Chapter 1
The Marketing
Management
Process
McGraw-Hill/Irwin
Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Why Are Marketing Decisions
Important?
• Marketing attempts to measure and
anticipate the needs and wants of a group
of customers and respond with a flow of
need satisfying goods and services.
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Why Are Marketing Decisions
Important?
• Firms should:
– Target those customer groups whose needs
are most consistent with the firm’s resources
and capabilities.
– Develop offerings that meet the needs of the
target market better than competitors.
– Make its products and services readily
available to potential customers.
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Why Are Marketing Decisions
Important?
• Firms should:
– Develop customer awareness and
appreciation of the value provided by the
company’s offerings.
– Obtain market feedback as a basis for
continuing improvement in the firm’s offerings.
– Work to build long-term relationships with
satisfied and loyal customers.
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Why Are Marketing Decisions
Important?
• The importance of the top line
– In the long run, all firms must make a profit to
survive.
– There can never be a positive bottom line
without the ability to build and sustain a
healthy top line: sales revenue.
– That is why the customer focus inherent in the
marketing function is important.
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Marketing Creates Value by Facilitating
Exchange Relationships
• Marketing is a social process involving the
activities necessary to enable individuals
and organizations to obtain what they
need and want through exchanges with
others and to develop ongoing exchange
relationships.
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Marketing Creates Value by Facilitating
Exchange Relationships
• The parties in an exchange
– Ultimate customers buy goods and services
for their own personal use or the use of others
in their immediate household.
• These are called consumer goods and services.
– Organizational customers buy goods and
services for resale; as production inputs; or
for use in the day-to-day operations.
• These are called industrial goods and services.
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Marketing Creates Value by Facilitating
Exchange Relationships
• Customer needs and wants
– Basic physical needs are critical to our
survival.
– Social and emotional needs critical to our
psychological well-being.
– Wants reflect desires or preferences for
specific ways of satisfying a basic need.
– Marketers—and many other social forces—
influence people’s wants.
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Marketing Creates Value by Facilitating
Exchange Relationships
• Products and services
– Products are essentially tangible physical
objects that provide a benefit.
– Services are less tangible and, in addition to
being provided by physical objects, can be
provided by people, institutions, places, and
activities.
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Marketing Creates Value by Facilitating
Exchange Relationships
• How exchanges create value
– Customers buy benefits, not products.
– Value is a function of intrinsic product
features, service, and price, and it means
different things to different people.
– Lifetime customer value —the present value
of a stream of revenue that can be produced
by a customer over time.
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Marketing Creates Value by Facilitating
Exchange Relationships
• How exchanges create value
– The assets linked to a brand’s name and
symbol constitute the brand’s equity.
– A brand’s value to the company depends on
how much value customers think the brand
provides for them; value creation cuts both
ways.
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Marketing Creates Value by Facilitating
Exchange Relationships
• A market consists of individuals and
organizations who are interested and
willing to buy a particular product to obtain
benefits that will satisfy a specific need or
want, and who have the resources to
engage in such a transaction.
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Marketing Creates Value by Facilitating
Exchange Relationships
• The total market for a given product
category is often fragmented into several
distinct market segments.
– Each segment contains people who are
relatively homogeneous in their needs, their
wants, and the product benefits they seek.
– Each segment seeks a different set of benefits
from the same product category.
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What Does Effective Marketing Practice
Look Like?
• Marketing management occurs whenever
one party has something it would like to
exchange with another.
– It is the process that helps make such
exchanges happen.
– The framework has a distinct decision-making
focus.
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What Does Effective Marketing Practice
Look Like?
• A good strategic marketing plan should
focus on the 4Cs:
– The company’s internal resources,
capabilities, and strategies
– The environmental context in which the firm
will compete
– The needs, wants, and characteristics of
current and potential customers
– The relative strengths and weaknesses of
competitors and trends in the competitive
environment.
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What Does Effective Marketing Practice
Look Like?
• Corporate strategy:
– Reflects the company’s mission; businesses
to pursue, resource allocation, and growth
policies.
• Business-level (or competitive) strategy:
– Addresses how the business intends to
compete.
• Marketing strategy
– Decisions about market segments, product
line, advertising appeals and media, prices,
and partnerships.
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What Does Effective Marketing Practice
Look Like?
• Market opportunity analysis
– Requires an examination of the external
environment, including the markets to be
served and the industry of which the firm is a
part.
– Customer analysis
– Marketing research and forecasting
– Market segmentation, targeting, and
positioning decisions
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What Does Effective Marketing Practice
Look Like?
