or a differential advantage. A firm has a cost advantage when the firm can I produce a good or service at a lower cost than competitors and thus charge customers a E lower price. A differential advantage means that the firm produces a product that differs significantly from competitors’ products and customers see the product as superior. How does a firm go about creating a competitive advantage? 5 The first step is to identify what it does really well. A distinctive competency is a firm’s capability that is superior to that 0 of its competition. For example, Coca-Cola’s success in global markets—Coke commands 5 50 percent of the world’s soft-drink business—is related to its distinctive competencies in distribution and marketing communications. Coke’s distribution system got a jump on 1 the competition during World War II, when Coke partnered with the military to make sure B every soldier had access to its soft drink. The military actually paid for the transportation of Coca-Cola and helped the company to build bottling plants toU keep the troops happy.22 Coke’s skillful marketing communications program, a second distinctive competency, has contributed to its global success. Coke doesn’t market its product; it sells “happiness. “ The second step to develop a competitive advantage is to turn a distinctive competency into a differential benefit—value that competitors don’t offer. Differential benefits set products apart from competitors’ products by providing something unique that customers want, that is the competitive advantage. Differential benefits provide reasons for customers to pay a premium for a firm’s products and exhibit a strong brand preference. For many years, loyal Apple computer users benefited from superior graphics capability compared to their PC-using counterparts. Later, when PC manufacturers caught up with this competitive advantage, Apple relied on its inventive product designers to create another differential benefit—futuristic-looking computers in a multitude of colors. competitive advantage A firm’s edge over its competitors that allows it to have higher sales, higher profits, and more customers and enjoy greater success year    # distinctive competency A superior capability of a firm in comparison to its direct competitors. differential benefit Properties of products that set them apart from competitors’ products by providing unique customer benefits. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 18 PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N Metrics Moment This section highlights the concepts of value and the value proposition that firms and their offerings bring to customers. But how do marketers actually measure value? Increasingly, they develop a marketing scorecard that reports (often in the form of numerical values) how the company or brand is actually doing in achieving various goals. We can think of a scorecard as a marketing department’s report card. Scorecards tend to be short and to the point, and they often include charts and graphs to summarize information in an easy-to-read format. They might report “grades” on factors such as actual cost per sale, a comparison of web hits (the number of people who visit an e-commerce site) versus web conversions (the number who actually buy something at the site), a measure of customers’ satisfaction with a company’s repair facilities, or perhaps even a percentage of consumers who respond to a mail piece marketing scorecards Feedback vehicles that report (often in quantified terms) how the company or brand is actually doing in achieving various goals. metrics Measurements or “scorecards” that marketers use to identify the effectiveness of different strategies or tactics. that asks them to make a donation to a charity that the firm sponsors. You can see an example of a simple scorecard in Table 1.4. Throughout this book, we’ll give you the opportunity to “get your hands dirty” as you calculate various kinds of scores, or metrics. Apply the Metrics 1. Using Table 1.4 as a template, develop a scorecard for student satisfaction with your marketing class. You will need to develop your own relevant items for satisfaction measurement. 2. Then have the students in your class complete the scorecard now and again in the middle of the semester. 3. Summarize, interpret, and present the results. W I L Table 1.4 | An Example of a Customer Service Scorecard S O Quarterly Scores Item 1st Qtr. 2nd Qtr. 3rd Qtr. N Satisfaction with , C1 Employee responsiveness 60% 65% 68% C2 Product selection 60% 62% 63% C3 Service quality J A €#%\?':%]?%^" M C6 Appearance of employees I C7 Convenience of location E 60% 62% 55% C4 Cleanliness of facility 75% 80% 85% 62% 62% 58% 60% 62% 63% 60% 65% 68% Source: '!'=%]* *Z#~'^!#'* !"+#%\+/< /+""+#:+#‚>!Z"!#'+#‚!:"!‚!=‚+#: Scorecards More Valuable,” Marketing Research, Winter 2003, 14–19, p. 18. Copyright © 2003 American Marketing Association. value chain A series of activities involved in designing, producing, marketing, delivering, and supporting any product. Each link in the chain has the potential to either add or remove value from the product the customer eventually buys. 5 0 This competitive advantage even tempted many loyal PC users to take a bite of the 5 Apple (see Table 1.5). 