INTRODUCTION TO MARKETING, CONSUMER, AND PRODUCT- BULLETPROOF VEST

Introducing Marketing

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Introducing Marketing

John Burnett

Copyright © 2011 John Burnett

Editor-In-Chief: John Burnett

Associate Editor: Marisa Drexel

Editorial assistants: Aashka Chaudhari, Rachel Pugliese, Jackie Sharman, LaKwanzaa Walton

Proofreaders: Tessa Greenleaf, Desiree White

Volunteers: Catherine Land, Bryan Wethington

For any questions about this text, please email: [email protected]

The Global Text Project is funded by the Jacobs Foundation, Zurich, Switzerland

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Introducing Marketing 2 A Global Text

Table of Contents About the author............................................................................................................................................... 5 Preface............................................................................................................................................................... 6

1. Introducing marketing ............................................................................................................ 8 Elvis—alive and well ........................................................................................................................................ 8 Marketing: definition and justification ......................................................................................................... 10 Keys to marketing success ............................................................................................................................. 29

2. Understanding and approaching the market....................................................................... 34 Defining the market........................................................................................................................................ 35 Types of markets............................................................................................................................................. 36 Approaching the market................................................................................................................................. 38

3. Marketing research: an aid to decision making....................................................................59 The nature and importance of marketing research....................................................................................... 60 What needs researching in marketing?.......................................................................................................... 61 Procedures and techniques in marketing research........................................................................................ 63 Conducting the research................................................................................................................................. 73 Processing the data......................................................................................................................................... 73 The value of marketing research.................................................................................................................... 73

4. Understanding buyer behavior............................................................................................. 80 Till death do us part....................................................................................................................................... 80 Buyer behavior and exchange......................................................................................................................... 81 Buyer behavior as problem solving ............................................................................................................... 82 Organizational buyer behavior ...................................................................................................................... 98

5. External considerations in marketing ................................................................................108 External factors that affect planning ............................................................................................................ 110

6. Marketing in global markets................................................................................................134 Defining international marketing................................................................................................................. 135 Standardization and customization.............................................................................................................. 136 Reasons for entering international markets................................................................................................. 137 Reasons to avoid international markets....................................................................................................... 138 The stages of going international................................................................................................................. 138 The international marketing plan................................................................................................................. 141 The international marketing environment................................................................................................... 146

7. Introducing and managing the product.............................................................................. 159 Defining the product..................................................................................................................................... 160 Classification of products.............................................................................................................................. 162 Product planning and strategy formulation ................................................................................................ 167

8. Communicating to mass markets........................................................................................ 195 The role of IMC............................................................................................................................................. 197 The objectives of marketing communication.............................................................................................. 200 How we communicate................................................................................................................................... 201 Designing an IMC strategy........................................................................................................................... 204 Understanding advertising........................................................................................................................... 209 Sales promotion and public relations........................................................................................................... 214

9. Pricing the product.............................................................................................................. 237 Price defined: three different perspectives.................................................................................................. 238 Pricing objectives.......................................................................................................................................... 241 Developing a pricing strategy....................................................................................................................... 242 New product pricing..................................................................................................................................... 246 Price lines...................................................................................................................................................... 247 Price flexibility.............................................................................................................................................. 248

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Price bundling............................................................................................................................................... 251 Psychological aspects of pricing.................................................................................................................... 251 Alternative approaches to determining price............................................................................................... 253 The future of pricing..................................................................................................................................... 257

10. Channel concepts: distributing the product..................................................................... 262 The dual functions of channels..................................................................................................................... 263 The evolution of the marketing channel...................................................................................................... 264 Flows in marketing channels........................................................................................................................ 264 Functions of the channel.............................................................................................................................. 266 Channel institutions: capabilities and limitations....................................................................................... 267 Organizing the channel................................................................................................................................. 279 The channel management process............................................................................................................... 280 The human aspect of distribution................................................................................................................ 284

Introducing Marketing 4 A Global Text

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About the author

Professor John Burnett is the author/co-author of twenty books and over 60

academic articles. He recently retired after 41 years as a professor of marketing and

lives in Carlsbad, California. For the last twenty years much of his focus has been on

marketing for nonprofits. The result has been numerous workshops, the creation of

several marketing plans, and the book entitled, Nonprofit Marketing Best Practices.

Consequently, he is particularly proud offering his book, Introducing Marketing, to

the Global Text organization. He finds the possibility of millions of the worlds’

impoverished to have access to his book as being quite remarkable!

Introducing Marketing 5 A Global Text

Dr. John Burnett

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Preface

Through good economic times and bad, marketing remains the pivotal function in any business. Determining

and satisfying the needs of customers through products that have value and accessibility and whose features are

clearly communicated is the general purpose of any business. It is also a fundamental definition of marketing. This

text introduces students to the marketing strategies and tools that practitioners use to market their products.

Balanced coverage

To emphasize how various marketing areas work together to create a cohesive strategy, I define and explain the

various marketing areas and their comparative strengths and weaknesses, as well as stress how to best "mix"

marketing tools in a strategic, integrated plan. The book begins with a discussion of the marketing planning

process, continues with a discussion of the preliminary tasks of developing the plan, and concludes with the tactics

available to the marketing planner. This complete coverage ensures that students will learn how to plan, execute,

and evaluate a marketing program that is effective and efficient from start to finish.

International and technology coverage

The chapter “Introducing marketing” recognizes the impact of the global community on marketing practices.

International implications are discussed in the chapter “Marketing in global markets” and are also integrated into

the text through relevant examples.

Technology is altering many marketing practices. The World Wide Web, databases, tracking devices, and market

simulations are only a few examples of the ways technology has affected marketing strategies. Technology coverage

is woven throughout the text, features, and end-of-chapter materials of this book. (Note that because technology is

changing so rapidly, it is virtually impossible for a text such as this to remain absolutely current.)

Current examples from all types and sizes of business

This book demonstrates how companies use marketing. Specific examples appear not only in text discussions,

but also in the chapter openers, the “Integrated Marketing” and “Newsline” boxes, and the end of chapter cases.

Examples and stories bring theory to life, demonstrating the relevance of the reading. The example subjects are

vivid, current, and varied. They range from Fortune 500 companies to smaller, privately held businesses. The text

also focuses on international companies of all sizes.

Learning is not always about success stories. Diagnosing problems and failures is an important aspect of critical

thinking, and examples of such are introduced to challenge students to learn from others' mistakes and better

manage real-world problems.

A clear, effective organization

Time is a precious commodity to instructors and students. Market feedback revealed that instructors want an

introductory marketing text that (1) covers the basics well and (2) omits unnecessary detail. Careful selection of

topics, appropriate depth of coverage, and concise writing helped us meet those two objectives. Instead of the

typical 20-25 chapters, this text offers 10 chapters of manageable length.

Helpful pedagogy

We introduce several features to reinforce learning and help students build business skills that they can use on

the job. Our comprehensive learning system enables students to master materials quickly and thoroughly. Some

Introducing Marketing 6 A Global Text

Preface

features of that system include opening vignettes, performance-based learning objectives, concept reviews,

“Integrated marketing” boxes, “Newsline” boxes, end-of-chapter projects, and end-of-chapter cases.

ACKNOWLEDGMENTS

Introducing Marketing, First Edition benefits from insights provided from marketing educators around the

country that carefully read and critiqued draft chapters. I am pleased to express my appreciation to the following

colleagues for their contributions:

Joe K. Ballenger

Stephen F. Austin–State University Dong Jin Lee

State University of New York (SUNY), Binghamton Amit Bhatnagar

University of Wisconsin, Milwaukee

Thomas L. Ainscough–College of William and Mary

Jeffrey B. Schmidt

University of Illinois at Urbana-Champaign

James V. Spiers–Arizona State University

For the Wiley edition, I would also like to thank the Wiley team including my editor, Jeff Marshall, marketing

manager, Charity Robey, production editor, Norine Pigliucci, Cindy Rhoads, Dawn Stanley, Mike Brennan, and

Elyse Rieder for their hard work and support of this project. A great deal of thanks also goes to my friend and

colleague, Pallab Paul, for his outstanding contributions to the website.

