Chapter 1 Customer-Driven Strategic Marketing TEACHING RESOURCES QUICK REFERENCE GUIDE Resource Location Purpose and Perspective IRM, p. 1 Lecture Outline IRM, p. 2 Discussion Starters IRM, p. 9 Class Exercise IRM, p. 12 Chapter Quiz IRM, p. 14 Answers to Issues for Discussion and Review IRM, p. 15 Answers to Marketing Applications IRM, p. 18 Answers to Internet Exercise IRM, p.20 Answers to Developing Your Marketing Plan IRM, p. 21 Comments on Video Case 1 IRM, p. 22 PowerPoint Slides Instructor’s website Note: Additional resources may be found on the accompanying student and instructor websites at www.cengagebrain.com. PURPOSE AND PERSPECTIVE The purpose of this chapter is to give students an overview of customer-driven strategic marketing and provide a general framework for studying the field of marketing. First, the chapter presents a definition of marketing and explores each element of the definition in detail. This exploration defines key marketing concepts including customers, target market, the marketing mix, the exchange process, value-driven marketing, relationship marketing, and the marketing environment. Since an understanding of the marketing concept and market orientation is fundamental, several pages have been devoted to this area, including its basic components, evolution, and implementation. The chapter also takes a look at the important concept of managing customer relationships, which customers are demanding more than ever. It then explores the process of marketing management, which includes planning, organizing, implementing, and controlling marketing activities to encourage marketing exchanges. Finally, it examines the importance of marketing in our increasingly global society. LECTURE OUTLINE I. Defining Marketing A. Marketing is the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers and to develop and maintain favorable relationships with stakeholders in a dynamic environment. B. This definition is consistent with that of the American Marketing Association which defines marketing as “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.” C. Marketing Focuses on Customers 1. As the purchasers of the products that organizations develop, price, distribute, and promote, customers are the focal point of all marketing activities. 2. Organizations have to define their products not as what the companies make or produce but as what they do to satisfy customers. 3. The essence of marketing is to develop satisfying exchanges from which both customers and marketers benefit. a. The customer expects to gain a reward or benefit greater than the costs incurred in a marketing transaction. b. The marketer expects to gain something of value in return, generally the price charged for the product. 4. Organizations generally focus their marketing efforts on a specific group of customers, called a target market. a. Marketing managers may define a target market as a vast number of people or a relatively small group. D. Marketing Deals with Products, Distribution, Promotion, and Price 1. Marketing is more than simply advertising or selling a product; it involves developing and managing a product that will satisfy customer needs. 2. Marketing focuses on making the product available in the right place and at a price acceptable to buyers, and communicating information to help customers determine if the product will satisfy their needs. 3. Marketers refer to these activities—product, distribution, promotion, and pricing—as the marketing mix because they decide what type of each element to use and in what amounts. a. A primary goal of a marketing manager is to create and maintain the right mix of these elements to satisfy customers’ needs for a general product type. 4. Marketing managers strive to develop a marketing mix that matches the needs of customers in the target market. a. Marketing managers must constantly monitor the competition and adapt their product, pricing, promotion, and distribution decisions to create long-term success. 5. Before marketers can develop a marketing mix, they must collect in-depth, up-to-date information about customer needs. a. Such information might include data about the age, income, ethnicity, gender, and educational level of people in the target market. E. The Product Variable 1. The product variable of the marketing mix deals with researching customers’ needs and wants and designing a product that satisfies them. 2. A product can be a good, a service, or an idea. a. Good—a physical entity that customers can touch b. Service—the application of human and mechanical efforts to people or objects to provide intangible benefits to customers c. Idea—concept, philosophy, image, or issue 3. The product variable also involves creating or modifying brand names and packaging and may include decisions regarding warranty and repair services. 4. Product variable decisions and activities are important because they are directly involved with creating products that meet customers’ needs and wants. 5. To maintain an assortment of products that helps an organization achieve its goals, marketers must develop new products, modify existing ones, and eliminate those that no longer satisfy enough buyers or that yield unacceptable profits. F. The Distribution Variable 1. In dealing with the distribution variable, a marketing manager makes products available in the quantities desired to as many target-market customers as possible, keeping total inventory, transportation, and storage costs as low as possible. 2. A marketing manager may select and motivate intermediaries, establish and maintain inventory control procedures, and develop and manage transportation and storage. 3. The advent of the Internet and electronic commerce has dramatically influenced the distribution variable. G. The Promotion Variable 1. The promotion variable relates to activities used to inform individuals or groups about an organization and its products. 