1 Add Value through the Value Chain B Many different players—both within and outside a firm—need to work together to create U The value chain is a useful way to appreciate all the playand deliver value to customers. š Inbound logistics: Bringing in materials or component parts necessary to make the product š Operations: Converting the materials into another form or the final product Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 ers that work together to create value. This term refers to a series of activities involved in designing, producing, marketing, delivering, and supporting any product. In addition to marketing activities, the value chain includes business functions such as human resource management and technology development.23 The value chain concept reminds us that every product starts with raw materials such as iron ore or crude oil that are of relatively limited value to the end customer. Each link in the chain has the potential to either add or remove value from the product the customer eventually buys. The successful firm is the one that can perform one or more of these activities better than other firms; this is its distinctive competency and thus provides an opportunity to gain a competitive advantage. The main activities of value chain members include the following: C H APTER 1 |         Table 1.5 |          How Firms Achieve a Competitive Advantage 24 with a Distinctive Competency Company Distinctive Competency Differential Benefit Competitive Advantage Coca-Cola Distribution and marketing communications Convenience and brand awareness for customers all over the world Other soft drinks are unable to take loyal customers away from Coke. Coca-Cola has more than 50% of the world soft-drink market. Apple Product quality and design Easy access to cutting-edge technology Apple’s sales of its Mac computer increased 28.5% as the overall market for PCs decreased. Southwest Airlines Price point Appeals to budget-conscious consumers Southwest is the number one domestic carrier in the U.S. Amazon.com Fulfillment and distribution Availability, convenience, and W ease of access of product Amazon holds about a 50% market share for books sold via the Internet. Starbucks Product quality CustomerI satisfaction L S š Outbound logistics: Shipping out the final product O š Marketing: Promoting and selling the final product N š Service: Meeting the customer’s needs by providing any additional support required , Starbucks has just under 33% of the market share in its industry. To better understand the value chain, consider a new iPad you buy at your local Apple store. Do you think about all the people and steps involved in designing, producing, and delivering that product to the store? And there are otherJ people who create brand advertising, conduct consumer research to figure out what people like or dislike about A their small tablet, or even make the box it comes in or the packaging that keeps the unit M would be no iPad, from being damaged in shipment? Without these people, there simply only a box of raw materials and parts. I As Figure 1.2 shows, all these activities and companies belong to Apple’s value E chain. This means that Apple must make a lot of decisions. What electronic components will go into its music players? What accessories will it include in the package? What trucking companies, wholesalers, and retailers will deliver the iPods to stores? 5 What service will it 0 5 Apple’s value chain includes inbound logistics, operations, outbound logistics, marketing and sales, and service. 1 Inbound Outbound Marketing B Operations Logistics Logistics and Sales U Figure 1.2 ISBN 1-323-75008-8 19 Snapshot | Apple’s Value Chain ,
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&!!% Source: Q!"'%#+#%=]!+%#=%]=+‚@/=]!#[[\\\*'"+:#/!+#*%][%ˆ="%=^*!"‰+""ZŠ"Z]]=* Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 20 PA RT O N E Figure 1.3 | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N Process | Create and Deliver Value This book is organized around the sequence of steps necessary to ensure that the appropriate value exchange occurs and that both parties to the transaction are satisfied. Each step corresponds to one of the book’s five parts. Process Understand the Value Proposition (Part One) Determine the Value Propositions Different Customers Want (Part Two) Develop the Value Proposition for the Customer (Part Three) provide to customers after the sale? And what marketing strategies will it use? In some cases, members of a value chain will work together to coordinate their activities to be more efficient and thus create a competitive advantage. We’ve organized this book around the series of steps in the marketing process. Each of these steps is essential to ensuring that the appropriate value exchange occurs and that both parties to the transaction are