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Principles of Marketing - Chapter 1 Key Concepts

What is Marketing?

  • Marketing is defined as the performance of activities that seek to accomplish objectives by anticipating customer or client needs, from producer to a customer or client, and directing a flow of need-satisfying goods and services. This emphasizes a systematic approach to creating and delivering value rather than just selling or advertising. (Derived from Slide 8)

Macro-Marketing vs. Marketing

  • Macro-marketing focuses on the whole system that matches supply and demand across society.
  • It emphasizes the entire market-driven economy and how to coordinate and improve the flow of goods and services for societal welfare. (Slide 10; Slides 3–4)
  • Marketing in practice involves intermediaries and collaborators who develop and perform universal marketing functions. (Slide 11–13)

Market-Driven Economy and the Macro-Marketing System

  • A market-driven economy adjusts the macro-marketing system through signals like prices, information, and consumer demand. (Slides 3–4, 18)
  • The macro-marketing system includes many producers and many consumers, with intermediaries and collaborators bridging gaps and overcoming spatial, time, and information separations. (Exhibit 1-2; Slide 18)
  • Checks on the system come from: customer dollars (vote), customer voice (satisfaction/dissatisfaction), public-interest groups, and government rules. (Slide 18)

The Marketing Concept and Customer Value

  • The Marketing Concept: Profit (or another long-term success measure) as the objective, achieved through total company effort and customer satisfaction. (Exhibit 1-3; Slide 20)
  • Customer value is central: value arises from the benefits received minus the costs incurred.
  • Customer Value equation:
    \text{Customer Value} = \text{Benefits} - \text{Costs}
  • Benefits can be categorized as:
    \text{Benefits} = \text{Functional} + \text{Emotional} + \text{Life-changing} + \text{World-changing}
  • Costs include:
    \text{Costs} = \text{Monetary} + \text{Inconvenience}
  • The goal is to attract, satisfy, and retain customers by offering superior customer value to build profitable relationships. (Slides 24–31; Exhibit 1-6)

Customer Value and Its Implications

  • Customer Value is the customer's perception of the benefits received relative to the costs incurred. It drives customer satisfaction and loyalty. (Slides 24–31)
  • Firms must continually evaluate value from the customer’s point of view and align offerings, price, service, and support accordingly. (Slides 24–31)

Triple Bottom Line and Purpose Orientation

  • Triple Bottom Line expands success metrics beyond profit to include social and environmental outcomes: Economic, Social, Environmental.
    \text{Triple Bottom Line} = (\text{Economic outcomes}, \text{Social outcomes}, \text{Environmental outcomes})
  • Purpose Orientation complements the triple bottom line by aligning strategy with broader beliefs and values, creating value for multiple stakeholders. (Slides 23–26)
  • This reflects a shift toward sustainability and ethical considerations in business strategy. (Slides 25–26)

Social Responsibility, Ethics, and the Micro–Macro Dilemma

  • Society’s needs should be considered; marketing concepts guide ethical decision-making, but there is a micro–macro dilemma about future costs (environment, social impacts) vs. present profits. (Slide 33–34)
  • Micro–Macro Dilemma example: Should future generations pay today’s environmental price for consumer conveniences? (Slide 34)
  • Sample criticisms of marketing include issues like advertising intrusion, product safety concerns, overconsumption, exploitation, and privacy concerns. (Slide 35)

The Marketing Concept in Nonprofits

  • Nonprofits also apply marketing principles, measuring success by impact rather than profit alone. Example: World Food Programme (WFP) using marketing to secure donations and deliver aid. (Slides 21–23, 40)
  • Marketing tools include apps and campaigns to reduce costs and increase donor engagement, such as the WFP smartphone app that lets users donate by tapping a gold medallion, funding meals for children. (Slide 40)

Nonprofits and Social Initiatives

  • Real-world examples: marketing supports social initiatives and development goals (e.g., Sustainable Development Goals). (Slides 41)
  • Donors benefit through shared identity and hope, while recipients gain improved nutrition and resilience. (Slide 40)

