PRINCIPLES OF MARKETING NOTES Chapters 1-3

Chapter I: Customer-Driven Strategic Marketing

Marketing Focusing on Customers 

Marketing: the process of creating, distributing, promoting, and pricing goods, services, and ideas to facilitate satisfying exchange relationships with customers and to develop and maintain favorable relationships with stakeholders in a dynamic environment

Customers are the focal point of marketing activities and strategies.                                    

Target Market: focus of marketing efforts on specific groups of customers 

Marketing Deals with Products, Price, Distribution, and Promotion

Marketing is more than just advertising or selling a product. It is not based on what the company thinks that consumers need, it needs to have ACTUAL EVIDENCE to support their choices. Place is a very important aspect, it can determine if consumers even want to attempt to go to your store.

Marketing Mix: the four variables that make up marketing; product, price, distribution, and promotion, involves-

• Communicating information to help customers determine if the product will satisfy their needs

Product: a good, a service, or an idea, developing and managing a product that will satisfy customer needs

Price: decisions and actions associated with pricing objectives and policies and actual product prices, used as a competitive tool, pricing the product at an acceptable level for buyers

Distribution (Place): products must be available at the right time and in appropriate locations, must make products available to as many people as possible while minimizing inventory, transportation, and storage costs, Making the product available in the right place

Promotion: relates to activities used to inform and persuade to create a desired response, includes personal selling, sales promotions, and publicity, promoting to help customers learn about the product and determine if the product will satisfy their needs

Marketing Creates Value

Value: a customer’s subjective assessment of benefits relative to costs in determining the worth of a product

• Consumers tend to get a feel for the worth of products based on our own expectations and previous experience.

• Customer costs include anything a buyer must give up to obtain the benefits the product provides, including cost, time, effort, and risk

customer value = customer benefits - customer costs

Stakeholders: constituents who have a “stake,” or claim, in some aspect of a company’s products, operations, markets, industry, and outcomes

• A firm should be proactive and responsive to stakeholder concerns

Marketing Occurs in a Dynamic Environment

Marketing Environment: the competitive, economic, political, legal and regulatory, technological, and sociocultural forces that surrounds the customer and affects the marketing mix

Understanding the Marketing Concept

Marketing Concept: managerial philosophy that an organization should try to satisfy customer’s needs through a coordinated set of activities that also allows the organization to achieve its goals

Production Orientation (1850-1900)

• New technology and new ways of using labor brought in a lot of products where demand for these products were high

• Firms were developing the ability to produce more products, and competition was becoming more intense

Sales Orientation (1900-1950)

• Competition increased and focus shifted to selling products to many buyers

• Businesses viewed sales as the major means of increasing profits

• Business-people believed that the most important marketing activities were personal selling, advertising, and distribution

Market Orientation (1950 onward)

• An organization-wide commitment to researching and responding to customer needs

• Linked to new product innovation by developing a strategic focus to explore and develop new products to serve target markets

• Should recognize the need to create specific types of value-creating capabilities that enhance organizational performance

Customer Relationship Management

Customer Relationship Management: using information about customers to create marketing strategies that develop and sustain desirable customer relationships

Achieving the full profit potential of each customer relationship should be the fundamental goal of every marketing strategy

Profits can be obtained through relationships in the following ways:

• By acquiring new customers

• By enhancing the profitability of existing customers

• By extending the duration of customer relationships

Relationship Marketing: establishing long-term, mutually satisfying buyer-seller relationships

• Focuses on value enhancement through the creation of more satisfying exchanges

• Continually deepens the buyer’s trust in the company

• Increases the firm’s understanding of the customer’s needs

The Importance of Marketing in Our Global Economy

Marketing is Important to Businesses and the Economy

• Help to product the profits that are essential to the survival of individual businesses

• Helps to create a successful economy and contributes to the well-being of society

Marketing Fuels Our Global Economy

• Advances in technology, along with falling political barriers and the universal desire for a higher standard of living, have made marketing across national borders commonplace while stimulating economic growth

Marketing Knowledge Enhances Consumer Awareness

• Studying marketing allows us to understand the importance of marketing to customers, organizations, and our economy