• Formulating strategic marketing programs
– Specifying marketing objectives and
strategies.
– The controllable elements of a marketing
program (4Ps) are the product offering; price;
promotion; and place.
– The marketing mix is the combination of
controllable marketing variables that a
manager uses to carry out a marketing
strategy in pursuit of the firm’s objectives in a
given target market.
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What Does Effective Marketing Practice
Look Like?
• Formulating strategic marketing programs
for specific situations
• Implementation and control of the
marketing program
• The final tasks are determining whether
the program is meeting objectives and
adjusting the program when performance
is disappointing.
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What Does Effective Marketing Practice
Look Like?
• The marketing plan—a blueprint for action
– A marketing plan is a written document
detailing the current situation with respect to
customers, competitors, and the external
environment and providing guidelines for
objectives, marketing actions, and resource
allocations over the planning period for either
an existing or a proposed product or service.
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What Does Effective Marketing Practice
Look Like?
• Three major parts to the marketing plan:
– First, the marketing manager details his or her
assessment of the current situation.
– The second part details the strategy for the
coming period.
– Finally, the plan details the financial and
resource implications of the strategy and the
controls to be employed to monitor the plan’s
implementation and progress over the period.
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Who Does What?
• Marketing institutions
– Vertical integration: In a few cases, nearly all
marketing activities are performed by a single
organization and its employees.
– Marketing channels or channels of
distribution.
•
•
•
•
Merchant wholesalers
Agent middlemen
Retailers
Facilitating agencies
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Who Does What?
• Cost of marketing activities
– The final selling price reflects the costs of
performing the activities necessary for
exchange transactions.
– Those costs vary widely.
• They account for a relatively high proportion of the
price of consumer package goods.
• Marketing costs for nontechnical industrial goods
are much lower
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Who Does What?
• Benefits of the marketing system:
– Customers can buy a wide variety of goods
from a single source in one transaction,
thereby increasing transactional efficiency.
– Specialization of labor and economies of
scale lead to functional efficiency.
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Who Does What?
• Benefits of the marketing system:
– The increased transactional and functional
efficiency of exchange increases the value for
the customer.
– A product has greater utility for a potential
customer when it can be purchased with a
minimum of risk and shopping time
(possession utility), at a convenient location
(place utility), and at the time the customer is
ready to use the product (time utility).
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Who Does What?
• Room for improvement in marketing efficiency
– Marketing costs have increased in recent years
because various reasons.
– At least part of the problem can be attributed to
marketers themselves.
– Marketing managers have been slow to develop
accurate measures and metrics of marketing
performance and, therefore, slow to understand the
effectiveness of various marketing actions relative to
their costs, and thus their impact on bottom line.
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Who Does What?
• The role of the marketing decision maker
– The title marketing manager is necessarily
and intentionally vague because many people
are directly involved with marketing activities.
– Many marketing activities are usually
contracted out.
– Implementing a marketing plan requires
cooperation and coordination across
specialized functional areas.
– Marketing is—or should be—everybody’s
business.
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Some Recent Developments Affecting
Marketing Management
• Globalization
– Promising opportunities for additional sales
growth and profits.
– Differences in market and competitive
conditions.
• Increased importance of service
– Services are the fastest-growing sector of
most developed economies around the world.
– The intangible nature of many services can
create unique challenges for marketers.
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Some Recent Developments Affecting
Marketing Management
• Information technology
– Firms can collect and analyze more detailed
information about potential customers and
their needs, preferences, and buying habits.
– Use of Web sites to communicate product
information, make sales, and deal with
customer problems.
– Ability to forge more cooperative and efficient
relationships with suppliers and channel
partners.
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Some Recent Developments Affecting
Marketing Management
• Relationships across functions and firms
– More firms are trying to develop and nurture
long-term relationships and alliances.
– Such relationships are thought to:
• Improve each partner’s ability to adapt quickly to
environmental changes or threats.
• Gain greater benefits at lower costs from its
exchanges.
• Increase the lifetime value of its customers.
– Similar cooperative relationships are
emerging inside companies.
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Take-Aways
• Marketing is pervasive.
• Customers buy benefits, not products.
• Delivering superior value to one’s
customers is the essence of business
success.
• A focus on satisfying customer needs and
wants is not inconsistent with being
technologically innovative.
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Take-Aways
• The marketing management process
requires an understanding of the 4Cs.
• Marketing decisions are made or approved
at the highest levels in most firms, whether
large or small.
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