2. Promotion aim to increase public awareness of the organization and of new or existing products. 3. Promotional activities also can educate customers about product features or urge people to take a particular stance on a political or social issue. 4. Promotion can help to sustain interest in established products that have been available for decades. 5. Many companies are using the Internet to communicate information about themselves and their products. H. The Price Variable 1. The price variable relates to decisions and actions associated with establishing pricing objectives and policies and determining product prices. 2. Price is a critical component of the marketing mix because customers are concerned about the value obtained in an exchange. 3. Price is often used as a competitive tool, and intense price competition sometimes leads to price wars. 4. The marketing mix variables are often viewed as controllable because they can be modified. a. However, economic conditions, competitive structure, and government regulations may prevent a manager from adjusting prices frequently or significantly. I. Marketing Creates Value 1. Value is a customer’s subjective assessment of benefits relative to costs in determining the worth of a product (customer value = customer benefits – customer costs). a. Customer benefits include anything a buyer receives in an exchange. b. Customer costs include anything a buyer must give up to obtain the benefits the product provides. (1) The most obvious cost is the monetary price of the product, but nonmonetary costs can be equally important in a customer’s determination of value. (2) Two nonmonetary costs are the time and effort customers expend to find and purchase desired products. 2. The process people use to determine value is not highly scientific. 3. In developing marketing activities, it is important to recognize that customers receive benefits based on their experiences. 4. The marketing mix can be used to enhance perceptions of value. 5. A product that demonstrates value usually has a feature or an enhancement that provides benefits. J. Marketing Builds Relationships with Customers and Other Stakeholders 1. Individuals and organizations engage in marketing to facilitate exchanges, the provision or transfer of goods, services, or ideas in return for something of value. 2. Any product (good, service, or even idea) may be involved in a marketing exchange. 3. For an exchange to take place, four conditions must exist: a. Two or more individuals, groups, or organizations must participate, and each must possess something of value desired by the other party. b. The exchange should provide a benefit or satisfaction to both parties involved in the transaction. c. Each party must have confidence in the promise of the “something of value” held by the other. d. To build trust, the parties to the exchange must meet expectations. 4. Figure 1.2 depicts the exchange process. 5. An exchange will not necessarily take place just because these conditions exist; marketing activities can occur even without an actual transaction or sale. 6. Marketing activities should attempt to create and maintain satisfying exchange relationships. 7. To maintain an exchange relationship, buyers must be satisfied with the good, service, or idea obtained, and sellers must be satisfied with the financial reward or something else of value received. 8. Marketers are also concerned with building relationships with relevant stakeholders. a. Stakeholders include those constituents who have a “stake,” or claim, in some aspect of a company’s products, operations, markets, industry, and outcomes; these may include customers, employees, investors and shareholders, suppliers, governments, communities, and many others. K. Marketing Occurs in a Dynamic Environment 1. The marketing environment, which includes competitive, economic, political, legal, regulatory, technological, and sociocultural forces, surrounds the customer and affects the marketing mix. a. The effects of these forces on buyers and sellers can be dramatic and difficult to predict. 2. The forces of the marketing environment affect a marketers’ ability to facilitate value-driven marketing exchanges in three general ways: a. They influence customers by affecting their lifestyles, standards of living, and preferences and needs for products. b. Marketing environment forces help to determine whether and how a marketing manager can perform certain marketing activities. c. Environmental forces may affect a marketing manager’s decisions and actions by influencing buyers’ reactions to the firm’s marketing mix. 3. Marketing environment forces can fluctuate quickly and dramatically. 4. Changes in the marketing environment produce uncertainty for marketers and at times hurt marketing efforts, but they also create opportunities. 5. Marketers who are alert to changes in environmental forces not only can adjust to and influence these changes but can also capitalize on the opportunities such changes provide. 6. Marketing mix variables—product, price, promotion, and distribution—are factors over which an organization has control; the forces of the environment, however, are subject to far less control. II. Understanding the Marketing Concept A. According to the marketing concept, an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals. B. Customer satisfaction is the major focus of the marketing concept. C. To implement the marketing concept, an organization focuses on customer analysis, competitor analysis, and integration of the firm’s resources to provide customer value and satisfaction, as well as to generate long-term profits. 1. The firm also must continue to alter, adapt, and develop products to keep pace with customers’ changing desires and preferences. D. The marketing concept emphasizes that marketing begins and ends with customers. 