CHAPTER 1

An Overview of Marketing

LEARNING OBJECTIVES 1 Define the term "marketing" Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. 2 Describe four marketing management philosophies

Four competing philosophies strongly influence the role of marketing and marketing activities within an organization. These philosophies are commonly referred to as production, sales, marketing, and societal marketing orientations. The production orientation focuses on internal efficiency to achieve lower prices for consumers. It assumes that price is the critical variable in the purchase decision. A sales orientation assumes that buyers resist purchasing items that are not essential and that consumers must be persuaded to buy. The marketing orientation is based on an understanding that a sale predominantly depends on the customer's decision to purchase a product and on the customer's perception of the value of that product. Responsiveness to customer wants is the central focus of the marketing orientation. The societal marketing orientation holds that the firm should strive to satisfy customer needs and wants while meeting organizational objectives and preserving or enhancing both the individual's and society's long-term best interests. 3 Discuss the differences between sales and market orientations Selling Orientation Organization's focus is inward on the firm's needs Marketing Orientation Focus is outward on the wants and preferences of customers Business is defined by its goods and services offered Business is defined by benefits sought by customers Product is directed to everybody Product is directed to specific groups (target markets) Primary goal is profit through maximum sales volume Primary goal is profit through customer satisfaction Goals are achieved primarily through intensive promotion Goals are achieved through coordinated marketing 4 Describe the marketing process

Marketing managers are responsible for a variety of activities that together represent the marketing process. These include: matching the role of marketing with the firms vision and mission, setting objectives, analyzing internal and external information, developing strategy, planning a marketing mix, implementing strategy, designing performance measures, and evaluating and adjusting strategy. 5 Describe several reasons for studying marketing

Marketing provides a delivery system for a standard of living, which is a monumental task in a society such as the United States, where a typical family consumes 2.5 tons of food per year.
Chapter 1 An Overview of Marketing 3

No matter what an individual's area of concentration in business, the terminology and fundamentals of marketing are important for communicating with others in the firm. Between one-fourth and one-third of the entire civilian work force in the United States performs marketing activities. Marketing offers career opportunities in areas such as professional selling, marketing research, advertising, retail buying, distribution management, product management, product development, and wholesaling. As a consumer of goods and services, everyone participates in the marketing process every day. By understanding marketing, one can become a more sophisticated consumer. PRE-TEST Answer the following questions to see how well you understand the material. Re-take it after you review to check yourself. 1. Marketing is defined as:

2. What five conditions must be satisfied for any kind of exchange to take place?

3. The

four

variables

of

the

marketing

mix

are:

_____________________________________________. variable?

Which is the most important

4. Four marketing management philosophies are:

5. List five ways in which a marketing orientation is different from a sales orientation. Sales Orientation Marketing Orientation

_________________________________________ _________________________________________

Chapter 1 An Overview of Marketing

_________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ 6. List seven steps in the marketing process:

7. Name four reasons for studying marketing:

Chapter 1 An Overview of Marketing 5

CHAPTER OUTLINE 1 I. Define the term "marketing" What Is Marketing? A. B. C. Marketing is not the same as selling or advertising. Marketing includes selling, advertising, making products available in stores, arranging displays, maintaining inventories, and much more. Marketing is a philosophy or a management orientation that stresses the importance of customer satisfaction, as well as the set of activities used to implement this philosophy. The American Marketing Association definition of marketing: Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. 1. The Concept of Exchange The concept of exchange means that people give up something in order to receive something that they would rather have. The usual medium of exchange is money. Exchange can also be fostered through barter or trade of items or services. a. Five conditions must be satisfied for an exchange to take place: 1. 2. 3. 4. 5. There must be at least two parties. Each party must have something the other party values. Each party must be able to communicate with the other party and deliver the goods or services sought by the other trading party. Each party must be free to accept or reject the other's offer. Each party must want to deal with the other party.

D.

Exchange may not take place even if all of these conditions exist, but these conditions are necessary for exchange to be possible. 2 II. Describe four marketing management philosophies Marketing Management Philosophies Four competing philosophies strongly influence an organizations marketing activities. These philosophies are commonly referred to as production, sales, marketing, and societal orientations. A. Production Orientation The production orientation focuses on internal capabilities of the firm rather than on the desires and needs of the marketplace. The firm is concerned with what it does best, based on its resources and experience, rather than with what consumers want.
6 Chapter 1 An Overview of Marketing

B.

