Chapter 1 - Marketing: Scope and Meaning - Apex CPE

200 Pages·2009·3.07 MB·English

MANAGING THE MARKETING
PROCESS

Delta Publishing Company
Copyright  2008 by

DELTA PUBLISHING COMPANY

P.O. Box 5332, Los Alamitos, CA 90721-5332

All rights reserved. No part of this course may be
reproduced in any form or by any means, without
permission in writing from the publisher.

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PREFACE

Managing the Marketing Process is intended to present the basic content of marketing in a
concise and informative manner. In addition to presenting basic marketing information, the
course attempts to develop in the reader an understanding of "the marketing management
concept."

In addition, the course can make a valuable contribution to:

 Undergraduate and graduate study;
 Sales training programs;
 Management and supervisory training programs;
 The marketing of services;
 Executive development seminars;
 Association marketing programs;
 On-the-job personnel development;
 Updating marketing management information;
 Government and business positions in purchasing; and
 A host of other situations where an intelligent marketing attitude is required
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TABLE OF CONTENTS

Chapter 1 Introduction to Marketing

Chapter 2 Marketing Research

Chapter 3 The Consumer and the Market

Chapter 4 Marketing Costs Versus Marketing Strategies

Chapter 5 The Consumer as a Variable

Chapter 6 Consumer Motivation

Chapter 7 Product as a Variable

Chapter 8 Product Planning

Chapter 9 Product identification and Consumer Response

Chapter 10 Pricing and Pricing Theory

Chapter 11 Pricing Patterns and Objectives

Chapter 12 Pricing and Business Decisions

Chapter 13 Promotional Decisions and Demand Stimulation

Chapter 14 Advertising

Chapter 15 Personal Selling and Sales Promotion

Chapter 16 Sales Force Management

Chapter 17 Retailing

Chapter 18 Physical Distribution and Channel Selection: Part I

Chapter 19 Physical Distribution and Channel Selection: Part II

Chapter 20 The Channel Functions

Chapter 21 Marketing Services
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Chapter 22 International Marketing

Chapter 23 Marketing Information Systems and Packages

Chapter 24 Implementing Interactive and Multichannel Marketing

GLOSSARY
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Chapter 1 – Introduction to Marketing

LEARNING OBJECTIVES:

After studying this chapter you will be able to:

1. Discuss the economic impact of marketing.
2. Compute and clarify basic economic functions.
3. Define the marketing management concept.
4. Identify the target market.
5. Describe the marketing mix.
6. Detail and give examples of the universal functions of marketing.
7. Describe the marketing program.
8. Explain customer relationship management (CRM).
9. List today’s marketing musts.

There have been some exciting changes in the way marketing is viewed by
practicing marketing managers and students of marketing. No longer is marketing
thought of as being limited to personal selling and advertising designed to get rid of the
output of the production process. On the contrary, today the concept of marketing held
by most successful firms is that (1) marketing must be consumer oriented, and (2) it must
have a part in the decision making in all phases of management. Modern marketing
begins with the customer, not with the production department. But it plays a vital role in
design and production; and it follows the product through its entire cycle into the hands
of the final users. Thus management is seen as a total marketing management system,
highly complex, and often expensive.

Marketing Defined
Marketing is an organizational function and set of processes for creating,
communicating, and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders. Marketers with a
stronger consumer orientation and a broader management approach place emphasis, in
defining marketing, on its role in directing the flow of goods and services to the
consumer. In other words, marketing is not viewed as the actual performance of such
functions as production and design but as the influencing and guiding of these activities
through the role marketing plays in decision making. Marketing may also be defined as
the activities involved in recognizing consumer needs, developing products and services
to satisfy these needs, and creating and then expanding a demand for these products and
services.

While marketing, especially in its use of marketing research and in its borrowing
from the behavioral sciences, does to some extent employ the scientific method, it can
never control all the variables or exactly repeat experiments with the same results.
Therefore, marketing is more of an art than a science. Like practitioners of other arts, the
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marketing person relies on skill, judgment, and intuition in making decisions more often
than on scientifically established certainties.

