Marketing and Customer

1. Define marketing and discuss how it is more than just “telling and selling.”

Marketing is managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction. Hence, marketing is defined as the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Today, marketing must be understood not in the old sense of making a sale—“telling and selling”—but in the new sense of satisfying customer needs. If the marketer understands consumer needs; develop products and services that provide superior customer value; and prices, distributes, and promotes them effectively, this goal will be achieved easily.

2. Marketing has been criticized because it “makes people buy things they don’t really need.” Refute or support this accusation.

The most basic concept underlying marketing is that of human needs. Human needs are states of felt deprivation. They include basic physical needs for food, clothing, warmth, and safety; social needs for belonging and affection; and individual needs for knowledge and self-expression. These needs were not created by marketers; they are a basic part of the human makeup. Wants are the form human needs take as they are shaped by culture and individual personality. Wants are shaped by one’s society and are described in terms of objects that will satisfy needs. Although marketers do not create customers’ needs, they may influence their wants.

3. Discuss the two important questions the marketing manager must answer to design a winning marketing strategy. How does the manager go about answering these questions

To design a customer-driven marketing strategy, the marketing manager must answer two important questions: What customers will we serve (what’s our target market)? and How can we serve these customers best (what’s our value proposition)? The company must first decide who it will serve—that is, the target market. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). Some people think of marketing management as finding as many customers as possible and increasing demand. But marketing managers know that they cannot serve all customers in every way. By trying to serve all customers, they may not serve any customers well. Instead, the company wants to select only customers that it can serve well and profitably. Ultimately, marketing managers must decide which customers they want to target and on the level, timing, and nature of their demand. Simply put, marketing management is customer management and demand management. The company must also decide how it will serve targeted customers—how it will differentiate and position itself in the marketplace. A company’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs.

4. What are the five different marketing management orientations? Which orientation do you believe Apple follows when marketing products such as the iPhone and iPad?

The five alternative concepts under which organizations design and carry out their marketing strategies are: the production, product, selling, marketing, and societal marketing concepts. 1) The production concept holds that consumers will favor products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. 2) The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Under this concept, marketing strategy focuses on making continuous product improvements.

3) The selling concept holds that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort. 4) The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. Under the marketing concept, customer focus and value are the paths to sales and profits. Instead of a product-centered “make and sell” philosophy, the marketing concept is a customer-centered “sense and respond” philosophy. 5) The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer shortrun wants and consumer longrun welfare. The societal marketing concept holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and the society’s wellbeing.

5. Explain the difference between share of customer and customer equity. Why are these concepts important to marketers?

Share of customer is the share a business gets of the customer’s purchasing in their product categories. For example, consumers purchase financial services from banks and other financial institutions such as insurance companies. Many insurance companies now offer banking and investment services to capture a greater share of an individual consumer’s purchases of these offerings. Increasing share of customer is one way to increase a customer’s lifetime value—the value to a company of a satisfied, loyal customer over his or her lifetime. To increase share of customer, firms can offer greater variety to current customers or create programs to cross-sell and up-sell in order to market more products and services to existing customers. Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. Clearly, the more loyal the firm’s profitable customers, the higher the firm’s customer equity. Customer equity may be a better measure of a firm’s performance than current sales or market share. Whereas sales and market share reflect the past, customer equity suggests the future.

Understanding these concepts is important to marketers because developing marketing activities that create value for customers should, ultimately, create value in return, in the form of current and future sales, market share, and profits. By creating superior customer value, the firm creates highly satisfied customers who stay loyal and buy more. This, in turn, means greater long-run returns for the firm.

6. Discuss trends impacting marketing and the implications of these trends on how marketers deliver value to customers.

The major changes in the marketplace are:
(1) the uncertain economic environment: sudden economic downturn, beginning in 2008 in the United States, has left consumers short of both money and confidence, causing many of them to rethink their spending priorities. In response, companies have aligned their marketing strategies with the new economic reality, emphasizing the value in their value propositions. (2) growth of digital technologies: the recent technology boom has created a digital age, which has had a major impact on the ways companies bring value to their customers. The digital age has provided marketers with exciting new ways to learn about and track customers and to create products and services tailored to individual customer needs.

(3) globalization: in an increasingly smaller world, companies are now connected globally with their customers and marketing partners. (4) sustainable marketing: as the worldwide consumerism and environmentalism movements mature, today’s marketers are being called to develop sustainable marketing practices. Corporate ethics and social responsibility have become hot topics for almost every business, and more forward-looking companies readily accept their responsibilities to the world around them. (5) the growth of not-for-profit marketing: marketing also has become a major part of the strategies of many not-for-profit organizations, such as colleges, hospitals, churches, and so on that provide value. Sound marketing can help them attract membership and support.