Sales Orientation

A sales orientation assumes that more goods and services will be purchased if aggressive sales techniques are used and that high sales result in high profits. C. The Marketing Concept and Market Orientation 1. This philosophy, called the marketing concept, states that the social and economic justification for an organizations existence is the satisfaction of customer wants and needs while meeting organizational objectives. 2. The marketing concept involves: a. b. c. 3. Focusing on customer wants and needs so the organization can differentiate its product(s) from competitors offerings Integrating all the organizations activities, including production, to satisfy these wants and needs Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly

Firms that adopt and implement the marketing concept are said to be market oriented. Market orientation requires a. b. c. d. Top management leadership A customer focus Competitor intelligence Interfunctional coordination to meet customer wants and needs and deliver superior values

4. 5. D.

Understanding your competitive arena and competitors strengths and weaknesses is a critical component of market orientation. Market-oriented companies are successful in getting all business functions together to deliver customer value.

Marketing Societal Orientation 1. The philosophy called a marketing societal orientation states that an organization exists not only to satisfy customer wants and needs and to meet organizational but also to preserve or enhance individual's and society's long-term best interests. This orientation extends the marketing concept to serve three bodies rather than two: customers, the organization itself, and society as a whole.

2. 3 III.

Discuss the differences between sales and marketing orientations Differences Between Contrasting Sales and Marketing Orientations A. The Organization's Focus 1. Sales-oriented firms tend to be inward-looking. They focus on satisfying their own needs rather than those of customers.

Chapter 1 An Overview of Marketing 7

2. 3.

Market-oriented firms derive their competitive advantage from an external focus. Departments in these firms coordinate their activities and focus on satisfying customers. Customer Value a. Customer value is the ratio of benefits to the sacrifice necessary to obtain those benefits. b. Creating customer value is a core business strategy of many successful firms. c. Marketers interested in customer value 1. 2. 3. 4. 5. Offer products that perform Give consumers more than they expect Avoid unrealistic pricing Give the buyer facts Offer organization wide commitment in service and aftersales support

4.

Customer Satisfaction Customer satisfaction is the feeling that a product has met or exceeded the customers expectations. The organizational culture focuses on delighting customers rather than on selling products.

5.

Building Relationships Relationship marketing is a strategy that entails forging long-term partnerships with customers and contributing to their success. a. b. c. d. The Internet is an effective tool for generating relationships with customers. Customers benefit from stable relationships with suppliers. A sense of well-being occurs when one establishes an ongoing relationship with provider. Most successful relationship marketing strategies depend upon: customer-oriented personnel, effective training programs, employees with authority to make decisions and solve problems, and teamwork.

6.

Customer-Oriented Personnel All employees in marketing-oriented firms must be customer-oriented for the customer satisfaction goals to be met. Often one employee is the only contact a customer has with a company.

7.

The Role of Training Leading marketers recognize the role of employee training in customer service. In order to have full participation and understanding of the marketing philosophy, companies such as Walt Disney World, McDonald's, and American Express train all their employees to become customeroriented.

8.

Empowerment

Chapter 1 An Overview of Marketing

Empowerment is the practice of giving employees expanded authority to solve customer problems as they arise. This technique improves customer service by improving responsiveness. 9. Teamwork Teamwork entails collaborative efforts of people to accomplish common objectives. B. The Firm's Business 1. A sales-oriented firm defines its business in terms of the goods and services it offers, like a encyclopedia publisher defining itself simply as a book publisher/seller. A market orientated firm defines its business based on the benefits customers seek. Why is this customer benefit definition so important? a. b. c. 4. It ensures the firm keeps focusing on customers It encourages innovation and creativity by reminding people that there are many ways to satisfy customer wants. It stimulates an awareness of changes in customer desires and preferences.

2. 3.

Focusing on customer wants does not mean that customers will always receive the specific goods and services they want. a. b. Giving the customer exactly what he or she wants is not practical if doing so threatens the survival of the firm. Sound professional judgment must influence the decision about which goods or services should be offered. Perhaps the most prudent course will be to alter the way consumers perceive their needs and means of satisfaction.

C.

Those To Whom the Product Is Directed 1. 2. A sales-oriented organization targets its products at "everybody" or "the average customer." However, few "average" customers exist. The market-oriented firm a. b. c. Recognizes that different customer groups have different wants Targets specific subgroups of customers Designs special products and marketing programs for these groups

D.

The Firm's Primary Goal 1. 2. The goal of a sales-oriented firm is profitability through sales volume. The focus is on making the sale rather than developing a long-term relationship with a customer. The ultimate goal of most market-oriented organizations is to make a profit from satisfying customers. Superior customer service enables a firm to have large amounts of repeat business, customer loyalty, and higher profit margins.

Chapter 1 An Overview of Marketing 9

E.

