UNDERSTAND MARKETING
Marketing may be the most visible set of business activities to consumers. Yet it may also be the most misunderstood business function. When asked to define marketing, people often use terms such as advertising or selling. While both of these are important, many other activities are a part of effective marketing.
The American Marketing Association's definition of marketing shows how complex it is: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” These words describe a complex but key part of every business. Marketing includes a range of activities and a number of businesses in the U.S. economy.
Marketing ActivitiesAs a consumer you are exposed to marketing activities all of the time. You take part in many of these activities. You see or hear advertisements for products and services. You see the brand names on the packages of foods you eat and on the clothes that you and your friends wear. You read product descriptions on a company's website. You interact with salespeople in your favorite retail store. These are all examples of marketing.
There are less obvious but equally important marketing activities. These include storing products in warehouses and distribution centers and moving the products to the places where they will be sold or used. Establishing and accepting credit and arranging means of online payment are marketing activities. Businesses use marketing when they gather data on consumer needs, use that information to improve products, and test new products before they are sold.
A great deal of marketing is not even aimed at final consumers. Businesses market products and services to other businesses. These businesses then use the products and services in their own business processes or sell them to final consumers. More time and money is spent in business-to-business marketing than in marketing products and services to final consumers.
Marketing BusinessesAll businesses must complete some marketing activities even if that is not their focus. Many businesses are directly involved in marketing. Marketing businesses include advertising agencies and marketing research firms. Transportation companies such as trucking, railroad, and air freight move products from producers to consumers. Shipping and delivery companies provide express pickup and delivery of documents and packages. Financial services companies issue and manage credit cards. They can also provide loans to businesses for purchasing raw materials and finished goods. Wholesalers and retailers participate in the distribution, storage, and sale of products to connect manufacturers and their customers. Marketing activities, marketing businesses, and marketing careers are an important part of the U.S. economy.
Marketing FunctionsMarketing activities can be organized into seven functions as shown in Figure 10-1. Each function occurs every time a product or service is developed and sold. Businesses provide many of the marketing functions. Consumers often take part in one or more of the marketing functions when they make purchases.
Product and service management is designing, developing, maintaining, improving, and acquiring products and services that meet consumer needs. Producers and manufacturers develop new products. Other businesses are also involved in product/service management when they obtain products for resale. Services are created and provided by the employees of service businesses.
Distribution involves determining the best ways for customers to locate, obtain, and use the products and services of an organization. Careful shipping, handling, and storing of products are needed for effective distribution.
Selling is communicating directly with potential customers to determine and satisfy their needs. Selling can be face to face, such as when a customer visits a business or when a salesperson goes to the home or business of a potential customer. Selling is also performed using a telephone or other technology such as instant messaging or videoconferencing to communicate directly with a customer.
Marketing-information management is obtaining, managing, and using market information to improve business decision-making and the performance of marketing activities. Marketing-information management includes marketing research and the development of databases with information about products, customers, and competitors.
Financial analysis is budgeting for marketing activities, obtaining the necessary funds needed for operations, and providing financial assistance to customers so they can purchase the business' products and services. Customers must have the resources and methods to pay for their purchases. Businesses must receive timely payments so they can continue to operate.
Pricing is setting and communicating the value of products and services. Customers must be able to easily identify the price of items that interest them or they will move on to another choice. Consumers want to know that they are getting a fair value for the money they are spending. Prices must be set low enough that customers are willing to pay but high enough that the business makes a profit.
Promotion is communicating information about products and services to potential customers. Advertising and other promotional methods are used to encourage consumers to buy. Advertising may occur in a variety of ways—television, newspapers, magazines, radio, direct mail, and the Internet. Other methods include contests, product displays, sponsorships, and public relations activities.
Marketing may be the most visible set of business activities to consumers. Yet it may also be the most misunderstood business function. When asked to define marketing, people often use terms such as advertising or selling. While both of these are important, many other activities are a part of effective marketing.
The American Marketing Association's definition of marketing shows how complex it is: Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” These words describe a complex but key part of every business. Marketing includes a range of activities and a number of businesses in the U.S. economy.
Marketing ActivitiesAs a consumer you are exposed to marketing activities all of the time. You take part in many of these activities. You see or hear advertisements for products and services. You see the brand names on the packages of foods you eat and on the clothes that you and your friends wear. You read product descriptions on a company's website. You interact with salespeople in your favorite retail store. These are all examples of marketing.
There are less obvious but equally important marketing activities. These include storing products in warehouses and distribution centers and moving the products to the places where they will be sold or used. Establishing and accepting credit and arranging means of online payment are marketing activities. Businesses use marketing when they gather data on consumer needs, use that information to improve products, and test new products before they are sold.