1. Research has found a positive association between customer satisfaction and shareholder value, and high levels of customer satisfaction also tend to attract and retain high-quality employees and managers. E. The marketing concept is not a second definition of marketing. 1. It is a management philosophy guiding an organization’s overall activities. F. The marketing concept is also not a philanthropic philosophy aimed at helping customers at the expense of the organization. 1. A firm that adopts the marketing concept must satisfy not only its customers’ objectives but also its own, or it will not stay in business long. G. It is important for marketers to consider not only their current buyers’ needs but also the long-term needs of society. 1. Striving to satisfy customers’ desires by sacrificing society’s long-term welfare is unacceptable. H. Evolution of the Marketing Concept 1. The marketing concept may seem like an obvious approach to running a business. 2. However, businesspeople have not always believed that the best way to make sales and profits is to satisfy customers. I. The Production Orientation 1. During the second half of the nineteenth century, the Industrial Revolution was in full swing in the United States. 2. With new technology and new ways of using labor, products poured into the marketplace, where demand for manufactured goods was strong. J. The Sales Orientation 1. During the first half of the twentieth century, competition increased and businesses realized that they would have to focus more on selling products to buyers. 2. Businesses viewed sales as the major means of increasing profits, and this period came to have a sales orientation. 3. Businesspeople believed that the most important marketing activities were personal selling, advertising, and distribution. K. The Market Orientation 1. By the early 1950s, some businesspeople began to recognize that they must first determine what customers want and then produce those products rather than making the products first and then trying to persuade customers that they need them. 2. A market orientation requires the “organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organization-wide responsiveness to it.” 3. Today, businesses want to satisfy customers and build meaningful, long-term buyer-seller relationships. L. Implementing the Marketing Concept 1. To implement the marketing concept, a market-oriented organization must accept some general conditions and recognize and deal with several problems. 2. Management must establish an information system to discover customers’ real needs and then use the information to create satisfying products. 3. An information system is usually expensive. 4. To satisfy customers’ objectives as well as its own, a company also must coordinate all its activities. a. This may require restructuring its internal operations, including production, marketing, and other business functions. b. This requires the firm to adapt to a changing external environment and predict major changes. III. Customer Relationship Management A. Customer relationship management (CRM) focuses on using information about customers to create marketing strategies that develop and sustain desirable customer relationships. B. Achieving the full profit potential of each customer relationship should be the fundamental goal of every marketing strategy. 1. At the most basic level, profits can be obtained through relationships in the following ways: a. By acquiring new customers b. By enhancing the profitability of existing customers c. By extending the duration of customer relationships 2. Implementing the marketing concept means optimizing the exchange relationship, otherwise known as the relationship between a company’s financial investment in customer relationships and the return generated by customers’ loyalty and retention. C. The term relationship marketing refers to “long-term, mutually beneficial arrangements in which both the buyer and seller focus on value enhancement through the creation of more satisfying exchanges.” 1. It continually deepens the buyer’s trust in the company, and as the customer’s confidence grows, this, in turn increases the firm’s understanding of the customer’s needs. 2. It strives to build satisfying exchange relationships between buyers and sellers by gathering useful data at all customer contact points and analyzing that data to better understand customers’ needs, desires, and habits. 3. It focuses on building and using databases and leveraging technologies to identify strategies and methods that will maximize the lifetime value of each desirable customer to the company. 4. To build the long-term customer relationships, marketers are increasingly turning to marketing research and information technology. 5. By increasing customer value over time, organizations try to retain and increase long-term profitability through customer loyalty, which results from increasing customer value. 6. Through the use of Internet-based marketing strategies (e-marketing), companies can personalize customer relationships on a nearly one-on-one basis. 7. Customer relationship management provides a strategic bridge between information technology and marketing strategies aimed at long-term relationships. IV. The Importance of Marketing in Our Global Economy A. Marketing Costs Consume a Sizable Portion of Buyers’ Dollars 1. Marketing activities are necessary to provide satisfying goods and services. a. These activities cost money. B. Marketing Is Used in Nonprofit Organizations 1. Marketing is also important in organizations working to achieve goals other than ordinary business objectives such as profit. 2. Government agencies at the federal, state, and local levels engage in marketing activities to fulfill missions and goals. 3. In the private sector, nonprofit organizations also employ marketing activities to create, price, distribute, and promote programs that benefit particular segments of society. C. Marketing Is Important to Businesses and the Economy 1. Businesses must engage in marketing to survive and grow, and marketing activities are needed to reach customers and provide products. a. Financial resources generated from sales are necessary for the operations of a firm and to provide financial returns to investors. 