Tools the Organization Uses to Achieve Its Goals 1. 2. Sales-oriented firms seek to generate sales volume through intensive promotional activities, mainly personal selling and advertising. Market-oriented organizations recognize that promotion is only one of the four basic tools that comprise the marketing mix. The tools are the marketing mix elements (the four P's): product, place (distribution), promotion, and price. 3. The important distinction is that market-oriented firms recognize that each of the four components of the marketing mix is of equal importance: salesoriented organizations view promotion as the primary means of achieving their goals.

4 V.

Describe the marketing process The Marketing Process A. B. Understanding the organizations mission and vision, and the role marketing plays. Setting marketing objectives C. Gathering, analyzing, and interpreting information about the organizations situation, including its strengths and weaknesses, as well as opportunities and threats in the environment. D. Developing marketing strategy by deciding exactly which wants and whose wants the organization will try to satisfy, and by developing appropriate marketing activities to satisfy the desires of selected target markets. E. F. G. Implementing the marketing strategy Designing performance measures Periodically evaluating marketing efforts and making changes if needed.

5 VI.

Describe several reasons for studying marketing Why Study Marketing? A. Marketing Plays an Important Role in Society Marketing provides a delivery system for a complex standard of living. The number of transactions needed everyday in order to feed, clothe, and shelter a population the size of the one in the United States is enormous and requires a sophisticated exchange mechanism. B. Marketing Is Important to Businesses

Marketing provides the following vital business activities 1.

10

Assessing the wants and satisfactions of present and potential customers

Chapter 1 An Overview of Marketing

2. 3. 4. 5. C.

Designing and managing product offerings Determining prices and pricing policies Developing distribution strategies Communicating with present and potential customers

Marketing Offers Outstanding Career Opportunities 1. 2. Between one-fourth and one-third of the entire civilian work force in the United States performs marketing activities. Marketing offers career opportunities in areas such as professional selling, marketing research, advertising, retail buying, distribution management, product management, product development, and wholesaling.

D.

Marketing Affects Your Life Every Day 1. 2. As consumers of goods and services, we participate in the marketing process every day. Almost 50 cents of every dollar consumers spend goes to pay marketing costs such as market research, product research and development, packaging, transportation, storage, advertising, and sales-force expenses.

Chapter 1 An Overview of Marketing 11

VOCABULARY PRACTICE Fill in the blank(s) with the appropriate term or phrase from the alphabetized list of chapter key terms. customer satisfaction customer value empowerment exchange marketing marketing concept 1 1. marketing orientation production orientation relationship marketing sales orientation societal marketing concept teamwork

Define the term "marketing" The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create ____________________ that satisfy individual and organizational objectives defines _____________________________.

2 2.

Describe four marketing management philosophies There are four alternative marketing management philosophies. The first focuses on the firm's internal capabilities rather than the needs and desires of the marketplace; this is the _____________________________. _____________________________, third best philosophy, interests of focuses its The which on second assumes that needs society philosophy buyers and has resist wants, is the purchasing is the the

nonessential items, so aggressive sales techniques should be used to sell more products. The customer and _____________________________. Finally, a firm that decides to focus on the long-term customers adopted _____________________________. 3. When a firm focuses on customer wants, integrates all firm activities to satisfy these wants, and achieves long-term goals by satisfying these wants legally and responsibly, the firm is using the _____________________________.

3 4.

Discuss the differences between sales and market orientations Marketers who offer products that perform beyond customer expectations, avoid unrealistic pricing, give consumers the facts and commit to after-sales support are in creasing _____________________________.

5.

When an organization focuses on meeting and exceeding the needs of customers' rather than selling products, the organization will likely achieve _____________________________.

12

Chapter 1 An Overview of Marketing

6.

A strategy of forging long-term partnerships with customers, becoming part of the customers organization and contribute to its success is called ___________________________.

7. When people collaborate their efforts to accomplish common objectives, they are practicing _____________________________. 8. Marketing-oriented firms which give their employees expanded authority to solve customer problems immediately are _____________________________ their workers. Check your answers to these questions before proceeding to the next section. TRUE/FALSE QUESTIONS Mark the statement T if it is true and F if it is false. 1 _____ _____ Define the term "marketing" 1. 2. A marketing exchange cannot take place unless each party in the exchange has something that the other party values. The process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational needs is management.

2 _____

Describe four marketing management philosophies 3. The owners of the Stayfast fasteners Company are pleased with their low unit costs and high production volumes. Salespeople are unnecessary because buyers are always waiting for new tires to come off the assembly line. Stayfast currently has a great sales orientation. The president of EOB Putting Devices does not find it necessary to conduct much marketing research because the telephone selling campaign has been such a successful marketing strategy. EOB has a marketing orientation.