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1. Introducing marketing Learning objectives

As you read the chapter, you should develop an understanding of the following key marketing concepts:

• the important role marketing can play in the success of an organization

• organizations that correctly employ marketing have several common characteristics

• the various kinds of marketing

• the strategic workings of marketing components

Elvis—alive and well

It is Elvis week in Memphis, Tennessee in the United States and all over town they have banners: ''20 years/Still

Rocking.” Is it just us, or is it weird to wax so upbeat about the twentieth anniversary of a death? You cannot help

but feel that the world's got the Elvis Presley it wanted: a changeless, ageless object of contemplation and

veneration. Elvis Week culminates in an event called Elvis-The Concert 2000 in which the man himself, resurrected

by video technology, will sing with his living ex-band mates and the Memphis Symphony Orchestra. Who would not

secretly prefer this fail-safe digitized spectacle to a weary 62-year-old grinding out "If I Can Dream" one more time?

Twenty years ago, no one close to Elvis could have imagined that his fans would spend over USD 250 million

annually on Elvis dolls, plates, key chains, towels, and wigs—to name just a few items. Two years after Elvis's death,

his estate was worth less on paper than it owed in taxes. Then, in 1979, Priscilla Presley, Elvis's ex-wife, was named

an executor of the estate for her daughter. The family's crown jewels—Elvis's recordings—had been sold off years

earlier and Priscilla had just one chance to save the legacy. She gambled that Elvis's name, image, and likeness were

worth something. She turned his home into a roadside attraction to finance a legal war, fighting for control of all

that was Elvis.

Priscilla concluded that there was only one way to save Graceland: sell tickets to the hundreds of gawkers who

daily pressed their faces against Elvis's gates. Meanwhile, why not sell some gewgaws to the fans that were already

buying cheesy trinkets at the strip mall across the street? Buoyed by an initial investment of USD 560,000,

Graceland's doors were opened to the public in 1982. It took 38 days to recoup their investment; 350,000 visitors

walked through the house the first year. "I felt I was betraying Elvis", says Priscilla, recalling her decision to enter

the amusement business. "Graceland was his pride and joy. But it came down to the reality that I had to open it up

for my daughter's future."

Today 750,000 people visit Graceland each year—52 per cent of them under 35, which suggests this is a business

with a future. The mansion has upgraded its public facilities many times over the years, but there still are no

vending machines on the grounds and the lawns have never been turned into a parking lot. The original 24 acres

(97,125 meters) have been expanded into an 80-acre (323,749-meter) compound and Priscilla intends to add a

hotel to the complex. There are also plans for a casino in Las Vegas—perhaps with an Elvis wedding chapel and an

Introducing Marketing 8 A Global Text

1. Introducing marketing

international chain of Hard Rock Cafe-style restaurants called Elvis Presley's Memphis. Finally, a staff of 10 lawyers

is employed full-time by Elvis Presley Enterprises simply to protect Elvis's image from interlopers 1.

© Elvis Presley Enterprises, Inc.

Introduction

The success of Elvis Presley Enterprises was a result of the insights and courage of Priscilla Presley. Despite her

lack of formal training in marketing, she exhibited a creative approach toward doing business that will become

more and more necessary as the twenty-first century continues. Innovative thinking has become a prerequisite for

success in today's global environment, which is saturated with near clone products being sold by millions of

comparable competitors. The status quo will no longer suffice. The need for constant change paired with clear

strategies is now essential.

Marketing constitutes just one of the functions available to every business. Along with research, production,

finance, accounting, and a myriad of other functions, marketing contributes to the ability of a business to succeed.

In many businesses, marketing may be deemed of highest importance; in others, it may be relegated to a lesser role.

The very existence of business depends upon successful products and services, which in turn rely on successful

marketing. For this reason, every business person will benefit from even basic marketing knowledge. Moreover,

marketing principles have been effectively applied to several nonbusiness institutions for more than 30 years.

Bankers, physicians, accounting firms, investment analysts, politicians, churches, architectural firms, universities,

and the United Way have all come to appreciate the benefits of marketing.

1 Sources: Corie Brown, "Look Who's Taking Care of Business," Newsweek, August 18, 1997, p. 62. Karen

Schoemer, "Burning Love," Newsweek, August 18, 1997, pp. 58—61. G. Brown, "More Early Elvis Unearthed,"

The Denver Post, August 15, 1997, p. 9F. Greg Hassell, "King of Trees Rises From Graceland," Houston

Chronicle, Dec. 8,1999, p. 11. Duncan Hughes, "Elvis is Back From the Dead Financially," Sunday Business,

August 15, 1999, p. 23.

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A word of warning: there is a long-standing myth that marketing is easy. After going through this book you may

conclude that marketing is interesting, fun, challenging—even vague—but it is not easy. Whether you like numbers

or hate numbers, like people or hate people, like doing the same thing every day or like constant change there are

opportunities for you in marketing.

Marketing: definition and justification Defining marketing

Noted Harvard Professor of Business, Theodore Levitt, states that the purpose of all business is to "find and

keep customers". Furthermore, the only way you can achieve this objective is to create a competitive advantage.

That is, you must convince buyers (potential customers) that what you have to offer them comes closest to meeting

their particular need or want at that point in time. Hopefully, you will be able to provide this advantage

consistently, so that eventually the customer will no longer consider other alternatives and will purchase your

product out of habit. This loyal behavior is exhibited by people in the US who drive only Fords, brush their teeth

only with Crest, buy only Dell computers, and have their plumbing fixed only by "Samson Plumbing—On Call 24

hours, 7 days a week". Creating this blind commitment, without consideration of alternatives, to a particular brand,

store, person, or idea is the dream of all businesses. It is unlikely to occur, however, without the support of an

effective marketing program. In fact, the specific role of marketing is to provide assistance in identifying,

satisfying, and retaining customers.

While the general tasks of marketing are somewhat straightforward, attaching an acceptable definition to the

concept has been difficult. A textbook writer once noted, "Marketing is not easy to define. No one has yet been able

to formulate a clear, concise definition that finds universal acceptance". Yet a definition of some sort is necessary if

we are to layout the boundaries of what is properly to be considered "marketing". How do marketing activities differ

from non-marketing activities? What activities should one refer to as marketing activities? What institutions should

one refer to as marketing institutions?

Marketing is advertising to advertising agencies, events to event marketers, knocking on doors to salespeople,

direct mail to direct mailers. In other words, to a person with a hammer, everything looks like a nail. In reality,

marketing is a way of thinking about business, rather than a bundle of techniques. It is much more than just selling

stuff and collecting money. It is the connection between people and products, customers and companies. Like

organic tissue, this kind of connection or relationship is always growing or dying. It can never be in a steady state.

Like tissue paper, this kind of connection is fragile. Customer relationships, even long-standing ones, are

contingent on the last thing that happened.

Tracing the evolution of the various definitions of marketing proposed during the last 30 years reveals two

trends: (1) expansion of the application of marketing to non-profit and non-business institutions; e.g. charities,

education, or health care; and (2) expansion of the responsibilities of marketing beyond the personal survival of the

individual firm, to include the betterment of society as a whole. These two factors are reflected in the official

American Marketing Association definition published in 1988.

“Marketing is the process of planning and executing the conception. pricing, promotion, and

distribution of ideas, goods, and services to create exchanges that satisfy individual (customer) and

organizational objectives.”1

Introducing Marketing 10 A Global Text

1. Introducing marketing

While this definition can help us better comprehend the parameters of marketing, it does not provide a full

picture. Definitions of marketing cannot flesh out specific transactions and other relationships among these

elements. The following propositions are offered to supplement this definition and better position marketing within

the firm:

The overall directive for any organization is the mission statement or some equivalent statement of

organizational goals. It reflects the inherent business philosophy of the organization.

• Every organization has a set of functional areas (e.g. accounting, production, finance, data processing,

marketing) in which tasks that are necessary for the success of the organization are performed. These

functional areas must be managed if they are to achieve maximum performance.

• Every functional area is guided by a philosophy (derived from the mission statement or company goals)

that governs its approach toward its ultimate set of tasks.

• Marketing differs from the other functional areas in that its primary concern is with exchanges that take

place in markets, outside the organization (called a transaction).