Marketing Connects People Through Technology

• Technology helps marketers to understand and satisfy more customers than ever before

• Disruptive technology has changed both marketing and business

• The internet allows companies to disseminate information about their products and interact with target markets

Socially Responsible Marketing: Promoting the Welfare of Customers and Stakeholders

• Social responsibility and ethical conduct are a part of strategic planning and the implementation of marketing activities

• By addressing concerns about the impact of marketing on society, a firm can contribute to society through socially responsible activities as well as increase its financial performance

Green Marketing: a strategic process involving stakeholder assessment to create meaningful long-term relationships with customers while maintaining, supporting, and enhancing the natural environment

Marketing Offers Many Exciting Career Prospects

• The marketing field offers a variety of interesting and challenging career opportunities throughout the world

Chapter II: Planning, Implementing, and Evaluating Marketing Strategies 

The Strategic Planning Process

Strategic Marketing Management: The process of planning, implementing, and evaluating the performance of marketing activities and strategies, both effectively and efficiently

• Effectiveness: the degree to which long-term customer relationships help achieve an organization’s objectives

• Efficiency: minimizing the resources an organization uses to achieve a specific level of desired customer relationships

Strategic planning: The process of establishing an organizational mission and formulating goals, a corporate strategy, marketing objectives, and a marketing strategy

Establishing Organizational Mission, Goals, and Strategies

Developing Organizational Mission and Goals

Mission Statement: a long-term view, or vision, of what the organization wants to become

• Goals of any organization should reference the mission statement

• Mission statements, goals, and objectives must be properly implemented to achieve the desired result.

• Mission statements should be available to the public so they know what to expect from the firm

• Each level of management and each department should have goals that stem from the mission statement and provide direction for the firm’s activities.

• Each level of management and each department should have goals that stem from the mission statement and provide direction for the firm’s activities.

Developing Corporate and Business-Unit Strategies

• Planning begins at the corporate level and proceeds downward to the business-unit and marketing levels.

• Organizations are increasingly developing strategies and conducting strategic planning that moves in both directions.

• Seek out experts from many levels of the organization to take advantage of in-house expertise and a variety of opinions.

  

Strategic planners should recognize the strategic performance capacities of each SBU and carefully allocate scarce resources among those divisions.

• Market: A group of individuals and/or organizations that have needs for products in a product class and have the ability, willingness, and authority to purchase those products

• Market share: The percentage of a market that actually buys a specific product from a particular company

Product quality, order of entry into the market, and market share have been

associated with SBU success.

Market Growth/Market Share Matrix: A helpful business tool, based on the philosophy that a product’s market growth rate and its market share are important considerations in determining its marketing strategy

The long-term health of an organization depends on having some products that generate cash and others that use cash to support growth.

The major indicators of a firm’s overall health are the:

• Size and vulnerability of the cash cows

• Prospects for the stars

• Number of question marks and dogs

If resources are spread too thin, the company will be unable to finance promising new product entries or acquisitions.

Competitive Growth Strategies

• Market penetration is a strategy of increasing sales in current markets with current products.

• Market development is a strategy of increasing sales of current products in new markets.

• Product development is a strategy of increasing sales by improving present products or developing new products for current markets.

• Diversification allows firms to make better and wider use of their managerial, technological, and financial resources.

Assessing Organizational Resources and Opportunities

The strategic planning process begins with an analysis of the marketing environment, including the industry in which the company operates or intends to sell its products.

Core competencies: Things a company does extremely well, which sometimes give it an advantage over its competition

Market opportunity: A combination of circumstances and timing that permits an organization to take action to reach a particular target market

Strategic windows: Temporary periods of optimal fit between the key requirements of a market and the particular capabilities of a company competing in that market

Competitive advantage: The result of a company matching a core competency to opportunities it has discovered in the marketplace

SWOT Analysis

Assessment of an organization’s strengths, weaknesses, (internal) opportunities, and threats (external)

First-Mover Advantage: the ability of a company to achieve long-term competitive advantages by being the first to offer an innovative product in the marketplace

Late-Mover Advantage: the ability of later market entrants to achieve long-term competitive advantages by not being the first to offer a product in a marketplace

Developing Marketing Objectives and Marketing Strategies

Marketing Objective: A statement of what is to be accomplished through marketing activities, should -

• Be based on a careful study of the SWOT analysis

• Match strengths to opportunities

• Eliminate weaknesses / Minimize threats

• Be stated in clear, simple terms / Be measurable!

