Copyright 1999 Prentice Hall 1-1 Chapter 1 Marketing in a Changing World: Creating Customer Value and Satisfaction PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong
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Chapter 1: Marketing in a Changing WorldMarketing in a Changing
World: Creating Customer Value and Satisfaction
PRINCIPLES OF MARKETING
Copyright 1999 Prentice Hall
What is Marketing?
Process by which individuals and groups obtain what they need and
want through creating and exchanging products and value with
others.
More simply: Marketing is the delivery of customer satisfaction at
a profit.
Copyright 1999 Prentice Hall
Core Concepts
This CTR corresponds to Figure 1-1 on p. 4 and relates to the
discussion on pp. 3-10. Also to the CTRs numbers 4 - 8 which
follow.
Core Concepts
Needs. These emerge from a state of felt deprivation. Ask students
to distinguish among physical, social, and individual needs.
Wants. These are the form taken by human needs as they are shaped
by culture and individual experience. Have students provide
examples for different wants based upon geographical differences,
gender, age, wealth. Link culture to socio-economic standing,
education.
Demands. These are wants backed by buying power. Discuss such
popular items as dream vacations or favorite cars to illustrate the
difference between wants and demands. You may want an Acura Legend
but drive a Subaru Justy. Introduce the idea that demands are often
for a bundle or group of benefits and may address a number of
related needs and wants.
Products. These are anything offered for sale to satisfy a need or
want. Have students discuss an extended view of products to include
services and ideas. Discuss the role of value in distinguishing
products.
Discussion Note: Ask students to identify their product choice set
for cars, vacations, dating partners, or college professors.
Exchanges. These are the act of obtaining desired objects by
offering something in return. Link to barter economies and promises
to pay (i.e., credit, checks).
Transactions. These are an actual trade of value between at least
two parties. Transaction marketing is part of the larger concept of
relationship marketing in which parties build long-term, economic
ties to enhance quality and customer-delivered value.
Markets. These are the set of actual and potential buyers of a
product. Markets may be decentralized or centralized. Markets exist
wherever something of value is desired, such as in the labor
market, the money market, even the donor market - for human
“products” such as blood or organs.
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to Take Action?
Needs - state of felt deprivation for basic items such as food and
clothing and complex needs such as for belonging. i.e. I am
thirsty
Wants - form that a human need takes as shaped by culture and
individual personality. i.e. I want a Coca-Cola.
Demands - human wants backed by buying power. i.e. I have money to
buy a Coca-Cola.
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Needs and Wants?
Products - anything that can be offered to a market for attention,
acquisition, use or consumption and that might satisfy a need or
want.
Examples: persons, places, organizations, activities, and
ideas.
Services - activities or benefits offered for sale that are
essentially intangible and don’t result in the ownership of
anything.
Examples: banking, airlines, haircuts, and hotels.
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Services?
Customer Value - benefit that the customer gains from owning and
using a product compared to the cost of obtaining the
product.
Customer Satisfaction - depends on the product’s perceived
performance in delivering value relative to a buyer’s expectations.
Linked to Quality and Total Quality Management (TQM).
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Products and Services?
Exchanges - act of obtaining a desired object from someone by
offering something in return.
Transactions - trade of values between parties. Usually involves
money and a response.
Relationships - building long-term relationships with consumers,
distributors, dealers, and suppliers.
Copyright 1999 Prentice Hall
Modern Marketing System
This CTR corresponds to Figure 1-3 on p.11 and relates to the
material on p. 10.
The Marketing System
A modern marketing system consist of four levels of activity. In a
very real sense, each level influences the other levels. Each level
adds value to the system.
Discussion Note: Consumers add value to the system when they buy
products. Their purchase price in turn funds the efforts (as
profits) of each of the other layers to create more value as the
system continues the cycle.
Suppliers. This level provides the inputs to the production of
goods and services.
Company and Competitors. Each company adds value to supplies to
create the products (goods, services, or both) offered to various
markets.