• Marketing is most successful when the philosophy, tasks, and manner of implementing available

technology are coordinated and complementary.

Perhaps an example will clarify these propositions: L.L. Bean is an extremely successful mail order company.

The organization bases much of its success on its longstanding and straightforward mission statement: "Customer

Satisfaction: An L.L. Bean Tradition" (Proposition 1). The philosophy permeates every level of the organization and

is reflected in high quality products, fair pricing, convenience, a 100 per cent satisfaction policy and, above all,

dedication to customer service (Proposition 2). This philosophy has necessitated a very high standard of

production, efficient billing systems, extensive and responsive communication networks, computerization,

innovative cost controls, and so forth. Moreover, it has meant that all of these functional areas have to be in

constant communication, must be totally coordinated, and must exhibit a level of harmony and mutual respect that

creates a positive environment in order to reach shared goals (Proposition 3). The L.L. Bean marketing philosophy

is in close harmony with its mission statement. Everything the marketing department does must reinforce and

make real the abstract concept of "consumer satisfaction" (Proposition 4). The price-product-quality relationship

must be fair. The product must advertise in media that reflects this high quality. Consequently, L.L. Bean advertises

through its direct-mail catalogue and through print ads in prestigious magazines (e.g. National Geographic). It also

has one of the most highly regarded websites.(AD 1) Product selection and design are based upon extensive

research indicating the preferences of their customers. Since product delivery and possible product return is

critical, marketing must be absolutely sure that both these tasks are performed in accordance with customers'

wishes (Proposition 5). While one might argue that the marketing function must be the most important function at

L.L. Bean, this is not the case. L.L. Bean is just as likely to lose a customer because of incorrect billing (an

accounting function) or a flawed hunting boot (a product function) as it is from a misleading ad (a marketing

function).

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AD 1: The website for L.L. Bean represents the newest form of marketing communication.

Admittedly, marketing is often a critical part of a firm's success. Nevertheless, the importance of marketing must

be kept in perspective. For many large manufacturers such as Proctor & Gamble, Microsoft, Toyota, and Sanyo,

marketing represents a major expenditure, and these businesses depend on the effectiveness of their marketing

effort. Conversely, for regulated industries (such as utilities, social services, or medical care or small businesses

providing a one-of-a-kind product) marketing may be little more than a few informative brochures. There are

literally thousands of examples of businesses—many quite small that have neither the resources nor the inclination

to support an elaborate marketing organization and strategy. These businesses rely less on research than on

common sense. In all these cases, the marketing program is worth the costs only if it fits the organization and

facilitates its ability to reach its goals.

Newsline: Picture your mission

Artist Linda Armantrout, owner of Armantrout Graphic Design and Illustration, works with

businesses to help them picture their goals literally—through a "pictorial mission statement".

As opposed to the typical written mission statement that is handed down to employees from

management. Armantrout creates a bright watercolor picture of the statement, after receiving input

from both employees and managers. The final result is usually a collage of sorts that depicts what is

important to the staff and the business—such as clients, products, services, and ethics.

The mission statement picture that Armantrout designs is framed and hung at the company to

remind employees of their goals. The pictorial statements also can be put on coffee mugs, jackets,

and desktop posters, or turned into screen savers.

Introducing Marketing 12 A Global Text

1. Introducing marketing

One of Armantrout's clients, BancOne Leasing Corporation, came up with a colorful image of a

globe surrounded by images representing its clients and services. Drawings of airplanes and buses

represent what the company leases and the globe represents its national presence. 2

Justification for study

This task of determining the appropriateness of marketing for a particular business or institution serves as a

major justification for learning about marketing. Although marketing has clearly come of age during the decades of

the 1970s, 1980s, and 1990s, there is still a great deal of misunderstanding about the meaning and usefulness of

marketing. For most of the global public, marketing is still equated with advertising and personal selling. While

marketing is both of those, it is also much more.

The business community can attribute a partial explanation for this general lack of understanding about

marketing to the uneven acceptance and adoption of marketing. Some businesses still exist in the dark ages when

marketing was defined as "the sales department will sell whatever the plant produces". Others have advanced a bit

further, in that they have a marketing officer and engage in market research, product development, promotion and

have a long list of marketing activities. More and more businesses firmly believe that the aim of marketing is to

make selling superfluous, meaning that the marketer knows and understands the customer so well that the product

or service is already what is wanted and sells itself. This does not mean that marketers ignore the engineering and

production of the product or the importance of profits. It does suggest, however, that attention to customers—who

they are and who they are going to be—is seen to be in the best long-term interest of the company. As a student

interested in business, it is beneficial for you to have an accurate and complete comprehension of the role

marketing can and should play in today's business world.

There are also several secondary reasons to study marketing. One we have already alluded to in our discussion

on definitions: The application of marketing to more nonprofit and nonbusiness institutions is growing. Churches,

museums, the United Way, the US Armed Forces, politicians, and others are hiring individuals with marketing

expertise. This has opened up thousands of new job opportunities for those with a working knowledge of marketing.

Even if you are not getting a degree in marketing, knowing about marketing will pay off in a variety of careers.

Consider the following individuals:

• Paul Moore, an engineer specializing in earth moving equipment, constantly works with product

development and sales personnel in order to create superior products.

• Christy Wood, a certified public accountant (CPA), is a top tax specialist who spends much of her time

maintaining customer relationships, and at least three days a month seeking new customers.

• Steve Jacobson, a systems analyst and expert programmer, understands that his skills must be used to find

the right combination of hardware and software for every one of his customers.

• Doris Kelly, a personnel manager, must be skilled at finding, hiring, and training individuals to facilitate

her organization's marketing efforts.

2 Sources: Katie Ford. "Picture Your Goals In Color," The Denver Business Journal, March 17—18, 1999, pp. 33A,

35A. Shirleen Holt, "Mission Possible," Business Week, August 16, 1999, p. F—12. Teri Lammers, ''The Effective

and Indispensable Mission Statement," Inc., August. 1999, p. 75.

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• Craig Roberts, an ex-Microsoft engineer, has recently started a dot-com company and is in the process of

raising capital.

There are two final factors that justify the study of marketing for nearly every citizen. First of all, we are all

consumers and active participants in the marketing network. Understanding the rudiments of marketing will make

us better consumers, which in turn will force businesses to do their jobs better. Second, marketing has an impact on

society as a whole. Concepts such as trade deficit, embargo, devaluation of a foreign currency, price fixing,

deceptive advertising, and product safety take on a whole new meaning when we view them in a marketing context.

This knowledge should make you a more enlightened citizen who understands what such social and political issues

mean to you and to our society.

Marketing capsules (like the one below) summarize the information throughout this text.

Characteristics of a marketing organization

As noted earlier, the application of marketing in a particular organization varies tremendously, ranging from

common-sense marketing to marketing departments with thousands of staff members and multimillion-dollar

budgets. Yet both may have a great deal in common in respect to how they view the activity called marketing. We

refer to these common characteristics as the Cs of Marketing. They are your clues that a business understands

marketing.

Capsule 1: Review

1. The purpose of marketing is to help find and keep customers by creating a competitive advantage.

2. Marketing, one of several functions operating in an organization, is directed by the mission statement of

the organization and provides certain tools to reach objectives.

3. The value of marketing must be kept in perspective: it must contribute to the growth of the firm.

4. The primary reasons for studying marketing are:

a. It is important to assess the role marketing should play in the firm.

b. Marketing offers growing career opportunities.

c. Marketing enhances our chances of becoming more effective consumers and citizens.

Consumer content

What makes the existence of any organization possible is that there are a significant number of people who need

the product or service offered by that organization. As soon as that group becomes too small, or the need no longer

exists, or some other organization can satisfy that need better, the organization will be eliminated. That is the way

of a free economy. Thus, a politician does not get re-elected, an inner-city church closes its doors, the money

needed to cure AIDS is not allocated, and the Colorado's Vail Ski Resort in the US files for bankruptcy.