A great deal of marketing is not even aimed at final consumers. Businesses market products and services to other businesses. These businesses then use the products and services in their own business processes or sell them to final consumers. More time and money is spent in business-to-business marketing than in marketing products and services to final consumers.
Marketing BusinessesAll businesses must complete some marketing activities even if that is not their focus. Many businesses are directly involved in marketing. Marketing businesses include advertising agencies and marketing research firms. Transportation companies such as trucking, railroad, and air freight move products from producers to consumers. Shipping and delivery companies provide express pickup and delivery of documents and packages. Financial services companies issue and manage credit cards. They can also provide loans to businesses for purchasing raw materials and finished goods. Wholesalers and retailers participate in the distribution, storage, and sale of products to connect manufacturers and their customers. Marketing activities, marketing businesses, and marketing careers are an important part of the U.S. economy.
Marketing FunctionsMarketing activities can be organized into seven functions as shown in Figure 10-1. Each function occurs every time a product or service is developed and sold. Businesses provide many of the marketing functions. Consumers often take part in one or more of the marketing functions when they make purchases.
Product and service management is designing, developing, maintaining, improving, and acquiring products and services that meet consumer needs. Producers and manufacturers develop new products. Other businesses are also involved in product/service management when they obtain products for resale. Services are created and provided by the employees of service businesses.
Distribution involves determining the best ways for customers to locate, obtain, and use the products and services of an organization. Careful shipping, handling, and storing of products are needed for effective distribution.
Selling is communicating directly with potential customers to determine and satisfy their needs. Selling can be face to face, such as when a customer visits a business or when a salesperson goes to the home or business of a potential customer. Selling is also performed using a telephone or other technology such as instant messaging or videoconferencing to communicate directly with a customer.
Marketing-information management is obtaining, managing, and using market information to improve business decision-making and the performance of marketing activities. Marketing-information management includes marketing research and the development of databases with information about products, customers, and competitors.
Financial analysis is budgeting for marketing activities, obtaining the necessary funds needed for operations, and providing financial assistance to customers so they can purchase the business' products and services. Customers must have the resources and methods to pay for their purchases. Businesses must receive timely payments so they can continue to operate.
Pricing is setting and communicating the value of products and services. Customers must be able to easily identify the price of items that interest them or they will move on to another choice. Consumers want to know that they are getting a fair value for the money they are spending. Prices must be set low enough that customers are willing to pay but high enough that the business makes a profit.
Promotion is communicating information about products and services to potential customers. Advertising and other promotional methods are used to encourage consumers to buy. Advertising may occur in a variety of ways—television, newspapers, magazines, radio, direct mail, and the Internet. Other methods include contests, product displays, sponsorships, and public relations activities.
MARKETING STRATEGYMarketing is an important and costly part of business operations. Marketing activities often cost 50 percent or more of the selling price of a product or service. In order for a company to make a profit, marketing must be carefully planned. It must be done well, yet at a low cost. Consumers usually have many choices of products and services. If they are not satisfied with the offering of one company, they will look to a competitor to meet their needs. Careful marketing will aid a company in understanding and meeting customer needs. Successful marketing results in satisfying exchanges between businesses and consumers. Businesses offer products and services that satisfy their customers' needs. Customers pay for those products and services, providing the businesses with revenues and profit.
Marketing PlanningMarketing planning is aimed at satisfying customer needs better than competitors do, resulting in sales and profits. A company's plan that identifies how it will use marketing to achieve its goals is called a marketing strategy .
Developing a marketing strategy is a two-step process. The first step is to identify a target market. A target market is a specific group of consumers who have similar wants and needs. Many companies try to promote their products to a wide audience whose wants and needs are quite varied. It is not easy for the company to meet all of those needs. The result is that many people will not want the company's products or will be dissatisfied with them. Focusing on a target market makes it easier to develop products and services that specific groups of customers want.
The second step in developing a marketing strategy is to create a marketing mix. A marketing mix is the blending of four marketing elements—product, distribution, price, and promotion. A successful marketing mix satisfies the wants and needs of the target market. It also provides a profit for the company.
Develop a Successful Marketing StrategyMany businesspeople believe they know what consumers want. They produce a product and then begin to plan how they will market it to consumers. This approach to marketing typically results in an emphasis on advertising and promotion in order to attract the attention of potential customers and convince them to buy the company's product. If the product does not appeal to consumers, the business will be forced to cut the price. Lower profits or even losses may be the result.
To increase the chances of developing a product or service that meets customer needs and can be sold at a profit, companies adopt a marketing orientation. A marketing orientation considers the needs of customers when developing a marketing mix. With a marketing orientation, businesspeople don't assume they know what customers want. They use research to study customers and their needs. The results of the research are used to plan a marketing mix designed to satisfy those needs.
