Chapter 1 – Section 2
The Importance of Marketing
® What
You ll Learn:
®  Benefits
of Marketing
®  Meaning of Economic Utility
®  Five Economic Utilities
®  Applying the concept of utility
Economic Benefits of Marketing
® Creates
competition
® New and Improved Products
® Lower Prices
® Add Value and Utility
Marketing Generates Competition
® More
competition will result in
®  lower
prices
Popular products results in more companies
entering into the marketplace
®  To remain competitive marketers find ways to
lower their prices
®
®  New
and improved products
Businesses look to better satisfy customers
needs and wants
®  Products are created or evolve (i.e. PC s have
gotten smaller, more powerful and less
expensive)
®
Lower Prices
® Marketing
adds values which should
increase demand
® High demand means manufacturers can
make products in large quantities
® Producing products in large quantities
reduces the unit cost for each product
® Lower unit cost means the manufacturer
can charge less, sell more and make
more money
Example of Lower Prices
® Fixed
costs are costs that remain the
same whether no products or a million
products are produced (i.e. rent)
® A company has fixed costs of $20,000
Quantity
Produced
10,000
Fixed Cost per
Unit
$2.00
200,000
$0.10
UTILITY – ADDED VALUE
® Functions
of marketing add value to a
product.
® Added value in economic terms is
UTILITY
® Five Economic Utilities
®  Form
– NOT DIRECTLY RELATED TO MARKETING
®  Place
®  Time
®  Possession
®  Information
ECONOMIC UTILITY
Utility means
Value Added
® Production
Utility--Form
® Marketing Utilities--Place,
Time, Information, Possession
Types of Utility
® Form
Utility
®  Changing
raw materials or putting parts
together to make them more useful
®  Not directly related to marketing
®  Lemons + Sugar + Water = Lemonade
Types of Utility
® Place
Utility
®  Having
a product in a convenient location
where a customer can buy it
®  Example: A lemonade stand on a busy
corner
Types of Utility
® Time
Utility
®  Having
a product available at a certain time
of year or a convenient time of day
®  Lemonade available during the summer or
the stand is open 24 hours
Types of Utility
® Information
Utility
®  Involves
communication with the consumer
®  Provides information about:
Features and benefits
®  Qualities and ingredients
®  Where to buy and how much it costs
®  How to use and safety precautions
®
Example: Put up a
sign to tell about
your lemonade
ICE COLD
LEMONADE
SOLD HERE
Types of Utility
® Possession
®  Exchange
Utility
of a product for some monetary
value
®  Increases as purchase options increase
®  Cash, Credit, lay-a-way, delivery,
installation, etc
TOPIC QUIZ
®
For each example, name the type of
utility: (2 points each)
1.  Soft drinks and workout clothing are
available at the health club.
2.  The store offers 6 months same as
cash when buying a large screen TV.
3.  A swing set includes instructions on
how to assemble the product.
4.  Christmas wrapping paper is available
during the holiday season.
5.  A company allows customers to
purchase a product from their website.
TOPIC QUIZ - ANSWERS
®
For each example, name the type of utility:
(2 points each)
1.  Soft drinks and workout clothing are available
at the health club. PLACE
2.  The store offers 6 months same as cash
when buying a large screen TV. POSSESION
3.  A swing set includes instructions on how to
assemble the product. INFORMATION
4.  Christmas wrapping paper is available during
the holiday season. TIME
5.  A company allows customers to purchase a
product from their website. PLACE