2. Marketing activities help produce the profits that are essential to the survival of individual businesses. 3. Marketing helps create a successful economy and contribute to the well-being of society. D. Marketing Fuels Our Global Economy 1. Marketing is necessary to advance a global economy. 2. Advances in technology, falling political and economic barriers, and the universal desire for a higher standard of living, have made marketing across national borders commonplace while stimulating global economic growth. E. Marketing Knowledge Enhances Consumer Awareness 1. Marketing activities help improve the quality of customers’ lives. 2. Studying marketing allows us to understand the importance of marketing to customers, organizations, and our economy. F. Marketing Connects People through Technology 1. Technology, especially computers and telecommunications, helps marketers to understand and satisfy more customers than ever before. 2. The Internet allows companies to provide tremendous amounts of information about their products to consumers and to interact with them through e-mails and websites. G. Socially Responsible Marketing: Promoting the Welfare of Customers and Stakeholders 1. The success of our economic system depends on marketers whose values promote trust and cooperative relationships in which customers are treated with respect. 2. The public is increasingly insisting that social responsibility and ethical concerns be considered in planning and implementing marketing activities. 3. In the area of the natural environment, companies are increasingly embracing the notion of green marketing, which is a strategic process involving stakeholder assessment to create meaningful long-term relationships with customers while maintaining, supporting, and enhancing the natural environment. 4. By addressing concerns about the impact of marketing on society, a firm can contribute to society through socially responsible activities as well as increase its financial performance. H. Marketing Offers Many Exciting Career Prospects 1. From 25 to 33 percent of all civilian workers in the United States perform marketing activities. 2. Marketing knowledge and skills are valuable assets no matter what the field. DISCUSSION STARTERS Discussion Starter 1: Customer Service ASK: How many of you have ever experienced rejection or disappointment in a customer service experience? This question can lead to a discussion on good and bad customer service. Play the classic 37 second Soup Nazi clip from Seinfeld episode. (http://www.youtube.com/watch?v=WZ3AOmZ2fps) This video clip is an outstanding complement to the class exercise described below for chapter 1 on great and poor customer service experiences. This clip could be used before or after that class exercise, or in place of it. Transition into a discussion about the marketing concept, a firm’s market orientation, and/or customer relationship management following the chapter outline. Discussion Starter 2: The Marketing Mix (This discussion starter refers to the Emerging Trends in Marketing box: Netflix Alienates Its Target Market, located in the text.) ASK: Why is it important for marketers to consider their target market before changing parts of the marketing mix like price and product? If a firm is market oriented, it will want to meet the needs of its target market. Although customers do not like price increases, they are more likely to accept gradual rate changes. Netflix decided to raise prices rapidly—nearly doubling them without warning customers. Because the higher prices changed customers’ perceptions of the value of Netflix’s services, the company lost over 805,000 subscribers after their rate hikes. Planning to break the company into Netflix and Qwikster also changed the product element. Netflix was successful because customers enjoyed the integration of mailed discs and digital streaming. The decision to split into two separate companies created two separate products, which was another unwanted change for customers. Netflix eventually decided not to split the company, although it kept the higher rates. Netflix is still working to rebuild its relationships with customers because of its changes to the marketing mix. In addition to dropping their subscriptions, the company’s unsatisfied customers posted thousands of comments on the Netflix blog. It was clear that Netflix did not anticipate the strong backlash from its customers. ASK: What could Netflix have done differently to keep customers satisfied? Will customers ever approve of price increases? Students should have a lot of ideas to answer this question. As consumers, they probably disapprove of the rate increases and how Netflix interacted with its customers. However, it is important for students to begin to think like business people and decide how they would have handled changing the marketing mix. Netflix obviously felt that the rate hikes were necessary for the success of the company, and it was willing to risk strong customer reactions. Students may suggest that Netflix should have raised prices more slowly and completed more consumer testing of the Netflix/Qwikster proposition. They may also argue that the company should have revealed both decisions at once and allowed customers to opt in to new services. Discussion Starter 3: The Exchange ASK: Why is the exchange at the core of all marketing transactions? Why is it crucial to think marketing is applicable to exchanges beyond buyers and sellers? Students should understand that marketing is about the exchange of values between two parties to arrive at mutually beneficial outcomes. If students are simply focused on buyers and sellers they will not be able to conceive of marketing outside