In the case of business organizations, and marketing organizations in particular, the people with the needs are

called consumers or customers. In marketing, the act of obtaining a desired object from someone by offering

something of value in return is called the exchange process. Moreover, the exchange between the person with the

need (who gives money or some other personal resource) and the organization selling this need-satisfying thing (a

product, service, or idea) is inherently economic, and is called a transaction. There tends to be some negotiation

between the parties. Individuals on both sides attempt to maximize rewards and minimize costs in their

transactions so as to obtain the most profitable outcomes. Ideally, all parties achieve a satisfactory level of reward.

Introducing Marketing 14 A Global Text

1. Introducing marketing

In each transaction, there is an underlying philosophy in respect to how the parties perceive the exchange.

Sometimes deception and lying permeate the exchange. Other exchanges may be characterized as equitable, where

each party receives about the same as the other—the customer's need is satisfied and the business makes a

reasonable profit. With the emergence of the Internet and e-commerce during the 1990s, the nature of the exchange

for many businesses and customers has changed dramatically. Today's consumers have access to far more and far

better information. They also have many more choices. Businesses must provide a similar level of information and

must deal with new competitors that are quicker, smarter, and open 24 hours a day.

An organization that employs marketing correctly knows that keeping customers informed is easier if they keep

in constant contact with the customer. This does not necessarily mean that they write and call regularly, although it

could. Rather, it more likely means that a marketing organization knows a great deal about the characteristics,

values, interests, and behaviors of its customers, and monitors how these factors change over time. Although the

process is not an exact science, there is sufficient evidence that marketers who do this well tend to succeed.

When this attempt to know as much about the consumer as possible is coupled with a decision to base all

marketing on this information, it is said that the organization is consumer-oriented or has adopted the marketing

concept. It means working back from the customers' needs, rather than forward from the factory's capabilities.

Both historically and currently, many businesses do not follow the marketing concept. Companies such as Texas

Instruments and Otis Elevator followed what has been labeled a production orientation, where the focus is on

technology, innovation, and low production costs. Such companies assume that a technically superior or less

expensive product sells itself. There are also companies, such as Amway, where sales and marketing are essentially

the same thing. This sales orientation assumes that a good salesperson has the capability to sell anything. Often,

this focus on the selling process may ignore the consumer or view the consumer as someone to be manipulated.

Insightful businesses acknowledge the importance of production and sales, but realize that a three-step process is

most effective: (1) continuously collect information about customers' needs and competitors' capabilities; (2) share

the information across departments; and (3) use the information to create a competitive advantage by increasing

value for customers. This is true marketing.

Company capabilities

All marketing organizations try to objectively compare their existing capabilities with their ability to meet the

consumer's needs now and in the future. Moreover, when deficiencies are found, a good marketing organization

must be willing to make changes as quickly as possible. When Toyota realized that their products were not

connecting with consumers aged 35 and younger, it decided to take direct action. In 1999, it gathered eight people

in their 20s and 30s from around the company into a new, ethnically diverse marketing group called "genesis".

Their first assignment was to launch three cars meant to pull in younger buyers: the entry-level ECHO subcompact,

a sporty new two-door Celica, and the MR2 Spyder, a racy convertible roadster.

Although assessing company capabilities often begins in the marketing area, all the business functions must be

assessed. Do we have the technical know-how to produce a competitive product? Do we have the plant capacity? Do

we have the necessary capital? Do we have good top management? A "no" to any of these questions may stymie the

marketing effort. Conversely, a strong advantage in cost control or dynamic leadership may provide the company

with a competitive marketing advantage that has little to do with marketing, but everything to do with the business

succeeding.

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Communication

Few doubt that the secret of success in any relationship is communication. This is especially true in a marketing

relationship, where the attitude of both parties is frequently skeptical, the nature of the contact is hardly intimate,

and the message delivery system tends to be impersonal and imprecise. It is because of these factors that

communication plays such an important role in a marketing organization.

Marketers know that consumers are constantly picking up cues put out by the organization, or about the

organization, that they use to form attitudes and beliefs about the organization. Many of these message-laden cues

are controlled by the organization, including factors such as product design, product quality, price, packaging,

outlet selection, advertising, and the availability of coupons. In this case, marketers follow basic communication

principles that are discussed throughout this book. Most notably, there is a constant attempt to make sure that all

of these elements deliver a consistent message, and that this message is understood and interpreted in the same

way by the various consumers.

On the other hand, there are many message-laden cues that are not under the control of the marketer, yet may

be more powerful in the minds of consumers, and that must be anticipated and dealt with by the marketers. A

recent report that United Airlines had the worst customer satisfaction scores created a downturn in both United's

stock and customer reservations. Although there are many sources delivering such information, the three most

prominent are employees, competitors, and the media.

Employees, from the president on down, are all considered representatives of the organization for which they

work. Consumers often assume that the behavior, language, or dress of an employee is an accurate reflection of the

entire organization. Making employees—and possibly even former employees—positive ambassadors of the

organization has become so important that a new term has emerged— internal marketing.

Competitors say a great deal about one another, some truths, some boldface lies. A marketing organization must

be cognizant of this possibility and be prepared to respond. The automobile industry has used comparison

messaging for over thirty years. Coke and Pepsi have been attacking and counter-attacking for about the same

length of time. Negative political messages appear to be very effective, even though few politicians admit to the

strategy.

Finally, the media (editors and reporters working for newspapers, TV and radio stations, and magazines) looms

as one of the greatest communication hurdles faced by marketers. In a large marketing organization, the

responsibility of communicating with the media is assigned to a public relations staff. Public relations people write

press release stories about their organization that they hope the media will use. If the press releases are not used,

the marketer attempts to ensure that whatever the media says about the organization is accurate and as

complementary as possible. For smaller companies, dealing with the media becomes everyone's responsibility.

Many businesses now face a new media, the Internet: chat rooms, websites, and propaganda campaigns intended to

destroy a business have become commonplace. Companies that are willing to focus on communication as a means

of doing business engage in relationship marketing—a type of marketing that builds long-standing positive

relationships with customers and other important stakeholder groups. Relationship marketing identifies "high

value" customers and prospects and bonds them to the brand through personal attention.

Introducing Marketing 16 A Global Text

1. Introducing marketing

Competition

We have already mentioned the importance that competition plays in a marketing organization. At a minimum,

marketing companies must thoroughly understand their competitors' strengths and weaknesses. This means more

than making sweeping generalizations about the competitors. It means basing intelligent marketing decisions on

facts about how competitors operate and determining how best to respond. Often the identification of competitors

is fairly straightforward. It is the supermarket on the next block, or the three other companies that manufacture

replacement windshields. There are instances, however, when the identification of a competitor is not clear.

Marketing expert Theodore Levitt coined the term "marketing myopia" several years ago to describe companies that

mis-identify their competition.3 Levitt argued, for example, that the mistake made by the passenger train industry

was to restrict their competition to other railroads instead of all mass transit transportation alternatives, including

automobiles, airlines, and buses. Today we see the same mistake being made by companies in the entertainment

industry (movie theaters, restaurants, and resorts), who assume that their only competition is like-titled

organizations.

Since practically no marketer operates as a monopoly, most of the strategy issues considered by a marketer

relate to competition. Visualize a marketing strategy as a huge chess game where one player is constantly making

his or her moves contingent on what the other player does. Some US partners, like Coke and Pepsi, McDonald's and

Burger King, and Ford and General Motors, have been playing the game so long that a stalemate is often the result.

In fact, the relative market share owned by Coke and Pepsi has not changed by more than a percentage or two

despite the billions of dollars spent by each on marketing.

The desire of companies to accurately gauge competitors has led to the growing popularity of a separate

discipline—competitive intelligence. This field involves gathering as much information about competitors through

any means possible, usually short of breaking the law. More is said about this process in the integrated marketing

box that follows.

Cross-functional contact

One of the first mistakes an organization might make is to allow the various functional areas to become

proprietary. Whenever a marketing department considers itself most important to the success of the organization

and self-sufficient without need for accounting, manufacturing, or human resources, it ceases to be a reliable

marketing group. True marketers know that they cannot be any better than their weakest link. Lack of

understanding and trust between marketing and manufacturing, for instance, could mean that a product sold by

marketing is not delivered when promised or with the right features. Marketers should consider their peers in

engineering, who might not be able to produce an ambitious product requested by marketing at the cost desired.

Likewise, human resources might not be able to locate the individual "with ten years of experience in package goods

marketing" requested by the marketing manager.