• Specify a time frame for its accomplishment

• Be consistent with business-unit and corporate strategies

Marketing Strategy: A plan of action for identifying and analyzing a target market and developing a marketing mix to meet the needs of that market

• Best use of the company’s resources to achieve its marketing objectives

• Key variable in strengthening organizational competitiveness

• Needs to be adapted as the environment changes

• Adaptive towards competition, consumer behavior, or other factors

Selecting a good target market is one of the most important decisions companies make during the strategic planning process

• Must be chosen before its possible to adapt its marketing mix to meet customer’s needs and preferences

• Analysis of a target market is what develops a marketing mix

• Marketing managers evaluate how entry could affect the company’s sales, costs, and profits.

• It is important to evaluate whether or not the company has the resources needed to meet the needs of target markets

In-depth research selects the appropriate target market, which is what creates specific marketing mixes for each company

All marketing mix decisions should be:

• Consistent with the business-unit and corporate strategies

• Flexible to permit the organization to alter the marketing mix in response to changes in market conditions, competition, and customer needs

By utilizing the marketing mix as a tool set, a company can detail how it will

achieve a competitive advantage.

• Sustainable Competitive Advantage: advantage that the competition cannot copy

Managing Marketing Implementation

Marketing Implementation: the process of putting marketing strategies into action

Organizing the Marketing Unit

Companies that truly adopt the marketing concept develop an organizational culture that is based on a shared set of beliefs that places the customer’s needs at the center of decisions about strategy and operations.

Centralized organization: A structure in which top-level managers delegate little authority to lower levels

Decentralized organization: A structure in which decision-making authority is delegated as far down the chain of command as possible

Coordinating and Communicating 

Marketing managers must coordinate diverse employee actions to achieve objectives and work closely with other departments to ensure marketing activities align with other functions of the firm.

It is important that communication flows upward, from the front lines of the organization to upper management.

Customer-contact employees can provide marketing managers with a rich source of information.

• What customers require

• How products are selling

• The effectiveness of marketing activities

• Any issues with marketing implementation

Evaluating Marketing Strategies

Strategic performance evaluation – Establishing performance standards, measuring actual performance, comparing actual performance with established standards, and modifying the marketing strategy, if needed

Performance Standard – An expected level of performance against which actual performance can be compared

• Examples: a 20 percent reduction in customer complaints, a monthly sales quota of $150,000, or a 10 percent increase in new-customer accounts

The principal means by which a marketer can gauge whether a marketing strategy has been effective in achieving objectives is by analyzing the actual performance of the marketing strategy.

Creating the Marketing Plan

Marketing Plan: A written document that specifies the activities to be performed to implement and control the organization’s marketing strategies

A clear and well-written marketing plan:

• Provides a uniform marketing vision for the firm and is the basis for internal communications

• Delineates marketing responsibilities and tasks and outlines schedules for implementation

• Presents objectives and specifies how resources are to be allocated to achieve them

• Helps marketing managers monitor and evaluate the performance of a marketing strategy

Organizations should make sure that the marketing plan aligns with corporate and business-unit strategies and is accessible to and shared with all key employees.