a sales transaction. The following examples may help students broaden their understanding: • Volunteer organizations—volunteers exchange the value associated with their time to gain the value of assisting their community or supporting a meaningful cause. The organization exchanges the opportunity to demonstrate support for a community or cause for volunteers’ time. • Non-monetary transactions—during the holiday season, many organizations trade a discount coupon toward the purchase of new goods for used goods. Others may trade admission to an event for canned foods or other non-monetary contributions. In these examples marketing extends beyond buyers and sellers to others who engage in a value exchange. As these examples illustrate, marketing applies to non-profit entities as well as for-profit entities. Transition the discussion into the next chapter sections about the marketing environment and the marketing concept. Discussion Starter 4: Socially Responsible Marketing ASK: How do you feel marketing benefits society? Be prepared for students to discuss the negative consequences of marketing activities, such as negative self-image among teen girls and consumption beyond fiscal responsibility (unnecessary wants). Steer the conversation to positive marketing attributes, using the text outline to guide this discussion. Remind students that marketing is a social process. Marketers must create value for all stakeholders. Items and issues of importance to consumer and society are also significant to marketers. For example, environmental concerns are playing an increasingly important role in consumer choices. Marketers may take the opportunity to provide consumers environmentally-friendly product alternatives as well as educate consumers about the environmental impacts. By constantly seeking to provide consumers the best possible product alternatives, marketers drive continuous product innovation. Special Note: The text discusses that socially responsible marketing can promote the welfare of customers and stakeholders. Transition the discussion into the next chapter sections about the marketing environment and the marketing concept. CLASS EXERCISES Class Exercise 1: Great and poor customer service experiences (from your students’ perspectives) The marketing concept, a firm’s market orientation, and customer relationship management all revolve around putting the customer at the center of strategic marketing. The illustrations on pages 1 and 4 depict this customer-centric viewpoint. With the customer at the center, the heart of strategic marketing revolves around providing outstanding customer service. Every beginning student in marketing will have experience with both superior and inferior customer service. Ask each student to take 5-10 minutes to write about two recent customer service experiences, one highlighting excellent customer service and one highlighting poor customer service. To conclude this exercise, the instructor may want to ask for volunteers to read their tales of customer service Joy (positive) and tales of Woe (negative). If there is no time, simply ask the students to hand them in. For the second option, the instructor may want to tabulate the information before the next class in order to better discuss the results with students. Instructors may want to read a selection of the particularly vivid experiences. Addendum: To underscore the logic behind the power of negative customer testimonials, you can introduce the Rule of 66. On average, when a customer has a particularly bad experience, they will tell on average 11 people, and those 11 people will tell an additional 5 people each. Thus 11 time 5 equals 55 and plus those original 11 people who were told the original bad experience make 66 people. For more information on the Rule of 66, go to http://therebelnetworker.com/negative-word-of-mouth-is-it-now-exponentia. Class Exercise 2: Taste Test Conduct a blind taste test using Coke, Diet Coke, Coke Zero, and Mexican Coke. Disguise the brands by pouring the beverages into unmarked cups, and have all students guess which is which. Keep track of everyone’s guesses and then report back the results. Special note: Some students will not be able to accurately distinguish between the soft drinks. This underscores the importance of branding and promotion, in which image can trump taste. Class Exercise 3: Bottled Water In 2010, bottled water consumption within the U.S. was around 28 gallons per person. As a beverage category, bottled water represents $60 billion in global annual sales. This beverage category has grown at an impressive rate. The success of this product represents a success for marketing. In this exercise we will examine the reasons for its success. 1. Describe the target market for bottled water. How does bottled water create value for target market consumers? 2. Examine the marketing mix elements. Discuss the product, distribution, price, and promotion for this product category. How did each element contribute to the success of this product category? 3. Bottled water has come under attack from environmental groups for the amount of waste created by the bottles. How do you feel this concern about packaging waste will impact sales? How could the marketing mix elements be used to address this concern? Class Exercise 4: The Target Market is You This group exercise examines the vast array of products for which college students represent the primary target market. Step 1: Brainstorm with the group a list of products that specifically target college students. Step 2: Next to each product list any other applicable target markets. Step 3: Evaluate each product and discuss whether college students will continue to use this product/service after college. Step 4: Choose one product/service and define its marketing mix. CHAPTER QUIZ 1. Coca-Cola is aiming its Diet Coke Plus (with vitamins and minerals) at health-conscious customers. These health-conscious customers represent Coke’s a. audience. b. sales alternative. c. business group. d. target market. e. focus group. 