Chapter 1 marketing is all around us Section 1.1 Marketing and the Marketing Concept Section 1.2 The Importance of Marketing Section 1.3 Fundamentals of Marketing Section 1.2 The Importance of Marketing Do NOW What promotions did you see the last time you went shopping? How did these promotions affect your decision to buy? Section 1.2 The Importance of Marketing • Describe the benefits of marketing. • Explain the concept of utility. • Cite examples of types of utilities. Section 1.2 The Importance of Marketing Marketing supports competition and offers benefits to consumers. Section 1.2 • utility The Importance of Marketing Economic Benefits of Marketing • Marketing is a global force that affects economies and standards of living around the world. • Marketing provides the means for competition which • Encourages companies to create new and improved products • Reduces prices • Adds value (Economic Utility) to the shopping experience New and Improved Products Lower Prices Economic Utility New and Improved Products • To gain a competitive advantage over other companies, businesses must continually look for ways to satisfy consumers’ wants and needs. • As peoples desires change, a larger variety of goods and services are offered to meet those wants and needs • Competition fosters new ideas • Businesses must constantly update and improve products to stay ahead of their competition Lower Prices • Marketing tends to lead to higher demand for products which results in lower prices • Law of supply and demand: • Demand goes Price goes • When demand is high, manufacturers can produce products in larger quantities which reduces the unit cost of each product. The IBM 610 Auto-Point Computer Cost: $55,000 (in 1957) 13-inch MacBook Pro Cost: $1,300 - $1,800 (in 2015) Unit Cost Math Problem • If it costs a company $300,000 in fixed costs (such as rent) to produce its products and the company increases production from 15,000 to 150,000 how much less could the company afford to price their products at? • 15,000 Units w/ $300,000 fixed costs • $300,000 ÷ 15,000 units = $20 per unit • 150,000 Units w/ $300,000 fixed costs • $300,000 ÷ 150,000 units = $2 per unit • The fixed cost per unit decreased by $18 • If the product cost $65 originally, it can now be sold for $47 Economic Utility • Economic Utilities • The attributes of goods or services that make them capable of satisfying consumers’ wants and needs • Changing the economic utilities of goods and services increases value and enhances satisfaction to the consumer Section 1.2 The Importance of Marketing Form Utility Changing raw materials into usable goods or putting parts together to make them more useful Place Utility Having a product where customers can buy it Time Utility Having a product or service available at a certain time of year or a convenient time of day Possession Utility The exchange of a product for money Information Utility Communication with consumer Form Utility • Offering a movie in DVD format is an improvement over the same movie in VHS format. • A DVD is easily transported – can be mailed (Netflix) – where as a VHS film is transported in a bulky container. Place Utility • Consumers want convenience when shopping • Companies study consumer shopping habits to determine the most convenient and efficient locations to sell products • Retail store, catalogue, online, phone app, TV rental Time Utility • Consumers want products available to them at a time when it is convenient for them • Marketers increase the value of products by extending the times when they are available • Price Chopper - open 24 hours a day • TD Bank - open 7 days/week and has extended hours each day • Black Friday shopping hours – have been extended into Thursday night Possession Utility • In order to ensure an exchange occurs, marketers may accept alternative to cash. • Checks • Debit cards • Credit • Installment plans • Layaway • Rent - To – Own • Lease Information Utility • Sales people provide information to consumers • In-store displays communicate information • Packaging provides information about qualities and uses • Labeling displays ingredient/nutritional information/directions/safety • Advertising informs about products, where to buy products, and how much they cost • Manufacturers provide owners manuals • Businesses have websites to inform consumers Section 1.2 The Importance of Marketing Section 1.2 1. Explain the role that marketing plays in an economy. Marketing plays an important role in an economy because it provides the means for competition to take place. In a competitive marketplace, businesses try to create new or improved products at lower prices than their competitors. Those efforts force them to be efficient and responsive to consumers. In addition, businesses look for ways to add value to a consumer’s shopping experience. Section 1.2 The Importance of Marketing Section 1.2 2. How does increased demand for a product help lower its price to consumers? When demand is high, manufacturers can produce products in larger quantities. This reduces the unit cost of each product. This is because the fixed costs (such as the rent on a building) remain the same whether the company produces 1,500 units or 15,000 units. When a company produces a larger quantity of a product, it spends less per unit on fixed costs. The company can charge a lower price per unit, sell more units, and make more money. Section 1.2 The Importance of Marketing Section 1.2 3. Identify the five economic utilities Form, Place, Time, Possession, Information Economic Utility Activity Product/Service #1 ____________________________________________ Briefly describe the 4 types of utility for this product/service 1. Form utility 2. Time utility 3. Place utility 4. Possession utility 5. Information How could one of the above utilities be improved upon? BE SPECIFIC! _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________