Marketing Intermediaries. Because of specialization, one or more
other firms can get products to consumers more efficiently than
most producers can (though there are important exceptions).
End User Market. The consumer is the “final cause” of the efforts
of each level of the marketing system.
Discussion Note: Ask students to comment on whether the schematic
should have “dotted line” feedback connection from the end user to
each level of the system. What form of communication does that
feedback take? Purchase? Satisfaction level? Brand loyalty? Brand
switching? You might encourage students to remember this system
perspective throughout the course and relate examples back to this
CTR from time to time.
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with target buyers to achieve organizational
goals
changing or reducing demand
The Marketing Management Process
The marketing concept suggests that businesses must actively manage
an on-going relationship with customers. Key concepts of this
perspective include:
Marketing Management. The text defines marketing management as “the
analysis, planning, implementation, and control of programs
designed to create, build, and maintain beneficial exchanges with
target buyers for the purpose of achieving organizational
objectives.”
Discussion Note: You might point out to students the influential
role played by Professor Kotler in the development of marketing
management, in both business and academic settings.
Demand Management. Matching supply and demand can be a difficult
balancing act. Traditional views of marketing were simplistic:
build demand. Now marketers recognize the need to manage demand so
that infrastructure resources are not overburdened.
Discussion Note: It might help to compare demand management with
Just-in-Time Inventory or Supply management. JIT lowers costs by
not requiring extra capacity to hold things -- supplies or
inventory -- before they are needed. By matching consumer demand to
the systems designed to meet needs and wants, overall costs of
marketing, and hence, the price of products, is reduced.
Building Customer Relationships. Growing markets traditionally mean
a plentiful supply of new customers. But as consumers become more
sophisticated and as market growth slows, maintaining existing
customers is the key to long term marketing success. As pointed out
in the text, a continuing customer relationship means years of
revenues for a company, not one time only sales. Further, existing
customers are less expensive to promote to as they have already
processed a great deal of product-specific information.
Marketing Management
This CTR corresponds to the material on pp. 11 - 12.
Copyright 1999 Prentice Hall
available and highly affordable
Improve production and distribution
innovative features
the company promotes/ sells these
product
markets & delivering satisfaction
better than competitors
markets & delivering superior value
This CTR relates to the material on pp. 12-17.
Teaching Tip: You may find it useful to ask students to give their
definitions of philosophy. How do they use philosophies for
studying? dating? planning their time? Work from their examples to
the idea that businesses too have philosophies about how to get
things done.
The Production Concept. One of the oldest concepts, it holds that
consumers favor products that are available and affordable.
Management emphasizes production and distribution efficiency.
Examples from the text include Ford's Model T and Texas
Instruments.
The Product Concept . This concept focuses on the actual product in
an effort to continuously improve quality, performance, and
features. May lead to marketing myopia or the tendency to too
narrowly define the scope of one's business. Consumers buy products
for their benefits, not their features.
The Selling Concept. This concept views consumers as unwillingly
customers whose inherent opposition must be overcome to make a
sale. It is most often used today for unsought goods. The selling
concept tends to encourage sellers to misrepresent the true nature
of their products or services and can lead to problems in
maintaining high customer satisfaction.
The Marketing Concept. This concept links the company's success
with the consumer's continuing satisfaction. Its "outside-in"
approach starts with a well defined target market, an analysis of
their needs and wants, and then builds the company's offering
around meeting those needs better than the competition (Note: the
selling and marketing concepts are contrasted on the following CTR
of Figure 1-4).
The Societal Marketing Concept. This concept adds to the marketing
concept the idea that the company should contribute to the
betterment of society as a whole (Note: The societal marketing
concept is developed in more detail on a following CTR of Figure
1-5 and the accompanying notes).
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Marketing and Sales Concept Contrasted
This CTR corresponds to Figure 1-4 on p. 15 and to the material on
pp. 14-16.