satisfied—making it more likely they’ll continue to do business in the future. Figure 1.3 shows these steps. Basically, we’re going to learn about what marketers do as a product makes its way through the firm’s value chain from obtaining the raw materials and component parts to produce the product to delivery into the customer’s hands. W We’ll start in Part 1 with a focus on how companies plan for success with global and ethical marketing strategies. In Part 2, we’ll I how research and Big Data help marketers understand and meet see the L different needs of different customers. Then Part 3 takes a look at how firms decide to “position” the product in the marketplace, inS cluding choices about what it should look like, how its value should Ocommunicated to customers, and how much to charge for it. As be we Nreach the end of our marketing journey in Part 4, we’ll talk about how the product gets delivered and promoted to consumers. , Deliver and Communicate the Value Proposition (Part Four) haul videos Videos consumers post on YouTube that detail the latest stuff they bought. Consumer-Generated Value: From Audience J Community to Awe discussed earlier, one of the most exciting changes in the As world M of marketing is that everyday people actually generate value instead of just buying it; consumers are turning into adI vertising directors, retailers, and new-product-development consultants. They create their own ads (some flattering,Esome not) for products and post them on sites like YouTube. They buy and sell merchandise ranging from Beatles memorabilia to washing machines (to body parts, but that’s another story) on eBay. They share ideas for new styles with fashion 5 designers, design new advertising, and customize their own unique versions of products on websites. Some even proudly announce the latest stuff they’ve bought in “haul videos” 0 they shoot and post on YouTube (if you don’t believe us, just search for “haul videos” and 5 see how many people take the time to do this). 1 mean that marketers must adjust their thinking about cusThese profound changes tomers: They need to stopBthinking of buyers as a passive audience and start thinking of them as a community that is motivated to participate in both the production and the conU sumption of what companies sell. They also are part of the brand communication process as they create their own videos, provide product reviews, and participate in blogs. Some examples of this consumer-generated content include: š Ghirardelli Chocolate broadcast consumer-generated comments in New York’s Times Square about when and where they most enjoyed eating its chocolate squares.25 š Rite-Solutions, a software company that builds advanced command-and-control systems for the U.S. Navy, sets up an internal “prediction market” in which any employee can propose that the company acquire a new technology, enter a new business, or make an efficiency improvement. These proposals become stocks, complete with ticker Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 š At iReport, budding citizen journalists can upload photos and videos to CNN in response to breaking news. The most timely and compelling of these stories have the potential to be vetted (cleared) and aired on the CNN TV network.26 C H APTER 1 |                  21 symbols, discussion lists, and e-mail alerts. Employees buy or sell the stocks, and prices change to reflect the sentiments of the company’s engineers, computer scientists, and project managers—as well as its marketers, accountants, and even the receptionist. One “stock” resulted in the development of a new product that now accounts for 30% of the company’s sales.27 š For almost a decade, Doritos cashed in on its “Crash the Super Bowl” contest, where fans submitted their best 30-second commercials. The winning commercial (as voted on by fans) was aired during the Super Bowl game, and the winner received not only bragging rights but also took home a cool $1 million.28 Consumer-Generated Value: Social Networking ISBN 1-323-75008-8 In the 1990s, the Internet (Web 1.0) was typified by static content provided by a site’s creator. Businesses and institutions permitted little consumer involvement on websites.29 Wsites that were crude, These commercially and technically based organizations created simple, and designed to accomplish one specific function. Later, Web I 2.0 offered marketers two-way communication through social networking sites such as Facebook. People wrote L blogs and E-commerce expanded. Web 3.0, where we are now, offers consumers real-time S instant communications through live chats and instant messaging. When a marketing blunder O is announced on the news such as Chipotle Grill’s tainted food crisis, consumers blanket Twitter and Facebook N with comments and complaints. Marketers are able to track customers’ browser behavior so that if a customer searched for a sleeping bag, sleeping bags would, be advertised/promoted on the main page and often on a totally different web page later. Maybe you’ve noticed that the things you search