A company that owns a fleet of cruise ships gathers information on people who might consider a cruise as a vacation choice. Families with young children, young singles, and retirement-age adults usually will want different kinds of vacation experiences. First-time cruisers will need different information than experienced cruisers. Menu items, entertainment, travel arrangements to and from the port, and payment options all must be planned to appeal to potential customers.
The company will first study possible customers and the similarities and differences in vacation wants and needs. Then it will select the target market that presents the best opportunity for planning a successful cruise. Using the information gathered about the target market, the company then develops the marketing mix. The product will be an exciting and relaxing cruise experience. There will be enjoyable onboard activities and interesting onshore excursions at cities on the ship's schedule. Distribution will include providing all of the documents needed by travelers, arranging customer travel to and from the port city, handling baggage, and ensuring effective customer service throughout the process. Pricing decisions provide an affordable cruise with payment options to meet the budgets of the target customers. Promotion offers information to interest prospective customers in the cruise and persuade them to decide it is the best vacation choice.
The cruise company will make each of these marketing mix decisions to meet the specific needs and expectations of their target market. The decisions will be different in many ways than if the cruise was planned for a different group of consumers.
Marketing PlanningMarketing planning is aimed at satisfying customer needs better than competitors do, resulting in sales and profits. A company's plan that identifies how it will use marketing to achieve its goals is called a marketing strategy .
Developing a marketing strategy is a two-step process. The first step is to identify a target market. A target market is a specific group of consumers who have similar wants and needs. Many companies try to promote their products to a wide audience whose wants and needs are quite varied. It is not easy for the company to meet all of those needs. The result is that many people will not want the company's products or will be dissatisfied with them. Focusing on a target market makes it easier to develop products and services that specific groups of customers want.
The second step in developing a marketing strategy is to create a marketing mix. A marketing mix is the blending of four marketing elements—product, distribution, price, and promotion. A successful marketing mix satisfies the wants and needs of the target market. It also provides a profit for the company.
Develop a Successful Marketing StrategyMany businesspeople believe they know what consumers want. They produce a product and then begin to plan how they will market it to consumers. This approach to marketing typically results in an emphasis on advertising and promotion in order to attract the attention of potential customers and convince them to buy the company's product. If the product does not appeal to consumers, the business will be forced to cut the price. Lower profits or even losses may be the result.
To increase the chances of developing a product or service that meets customer needs and can be sold at a profit, companies adopt a marketing orientation. A marketing orientation considers the needs of customers when developing a marketing mix. With a marketing orientation, businesspeople don't assume they know what customers want. They use research to study customers and their needs. The results of the research are used to plan a marketing mix designed to satisfy those needs.
A company that owns a fleet of cruise ships gathers information on people who might consider a cruise as a vacation choice. Families with young children, young singles, and retirement-age adults usually will want different kinds of vacation experiences. First-time cruisers will need different information than experienced cruisers. Menu items, entertainment, travel arrangements to and from the port, and payment options all must be planned to appeal to potential customers.
The company will first study possible customers and the similarities and differences in vacation wants and needs. Then it will select the target market that presents the best opportunity for planning a successful cruise. Using the information gathered about the target market, the company then develops the marketing mix. The product will be an exciting and relaxing cruise experience. There will be enjoyable onboard activities and interesting onshore excursions at cities on the ship's schedule. Distribution will include providing all of the documents needed by travelers, arranging customer travel to and from the port city, handling baggage, and ensuring effective customer service throughout the process. Pricing decisions provide an affordable cruise with payment options to meet the budgets of the target customers. Promotion offers information to interest prospective customers in the cruise and persuade them to decide it is the best vacation choice.
The cruise company will make each of these marketing mix decisions to meet the specific needs and expectations of their target market. The decisions will be different in many ways than if the cruise was planned for a different group of consumers.
UNDERSTAND CUSTOMERSEffective marketing begins with customers. Think of a recent product or service you purchased and why you made the choice you did. You likely had several products that would generally meet your needs. You considered those choices and selected the one that you believed would provide the most satisfaction for the money you had to pay.
Many new businesses fail because the owners have an idea for a product but fail to consider customers and their needs. If a product appeals to a group of customers with unsatisfied needs, it has a real chance to succeed. If customers do not see a need for a product or believe they have other choices that are better or less costly, the product will likely not succeed.
Businesses can develop products for two types of consumers. Final consumers are persons who buy products and services mostly for their own use. Business consumers are persons, companies, and organizations that buy products for the operation of a business, for incorporation into other products and services, or for resale to their customers.
Consumer Decision-MakingThe specific sequence of steps consumers follow to make a purchase is known as the consumer decision-making process . Both the steps and the sequence of decisions are the same for all consumers. The length of time taken to complete the process and the information used to complete each step might be quite different from one consumer to the next. The five steps in the consumer decision-making process are shown in Figure 10-2.