Chapter 2 Review Notes

1. Explain what is meant by a market-oriented mission statement and discuss the characteristics of effective mission statements.

A mission statement is a statement of the organization’s purpose—what it wants to accomplish in the larger environment. A clear mission statement acts as an “invisible hand” that guides people in the organization. Some companies define their missions myopically in product or technology terms (“we make and sell furniture” or “we are a chemical-processing firm”). But mission statements should be market oriented and defined in terms of satisfying basic customer needs. Products and technologies eventually become outdated but basic market needs may last forever. Mission statements should be meaningful and specific yet motivating. They should emphasize the company’s strengths in the marketplace. Too often, mission statements are written for public relations purposes and lack specific, workable guidelines. Finally, a company’s mission should not be stated as making more sales or profits—profits are only a reward for creating value for customers. Instead, the mission should focus on customers and the customer experience the company seeks to create.

2. Define strategic planning and briefly describe the four steps that lead managers and the firm through the strategic planning process. Discuss the role marketing plays in this process.

Strategic planning is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities. At the corporate level, the company starts the strategic planning process by defining its overall purpose and mission. This mission then is turned into detailed supporting objectives that guide the whole company. Next, headquarters decides what portfolio of businesses and products is best for the company and how much support to give each one. In turn, each business and product develops detailed marketing and other departmental plans that support the companywide plan. Marketing planning occurs at the business-unit, product, and market levels. Marketing supports company strategic planning with more detailed plans for specific marketing opportunities.

Marketing plays a key role in the company’s strategic planning in several ways: (1) it provides a guiding philosophy—the marketing concept—that suggests that company strategy should revolve around building profitable relationships with important consumer groups; (2) it provides inputs to strategic planners by helping to identify attractive market opportunities and by assessing the firm’s potential to take advantage of them; and (3) within individual business units, marketing designs strategies for reaching the unit’s objectives.

3. Explain why it is important for all departments of an organization—marketing, accounting, finance, operations management, human resources, and so on—to “think consumer.” Why is it important that even people who are not in marketing understand it?

Each department is a link in the company’s internal value chain that carries out value-creating activities to design, produce, market, deliver, and support the firm’s products. The firm’s success depends not only on how well each department performs its work, but also on how well the various departments coordinate their activities. A company’s value chain is only as strong as its weakest link. Success depends on how well each department performs its work of adding customer value and on how well the activities of various departments are coordinated. Ideally then, a company’s different functions should work in harmony to produce value for consumers. Every department in an organization should “think consumer” to deliver value for the customer, so it is important for every employee to understand his or her role in creating customer value.

4. Define positioning and explain how it is accomplished. Describe the positioning for the following brands: Wendy’s, Chevy Volt, Amazon.com, Twitter, and Coca-Cola.

Positioning is arranging for a product to occupy a clear, distinctive, and desirable place relative to competing products in the minds of target consumers. Effective positioning begins with differentiation—actually differentiating the company’s market offering so that it gives consumers more value.

Wendy’s positioning is “Quality is our recipe.” The chain offers fresh, made-to-order high-quality food with real ingredients.

Chevy’s Volt is “the electric car that is redefining the automotive world.” The Volt is differentiating itself from other electric automobiles, such as Nissan’s Leaf, with its gas-powered backup engine so there is no fear of being stranded by a dead battery.

Amazon.com offers “everything from A to Z.” Notice how the logo has an arrow going from the A to the Z in the word Amazon and is in the shape of a smile.

With Twitter, you can “Discover what’s happening right now, anywhere in the world.” You can find out what’s going on in 140 characters or less.

Coca-Cola’s current campaign says it all about the brand’s positioning—“Open happiness.”

5. Define each of the four Ps. What insights might a firm gain by considering the four Cs rather than the four Ps?

The four Ps of marketing are product, price, place, and promotion. Product means the goodsandservices combination the company offers to the target market. Price is the amount of money customers have to pay to obtain the product. Place includes company activities that make the product available to target consumers. Promotion means activities that communicate the merits of the product and persuade target customers to buy it. The four Cs—customer solution, customer cost, convenience, and communication—describe the four Ps from the customer’s viewpoint. By examining products and services using the four Cs, marketers may be better equipped to build customer relationships and offer true value.