for tend to “follow” you around even as you visit other sites. J Marketers are now beginning to enjoy the benefits provided by Web 4.0, which offers A customer engagement, cloud operations, and web participation as necessities. This means that marketers can now do much more than sell products to customers Mand the customers post their experiences and opinions of the products. To be successful in our fast-changing InternetI connected lives, companies must engage customers with the brand through social media, blogs and other online channels. Although we may imagine the Cloud as E a physical place, in reality it’s a network of servers, all having different functions. Because the Cloud provides an almost infinite amount of storage space, your school may have moved your e-mail to the Cloud. Some 5 software companies have moved their programs to the Cloud. For example, small business 0 to QuickBooks.30 owners now have the option of buying or paying a monthly subscription With the web, consumers create value through social media, 5 which are Internet-based platforms that allow users to create their own content and share it with others who access 1 their sites. Social media include, among others, social networks such as Facebook and Twitter and product review sites such as TripAdvisor. On socialB networking platforms, a user posts a profile on a website and he or she provides and receives U links to other members of the network to share input about common interests. The odds are that you and most of your classmates checked your Facebook page before (or during?) class today. Social media platforms like this are very hot today; more and more advertisers realize that these sites are a great way to reach an audience that tunes in regularly and enthusiastically to catch up with friends, check out photos of what they did at that outrageous party Saturday night (ouch!), proclaim opinions about political or social issues, or share discoveries of new musical artists.31 They share several important characteristics: Web 1.0 The beginning phase of the Internet that offered static content provided by the owner of the site. Web 2.0 The second generation of the World Wide Web that incorporated social networking and user interactivity via two-way communication. Web 3.0 The current generation of the web that offers consumers real-time instant communications through live chats and instant messaging and marketers the ability to track customers’ online behavior. Web 4.0 The web gives consumers access to thousands of apps and makes the ability to use their smartphones and tablets to access brands anywhere and anytime a necessity. Cloud A network of servers that provide an almost infinite amount of storage space. social networking platforms Online platforms that allow a user to represent himself or herself via a profile on a website and provide and receive links to other members of the network to share input about common interests. š They improve as the number of users increases. For example, Amazon’s ability to recommend books to you based on what other people with similar interests have bought gets better as it tracks more and more people who enter search queries. š Their currency is eyeballs. Google makes its money by charging advertisers according to the number of people who see their ads after they type in a search term. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 22 PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N š They are version free and in perpetual beta. Unlike static websites or books, content is always a work in progress. Enthusiastic users who serve as volunteer editors constantly update Wikipedia, the online encyclopedia and “correct” others’ errors. folksonomy A classification system that relies on users rather than preestablished systems to sort contents. wisdom of crowds Under the right circumstances, groups are smarter than the smartest people in them, meaning that large numbers of consumers can predict successful products. crowdsourcing A practice where firms outsource marketing activities (such as selecting an ad) to a community of users. š They categorize entries according to folksonomy rather than “taxonomy.” In other words, sites rely on users rather than preestablished systems to sort contents. Listeners at Pandora create their own “radio stations” that play songs by artists they choose as well as other similar artists.32 This last point highlights a key change in the way some new media companies approach their businesses: Think of it as marketing strategy by committee. The wisdom of crowds perspective (from a book by that name) argues that under the right circumstances, groups are smarter than the smartest people in them. If this is true, it implies that large numbers of (nonexpert) consumers can predict successful products.33 Marketers rely on crowdsourcing when they outsource marketing activities to a large group of people, often through a social W example, Lego offers up its Lego CUUSOO crowdsourcing networking community. For platform to solicit productI and concept ideas from fans. The company periodically reviews the ideas that garner 10,000 supporters to see which ones might merit the chance to become L a real Lego product, such as the Ghostbusters 30th Anniversary set, and “winners” earn S sales.34 We’ll talk more about crowdsourcing in Chapter 13. 