_____

4.

5. The marketing manager for International Internet Inc proposes to senior management that the company create Internet kiosks to be given to poor, isolated groups around the world. She argues that although this will not likely be profitable anytime in the near future, it will provide needed access to information for these people and exemplify the companys long-term goals and societal marketing orientation. 3 _____ Discuss the differences between sales and marketing orientations 6. You are about to start manufacturing and selling ferret food. You have met with your board of directors and discussed consumer benefits and sacrifices regarding the purchase of your food. Knowing the ratio of benefits to sacrifices allows you to specify how much customer value you will achieve. As the new marketing major hired by Antiquated Approaches Company, you suggest the company could profit from repeat sales and referrals if you develop a strategy of forging long-term partnerships with existing customers. You are proposing the company take a better sales orientation.

7.

Chapter 1 An Overview of Marketing 13

4 _____ 5 ____

Describe the marketing process 8. The marketing mix variables are product, place, promotion, and price.

Describe reasons for studying marketing 9. The most important reason to study marketing is to make money.

Check your answers to these questions before proceeding to the next section.

14

Chapter 1 An Overview of Marketing

AGREE/DISAGREE QUESTIONS For the following statements, indicate reasons why you may agree and disagree with the statement. 1. The marketing orientation actually encompasses both the sales orientation and the production orientation. Reason(s) to agree:

Reason(s) to disagree:

2. Marketing is the job of everyone in a business organization, not just the marketing department. Reason(s) to agree:

Reason(s) to disagree:

3. Only students who are majoring in marketing should be required to take marketing courses. Reason(s) to agree:

Reason(s) to disagree: 4. The definition of marketing is really the same as the definition of management. Reason(s) to agree:

Reason(s) to disagree:

Chapter 1 An Overview of Marketing 15

MULTIPLE-CHOICE QUESTIONS Select the response that best answers the question, and write the corresponding letter in the space provided. 1 Define the term "marketing" 1. Which of the following is true about marketing? a. Marketing is a philosophy that stresses producer satisfaction. b. Marketing is a product. c. Marketing involves everyone in an organization. d. Marketing is used for products only. e. Marketing involves projects, profits, production, and distribution. Go-Go International wants to sell their products in a country that does not have an internationally accepted currency. One way Go-Go could overcome this problem would be to: a. insist the country join the World Trade Organization b. barter for a product from the country and then sell it in international markets. c. encourage the country to adopt the U.S. dollar as their currency. d. get the U.S. government to accept the countrys currency. e. organize assistance so the country can improve its international credibility. If you were in the marketing consulting business which of the following clients could you NOT serve? a. The Boston Museum of Science, which needs to determine what exhibits should it offer visitors b. The State of Mississippi, which needs to attract tourists c. Dr. Susan Scott, an orthopedic surgeon wishing to open a practice in your home town d. The World Gym, which needs to determine where to locate its next outlet for customers e. All of the above could be served by a marketing consultant You are concerned with managing the exchange between the Red Cross and its blood donors. Which of the following costs would you have to be concerned about to create the ideal exchange? a. The travel costs incurred by donors visiting the Red Cross blood donation sites. b. The personal energy and time expended by the donor c. Your opportunity costs lost by not engaging in some other activity d. All of the above are marketing costs that would be of concern to someone managing the exchange situation e. None of the above are costs of exchange situations _____

_____

2.

_____

3.

_____

4.

2 _____

Describe four marketing management philosophies 5. Florence Rock, the owner of Yesterday Products, Inc. is production-oriented. If you were in charge of her marketing operations, which of the following statements might you use as a guiding principle if you wish to meet Ms. Rock's demand? a. "I'm a customer and everyone is like me. I buy on price, therefore everyone does, as well." b. "We need to buy the fastest production equipment as possible to raise productivity and keep prices at the lowest possible level." c. "We produce the best widgits in the market place." d. All of the above would be consistent with Mr. Stone's demands. e. None of the above would be consistent, because all reflect a sales orientation. Peter's company does an excellent and efficient job of churning thousands of Nit-Pickers off the assembly line every day. One problem with this approach to
Chapter 1 An Overview of Marketing

_____
16

6.

marketing is the failure to consider whether Nit-Pickers also meet the needs of the marketplace. a. customer orientation b. sales orientation c. discount orientation d. marketing orientation e. production orientation

Chapter 1 An Overview of Marketing 17

_____

7.