The point is that marketing is far more likely to be successful if its staff relate intelligently and honestly with

members of the other functional areas. In some organizations, the walls of parochialism have been standing so long

that tearing them down is almost impossible. Nevertheless, creating inter-departmental connections is critical.

With downsizing and other cost-cutting activities prevalent during the 1990s, the need for inter-related and

harmonious business functions has become even more important. In the field of marketing, the term integrated

marketing has been coined, suggesting that individuals working in traditional marketing departments are no longer

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specialists, but must become knowledgeable about all the elements of the business that currently or potentially have

an impact on the success of marketing. At the corporate level, all managers should share a corporate vision, and

there should be an organizational structure that makes it possible for departments or divisions to share information

and participate in joint planning.

This approach represents the direction in which many companies are moving, including US giants like Kraft and

Disney. To be truly integrated, though, every decision at each level of the business should support decisions made at

all the other levels. To illustrate, let us say that the corporate goal is to maximize profit. A marketing plan objective

to increase sales by marketing new products matches the goal.

Integrated marketing

Spying to stay competitive

Most corporate detectives avoid terms like spying and espionage, preferring the more dignified

label "competitive intelligence", but whatever they call it, snooping on business rivals has become

an entrenched sub-industry.

Nearly every large US company has an intelligence office of some kind. Some, like Motorola, Inc.,

have units sprinkled in almost all of their outposts around the world. Their assignment is to

monitor rivals, sniff out mergers or new technologies that might affect the bottom line, even to keep

tabs on morale at client companies. A veteran of the Central Intelligence Agency formed Motorola's

intelligence unit, viewed as a model in the business, in 1982.

Corporate intelligence relies on a slew of tools—some sophisticated, many quite basic. On the

simpler end of the spectrum, business sleuths do everything from prowling trade show floors to

combing through rivals' web sites and patent office filings. They keep their ears open in airports and

aboard flights. Sometimes they go further. They take photographs of competitive factories, and,

increasingly, they rely on new data-mining software that permits them to scan the Internet at high

speeds for snippets about their rivals. 3

Community contact

Most marketers are curious; they enjoy observing and noting what's happening in their community. Although

the word "community" usually denotes a city, town, or neighborhood, we use the word here in a much broader

sense. "Community" refers to the environment in which the marketer operates. For Esther and Jim Williams, who

operate an A&W drive-in in Mattoon, Illinois in the US, community is quite small. For Verizon Communication,

community encompasses practically the entire world, extending even to outer space.

Regardless of the scope of the marketer's community, maintaining contact with it is essential. Contact could

mean reading the local newspaper and listening to the local gossip. Or it could mean subscribing to information

releases of several marketing research firms that monitor world events 24 hours a day, every day. Either might do

the job, although the differences in financial costs would be great. In the chapter “Marketing research: an aid to

3 Sources: Neil King, Jr. and Jess Bravin, "Call It Mission Impossible Inc.—Corporate Spying Firms Thrive," The

Wall Street Journal, Monday, July 3, 2000, pp. B1, B4; Norm Brodsky, "The First Step," Inc., August, 2000, pp.

37—38; "Spy Practice," Sunday Times (London), July 23, 2000, p. 89; "Competitive Intelligence is Not

Corporate Espionage,” Financial News, June 30, 2000, p. A6.

Introducing Marketing 18 A Global Text

1. Introducing marketing

decision making” we discuss some of the more important trends in the world community. Esther and Jim would

find this discussion interesting, but not very useful.

Ultimately, to be considered a responsible citizen in the environments in which a company operates, marketers

have the ongoing task of engaging in only pro-societal activities and conducting business in an ethical manner.

There are many marketing companies that donate millions of dollars or land to communities, clean lakes and rivers,

revamp deteriorating neighborhoods, give free products to the needy, manage recycling activities, and so forth.

There is no doubt that the need for marketing to continue such activities will increase.

The role of marketing in the firm: a basis for classification

Marketing is an individualized and highly creative process. Despite the availability of high-powered computers

and sophisticated software capable of analyzing massive amounts of data, marketing is still more of an art rather

than a science. Each business must customize its marketing efforts in response to its environment and the exchange

process. Consequently, no two marketing strategies are exactly the same.

This requirement of marketing to play slightly different roles, depending upon some set of situational criteria,

has in turn provided us with a division of marketing into a number of different categories. This is not to imply,

however, that there are not general marketing principles that work in most businesses—there are. There is a right

and wrong way to design a package. There are certain advertising strategies that tend to work more often than

others. Rather, we are saying that because of certain factors, a business's approach toward marketing and the

ensuing strategy will require some modification from the basic plan.

Shown in Table 1 are the most common types of marketing categories. Since these various types of marketing

will be discussed throughout this text, a brief introduction is provided at this point.

Macromarketing versus micromarketing

The division of marketing into macromarketing and micromarketing is a fairly recent one. Initially, the division

was a result of the controversy concerning the responsibility of marketing. Should marketing be limited to the

success of the individual firm, or should marketing consider the economic welfare of a whole society? Accepting the

later, or "macro", point of view dramatically changes the way marketing is carried out. In this light, every marketing

decision must be evaluated with regard to how it might positively or negatively affect each person and institution

operating in that society. In 1982, Bunt and Burnett surveyed the academic community in order to define more

precisely the distinction between macro- and mircomarketing.4 Their findings suggest that the separation depends

upon "what is being studied", "whether it is being viewed from the perspective of society or the firm", and "who

receives the consequences of the activity". Examples of macromarketing activities are studying the marketing

systems of different nations, the consequences on society of certain marketing actions, and the impact of certain

technologies on the marketing transaction.

The use of scanners in supermarkets and automatic teller machines in banking illustrates the last example.

Micromarketing examples include determining how Nikon Steel should segment its market, recommending how

Denver Colorado’s National Jewish Hospital in the US should price their products, and evaluating the success of the

US "Just Say No" anti-drug campaign.

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AD 2: The pharmaceutical industry tries to

maintain contact with consumers.

Service marketing versus goods marketing

The distinction between services and goods products is not always clear-cut. In general, service products tend to

be intangible, are often consumed as they are produced, are difficult to standardize because they require human

labor, and may require the customer to participate in the creation of the service product.

Goods products tend to be just the opposite in terms of these criteria. Consequently, marketers of service

products usually employ a marketing strategy quite different from that of goods marketers. For example, a local

family physician creates tangibility by providing an environment: waiting room examination rooms, diplomas on

the walls, that convinces patients that they are receiving good health care. Conversely, coffee producers create

intangibility in order to appear different from competitors. This is done through colorful packaging and

advertisements showing people who are successful because they start each day with a cup or two or ten of

Starbuck's coffee.

Introducing Marketing 20 A Global Text

1. Introducing marketing

AD 3: Hot dogs are goods products and, as such, are marketed

differently.

Table 1: Kinds of marketing

Classification Example Factors

Macromarketing The devaluation of the yen Emphasis of study

Micromarketing A pricing strategy for Wal-Mart Perspective, receiver of consequences

Goods Marketing Nabisco International Tangibility, standardization, storage,

production, involvement Service marketing Chase Manhattan Bank

For-profit marketing Otis Elevator Concerns for profits

Nonprofit marketing New York Museum of Art Tax status

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Mass marketing Sony Nature of contact information, process for

purchasing and delivery Direct marketing Time Magazine

Internet marketing trip.com

Local marketing Imperial Garden Restaurant Proximity of customers, geographic area,

extent of distribution, network, marketing,

variation commitment to country Regional marketing Olympia Brewery

National marketing American Red Cross

International marketing Ford Motor Company

Global marketing Qwest

Consumer goods

marketing

Kraft Foods Nature of consumer

Business-to-business

marketing

IBM Product function

For-profit marketing versus nonprofit marketing

As the terms connote, the difference between for-profit and nonprofit marketing is in their primary objective.

For-profit marketers measure success in terms of profitability and their ability to pay dividends or pay back loans.

Continued existence is contingent upon level of profits.

Nonprofit institutions exist to benefit a society, regardless of whether profits are achieved. Because of the

implicit objectives assigned to non-profits, they are subject to an entirely different additional set of laws, notably

tax laws. While they are allowed to generate profits, they must use these monies in specific way in order to maintain

their non-profit status. There are several other factors that require adjustments to be made in the marketing

strategies for nonprofits.