1 percent of the profits on net O N Every company’s activities influence the world around it in ways both good and bad. , Therefore, we must also consider how marketing transactions add or subtract value from Value from Society’s Perspective society. In many ways, we as consumers are at the mercy of marketers, because we trust them to sell us products that J are safe and perform as promised. We also trust them to price and distribute these products fairly. Conflicts often arise in business when the pressure to A succeed in the marketplace provokes dishonest business practices; the huge failure of maM jor financial services organizations like AIG and Goldman Sachs is a painful case in point. Companies usually find that stressing ethics and social responsibility also is good I business. The Internet and social media mean that consumers communicate about unsafe E or faulty products, bad service, or scams. Some find this out the hard way: The U.S. Environmental Protection Agency accused Volkswagen AG of using software to make 482,000 Volkswagen 5 diesel-powered cars appear cleaner than they were. After first denying the accusation, Volkswagen later admitted to the charge. VW stock lost a third of 0 company faced the possibility of billions of dollars in fines.35 In its value in one day and the 5voluntarily withdrew its Rely tampons from the market followcontrast, Procter & Gamble ing reports of women who 1 had suffered toxic shock syndrome (TSS). Although scientists did not claim a causal link between Rely and TSS, the company agreed with the Food and Drug Administration thatB they would undertake extensive advertising notifying women of the symptoms of TSS andU asking them to return their boxes of Rely for a refund. The company took a $75 million loss and sacrificed an unusually successful new product that had already captured about one-quarter of the billion-dollar sanitary product market.36 The Dark Side of Marketing and Consumer Behavior Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. ISBN 1-323-75008-8 For some—hopefully not many and hopefully not you after you read this book—marketing is a four-letter word. Whether intentionally or not, some marketers do violate their bond of trust with consumers, and unfortunately the “dark side” of marketing often is the subject of harsh criticism.37 In some cases, these violations are illegal, such as when a retailer adopts a “bait-and-switch” selling strategy, luring consumers into the store with promises of inexpensive products with the sole intent of getting them to switch to higher-priced goods. In other cases, marketing practices have detrimental effects on society even though they are not actually illegal. Some alcohol and tobacco companies advertise in lowincome neighborhoods where abuse of these products is a big problem. Others sponsor C H APTER 1 |                  23 commercials that depict groups of people in an unfavorable light or sell products that encourage antisocial behavior. An online game based on the Columbine High School massacre drew criticism from some who say it trivializes the actions of the two teen killers. We’ll talk more about marketing ethics in Chapter 2. Despite the best efforts of researchers, government regulators, and concerned industry people, sometimes consumers’ worst enemies are themselves. We tend to think of ourselves as rational decision makers, calmly doing our best to obtain products and services that will maximize our health and well-being and that of our families and society. In reality, however, our desires, choices, and actions often result in negative consequences to ourselves and the society in which we live. Some of these actions are relatively harmless, but others have more onerous consequences. Some harmful consumer behaviors, such as excessive drinking or cigarette smoking, stem from social pressures, and the cultural value that people place on money encourages activities such as shoplifting or insurance fraud. Exposure to unattainable ideals of beauty and success can create dissatisfaction with the W self. Let’s briefly review some dimensions of the “dark side” of consumer behavior: I Addictive consumption: Consumer addiction is a physiologicalLor psychological dependency on goods or services. These problems, of course, include alcoholism, drug S addiction, and cigarettes, and many companies profit from addictive products or by selling solutions. More recently, as we’ve already seenO many have become concerned about small screen addiction. Although most people N equate addiction with drugs, consumers can use virtually anything to relieve (at least temporarily) some problem or satisfy some need to the point that reliance, on it becomes extreme. “Shopaholics” turn to shopping much the way addicted