The Economic Impact of Marketing
Marketing’s role as a catalytic agent is dramatically illustrated by the growth of
the U.S. Gross Domestic Product (GDP). GDP, the value of all goods and services
produced in a year, rose from a little over $1 trillion in 1970 to over $12.3 trillion by the
first quarter of 2005. Marketing provides the synergistic network required for an
economy of abundance. Marketing activities are the source of increasing employment.
Sales employees in manufacturing, service, and other industries, retail employees, and
workers in transportation, communications, and other related groups represent between
one fourth and one third of the civilian labor force. About 50 cents of every retail dollar
goes to cover marketing costs.

Basic Economic Functions
Marketing is a regulating force, allocating scarce resources and influencing the
distribution and size of income for both individuals and firms. Basically, marketing is
closely related to the broader field of economics. Marketing is viewed by economists as
creating time, place and possession utilities - that is having goods when and where they
are wanted, and then completing the transfer to provide possession utility. As a branch of
economics, marketing draws on such concepts as value theory, demand-supply analysis,
scale of economy, marginal revenue, the law of diminishing marginal utility, various
theories of competition, and concepts of nonprice competition.

While most closely related to the field of economics, marketing also makes use of
techniques and findings borrowed from the other behavioral sciences, especially
psychology, sociology, and anthropology. These disciplines help the marketer better
understand consumers - their motivations and needs, their social behavior and structure,
and human nature in general. Marketing also looks to mathematics for techniques -
sampling, probability and quality control, and quantitative methods with varying
applications.

The Marketing Management Concept
Today, most successful business firms have emerged, or are emerging, from
dominance by production and engineering considerations to a marketing management
viewpoint, which encompasses all of the activities of the firm. Fundamental to this new
philosophy is the recognition and acceptance of a customer-oriented approach. Although
the overall dimensions of the business system are determined by individual decisions,
such decisions now include a much broader range of interrelated internal and external
factors.

Internally, executive decision makers now realize that profitable decisions emerge
from not only production or sales estimates, but also from the ripple effect of information
concerning areas such as personnel, finance, management, or accounting. Each area of
the firm has aspects of marketing just as marketing contains functions of all the other
areas. To make intelligent decisions a marketing manager must know the nature of these
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other functions and must understand how alternative marketing strategies will be
affected.

Externally, information for the development of alternative strategies is generated
by a consumer-oriented view of marketing activity by the firm. Early approaches to
marketing emphasized commodities, institutions, and functions. These elements were
studied in an attempt to determine the nature of the marketing activity. Little emphasis
was placed on interaction between the various functional areas of the firm or on the
decision-making process.

Functional conflicts arise when the accountant wants a high rate of capital
turnover and return on investment, the production manager or engineer wants costly
capital-intensive equipment to produce large homogeneous quantities, the cost control
person wants small inventories and limited varieties, the personnel manager wants stable
production with few cyclical demands for labor, and the marketer wants increased
varieties and large inventories in an attempt to please clients and maximize sales. It is
easy to see that any marketing strategy will involve many compromises before an
optimum decision is reached.

Marketing management implies that all functional areas, including marketing,
must be first devoted to determining consumers’ wants followed by an integrated effort
toward satisfying those wants at a profit. Profit replaces sales as a primary goal. A basic
change in management attitudes resulting in organizational and procedural changes may
be necessary for effective adoption of the marketing management concept.

Today’s marketing person - more and more, the marketers of the future - rely on
systems theories and analysis to guide their decisions. Marketing is seen as a total
system, embedded in the overall social and economic system, and not as a collection of
unrelated activities and institutions. You will learn more of the systems approach later in
this course.

Present-day marketers and students of marketing emphasize the importance of
marketing strategy. Development of strategies entails two steps: (1) selection of a target
market, and (2) development of a marketing mix.