2. Customer relationship management (CRM) focuses on using __________ about customers to create marketing strategies that develop and sustain desirable customer relationships. a. internal communication b. information c. purchasing power insights d. marketing mix knowledge e. implementation knowledge 3. Marketers use the term __________ to describe establishing long-term, mutually satisfying buyer-seller relationships. a. relationship marketing b. customer service c. marketing management d. exchange e. utility 4. Developing the internal structure of a firm’s marketing unit relates to which of the following marketing management activities? a. Marketing control b. Implementation c. Organizing d. Planning e. Managing Answers to Chapter Quiz: 1. d; 2. b; 3. a; 4. c. ANSWERS TO ISSUES FOR DISCUSSION AND REVIEW 1. What is marketing? How did you define the term before you read this chapter? The text defines marketing as the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers in a dynamic environment. The second part of this question can be used to stimulate class discussion about how the average person views marketing. 2. What is the focus of all marketing activities? Why? Customers are the focal point of all marketing activities because they are the purchasers of the products which organizations develop, price, distribute, and promote. Without customers for its products, a firm would quickly fail. 3. What are the four variables of the marketing mix? Why are these elements known as variables? The marketing mix is the combination of activities that are planned, organized, implemented, and controlled to meet the needs of customers within the target market. These activities are product, pricing, distribution, and promotion and price. They are called variables because marketing managers decide what type of each element to use and to what degree. 4. What is value? How can marketers use the marketing mix to enhance the perception of value? Value is a customer’s subjective assessment of benefits relative to costs in determining the worth of a product. Examples of ways marketers can modify their marketing mixes to enhance perceptions of value include offering product features or enhancements that provide desirable consumer benefits, using promotion to create positive images or prestigious characteristics that consumers consider in value assessment, pricing products according to how consumers use them, and offering convenient distribution outlets. 5. What conditions must exist before a marketing exchange can occur? Describe a recent exchange in which you participated. For an exchange to take place, the following four conditions must exist: • Two or more individuals, groups, or organizations must participate, and each must possess something of value that the other party desires. • The exchange should provide a benefit or satisfaction to both parties involved in the transaction. • Each party must have confidence in the promise of the “something of value” held by the other. • Both parties to the exchange must meet expectations. The second part of this exercise can be used to stimulate class discussion about exchanges based on students’ experiences. 6. What are the forces in the marketing environment? How much control does a marketing manager have over these forces? The marketing environment, which involves uncontrollable factors that exist outside of the marketing mix, includes competitive, economic, political, legal and regulatory, technological, and socio-cultural forces. These forces can have a swift and strong effect on an organization, but marketers have little control over them. Marketers must be aware of environmental forces, adapt to them, and capitalize on the opportunities they provide. 7. Discuss the basic elements of the marketing concept. Which businesses in your area use this philosophy? Explain why. The marketing concept is an organizational philosophy that states that an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allow the organization to achieve its goals. The major focus is customer satisfaction. The answers to the other parts of this question are based on local examples. 8. How can an organization implement the marketing concept? To implement the marketing concept, a marketing organization must first establish an information system to discover customers’ real needs and then use the information to create satisfying products. The organization must also coordinate all its activities. 9. What is customer relationship management? Why is it so important to “manage” this relationship? Customer relationship management focuses on using information about customers to create marketing strategies which develop and sustain desirable customer relationships. “Managing” customer relationships is important to marketers because it can foster customer loyalty and thereby increase long-term profitability. A loyal lifelong customer can be worth a considerable sum of money, so the loss of such customers can result in lower profits. 10. Why is marketing important in our society? Why should you study marketing? Marketing is important in our society because it provides employment for many people and helps sell products that address stakeholder needs. This, in turn, generates profits essential to the survival of individual businesses as well as to the health and ultimate survival of the global economy. Many organizations—including nonbusiness organizations like governments and NGOs—use marketing activities. The study of marketing is important because marketing costs consume a sizable portion of buyers’ dollars, and knowledge about how this money is used helps consumers understand product costs. By becoming informed about marketing activities, students can one day become good marketers themselves, working effectively and efficiently to create products that satisfy needs and provide them to the stakeholders who need them. The study of marketing activities also enables consumers to weigh the costs and benefits of marketing activities and to evaluate laws, regulations, and industry guidelines intended to stop unfair, misleading, and unethical marketing practices. ANSWERS TO MARKETING APPLICATIONS 1. Identify several businesses in your area that have not adopted the marketing concept. What characteristics of these organizations indicate nonacceptance of the marketing concept? Student answers will vary, but they should focus on how the business does not focus on the needs of customers. The businesses will most likely have sales orientation focused on advertising or personal selling. 