The Universal Functions of Marketing

  • The set of universal marketing functions includes:
    • Buying
    • Selling
    • Transporting
    • Storing
    • Standardization & Grading
    • Financing
    • Risk Taking
    • Market Information
      (Slide 11)
  • These functions are performed by a range of actors, including transport firms, ISPs, product testing firms, ad agencies, research firms, wholesalers, retailers, and other specialists, as well as producers and consumers. (Slide 13)

Two Markets: Applied Universal Functions (Exhibit 1-1)

  • Example 1: Industry focus – Producer: OtterBox (phone case); Customer: Smartphone owner; Intermediary: Retailers (Best Buy, Amazon); Possible collaborators: shipping company, bank, marketing research firm, advertising agency, online reviewers. (Slide 14)
  • Example 2: Travel industry – Producer: Southwest Airlines; Customer: Traveler; Intermediary: Travel agent (Expedia), Retailers; Possible collaborators: shipping/bank/FAA, marketing research firm, online reviewers. (Slide 14)
  • These exhibits illustrate how buying, selling, transporting, storing, standardization, financing, risk taking, and market information are applied across markets. (Slides 14–15)

Overcoming Spatial and Other Separations

  • Marketing functions help overcome spatial separation (distance), time separation, and information gaps to facilitate exchange. (Slide 12)

The Role of Marketing in Economic Systems

  • Command Economy: Government officials decide production and distribution; may work in simple economies with little variety and adverse conditions. (Slide 17)
  • Market-Directed Economy: Prices convey value; freedom of choice; government role is limited; public interest groups monitor information and outcomes. (Slide 17)

Model of a Market-Directed Macro-Marketing System (Exhibit 1-2)

  • Many individual producers with heterogeneous supply and many individual consumers with heterogeneous demand.
  • Intermediaries and collaborators perform universal marketing functions to overcome discrepancies and separation and to create value.
  • Checks: customer votes with dollars; customer voice via satisfaction/dissatisfaction; public interest groups share information; government sets rules. (Slide 18)

Marketing’s Evolution: From Sell to Sustainable Value

  • Historical focus shifts:
    • Simple Trade Era → Production Era → Sales Era → Marketing Department Era → Marketing Company Era. (Slide 19)
  • The shift emphasizes moving from merely selling to coordinating and delivering long-term customer satisfaction and value. (Slide 19)

The Marketing Concept: A Framework for Firms and Nonprofits

  • Core idea: achieve long-term profitability (or other success metric) by achieving high customer satisfaction through total company effort. (Slide 20)
  • This requires aligning product design, pricing, promotion, distribution, and service with customer needs. (Slide 20)

Practice Knowledge Check (Partial)

  • Scenario: A wedding registry visit occurs near closing; staff choices conflict with a memo to stay late to assist; which element of the marketing concept is in dispute?
    • Options include: Customer need, Total company effort, Customer satisfaction, Marketing orientation, Product orientation. (Slide 21)
  • Another knowledge check: For nonprofits, what is a measure of long-term success? (Slide 22–23)
  • They illustrate the importance of considering customer value and stakeholder impact beyond short-term profits (Slides 21, 32, 33).

How to Increase Customer Value (Practice Question)

  • Customer value can be increased by improving one or more components of benefits and/or reducing or eliminating one or more costs. Potential approaches include:
    • Enhancing functional benefits (e.g., time savings, information, convenience)
    • Adding emotional benefits (e.g., better experience, prestige)
    • Providing life-changing or world-changing benefits (e.g., purpose, contribution to society)
    • Reducing monetary costs (price, fees) and reducing inconvenience (shipping speed, availability)
  • Question prompts (Slides 31–32): Which actions would raise perceived value? E.g., higher support, better warranty, free shipping, price adjustments, etc.