6. What is return on marketing investment? Why is it difficult to measure?Return on marketing investment (or marketing ROI) is the net return from a marketing investment divided by the costs of the marketing investment. It is difficult to measure primarily due to lack of a consistent definition of marketing ROI and tools to measure it. In measuring financial ROI, both the R and the I are uniformly measured in dollars. But measuring marketing benefits such as advertising impact aren’t easily put into dollar returns.

Chapter 3 Review Notes

1. Describe the elements of a company’s marketing environment and why marketers play a critical role in tracking environmental trends and spotting opportunities.

A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers. More than any other group in the company, marketers must be the environmental trend trackers and opportunity seekers. Although every manager in an organization needs to observe the outside environment, marketers have two special aptitudes. They have disciplined methods—marketing research and marketing intelligence—for collecting information about the marketing environment. They also spend more time in customer and competitor environments. By carefully studying the environment, marketers can adapt their strategies to meet new marketplace challenges and opportunities. The marketing environment is made up of a microenvironment and a macroenvironment. The microenvironment consists of the actors close to the company that affect its ability to serve its customers—the company, suppliers, marketing intermediaries, customer markets, competitors, and publics. The macroenvironment consists of the larger societal forces that affect the microenvironment—demographic, economic, natural, technological, political, and cultural forces. We look first at the company’s microenvironment.

2. List some of the demographic trends of interest to marketers and discuss whether these trends pose opportunities or threats for marketers.

The major trends discussed in the chapter include: (1) the changing age structure of the population, (2) the changing American family, (3) geographic shifts in population, (4) a better-educated, more white-collar, more professional population, and (5) increasing diversity.

3. Discuss current trends in the economic environment of which marketers must be aware and provide examples of companies’ responses to each trend.

The economic environment consists of factors that affect consumer purchasing power and spending patterns. Marketers must pay close attention to major trends and consumer spending patterns both across and within their world markets.

4. Discuss trends in the natural environment of which marketers must be aware and provide examples of companies’ responses to them.

The natural environment involves the natural resources that are needed as inputs by marketers, or that are affected by marketing activities. Marketers should be aware of several trends in the natural environment. The first involves growing shortages of raw materials. Marketers need to rely less on nonrenewable resources and use renewable resources more wisely. A second environmental trend is increased pollution. Industry will almost always damage the quality of the natural environment. A third trend is increased government intervention in natural resource management. The governments of different countries vary in their concern and efforts to promote a clean environment. The general hope is that companies around the world will accept more social responsibility, and that less expensive devices can be found to control and reduce pollution.

Concern for the natural environment has spawned the so-called green movement. Today, enlightened companies go beyond what government regulations dictate. They are developing environmentally sustainable strategies and practices in an effort to create a world economy that the planet can support indefinitely. They are responding to consumer demands with more environmentally responsible products, such as recyclable or biodegradable packaging, recycled materials and components, better pollution controls, and more energy-efficient operations. More and more, they are recognizing the link between a healthy ecology and a healthy economy. They are learning that environmentally responsible actions can also be good business.

5. Compare and contrast core beliefs/values and secondary beliefs/values. Provide an example of each and discuss the potential impact marketers have on each.

Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and government. Secondary beliefs and values are more open to change. Believing in marriage is a core belief; believing that people should get married early in life is a secondary belief. Marketers have some chance of changing secondary values but little chance of changing core values.

6. Explain how companies can take a proactive stance toward the marketing environment.

Many companies view the marketing environment as an uncontrollable element to which they must react and adapt. They passively accept the marketing environment and do not try to change it. They analyze the environmental forces and design strategies that will help the company avoid the threats and take advantage of the opportunities the environment provides. Other companies take a proactive stance toward the marketing environment. Rather than simply watching and reacting, these firms take aggressive actions to affect the publics and forces in their marketing environment. Such companies hire lobbyists to influence legislation affecting their industries and stage media events to gain favorable press coverage.

They run advertorials (ads expressing editorial points of view) to shape public opinion. They press lawsuits and file complaints with regulators to keep competitors in line, and they form contractual agreements to better control their distribution channels. By taking action, companies can often overcome seemingly uncontrollable environmental events. Marketing management cannot always control environmental forces. In many cases, it must settle for simply watching and reacting to the environment. For example, a company would have little success trying to influence geographic population shifts, the economic environment, or major cultural values. But whenever possible, smart marketing managers take a proactive rather than reactive approach to the marketing environment.