Mass marketing, direct marketing, and Internet marketing

Mass marketing is distinguished from direct marketing in terms of the distance between the manufacturer and

the ultimate user of the product. Mass marketing is characterized as having wide separation and indirect

communication. A mass marketer, such as Nike, has very little direct contact with its customers and must distribute

its product through various retail outlets alongside its competitors. Communication is impersonal, as evidenced by

its national television and print advertising campaigns, couponing, and point-of-purchase displays. The success of

mass marketing is contingent on the probability that within the huge audience exposed to the marketing strategy

there exist sufficient potential customers interested in the product to make the strategy worthwhile.

Introducing Marketing 22 A Global Text

1. Introducing marketing

Direct marketing establishes a somewhat personal relationship with the customer by first allowing the customer

to purchase the product directly from the manufacturer and then communicating with the customer on a first-name

basis. This type of marketing is experiencing tremendous growth. Apparently, marketers have tired of the waste

associated with mass marketing and customers want more personal attention. Also, modern mechanisms for

collecting and processing accurate mailing lists have greatly increased the effectiveness of direct marketing.

Catalogue companies (Spiegel, J.C. Penney), telecommunications companies (Sprint), and direct mail companies

(Publishers Clearing House) are example of direct marketers. A modified type of direct marketing is represented by

companies that allow ordering of product by calling a toll-free number or mailing in an order card as part of an

advertisement.

Although, officially, Internet marketing is a type of direct marketing, it has evolved so quickly and demanded the

attention of so many companies that a separate section here is warranted. Essentially, Internet technology (which

changes by the moment) has created a new way of doing business. In the Internet age, the way consumers evaluate

and follow through on their purchase decisions has changed significantly. "Call now!" is no longer an effective pitch.

Consumers have control over how, when, and where they shop on the Internet. The Internet has all but eliminated

the urgency of satisfying the need when the opportunity is presented. Internet marketing will be discussed in detail

in a later chapter.

AD 4: An example of Internet marketing.

Local, regional, national, international, and global marketers

As one would expect, the size and location of a company's market varies greatly. Local marketers are concerned

with customers that tend to be clustered tightly around the marketer. The marketer is able to learn a great deal

about the customer and make necessary changes quickly. Naturally, the total potential market is limited. There is

also the possibility that a new competitor or environmental factor will put a local marketer out of business.

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Regional marketers cover a larger geographic area that may necessitate multiple production plants and a more

complex distribution network. While regional marketers tend to serve adjoining cities, parts of states, or entire

states, dramatic differences in demand may still exist, requiring extensive adjustments in marketing strategy.

National marketers distribute their product throughout a country. This may involve multiple manufacturing

plants, a distribution system including warehouses and privately owned delivery vehicles, and different versions of

the marketing "mix" or overall strategy. This type of marketing offers tremendous profit potential, but also exposes

the marketer to new, aggressive competitors.

International marketers operate in more than one country. As will become clear later in this book, massive

adjustments are normally made in the marketing mix in various countries. Legal and cultural differences alone can

greatly affect a strategy's outcome. As the US market becomes more and more saturated with US-made products,

the continued expansion into foreign markets appears inevitable.

Global marketing differs from international marketing in some very definite ways. Whereas international

marketing means a company sells its goods or services in another country, it does not necessarily mean that the

company has made any further commitments. Usually the product is still manufactured in the home country, sold

by their people, and the profits are taken back to that country. In the case of Honda Motors, for example, it means

building manufacturing plants in the US, hiring local employees, using local distribution systems and advertising

agencies, and reinvesting a large percentage of the profits back into the US

Consumer goods marketing and business-to-business (industrial) marketing

Consumer goods marketers sell to individuals who consume the finished product. Business-to-business

marketers sell to other businesses or institutions that consume the product in turn as part of operating the

business, or use the product in the assembly of the final product they sell to consumers. Business-to-marketers

engage in more personal selling rather than mass advertising and are willing to make extensive adjustments in

factors such as the selling price, product features, terms of delivery, and so forth.

For the consumer goods marketer, the various marketing components are relatively fixed. In addition, consumer

goods marketers might employ emotional appeals and are faced with the constant battle of getting their product

into retail outlets.

Strategic components of marketing

A necessary and useful starting point for the study of marketing is consideration of the management process.

The management of marketing serves as the framework for the process of marketing. Marketing management also

serves as a central link between marketing and the societal level and everyday consumption by the general public.

Although there are many variations of the marketing process, the one shown in Exhibit 1 will be employed in this

book. Our process begins with corporate-level considerations, which dictate the direction the entire organization

will take. The three corporate-level considerations listed here (mission, objectives, and strategy) are more precisely

basic management topics, but are addressed in passing in the following sections.

Functional-level considerations

If a marketing firm is to adopt the customer-centered orientation discussed earlier, it must also extend this

philosophy to the other functions/institutions with which it must interact. These functions, and the institutions that

perform the functions can be categorized as non-marketing institutions and marketing institutions.

Introducing Marketing 24 A Global Text

1. Introducing marketing

Nonmarketing institutions can exist within the organization or outside the organization. The former include

accounting, financial planning, human resources, engineering, manufacturing, research and development, and so

on. Marketing must be familiar with the capabilities of each of these functions and plan accordingly. Establishing

and maintaining rapport with leaders in these other functional areas is a challenge for every marketer. Non-

marketing institutions outside the firm facilitated the marketing process by providing expertise in areas not directly

related to marketing. Examples include financial institutions that lend marketers necessary funds; regulatory

institutions that pass laws to allow marketers to perform an activity; and the press, which tells the public about the

activities of the marketer.

The marketing plan

To a great extent, the same sequence of activities performed at the corporate level is repeated at the marketing

level. The primary difference is that the marketing plan is directly influenced by the corporate plan as well as the

role of the other functions within the organization. Consequently, the marketing plan must always involve

monitoring and reacting to changes in the corporate plan.

Apart from this need to be flexible to accommodate the corporate plan, the marketing plan follows a fairly

standardized sequence. The marketing plan begins with a mission. A mission reflects the general values of the

organization. What does it stand for? How does it define integrity? How does it view the people it serves? Every

organization has an explicit or implicit mission. The corporate mission might contain words such as "quality",

"global", "profitability", and "sacrifice". The marketing-level mission should extend the corporate mission by

translating the latter into a marketing context. For example, a corporate mission that focuses on technology might

be accompanied by a production-oriented marketing mission. A corporation that stresses stockholders/dividends

may result in a sales-orientation in marketing. A corporate mission that concentrates on value or quality reflects a

consumer oriented marketing mission. Once the mission is established, the situation analysis follows.

Capsule 2: Review

The characteristics of a marketing organization include:

1. maintenance of contact with consumers

2. objective comparison of existing capabilities with ability to meet present and future consumer needs

3. maintenance of a consistent message from all marketing elements to all consumer groups

4. thorough understanding of strengths and weaknesses of competitors

5. understanding of the capabilities of other non—marketing marketing functions

6. attempts at familiarity with the community

The types of marketing:

1. macromarketing and micromarketing

2. service marketing and goods marketing

3. for-profit marketing and nonprofit marketing

4. mass marketing, direct marketing, and internet marketing

5. local, regional, national, and international marketing

6. consumer goods marketing and business-to-business marketing

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Exhibit 1: The marketing process.

A marketing plan's situation analysis identifies factors, behaviors, and trends that have a direct bearing on the

marketing plan. Much of this information is usually collected simultaneously with the corporate information.

However, collecting information about potential and actual customers tends to be the concern of marketers. This is

an ongoing activity and represents a great deal of the marketer's time and money. (The understanding and

approaching the market chapter describes the process of marketing research.)

The situation analysis helps produce a relevant set of marketing objectives. At the corporate level, typical

objectives include profitability, cost savings, growth, market share improvement, risk containment, reputation, and

so on. All these corporate objectives can imply specific marketing objectives. "Introducing a certain number of new

products usually" may lead marketers to profitability, increased market share, and movement into new markets.