Chapter III: The Marketing Environment, Social Responsibility, and Ethics

The Marketing Environment

Several forces constitute the marketing environment:

Competitive, Economic, Political, Legal and Regulatory, Technological, Sociocultural

Environment Scanning: the process of collecting information about forces in the marketing environment

Observation         Secondary Sources Marketing Research

• The internet has become a popular scanning tool because it makes data more accessible and allows companies to gather needed information quickly

Environmental Analysis: the process of accessing and interpreting the information gathered through environmental scanning

A manager evaluates the information for accuracy, tries to resolve inconsistencies in the data, and, if warranted assigns significance to the findings

Marketers take two general approaches to environmental forces:

• Passive/reactive: accepting them as uncontrollable

• Proactive: attempting to influence and shape them

There is no best way to react

Decisions depend on: managerial philosophies, objectives, financial resources, customers, and human resource skills, and the environment that the organization operates in

Political action is another way to affect environmental forces

A single organization is unlikely to significantly change major economic factors, even if they would be able to influence legislation through lobbying

Competitive Forces

Competition: other firms that market products that are similar to or can be substituted for a firm’s products in the same geographic area, can be classified to one of four types- 

• Brand: firms that market products with similar features and benefits to the same customers at similar prices

• Product: firms that compete in the same product class but market products with different features, benefits, and prices

• Generic: firms that provide very different products that solve the same problem or satisfy the same basic customer need

• Total Budget: firms that compete for the limited financial resources of the same customers
  

  

Marketers need to monitor the actions of major competitors to determine what specific strategies competitors are using and how these strategies affect their own

The firm must develop a system for gathering ongoing information about competitors and potential competitors.

• Information about competitors allows marketing managers to assess the performance of their own marketing efforts and to recognize the strengths and weaknesses in their own marketing strategies.

Economic Forces

Buying Power: Resources – such as money, goods, and services– that can be traded in an exchange

The major financial sources of buying power are income, credit, and wealth

Income: for an individual, the amount of money received through wages, rents, investments, pensions, and subsidy payments for a given period

Disposable Income: after-tax income (marketers are most interested in this!)

Discretionary Income: disposable income available for spending and saving after an individual has purchased the basic necessities of food, clothing, and shelter

Economic Conditions

Supply and Demand, Buying Power, Willingness to Spend, Consumer Expenditure Levels, Intensity of Competitive Behavior

Business Cycle: a pattern of economic fluctuations that has four stages:

• Prosperity: a stage of the business cycle characterized by the low employment and relatively high total income, which together ensure high buying power (provided the inflation rate stays low)

• Recession: a stage of the business cycle during which unemployment rises and total buying power decline, interest rates high, stifling both consumer and business spending

• Depression: a stage of the business cycle during when unemployment is extremely high, wages are very low, total disposable income is at a minimum, and consumers lack confidence in the economy

• Recovery: a stage of the business cycle in which the economy moves from depression or recession to prosperity

Political Forces

Political, legal, and regulatory forces of the marketing environment are closely interrelated

• Legislation is enacted

• Legal decisions are interpreted by courts

• Regulatory agencies are created and operated, for the most part, by elected or appointed officials

Marketers may:

• View political forces as beyond their control and simply adjust to conditions that arise from those forces

• Influence the process through contributions and lobbying (is this okay?)

Legal and Regulatory Forces

Better Business Bureau (BBB): A system of nongovernmental, independent, local regulatory agencies supported by local businesses that helps settle problems between customers and specific business firms

Technological Forces

Technology: The application of knowledge and tools to solve problems and perform tasks more efficiently

Robotics, self-driving cars, artificial intelligence (AI), and marketing analytics are rapidly evolving the state of technology.

More than 50 billion common devices will be connected to the internet within the next few years, including cars, refrigerators, medical devices, etc.

It is important for organizations to determine when a technology is changing an industry and to define the  strategic influence of the new technology.

Through a procedure known as technology assessment, managers try to foresee the effects of new products and processes on their firm’s operations, on other business organizations, and on society in general.

Sociocultural Forces

Sociocultural Forces: The influences in a society and its culture(s) that change people’s:

Attitudes    Beliefs    Norms    Customs    Lifestyles

Changes in a population’s demographic characteristics have a significant bearing on relationship and individual behavior.

• Increasing proportion of older consumers and singles

• Declining birth rate

• Increasing multicultural nature of society

A more diverse customer base means marketing practices must be modified and diversified to meet its changing needs.

