CHAPTER ONE
CUSTOMER-DRIVEN MARKETING
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CHAPTER OBJECTIVES
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Explain how marketing creates utility through
the exchange process
Contrast marketing activities during the four
eras in the history of marketing
Define the Marketing Concept and its
relationship to Marketing Myopia
Describe the five types of nontraditional
marketing
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CHAPTER OBJECTIVES
Identify the basic elements of a
marketing strategy and the
environmental characteristics that
influence strategy decisions
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If we want to know what a business is, we
have to start with its purpose. And its purpose
must lie outside the business itself. In fact, it
must lie in society since a business enterprise
is an organ of society. There is one valid
definition of business purpose: to create a
customer.
*Peter F. Drucker, The Practice of Management (New York: Harper & Row, 12954), p. 37.
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How does an organization create a customer?
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Identifying customer needs
Designing goods and services that meet those
needs
Communicating information about those goods
and services to prospective buyers
Making the goods or services available at times
and places that meet customers’ needs
Pricing goods and services to reflect costs,
competition, and customers’ ability to buy
Providing for the necessary service and follow-up
to ensure customer satisfaction after the purchase
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Things to Consider Prior to Production
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Analyze the needs of people who play tennis and decide if consumers want
more or different rackets.
Predict what types of rackets - handle sizes, shapes, weights, and materials different players will want and decide which of these people the firm will try
to satisfy.
Estimate how many of these people will be playing tennis over the next
several years and how many rackets they’ll buy.
Predict exactly when these players will want to buy tennis rackets.
Determine where these tennis players will be - and how to get the firm’s
rackets to them.
Estimate what price they are willing to pay for their rackets - and if the firm
can make a profit selling at that price.
Decide which kinds of promotion should be used to tell potential customers
about the firm’s tennis rackets.
Estimate how many competing companies will be making tennis rackets,
how many rackets they’ll produce, what kind, and at what prices.
These activities are marketing rather than production functions. Marketing provides the needed direction for
production and helps make sure that the right products are produced and find their way to consumers.
WHAT IS MARKETING?
Four Types of Utility
Organizational
Function
Responsible
Type
Description
Examples
Form
Conversion of raw
materials and
components into
finished goods and
services
Skippy Peanut Butter; State
Farm automobile insurance
policy; Boeing 767 aircraft
Production
Time
Availability of goods
and services when
consumers want them
One-hour dry cleaning;
LensCrafters eyeglass
guarantee; Federal Express’
guarantee of package delivery
by 10:30 a.m. the next day
Marketing
Place
Availability of goods
and services at
convenient locations
Soda machines in school
lobbies; coffee and snacks in
Barnes & Noble bookstores; day
cares in office complexes; ATM
machines in gas stations; mail
boxes outside convenience
stores
Marketing
Retail sales (in exchange for
Marketing
Ownership
Ability to transfer title
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A Definition of Marketing
Micro-Marketing: the process of planning
and executing the conception, pricing,
promotion, and distribution of ideas,
goods, services, organizations, and events
to create and maintain relationships that
will satisfy individual and organizational
objectives.
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A Definition of Marketing
Macro-Marketing: The social process
that directs an economy’s flow of
goods and services from producers to
consumers in a way that matches
supply and demand and accomplishes
the objectives of society.
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Eight Universal Marketing Functions
Exchange
Functions
1. Buying
Ensuring product
offerings are
available in sufficient
quantities to meet
customer demands
2. Selling
Using advertising,
personal selling, and
sales promotion to
match products to
customer need
Physical
Distribution
3. Transporting
Moving products
from their point of
production to
locations
convenient for
purchasers
4. Storing
Warehousing
products until
needed for sale
Facilitating
5. Standardizing
and grading
Ensuring product
offerings meet
quality and
quantity controls
of size, weight,
and other
variables
6. Financing
Providing credit
for channel
members
(wholesalers and
retailers) and
consumers
Functions
7. Risk taking
Dealing with uncertainty
about future customer
purchases
8. Securing marketing
information
Collecting information
about consumers,
competitors, and channel
members for use in
making marketing
decisions
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The Exchange Process
Two or more parties give
something of value to each
other to satisfy felt needs.
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Four Eras In the History of Marketing
Era
Approximate
Time Period
Prevailing
Attitude
Production
Prior to 1920s
“A good product will sell itself.”
Sales
Prior to 1950s
“Creative advertising and selling will
overcome consumers’ resistance and
convince them to buy.”
Marketing
Since 1950s
“The consumer is king! Find a need and
fill it.”
Relationship
Began in 1990s
“Long-term relationship with customers
and other partners lead to success.”
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Four Eras in the History of
Marketing
Production
• Prior to 1920s
• Production
orientation
• Business success
often defined solely
in terms of
production victories
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Mission of Pillsbury (Production Era)
We are professional flour millers. Blessed with
a supply of the finest North American wheat,
plenty of water power, and excellent milling
machinery, we produce flour of the highest
quality. Our basic function is to mill highquality flour, and, of course, we must hire
[salespeople] to sell it, just as we hire
accountants to keep our books.