2. Identify possible target markets for the following products: a. Kellogg’s Corn Flakes b. Wilson tennis rackets c. Disney World d. Diet Pepsi Student responses will vary, but they should be able to support their answers. Potential answers include: a. Kellogg’s Corn Flakes—children or college students b. Wilson tennis rackets—athletes or active seniors c. Disney World—families with young children (parents are the buyers but children contribute to the decision-making process), families trying to organize an event like a reunion or anniversary party, honeymooners d. Diet Pepsi—people concerned about their weight such as athletes or dieters 3. Discuss the variables of the marketing mix (product, price, promotion, and distribution) as they might relate to each of the following: Student responses will vary, but they should be able to support their answers. Students could use a table like the one below as they answer the question. Potential answers include: Product Price Promotion Distribution A trucking company The service of shipping Competitive with other shipping options including air freight Business to business Locations nationwide A men’s clothing store Clothes; customer service Value (is the product worth the price?) Directly to consumers Location and proximity to shopping areas; online; catalog A skating rink Skating experience; rentals Consider the needs of target market Directly to consumers Location in city; customer service A campus bookstore Books; supplies; clothing Competitive with online and used prices On campus; targeted to students and staff In-store; Alternative pick-up methods 4. There are seemingly hundreds of different cell phones available on the market today. How do consumers choose? The answer is simple: consumer value. Compare the value of an Apple iPhone and a Samsung Galaxy smartphone. Begin by identifying the benefits and costs that you consider when evaluating cell phones— factors such as ease of texting, overall look and feel, or purchasing price. Assign a weighting coefficient to each factor which reflects its importance to you. You could use 0-5, for example, with 0 meaning no importance whatsoever and 5 meaning absolutely important. Using the equation Value=Benefits-Costs, calculate the value for the iPhone and the Samsung Galaxy. Do these results match actual cell phone sales for the two products? Students can make a table such as the one below to compare the two products. They can use +/- signs to indicate where each characteristic is a benefit or a cost. Ease of use (+) Look and feel (+) Total Benefits Price (-) Total Costs Total Value Importance of factor x4 x3 x2 iPhone 4 5 (4x4) + (5x3) = 31 5 (most expensive) 5x2 = 10 31-10 = 21 Galaxy 4 3 (4x4) + (3x3) = 25 4 4x2 = 8 25-8 = 17 Sales numbers for August 2012 were: • Apple iPhones—85 million • Samsung Galaxy—3.575 million (includes the Galaxy S II Epic 4G Touch and the original Galaxy Epic 4G) Because students will choose different factors and rate each one differently, it is important for them to discuss their ratings. If some students rate the Galaxy as a better value, ask students to consider the role of brand reputation and “coolness,” which can sometimes override objective value assessments. 5. Develop your analytical and communication skills using the Role-Play Exercises Online at www.cengagebrain.com. Students can visit the website and develop their analytical and communication skills. ANSWERS TO INTERNET EXERCISE The American Marketing Association The American Marketing Association (AMA) is the marketing discipline’s primary professional organization. In addition to sponsoring academic research, publishing marketing literature, and organizing meetings of local businesspeople with student members, it helps individual members to find employment in member firms. Visit the AMA website at www.marketingpower.com. a. What type of information is available on the AMA website to assist students in planning their careers and finding jobs? According to the AMA website, AMA provides collegiate members with an access to all member-only content on MarketingPower.com, including the AMA College 2 Career Resource Center that provides students and young professionals with the resources (webcasts, podcasts, articles, whitepapers, virtual networking etc.) that are critical in making a successful transition from life as a college student to life as a productive marketing professional. In addition, their career management resources assist marketing graduates entering the workforce or searching for internships. Apart from this one can find AMA’s popular job board, career advice in their “Ask the Expert” series, and skill boosting activities at their Marketing Boot Camps. b. If you joined a student chapter of the AMA, what benefits would you receive? According to the AMA website, a student chapter will help students gain valuable experience managing finances, people, projects and deadlines—perfect leadership skills to highlight on their resume. Collegiate chapters focus on professional development, community service and fundraising as well hosting activities like Marketing Week, with marketing speakers, etiquette dinners, open houses and more. c. What marketing-mix variable