Desire to increase profit margins might dictate level of product innovation, quality of materials, and price charged.

The marketing mix

Once the objectives are established, the marketer must decide how to achieve these objectives. This produces a

set of general strategies that must be refined into actionable and achievable activities. The marketing mix-product,

price, promotion, and distribution—represents the way in which an organization's broad marketing strategies are

translated into marketing programs for action.

Product. Products (and services)—the primary marketing mix element that satisfied customer wants and needs

—provide the main link between the organization and its customers. Marketing organizations must be ready to alter

Introducing Marketing 26 A Global Text

1. Introducing marketing

products as dictated by changes in competitive strategies or changes in other elements of the organization's

environment. Many organizations have a vast array of products in their mix. Ideally, each of the products is

profitable. This is often not the case, so some tough decisions must be made concerning the length of time an

unsuccessful product is kept on the market.

Distribution. The organization's distribution system moves the product to the final consumer. Because there

are many alternatives when selecting a distribution channel, marketing management must have a clear

understanding of the types of distributors, of the trends influencing those distributors, and of how those

distributors are perceived by customers.

Communication (Promotion). The product's benefits must be communicated to the distributors and to the

final customers. Therefore, the marketing organization must provide marketing information that is received

favorably by distributors and final customers. Marketing organizations, through promotion, provide information by

way of advertising, sales promotions, salespeople, public relations, and packaging.

Price. Finally, marketers must price their products in such a way that customers believe they are receiving fair

value. Price is the primary means by which customers judge the attractiveness of a product or service. Moreover,

price is a reflection of all the activities of an organization. Finally, price is a competitive tool, in that it is used as a

basis for comparison of product and perceived value across different organizations.

Decisions about the marketing mix variables are interrelated. Each of the marketing mix variables must be

coordinated with the other elements of the marketing program. Consider, for a moment, a situation in which a firm

has two product alternatives (deluxe and economy), two price alternatives (USD 6 and USD 3), two promotion

alternatives (advertising and couponing), and two distribution alternatives (department stores and specialty

stores). Taken together, the firm has a total of 16 possible marketing mix combinations. Naturally, some of these

appear to be in conflict, such as the "deluxe" product/low price combination. Nevertheless, the organization must

consider many of the possible alternative marketing programs. The problem is magnified by the existence of

competitors. The organization must find the right combination of product, price, promotion, and distribution so

that it can gain a differential advantage over its competitors. (All the marketing mix elements will be discussed in

more detail in later chapters of this book.)

Nintendo Co., Ltd. (NTDOY) provides a good example of a multinational organization that has effectively

implemented their marketing strategy. As a pioneer in the interactive entertainment industry, Nintendo has

succeeded in branding their productions as social icons. The company produces innovative products, redefines

traditional markets within the industry, and connects with its customers as a social experience. 4

Even a well-designed marketing program that has been through a thorough evaluation of alternatives will fail if

its implementation is poor. Implementation involves such things as determining where to promote the product,

getting the product to the ultimate consumer, putting a price on the product, and setting a commission rate for the

salespeople. Once a decision is made, a marketing manager must decide how to best implement the terms of the

plan.

Scandinavian Airlines (SAS) provides a good example of an organization that has successfully implemented their

marketing strategy. SAS had good on-time performance, a good safety record, and many services designed to make

flying easier for its customers. However, these were not enough to improve SAS revenue. Other things had to be

done to attract business-class customers. The approach taken by SAS was largely symbolic in nature. They put

4 Burnett's update for 2009 publication.

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everyone who bought a full-price ticket in "Euroclass", entitling them to use a special boarding card, an executive

waiting lounge, designer steel cutlery, and a small napkin clip that could be taken as a collector's item. These and

other values were provided at no extra cost to the customer. The approach was very successful; business class

passengers flocked to SAS, since they appreciated the perceived increase in value for the price of a ticket.

The budget

Marketing mix components must be evaluated as part of an overall marketing strategy. Therefore, the

organization must establish a marketing budget based on the required marketing effort to influence consumers. The

marketing budget represents a plan to allocate expenditures to each of the components of the marketing mix. For

example, the firm must establish an advertising budget as part of the marketing budget and allocate expenditures to

various types of advertising media—television, newspapers, magazines. A sales promotion budget should also be

determined, allocating money for coupons, product samples, and trade promotions. Similarly, budgets are required

for personal selling, distribution, and product development.

How much should be spent? Consider the following example. A common question that marketers frequently ask

is: "Are we spending enough (or too much) to promote the sale of our products?" A reasonable answer would

revolve around another consideration: "What do we want to accomplish? What are our goals?" The discussion

should next turn to the methods for achievement of goals and the removal of obstacles to these goals. This step is

often skipped or avoided.

Usually, when the question is asked, "Are we spending enough?" an automatic answer is given, in terms of what

others spend. Knowing what others in the same industry spend can be important to an organization whose

performance lags behind the competition or to an organization that suspects that its expenditures are higher than

they need to be. But generally, knowing what others spend leads to an unproductive "keeping-up-with-the-Joneses"

attitude. It also assumes that the others know what they are doing.

Evaluating results

No marketing program is planned and implemented perfectly. Marketing managers will tell you that they

experience many surprises during the course of their activities. In an effort to ensure that performance goes

according to plans, marketing managers establish controls that allow marketers to evaluate results and identify

needs for modifications in marketing strategies and programs. Surprises occur, but marketing managers who have

established sound control procedures can react to surprises quickly and effectively.

Marketing control involves a number of decisions. One decision is what function to monitor. Some organizations

monitor their entire marketing program, while others choose to monitor only a part of it, such as their sales force or

their advertising program. A second set of decisions concerns the establishment of standards for performance; e.g.

market share, profitability, or sales. A third set of decisions concerns how to collect information for making

comparisons between actual performance and standards. Finally, to the extent that discrepancies exist between

actual and planned performance, adjustments in the marketing program or the strategic plan must be made.

Once a plan is put into action, a marketing manager must still gather information related to the effectiveness

with which the plan was implemented. Information on sales, profits, reactions of consumers, and reactions of

competitors must be collected and analyzed so that a marketing manager can identify new problems and

opportunities.

Introducing Marketing 28 A Global Text

1. Introducing marketing

Keys to marketing success

A prime guideline for marketing success is to realize that establishing customer satisfaction should be the

company's number-one priority. The only people who really know what customers want are the customers

themselves. A company that realizes this will develop a marketing mentality that facilitates information gathering

and maintains effective communication with the primary reason for the company's existence: the customer.

A second guideline is to establish a company image that clearly reflects the values and aspirations of the

company to employees, customers, intermediaries, and the general public. Philips Petroleum has done this for years

with their advertising campaign that focuses on how their company benefits society.

Third, while marketing requires work that is clearly distinct from other business activities, it should be central to

the entire organization. Marketing is the aspect of the business that customers see. If they see something they do

not like, they look elsewhere.

Fourth, the business should develop a unique strategy that is consistent with the circumstances that it faces. The

marketer must adapt basic marketing principles to the unique product being sold. This means that what General

Foods does may not work for General Telephone & Electronics Corporation (GTE) because one is inherently a

goods product and the other a service product. Neither will work for the US State of Kentucky's Parks and

Recreation Department, because that is a public, nonprofit organization. In other words, imitating what other

organizations do without fully understanding one's own situation is a dangerous strategy.

Finally, technological progress dictates how marketing will be performed in the future. Because of computer

technology inventiveness, both consumers and businesses are better informed. Knowledge is the most important

competitive advantage. The world is one market, and information is changing at light-speed.

Capsule 3: Review

1. The components of marketing management are as follows:

(a) corporate—level considerations include the organization's mission and objectives

(b) functional—level considerations include non—marketing institutions and marketing institutions.

(c) marketing—level considerations include the mission, the situation analysis, objectives, strategy,

implementation, budget, and evaluation

(d) the marketing mix includes the primary tools available to the marketer: product, distribution,

promotion, and price

2. The keys to marketing success are:

(e) satisfy the customer

(f) establish a clear company image

(g) make marketing central to the organization

(h) be proactive

(i) develop a strategy consistent with the situation

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The Wall Street Journal

wsj.com

In practice

Marketing plays a critical role in the success of business organizations: it helps them create a

competitive advantage. By continuously collecting information about customers' needs and

competitors' capabilities and by sharing this information across departments, business

organizations can create a competitive advantage by increasing value for customers.