*Robert J. Keith, ex-CEO, Pillsbury
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Four Eras in the History of
Marketing
• Prior to 1950s
• Customers resist
Sales
nonessential goods
and services
• Personal selling and
advertising’s task is
to convince them to
buy
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Mission of Pillsbury (Sales Era)
We are a flour-milling company, manufacturing a
number of products for the consumer market. We
must have a first-rate sales organization which can
dispose of all the products we can make at a
favorable price. We must backup this sales force
with consumer advertising and market intelligence.
We want our sales representatives and our dealers to
have all the tools they need for moving the output of
our plants to the consumer.
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Four Eras in the History of
Marketing • Since 1950s
• Marketing Concept Emerges
• Shift from seller’s
to buyer’s market
Marketing
Marketing
• Consumer orientation
• Marketing Concept
• Company–wide
consumer orientation
• Objective of achieving
long–run success
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Mission of General Electric
(Marketing Era)
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[The concept]…introduces the marketing man at
the beginning rather than at the end of the
production cycle and integrates marketing into
each phase of the business. Thus, marketing,
through its studies and research, will establish
for the engineer, the design and manufacturing
man, what the customer wants in a given
product, what price he is willing to pay, and
were and when it will be wanted. Marketing will
have authority in product planning, production
scheduling, and inventory control, as well as in
sales distribution and servicing of the product.
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Four Eras in the History of
Marketing
• Began in 1990s
• Carried customer
orientation even further
• Focuses on establishing and
maintaining relationships
with both customers and
suppliers
• Involves long–term,
value–added relationships
Relationship
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NONTRADITIONAL MARKETING
Categories of Nontraditional Marketing
Type
Brief Description
Examples
Person
marketing
Marketing efforts designed
to cultivate the attention,
interest, and preference of a
target market toward a
person
Celebrities such as basketball star
Shaquille O’Neal, Latin singing star
Ricky Martin, comedian Chris Rock, and
singer/actress Madonna; political
candidates such as “Bush for President”
Place
marketing
Marketing efforts designed
to attract visitors to a
particular area; improve
consumer images of a city,
state, or nation; and/or
attract new business
Israel: No one belongs here more than
you.
Come to Jamaica and feel all right.
Washington, D.C.: The American
Experience
Cause
marketing
Identification and marketing
of a social issue, cause, or
idea to selected target
markets
Welfare to Work. It works.
Friends don’t let friends drive drunk.
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NONTRADITIONAL MARKETING
Categories of Nontraditional Marketing
Type
Brief Description
Examples
Event
marketing
Marketing of sporting, cultural, NASCAR Firecracker 400;
and charitable activities to
American Cancer Society Relay
selected target markets
for Life
Organization
marketing
Marketing efforts of mutualbenefit organizations, service
organizations, and government
organizations that seek to
influence others to accept their
goals, receive their services, or
contribute to them in some way
Navy: Let the journey begin.
United Way brings out the best
in all of us.
Tech Corps: America needs to
know.
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Elements of a Marketing Strategy and Its
Environmental Framework
Target Market
Distribution
Product
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Target
Market
Promotion
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Price
Group
Groupofofpeople
people
toward
towardwhom
whom the
the
firm
firmdecides
decidestoto
direct
directits
its
marketing
marketingefforts
efforts
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Marketing Mix
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Distribution
Product
Target
Market
Promotion
Price
Blending
Blendingthe
thefour
four
strategy
elements
strategy elementsofof
marketing
marketingdecisiondecisionmaking
making
• Product
• Product
• Price
• Price
• Distribution
• Distribution
• Promotion
• Promotion
totosatisfy
satisfychosen
chosentarget
target
markets
markets
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Product Strategy
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Distribution
Product
Target
Market
Promotion
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Price
Deciding
Deciding
• What goods or
• What goods or
services
servicestotooffer
offer
• Customer service
• Customer service
• Package design
• Package design
• Brand names
• Brand names
• Trademarks
• Trademarks
• Warranties
• Warranties
• Product Life Cycle
• Product Life Cycle
• Positioning
• Positioning
• New – product
• New – product
development
development
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Distribution Strategy
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Distribution
Product
Target
Market
Promotion
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Price
Decisions
Decisionsabout
about
• Modes of
• Modes of
transportation
transportation
• Warehousing
• Warehousing
• Inventory control
• Inventory control
• Order processing
• Order processing
• Marketing channels
• Marketing channels
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Promotional Strategy
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Distribution
Product
Target
Market
Promotion
© PhotoDisc
Price
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Blending
Blendingtogether
togetherthe
the
various
variouselements
elementsofof
promotion
promotiontoto
communicate
communicatemost
most
effectively
effectivelywith
withthe
thetarget
target
market
market
Promotional
Promotionalelements
elements
include
includeadvertising,
advertising,sales
sales
promotion,
promotion,public
public
relations,
relations,and
andpersonal
personal
selling
selling
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Pricing Strategy
Distribution
Product
Target
Market
Promotion
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Price
nn Deals
Dealswith
withthe
the
methods
methodsof
of
setting
setting
profitable
profitableand
and
justifiable
justifiable
prices
prices
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Conceive vs Rapid Vue
Two marketing mixes for different
market segments
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