Comparisons and Contrasts:
The Selling Concept takes an inside-out perspective -- looking at
the company’s needs and wants in terms of existing products and
ways to find customers for them. The Marketing Concept takes an
outside-in perspective - identifying the needs and wants of a
clearly defined market and adjusting company efforts to make
products that meet the needs.
Discussion Note: Promotional tone may help indicate whether a
company practices the selling or the marketing concept. Selling
involves persuasion -- convincing the customer of their need to buy
existing products. Marketing, at its best, involves information --
bringing the developed product to the awareness of a target market
that recognizes need satisfying products.
As the text notes, companies can let their own success lock them
into a rigid selling structure. As times change, and they always
do, those companies fail to see the need for meeting new and
emerging consumer needs. The marketing concept helps companies
focus on customer need satisfaction, leading to long-term success
by customer retention.
Copyright 1999 Prentice Hall
Societal Marketing Concept
This CTR corresponds to Figure 1-5 on p. 16 and relates to the
material on pp. 16-17.
The Societal Marketing Concept holds that the organization should
determine the needs, wants, and interests of target markets. In
delivering the desired satisfactions more effectively and
efficiently than the competition, the company should also maintain
or improve both the consumer’s and society’s well being.
Discussion Note: You may wish to consider extra-textual class
discussion identifying the pros and cons of the societal marketing
concept.
Pros: Reasons for adopting the societal marketing concept
include:
1. Public expectations. Social expectations of business have
increased. 2. Long-run profits. Socially responsible marketing may
lead to more secure long-run profits. 3. Ethical obligation.
Business should recognize that responsible actions are right for
their own sake. 4. Public image. A good public image helps firms
gain more customers, better employees, access to money markets, and
other benefits. 5. Better environment. Involvement by business can
help solve difficult social problems, creating a better quality of
life and a more desirable community in which to attract and hold
skilled employees. 7. Balance of responsibility and power.
Marketers have a large amount of power in society that requires an
equally large amount of responsibility. 8. Stockholder interests.
Socially responsible companies are considered less risky and safer
investments 9. Possession of resources. Business has the financial
resources, technical experts, and managerial talent to provide to
support public causes.
Cons: Reasons for not adopting the societal marketing concept
include:
1. Violation of profit maximization. 2. Dilution of purpose. The
pursuit of social goals dilutes business’s primary purpose. 3.
Costs. Many socially responsible activities don’t pay their way. 4.
Too much power. Business is already one of the most powerful
institutions in society. 5. Lack of skills. Marketers may be poorly
qualified to deal with social issues. 6. Lack of accountability.
There are no direct lines of social accountability from the
business sector to the public. 7. Lack of broad public support.
Even favorable attitudes are general and lack consensus on specific
actions marketers should take on social issues.
The Societal Marketing Concept
Copyright 1999 Prentice Hall
This CTR relates to the material on pp. 17-24.
Teaching Tip: Challenge students to see marketing as an exciting
and creative field needing new ideas and new solutions to emerging
business opportunities.
Growth of Nonprofit Marketing. More and more charitable firms and
businesses that hold nonprofit status, like colleges and hospitals,
are adopting a marketing orientation toward serving their
constituencies.
Globalization. Technological and economic developments continue to
shrink the distances between countries. Computer and communications
technology make possible truly global businesses that buy, sell,
manufacturer, market, and service customers easily across
international borders. Rising affluence creates new markets.
Similarly, more European and Asian companies now compete
successfully in the US. market.
Changing World Economy. Even as new markets open to rising
affluence in such countries as the “newly industrialized” pacific
rim, poverty in many areas and slowed economies in previously
industrial nations has already changed the world economy. Americans
increasingly maintain living standards only by having two incomes
per household. Value is hunted for by penny-wise consumers.
Ethics and Responsibility. The greed of the 1980s and other
problems has spurred a new interest in ethical conduct in business.
Many consumers feel business in general has more of an obligation
to those who generate profits -- the consumer!