The Target Market
The idea of a target market is based on the concept of market segmentation - the
thought that any market with divergent demands (heterogeneous) will consist of a
number of smaller markets. The marketer can identify these segments and set up targets
by taking into consideration the characteristics of potential customers in these segments,
the marketing mixes that might meet their needs, the goals of the company’s marketing
program, and various other factors. The market grid is a matrix type of chart used to
analyze markets, set up target markets, and develop appropriate marketing mixes for each
individual segment.

The Marketing Mix
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In developing a marketing mix, the marketing manager selects the elements to
combine in a effort to meet the needs of a target market.

The marketing mix, commonly called four Ps, reduces the number of variables in
the marketing function to four broad classifications: product, price, promotion, and place.
These are often called,

for the sake of simplicity (due to the forgetfulness of marketing professors), the ―four
P’s‖ (see Figure 1-1).

Product is the nature of the item itself as it is designed to satisfy a predetermined
group of customers or a segment. Pricing will depend on the image we want to portray,
competitor’s prices, and market demand. Promotion may be by newspaper, radio or TV
advertising, Internet, or point-of-sale promotions. Place implies not only the
geographic area of the country chosen, but all the channels and marketing intermediaries
(sometimes called middlemen) through which the product moves, plus whatever means of
transportation employed en route to the final user.

By now, you should be able to think your way through an example of how, if you
alter any one of the four P’s, you in turn change the behavior of one or all of the
remaining ones. In essence, by altering one variable, you create an entirely new mix or
combination.

Preparing the perfect marketing mix. To simplify the process let us suppose we
have a large vat and a stirring stick. We then take our ingredients and add them slowly.
First, we drop in the desired product with all its design and image implications. Then we
add the price we have chosen and on top of this some newspaper, radio, TV, and point-
of-sale promotion. All in the proper amounts, naturally. Our focus is the southeastern
United States, so we toss that in along with the most profitable and economical channels
of distribution and transportation. Now we mix it all together and ... our finished result is
the best technically prepared marketing mix possible. But we must now ask ourselves, ―
Have we included all the variables affecting the firm’s decision-making process?‖

How does the nature of the firm affect the nature of the marketing mix? Answer -
Dramatically! Normally a firm would use market research, operations research, and a
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computer to prepare the perfect mix. However, unless consideration was given to the
internal and external environmental variables, the mix would not reflect the true ―nature
of the firm‖.

Every firm, like each individual, has a set of internal and external environmental
constraints. Figure 1-2 illustrates how, even if the functional objectives of the marketing
mix are fulfilled, the final product or mix must be tempered by the firm’s decisions on
degrees of profit, growth, or survival, and by the external social, economic, political,
moral, legal, and ethical variables.

Hopefully, original marketing mixes will reflect these factors in the makeup of the
four P’s. Marketing policies and decisions must be made within the context of the firm
as a whole, and among the most important factors a marketing manager must consider are
the basic overall objectives of the firm. Marketing decisions are not made in a
purposeless vacuum. For practical purposes, there is no best marketing mix. Markets
and firms are in a continual state of flux, requiring marketing mixes to meet changing
internal and external conditions. Thus, the marketing mix requires an ongoing current
consumer orientation if profitable sales volumes are to be realized.

Universal Functions of Marketing
As previously mentioned, one early approach to the study of marketing was the
listing of functions. These functional classifications have become basic, in that they tend
to serve as a foundation for our four P’s and the managerial approach.

Functions involving physical supply. Transportation and storage involve
handling and movement of goods and often change of title. The cost of transportation is
more than offset by the creation of place utility, and the storage function gives us time
utility. Transportation and storage are major activities of numerous marketing
institutions, such as wholesalers, warehouses, freight forwarders, pipelines, and some
retailers and manufacturers.

Facilitating functions. Standardization and grading, risk taking, market
information, and financing are functions that assist buying, selling, transportation, and
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