Orientation Eras: Key Distinctions

  • Production Orientation:
    • Attitude toward customers: Customers should be glad we exist; focus on cutting costs and making products.
    • Relationship with customers ends at sale.
  • Marketing Orientation:
    • Customer needs determine company plans; focus on satisfying customers after sale to build relationships.
  • Purpose Orientation:
    • Customer, employee, and community needs determine company plans; relationships extend beyond sale; company operates under a broader purpose. (Exhibit 1-4; Slides 26–28)

Role of Marketing Research Across Orientations

  • Production: Minimal focus on research; often used to determine reactions if any.
  • Marketing: Research focuses on identifying customer needs and how well they are being satisfied.
  • Purpose: Advertising communicates the company’s purpose to customers and employees; research informs opportunities aligned with purpose. (Slides 26–28)

Advertising Focus Across Orientations

  • Production: Advertising emphasizes product features and how products are made.
  • Marketing: Advertising emphasizes need-satisfying benefits.
  • Purpose: Advertising communicates the company’s purpose and value to stakeholders. (Slides 27–28)

Relationship and Costs Across Orientations

  • Relationship with customers: In Production, ends at sale; in Marketing, ongoing satisfaction leads to loyalty; in Purpose, strong and lasting relationships with customers, employees, and communities.
  • Costs: Production aims for low costs; Marketing eliminates non-value-adding costs; Purpose eliminates non-value-adding costs and aligns with broader mission. (Slides 28)

Putting It Together: What Is "Value" in Marketing?

  • Customer Value = Benefits − Costs, with benefits including functional, emotional, life-changing, and world-changing aspects; costs include monetary and inconvenience. (Slides 29)
  • Firms strive to maximize customer value to build profitable relationships (Exhibit 1-6; Slide 30).

Key Terms (Overview)

  • Production, Customer Satisfaction, Innovation, Marketing, Pure Subsistence Economy, Macro-Marketing, Universal Functions of Marketing, Buying Function, Selling Function, Transporting Function, Storing Function, Standardization & Grading, Financing, Risk Taking, Market Information Function, Intermediary, Collaborators, Economic System, Command Economy, Market-Directed Economy, Simple Trade Era, Production Era, Sales Era, Marketing Department Era, Marketing Company Era, Marketing Concept, Production Orientation, Marketing Orientation, Marketing Metrics, Triple Bottom Line, Purpose Orientation, Customer Value, Micro–Macro Dilemma, Social Responsibility, Marketing Ethics. (Slides 36–37)

Supplemental Slides and Real-World Applications

  • Supplemental slides add images and video content to support learning; some materials include questions in captions to stimulate discussion. (Slide 38)
  • Real-world examples of marketing driving innovation include: COVID-19 vaccine distribution, Doordash demand for at-home food delivery, and advertising campaigns that discourage texting and driving. (Slide 39)
  • Marketing for nonprofits includes mechanisms like the WFP app to simplify donations and reduce costs, enabling more meals to be shared. (Slide 40)
  • Alignment with global goals: Sustainable Development Goals can guide firms to balance profit with social impact. (Slide 41)

Ethical and Practical Implications Summary

  • Marketing should balance profitability with social responsibility and ethical practices to avoid criticisms (advertising excess, consumer manipulation, privacy concerns). (Slide 35)
  • The Micro–Macro Dilemma highlights the tension between current profits and long-term societal welfare; marketing ethics and the marketing concept provide a framework for evaluating trade-offs. (Slides 33–34, 35)

Quick Practice Questions (Sample)

  • Question: Which key element of the marketing concept is the main problem area when a newlywed registry customer is poorly served near closing time? (Slide 21)
    • Answer: Likely C. Customer satisfaction (context-dependent; focuses on total company effort and service in the closing-time scenario)
  • Question: A computer manufacturer seeks to increase customer value. Which approach could help? (Slide 32)
    • Answer: D. Any of the above, depending on target market needs (e.g., better support, warranty, shipping), plus price/value alignment.
  • Question: True or False — Nonprofits measure success only by profits. (Slides 22–23)
    • Answer: False; nonprofits often measure success by impact and outcomes (economic, social, environmental).