people turn to drugs or alcohol.38 Numerous treatment centers in China, South Korea, and Taiwan (and J now a few in the U.S. also) deal with cases of Internet or small screen addiction— Aliterally forget to eat or some hardcore gamers have become so hooked that they drink and die of dehydration. There is even a Chap Stick MAddicts support group with approximately 250 active members!39 consumer addiction A physiological or psychological dependency on goods or services including alcoholism, drug addiction, cigarettes, shopping, and use of the Internet. I Illegal activities: The cost of crimes that consumers commit against E businesses has been estimated at more than $40 billion per year. A survey the McCann-Erickson advertising agency conducted revealed the following tidbits:40 5 š Ninety-one percent of people say they lie regularly. One in three fibs about their weight, 0 age. Nine percent even one in four fudges their income, and 21 percent lie about their lie about their natural hair color. 5 š Four out of 10 Americans have tried to pad an insurance bill to cover the deductible. 1 B š More than three out of five people say they’ve taken credit for making something from U CEO, this “behavscratch when they have done no such thing. According to Pillsbury’s š Nineteen percent say they’ve snuck into a theater to avoid paying admission. ISBN 1-323-75008-8 ior is so prevalent that we’ve named a category after it—speed scratch.” Shrinkage: In 2014, shrinkage cost retailers an average of 1.38 percent of their total sales or $44 million. Shrinkage is the industry term for inventory and cash losses from shoplifting, employee theft, and damage to merchandise. As we’ll see in Chapter 12, this is a massive problem for businesses, one that they in turn pass on to consumers in the form of higher prices. Analysts attribute about 40 percent of the losses to employees rather than shoppers. Anticonsumption: Some types of destructive consumer behavior are anticonsumption, when people deliberately deface or otherwise damage products. This practice ranges from relatively mild acts like spray-painting graffiti on buildings and subways, to serious incidences of product tampering or even the release of computer viruses that can bring large corporations to their knees. shrinkage Losses experienced by retailers as a result of shoplifting, employee theft, and damage to merchandise. anticonsumption The deliberate defacement of products. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W. Stuart. Published by Pearson. Copyright © 2018 by Pearson Education, Inc. 24 PA RT O N E | UN DE R S TA ND T H E VA LU E P R OPO SI TI O N 1.4 Marketing as a Process OBJECTIVE Our definition of marketing also refers to processes. This means that marketing is not a one-shot operation. When it’s done right, marketing is a decision process in which marketing managers determine the strategies that will help the firm meet its objectives and then execute (p. 24) those strategies using the tools they have at their disposal. In this section, we’ll look at how marketers make business decisions and plan actions and the tools they use to execute their plans. We’ll build on this brief overview in Chapter 3. A big part of the marketing process is market planning, where we think carefully and strategically about the “big picture” and where our firm and its products fit within it. The first phase of market planning is to analyze the marketing environment. This means underWstrengths and weaknesses by assessing factors that might help standing the firm’s current or hinder the development I and marketing of products. The analysis must also take into account the opportunities and threats the firm will encounter in the marketplace, such as the L actions of competitors, cultural and technological changes, and the economy. Firms (or individuals)Sthat engage in market planning ask questions like these: Explain the basics of market planning. Owill our customers look for in three to five years? š What product benefits Nour firm have that set it apart from the competition? š What capabilities does š What additional customer , groups might provide important market segments for us in the future? š How will changes in technology affect our production process, our communication J strategy, and our distribution strategy? š What changes in social A and cultural values are occurring now that will impact our market in the next few years? M š How will customers’ awareness of environmental issues affect their attitudes toward I our manufacturing facilities? E issues may affect our business in both domestic and global š What legal and regulatory markets? mass market All possible customers in a market, regardless of the differences in their specific needs and wants. target market The market segments on which an organization focuses its marketing plan and toward which it directs its marketing efforts. Marketing: Real People, Real Choices, Ninth Edition, by Michael R. Solomon, Greg W. Marshall, and Elnora W....
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