does the AMA’s Internet marketing effort exemplify? The AMA’s internet marketing focuses on promotion. It provides a list of member benefits and assists potential members in finding local chapters and other resources. The other parts of the marketing mix (product, price, and distribution) are more difficult to find on the site. ANSWERS TO DEVELOPING YOUR MARKETING PLAN The information obtained from the following questions should assist you in developing various aspects of your marketing plan. Develop your marketing plan online using the Interactive Marketing Plan at www.cengagebrain.com. 1. Discuss how the marketing concept contributes to company’s long-term success. The marketing concept is a managerial philosophy that states that an organization should try to satisfy customers’ needs through a coordinated set of activities that also allows the organization to achieve its goals. The marketing concept contributes to a company’s long term success in several ways. First, the marketing concept realizes that for any exchange to be sustainable, both parties (i.e. buyers and sellers) must have their needs met. Second, the marketing concept requires organizations to generate market intelligence pertaining to current and future customer needs. Understanding future customer needs is essential to sustaining long-term success. Finally, businesses want to satisfy customers and build meaningful long-term buyer-seller relationships. Doing so helps a firm to boost its financial value, and the marketing concept is the proven way to achieve this result. 2. Describe the level of market orientation that currently exists in your company. How will a market orientation contribute to the success of you new product? Students must first identify a company (either their employer or another company with which they are familiar), then describe the level of market orientation that currently exists within this company, and finally explain how a market orientation will contribute to the success of the new product. 3. What benefits will your product provide to the customer? How will these benefits play a role in determining the customer value of your product? Students must explain what specific benefits their new product will provide to customers. As an example, if their new product is a soft drink, the soft drink would have to provide great taste that is different from other drinks on the market, attractive or innovative packaging, and probably a catchy or interesting name in order to attract customers. COMMENTS ON VIDEO CASE 1.1: CRUISING TO SUCCESS: THE TALE OF NEW BELGIUM BREWING Summary This case illustrates how New Belgium Brewing’s market orientation has helped the company grow from a small business to America’s third largest brewery. Since its founding, New Belgium has emphasized the importance of meeting the needs of its many stakeholder groups, and that philosophy continues to guide the company’s marketing activities. While students may be familiar with the company’s corporate social responsibility activities, it is important for them to realize that those activities are part of the company’s marketing strategy and thus its profitability. Questions for Discussion 1. How has New Belgium implemented the marketing concept? According to the marketing concept, an organization should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allow the organization to achieve its goals. New Belgium considers its customers and other stakeholders at every level of its marketing activities, which has led to the company’s popularity and success. Students may cite examples related to each part of the marketing mix, so make sure they focus on how the marketing mix contributes to customer satisfaction and the marketing concept. To ensure customer satisfaction, New Belgium focuses on creating quality products. The company engages in market research when creating its beers. It continually creates new products to keep customers engaged and excited about the brand. Even the company’s focus on sustainability reflects what is important to their customers. However, New Belgium’s corporate social responsibility activities are not just philanthropic—they are strategic. Because New Belgium beers provide more value, customers are willing to pay premium prices, which leads to higher profits for the company and its impressive 15 percent growth rate. 2. What has Kim Jordan done to create success at New Belgium? Kim Jordan created a unique marketing mix for New Belgium. Under her direction, the company crafted quality beers (product), placed them on shelves and in bars (distribution), created a unique indie brand (promotion), and increased their profit by providing more value and charging a higher price. In addition, Jordan’s vision for New Belgium’s corporate culture creates value for all stakeholder groups, including employees, customers, the environment, and the community and fosters loyalty to the New Belgium brand. 3. How does New Belgium’s focus on sustainability as a core value contribute to its corporate culture and success? Sustainability has been a major part of the company’s vision since its founding. For this reason, NBB strives to incorporate environmental responsibility directly into its business strategies. Sustainability is important to several of New Belgium’s stakeholder groups, which increases customer and employee loyalty. Because of this, the company’s environmental philosophy creates a competitive advantage. Environmentally conscious consumers are more likely to do business with a company that incorporates green practices into its business activities. Sustainable practices also increase consumers’ perceptions of the value of New Belgium’s prices, which results in higher prices and better financial returns for the company. Solution Manual for Foundations of Marketing William M. Pride, O. C. Ferrell 9781305361867, 9781305405769, 9780357033760
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