Individuals working in marketing departments must be knowledgeable about all the elements of

the business that impact the success of marketing efforts. Marketing objectives are directed by an

organization's mission statement, and marketers use a set of strategies to achieve these objectives.

Implementation is critical to a marketing plan's success; therefore, the marketing budget allocates

expenditures for each of the components of the marketing mix. Marketing success depends on

several factors, the most important of which is establishing customer satisfaction as the number

one priority.

Take a tour

The Front Section of the Interactive Journal (wsj.com) is similar to the front page of the newspaper

version of The Wall Street Journal. The left column displays the menu selection, with the five

major sections listed at the top. These five sections are:

1. Front Section

2. Marketplace

3. Money & Investing

4. Tech Center

5. Personal Journal

The menu remains on the page as you navigate through the site, allowing you to return to the Front

Section at any time.

Articles related to marketing are typically found in the Marketplace section. Click on

Marketplace now to view today's articles. Just below the main menu on the left side, a smaller

menu titled In this Section appears, listing main header topics in Marketplace. One of the topics

is Marketing/Media. Visit this section now to read today's articles.

The chapter, “Introducing marketing”, provides and overview of the importance and functions of

marketing in business organizations. Marketing takes many forms, and evolves with new

technologies. Marketing on the Internet, also known as e-commerce marketing, provides

challenges and opportunities for marketers. Visit Volkswagen's website, www.vw.com to see how

the company has extended its marketing efforts from television and print to its website.

Deliverable

Introducing Marketing 30 A Global Text

1. Introducing marketing

Search the Interactive Journal for articles about e-commerce marketing. Under Journal Atlas,

click on Search to conduct a search using key words like e-commerce, Internet, and marketing.

Use the Business Index feature to search for articles on specific companies. Search the

Business Index now to find articles on Volkswagen.

Questions

➢ Some marketers believe the Internet will become the most effective avenue for marketing

products to consumers. Do you agree or disagree?

➢ Recently, the effectiveness of online marketing efforts has been questioned. What can

marketers do to measure the success of online marketing?

➢ What advantages does receiving the Wall Street Journal online provide for users?

Specifically, marketers?

Summary

This introductory chapter described marketing as one of the major strategic tools available to the business

organization. It began with a basic definition and expanded to a set of propositions of marketing. Simply, marketing

is based on the mission statement of the organization; is dependent on the effective management of other

functional areas; contains a functional area guided by its own philosophy; is the functional area that is concerned

with market exchanges; and is likely to be successful when the philosophy, tasks, and manner of implementing

available technology are coordinated and complimentary.

The chapter also discussed several characteristics shared by organizations that correctly implement marketing.

Referred to as the Cs of marketing, they include consumer contact, company capabilities, communication, cross-

functional contact, and community contact. Companies share these characteristics; the following factors divide

marketing into specific types: macromarketing and micromarketing; services and goods marketing; for-profit and

nonprofit marketing; mass and direct marketing; local, regional, national, and international marketing; and

consumer goods and business-to-business marketing.

The chapter concluded with a discussion of the four levels of strategic management with considerations

applicable to marketing: corporate functional, marketing, and marketing mix.

Key terms Marketing The process of planning and executing the conception, pricing, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives. Consumer/customers Individuals who have needs/wants that can be satisfied by the marketer's product or service. Transaction An exchange between the person with the need and the organization selling the need- satisfying thing, inherently economic-based. Internal marketing Attempting to ensure that all employees are positive ambassadors of the organization.

Competitive advantage Convince buyers (potential customers) that what you have to offer them comes closest to meeting their particular want or need at that point in time.

Marketing concept Understanding the consumer and working from the customer back rather than factory forward.

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Questions

➢ How would you have defined marketing before you read this chapter? How does that definition differ

from the definition provided?

➢ Can you think of another organization that demonstrates the propositions of marketing as well as

L.L. Bean? Provide a similar discussion using that organization.

➢ What are the factors to consider in maintaining consumer contact? Community contact?

➢ Why is it so important to understand your competition? Company functions?

➢ Contrast macro- and micromarketing. Contrast services and goods marketing.

➢ Demonstrate how the corporate mission can directly influence marketing.

➢ What is the difference between the internal and external environment? Provide five examples of

each.2

➢ What is a competitive advantage? How does marketing contribute to the creation of a competitive

advantage?

➢ Discuss the reasons for studying marketing.

➢ Give examples of how marketing communication differs from personal communication.

Project

Survey 10 nonbusiness students and ask them to provide a definition of marketing. Analyze these answers with

respect to how they differ and why people differed in their understanding of this topic. Write a five page report

explaining.

Case application The hog is alive and well

After making a remarkable comeback in the 1980s, motorcycle manufacturer Harley-Davidson had two-year-

long waiting lists all over the country. But the success placed the company in a familiar quandary. Should

Harley expand and risk a market downturn or should it stay the course, content with its good position in

the industry?

“To invest or not to invest, that was the question", notes Frank Cimermancic, Harley's Director of Business

Planning. "Dealers were begging us to build more motorcycles. But you have to understand our history.

One of the things that caused past problems was lack of quality, and that was the result of a too-rigid

expansion. We did not want to relive that situation.”

In 1989, the reputation of Harley-Davidson was excellent. Harley shipped 30,000 motorcycles in 1985; just

four years later it shipped 44,000. Harley's market share in the heavyweight bike category went from 27

per cent to 57 per cent during the same time period. It was regularly turning a profit—USD 53 million in

1989.

At the same time, however, the market for heavyweight bikes was shrinking. Harley-Davidson needed to

know whether its growth could continue. "We were doing fine, but look at the market", said Cirnermancic.

"Maybe, we thought, we could reverse these trends and become an industry leader, something we had not

been for years."

A new kind of customer seemed to hold the key to market growth. White-collar motorcycle enthusiasts, or

"Rubbies" (rich urban bikers), started to shore up Harley sales in the mid-1980s, adding to the company's

Introducing Marketing 32 A Global Text

1. Introducing marketing

success and image. But whether these people were reliable, long-term customers was another question.

Harley also needed to know if it should market its product differently to different audiences. A core

clientèle of traditional "bikers" had kept Harley afloat during its leanest years, and they could not be

alienated.

From their research, Harley identified seven core customer types: the Adventure-Loving Traditionalist, the

Sensitive Pragmatist, the Stylish Status-Seeker, the Laid-Back Camper, the Classy Capitalist, the Cool-

Headed Loner, and the Cocky Misfit. All of them appreciated Harley-Davidson for the same reasons:

independence, freedom, and power constituted the universal Harley appeal. Also, owners were very loyal.

Loyalty meant the company could build and sell more motorcycles without having to overextend itself. In

1990, Harley expanded to build 62,800 bikes; in 2000, it built more than 180,000. Based on research and

the still-expanding waiting lists, Harley expects its phenomenal growth to continue. In addition, Harley is

expanding its product line. In early 2000, the company introduced a USD 4,400 bike called the Blast,

aimed at first-time riders and women.5

Questions

➢ Identify the ways in which Harley-Davidson exhibits the propositions discussed in this chapter.

➢ Would you consider Harley to be a marketing organization? Why or why not?

References

1 Dictionary of Marketing Terms, Peter D. Bennett, Ed., American Marketing Association, 1988 p. 54.

2 "A New Recipe for the Family Dinner," Adweek, April 27. 1992, p. 46.

3 Theodore Levitt, "Marketing Myopia," Harvard Business Review, July-August, 1960, pp. 45-66.

4 Shelby D. Hunt and John J. Burnett, "The Macromarketing/Micro marketing Dichotomy: A Taxonomical

Model," Journal of Marketing, Summer. 1982 pp. 11-26.

5 Sources: Ian P. Murphy, "Aided by Research, Harley Goes Whole Hog," The Marketing News, December 2,

1996, p. 16; Richard A. Melcher, "Tune-up Time for Harley," Business Week, April 8, 1996, pp. 90. 94; Kelly

Barron, "HogWild," Forbes, May 15, 2000, pp. 68—70.

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