Social Responsibility and Ethics in Marketing

Social Responsibility: An organization’s obligation to maximize its positive impact and minimize its negative impact on society, can:

• Improve Employee Performance

• Improve Customer Loyalty

• Generate Positive Publicity

• Boost Sales

• Attract Goodwill, Publicity, Customers, and Employees

• Generate Indirect Long-Term Benefits

Stakeholders include those constituents who have a “stake” or claim in some aspect of a company’s products, operations, markets, industry, and outcomes; these include customers, employees, investors and shareholders, suppliers, governments, communities, and many others.

A stakeholder orientation involves understanding and addressing the needs of all stakeholders, including communities and special-interest groups

Marketing Citizenship: The adoption of a strategic focus for fulfilling the economic, legal, ethical, and philanthropic social responsibilities expected by stakeholders

Legal Dimension

Marketers are expected to follow all laws and regulations designed to keep U.S. companies’ actions within the range of acceptable conduct and fair competition.

Not all legal cases are violations of the law; sometimes they are an attempt to interpret the law.

When marketers engage in deceptive practices to advance their own interests over those of others, charges of fraud may result.

Deceptive advertising in particular causes consumers to become defensive toward all promotional messages, and to become distrustful of all advertising, thus harming both consumers and marketers.

Ethical Dimension

Economic and legal responsibilities are the most basic aspects of social responsibility; failure to consider them may mean that a marketer does not operate long enough to engage in ethical or philanthropic activities.

Ethical marketing decisions foster trust, which helps build long-term marketing relationships.

Ethical Issue: An identifiable problem, situation, or opportunity requiring a choice among several actions that must be evaluated as right or wrong, ethical or unethical NOTE: Just because it’s legal does not mean it is ethical!

• Any time an activity causes marketing managers or customers in their target market to feel manipulated or cheated, a marketing ethical issue exists, regardless of its legality.

  

Philanthropic Dimension

Philanthropic responsibilities are not required of a company, but they promote human welfare or goodwill.

Cause-related Marketing: The practice of linking products to a particular social cause on an ongoing or short-term basis (this can be tricky!!)

Strategic Philanthropy Approach: The synergistic use of organizational core competencies and resources to address key stakeholders’ interests and achieve both organizational and social benefits

A business must determine what customers, regulators, competitors, and society in general want or expect in terms of social responsibility.

Many companies are adopting eco-friendly business practices and/or supporting environmental initiatives.

The consumption of green products can be promoted by emphasizing the shared responsibility between the firm and consumers in protecting the environment.

Consumers are becoming skeptical of greenwashing, which occurs when firms claim to protect the environment but fail to demonstrate their commitment.

Consumerism: Organized efforts by individuals, groups, and organizations to protect consumers’ rights

The movement’s major forces are:

• Individual consumer advocates

• Consumer organizations and other interest groups

• Consumer education

• Consumer laws

Incorporating Social Responsibility and Ethics in Strategic Planning

It is important to distinguish between marketing ethics and social responsibility.

• Ethics relates to individual and group decisions—judgments about what is right and wrong in a particular decision-making situation.

• Social Responsibility deals with the total effect of marketing decisions on society.

Codes of Conduct: Formalized rules and standards that describe what a company expects of its employees

• Codes of conduct promote ethical behavior by reducing opportunities for unethical behavior.

• Codes help marketers deal with ethical issues or dilemmas that develop in daily operations.

• Companies should consistently enforce standards and correct or impose negative consequences on those who violate codes of conduct.

Firms have a responsibility to treat customers ethically.

• More firms are moving beyond a market orientation and are adopting a stakeholder   that focuses on all constituents.

By encouraging employees to understand their markets, companies can help them respond to stakeholder demands.

AI systems that can think like humans will need to make ethical decisions, requiring effective ethics and compliance systems to be programmed into AI devices.

• There is a direct association between corporate social responsibility and customer satisfaction, profits, and market value.

Companies that fail to develop strategies and programs to incorporate ethics and social responsibility into their organizational culture—a set of values, beliefs, goals, norms, and rituals that members of an organization share—may pay the price with poor marketing performance, the potential costs of legal violations, civil litigation, and damaging publicity.