Decision-making begins with a need. You may be hungry or thirsty, or you may want to plan an evening's entertainment with friends. Maybe you need a summer job or are trying to choose a college to attend. If the need is urgent, you will try to satisfy it right away. If it is less important you may put it off or even ignore it. If the need is one that is familiar to you and you have satisfied it before, you will often use that past experience to help make a decision. If it is a new need, you may have a hard time deciding how to make the best choice because you have no similar experience.
People use information to make decisions. You may talk to friends or a trusted adult. An advertisement, magazine article, or Internet site may catch your attention because it provides information related to an important need. You choose sources that you trust and that provide information you understand. Using this information, you will select a very few products that seem to meet your needs. Once the choices are narrowed, you will compare them to determine if one appears to be a better choice or a greater value than the others.
Based on the information you have obtained and the urgency and importance of the need, you will make a decision. The decision is usually to buy the product you have decided is best for you. The decision may be not to buy because you have not found a satisfying choice or you do not have the money you need at the time. You may
then go back to a previous step and look at other choices or gather more information.
If you decide to purchase a product, you will complete the purchase and use the product you chose. Based on that experience you will decide if you made a good choice. If you liked the product, you will probably make the same decision the next time you have the same need. You may also make the decision more quickly and easily. If the product was not what you expected, you will be unlikely to purchase that product again.
Buying MotivesWhy do you shop in a certain store or choose one brand of a product over another? The reasons consumers decide what products and services to purchase are called buying motives . Understanding the motives of consumers helps businesses plan a marketing mix.
Some purchases are guided by emotions. Emotional buying motives are reasons to purchase based on feelings, beliefs, and attitudes. If you are concerned about protecting your family and possessions, you may decide to buy a home security system. Purchases of gifts and cards for holidays and occasions are triggered by feelings of love and affection.
Rational buying motives are guided by facts and logic. You may want the most cost-effective car, so you consider fuel use and repair costs of various models. When choosing a college to attend, you can compare the costs of tuition and the reputation of the college in the major you plan to study.
Many new businesses fail because the owners have an idea for a product but fail to consider customers and their needs. If a product appeals to a group of customers with unsatisfied needs, it has a real chance to succeed. If customers do not see a need for a product or believe they have other choices that are better or less costly, the product will likely not succeed.
Businesses can develop products for two types of consumers. Final consumers are persons who buy products and services mostly for their own use. Business consumers are persons, companies, and organizations that buy products for the operation of a business, for incorporation into other products and services, or for resale to their customers.
Consumer Decision-MakingThe specific sequence of steps consumers follow to make a purchase is known as the consumer decision-making process . Both the steps and the sequence of decisions are the same for all consumers. The length of time taken to complete the process and the information used to complete each step might be quite different from one consumer to the next. The five steps in the consumer decision-making process are shown in Figure 10-2.
Decision-making begins with a need. You may be hungry or thirsty, or you may want to plan an evening's entertainment with friends. Maybe you need a summer job or are trying to choose a college to attend. If the need is urgent, you will try to satisfy it right away. If it is less important you may put it off or even ignore it. If the need is one that is familiar to you and you have satisfied it before, you will often use that past experience to help make a decision. If it is a new need, you may have a hard time deciding how to make the best choice because you have no similar experience.
People use information to make decisions. You may talk to friends or a trusted adult. An advertisement, magazine article, or Internet site may catch your attention because it provides information related to an important need. You choose sources that you trust and that provide information you understand. Using this information, you will select a very few products that seem to meet your needs. Once the choices are narrowed, you will compare them to determine if one appears to be a better choice or a greater value than the others.
Based on the information you have obtained and the urgency and importance of the need, you will make a decision. The decision is usually to buy the product you have decided is best for you. The decision may be not to buy because you have not found a satisfying choice or you do not have the money you need at the time. You may
then go back to a previous step and look at other choices or gather more information.
If you decide to purchase a product, you will complete the purchase and use the product you chose. Based on that experience you will decide if you made a good choice. If you liked the product, you will probably make the same decision the next time you have the same need. You may also make the decision more quickly and easily. If the product was not what you expected, you will be unlikely to purchase that product again.
Buying MotivesWhy do you shop in a certain store or choose one brand of a product over another? The reasons consumers decide what products and services to purchase are called buying motives . Understanding the motives of consumers helps businesses plan a marketing mix.
Some purchases are guided by emotions. Emotional buying motives are reasons to purchase based on feelings, beliefs, and attitudes. If you are concerned about protecting your family and possessions, you may decide to buy a home security system. Purchases of gifts and cards for holidays and occasions are triggered by feelings of love and affection.
Rational buying motives are guided by facts and logic. You may want the most cost-effective car, so you consider fuel use and repair costs of various models. When choosing a college to attend, you can compare the costs of tuition and the reputation of the college in the major you plan to study.