Jacque Lewellyn's company markets gourmet syrups. Jack knows that buyers may consider the product nonessential, and he assumes that if he hires a team of aggressive, persuasive salespeople, buyers will buy more of the polish. Jacque has a: a. sales orientation b. production orientation c. promotion orientation d. marketing orientation e. customer orientation Beth has noticed the lack of specialty recycling centers in her community, although local neighborhood clubs have repeatedly asked the city to provide such centers. Beth has decided to become certified in waste disposal and hopes to open a battery and motor oil recycling center next year. She hopes to include the innovative service of home pickup and delivery of recyclables. This business philosophy supports a(n) orientation. a. production b. sales c. retail d. marketing e. enterprise The American Banking Company tells its salespeople to try to sell credit cards to everyone they meet or contact. In contrast, the Family Financial Company concentrates on credit designed for single parents. Family Financial is: a. missing out by not concentrating on the average customer b. a company that would state that they are in the business of selling insurance c. a selling-oriented company d. recognizing that different customer groups have different needs and wants e. aiming at a goal of profit through maximum sales volume

_____

8.

_____

9.

_____

10. Bob & Garys is a contemporary ice cream manufacturer that donates 10 percent of its earnings to the local United Way organization. Bob & Garys has which type of orientation? a. production b. sales c. promotion d. marketing e. societal marketing Discuss the differences between sales and market orientations 11. A sales orientation ___________, while a marketing orientation __________. a. achieves profit through customer satisfaction, achieves profit through maximum sales volume b. targets specific groups of people, targets everybody c. delivers superior customer value, focuses on selling goods and services d. has an outward focus, has an inward focus e. uses intensive promotion to maximize profits, uses coordinated customer focus Describe the marketing process 12. a. b. c. d. e. Which of the following is NOT a part of the marketing process? understanding the organizations mission developing performance appraisals for marketing personnel designing performance measures setting objectives determining target markets

3 _____

4 _____

18

Chapter 1 An Overview of Marketing

_____

13. The marketing manager for Oil of Olan, a skin care product, is working with an advertising agency to develop a new web site targeting teen-agers. Which of the following marketing mix variables best describes this activity? a. product b. price c. target market d. distribution e. promotion Describe several reasons for studying marketing 14. Jackie is a food science major at a state university and hopes to operate the family restaurant after graduation. Jackie has been advised to take a marketing course in the school of business as an elective, but she thinks this would be a waste of time. You are her friend and a marketing major. You advise that: a. marketing is not relevant for a business like a family restaurant b. Jackie declare a business minor because she needs a backup career c. more nutrition and gourmet cooking classes will be most useful for Jackie d. the main reason to take marketing is to teach Jackie how to advertise the restaurant e. marketing knowledge will help Jackie to understand how she can satisfy consumers' needs and wants 15. Paul owns a small laboratory that makes biotech products. His company is growing fast, and there are many things he does not understand about his customers. Should Paul take a marketing course? a. Yes, because marketing is synonymous with selling, and Paul will want to learn aggressive sales techniques to continue the company's growth b. No, because he can hire an advertising firm and will not need further knowledge of marketing c. No, because he has a high-tech business and will only be marketing to other tech people. d. Yes, because the concept of marketing will help Paul to better serve and satisfy his customers e. Yes, because marketing teaches businesses how to sell products that people don't need

5 _____

_____

Check your answers to these questions before proceeding to the next section. ESSAY QUESTIONS 1. The concept of exchange is crucial to the definition of marketing. What are the five conditions that must be satisfied for an exchange to take place? Can marketing occur even if an exchange does not take place?

Chapter 1 An Overview of Marketing 19

2.

Assume you are a marketing manager. Describe the marketing strategy for each of the four orientations of marketing management philosophy.

3.

Name and describe five key areas in which a market orientation differs from a sales orientation.

4.

Briefly define the marketing process activities.

5.

Your roommate sees you spending extra time studying this book and says, why all the effort? Marketing is just sales and advertising. How do you respond?

20

Chapter 1 An Overview of Marketing

Internet Exercise Visit your college or universitys web site. Go to the home page and look at the choices, read some of the introductory information targeted for prospective students. Using the production, sales, marketing, and societal marketing orientations discussed in Chapter 1, evaluate your universitys orientation. Use examples from the web site to justify your opinion.

CHAPTER NOTES Use this space to record notes on the topics you are having the most trouble understanding.

WORK SPACE ANSWERS TO THE END-OF-CHAPTER DISCUSSION AND WRITING QUESTIONS Use this space to work on the questions at the end of the chapter.

Chapter 1 An Overview of Marketing 21

ANSWERS TO THE END-OF-CHAPTER CASE Use this space to work on the questions at the end of the chapter.

22

Chapter 1 An Overview of Marketing