MARKETING

Marketing is the process of:

• creating, distributing, promoting, and pricing
  goods, services, ideas, people, places, and organizations
  in a dynamic environment
  with the result of satisfaction for both buyer and seller.

Note that this definition includes controllable marketing factors, a product, uncontrollable marketing factors, and an exchange that results in satisfaction for both parties of the exchange.

EXCHANGE
obtaining something desired for giving something in return

• simple exchange
  -You a painting at a craft show directly from the artist who painted it.

• complex exchange
  -A drug manufacturer promotes products, through salespeople known as "detail persons," to physicians who write prescriptions. The final consumer, however, purchases the prescribed product from a pharmacist. There are many beneficiaries, including the manufacturer, the physician, the pharmacist, and the final consumer, but no direct exchange relationship between the final consumer and the manufacturer. The salesperson maintains a relationship with physicians and promotes products to them, but the physicians never actually purchase product from this representative.

Satisfaction to all parties should be the result of an exchange.

MARKETING MIX VARIABLES
also known as the 4Ps

• Product
• Price
• Promotion
• Distribution (place)

These are directed toward a target market, which is a group of people or organizations at which the organization is aiming its products.

A market can be all actual and potential buyers of a product.

These 4Ps are the controllable factors in marketing because the marketer generally has direct control over the design of the product that is offered, the price level at which the prodcut is offered, the means and amount used in promoting the product, and ways that the product is distributed to reach its final consumer.

PRODUCT
anything, tangible or intangible, received in an exchange to satisfy a want or need

Good:
a tangible physical entity that one can touch

• e.g., car, computer, shirt

Service:
an action that one party can offer to another which provides an outcome with intangible benefits but does not result in the ownership of anything

• e.g., college course, haircut, bank machine transaction

Idea:
a concept, philosophy, image, or issue

• e.g., messages of: don't do drugs, do use condoms, don't wear fur, do eat meat

Entities such as people, places, and organizations can also be products. A political candidate provides promises of future performance in exchange for your vote. A country can promise low taxes and operating expenses to attract businesses which provide jobs.

PRODUCT OFFERING

• Core Product
  the problem-solving benefits of a product

• Augmented or Extended Product
  additional customer benefits built around the core product

These together make up the product offering.

E.g., the product offering of an automobile would include the core product of some bundle of tangible features at some price and the augmented product which includes the ministrations of the salesperson, the expectations that the particular dealership does good service work, the convenient location of the dealership, and such.

E.g., the core product of a life insurance policy includes a particular contractual agreement to provide so much death benefit, so much annuity value, etc. for some set price, but many products are purchased because buyers appreciate the trustworthiness of a particular sales agent, who is part of the augmented product.

Indeed, many products are differentiated not on the core features, but on the augmented features.

PRODUCT ATTRIBUTES

Products have features or attributes which provide benefits to the buyer. Note that benefits, not features, provide solutions to a buyer's needs. People buy a bundle of benefits, not features.

A reason that many people fail as salespeople is that they attempt to sell features rather than benefits.

UTILITY
want satisfying ability of a product; the benefits or value received by users of the product

form utility
associated with having the core or physical product attributes which customers want

• e.g., a car has a 2.5 liter engine and automatic transmission

time utility
associated with having products available when the customer wants them

• e.g., a car is on the dealer's lot right now and doesn't need to be ordered

place utility
associated with having products available in locations where customers wish t purchase them

• e.g., the car dealer is located near my home

possession utility
associated with facilitating customer access to the product to use or to store for future use

• e.g., this dealer can provide financing or lease agreements so that I don't have to wait until I save enough to pay cash for the car

PROMOTION
communication that facilitates exchanges by influencing the audience to accept a product

The basic objectives of promotion are to:

• inform
• persuade
• remind

Three engineers quit their jobs to start a company that made signs for fast food restaurants. They rented a building and designed and built the equipment to make signs. This effort, however, would not be enough to bring any new business to them. Fortunately, their friend Terry also quit his job to help found the company. Terry's role was to go out and find fast food restaurants that needed signs - e.g., those just under construction.

Many of the people that Terry found were restuarant owners who might possibly build another restaurant in the future. At first Terry needed to find and inform these people about what his company produced and how its products were different and, of course, better than those of competitors. If the restaurant owner just happened to need some new signage (e.g., additional menu signs inside the restaurant), then Terry could persuade them to make a purchase from his company. If the owner did not need any signage, Terry would nonetheless periodically make a call anyhow just to leave a reminder that his company should be considered if there ever is a need for some new signage.

promotion mix
the combination of one or more promotional alternatives:

• advertising
  any paid form of nonpersonal communication about an organization, good, service, person, or idea by an identified sponsor

• personal selling
  two way flow of communication between a buyer and seller f or the purpose of making sales and building customer relationships

• sales promotion
  short term incentives to encourage purchase or sales of a product

• publicity
  nonpersonal, indirectly paid presentation about an organization, good, service, person, or idea

push vs. pull promotional strategies

• channel push strategy
  promoting a product only to the next intermediary down the marketing channel

• channel pull strategy
  promoting a product directly to final consumers to build strong consumer demand that pulls products through the marketing channel

DISTRIBUTION: FUNCTIONAL INTERMEDIARIES
intermediaries that negotiate purchases and expedite sales for a fee but do not take title to products

agents
represent buyers or sellers on a permanent basis

• E.g., manufacturer's rep.who finds buyers for the manufacturer's products.

• E.g., a real estate agent who finds prospective buyers for the seller. The agent is representing the seller in this case, so is typically motivated and compensated by a fee, paid by the seller, that is a percentage of the final selling price.

brokers
bring buyers and sellers together to help negotiate exchanges

• E.g., a food broker who matches buyers and producers, for a fee.

• E.g., a real estate broker, who finds sellers of large apartment buildings for people who are looking to buy, but who also finds buyers for owners of large apartment buildings who are looking for a buyer. The broker would typically be paid a flat fee by each party.

MARKETING CONCEPT

• a managerial philosophy that an organization should
  try to satisfy customers needs
  through activities
  that allow the organization to achieve its goals

Customer satisfaction is the major aim of the marketing concept.

Therefore, the achievement of organizational goals depends on determining the needs and wants of current and prospective customers and delivering the desired satisfactions more effectively and efficiently than do competitors.

The idea is that a focus merely on, say, increasing sales, will not necessarily meet buyer needs, and could therefore result in decreased sales. E.g., promising unrealistic delivery schedules to institutional customers could increase sales in the sort run, but might ultimately chase away millions of dollars in future business from customers who no longer trust you.

On the other hand, a blind focus on customer satisfaction could result in putting the organization out of business. E.g., increasing quality and lowering prices might result in great customer satisfaction, but could also result in such high costs that the company can no longer pay shareholders and employees, or no longer has the profits to invest into the research and development of new products to replace older obsolete products.

Those entertaining dog-and-pony consultants who blindly preach "quality" and "give the customer what they want" are just as dangerous as the orgainzational "bean counters" with a cost-cutting production orientation. Neither understands the notion of the marketing concept.

PSEUDO EVOLUTION OF THE MARKETING ORIENTATION

Note that there is some controversy regarding the notion of eras in marketing. The idea is here considered to be conceptually useful, albeit without dates.

Geseppi was a furniture maker many years ago just as water powered machinery was being discovered. In the old days he could make about five chairs per week during a normal work week. When his son asked for pony for his sixteenth birthday, Geseppi couldn't afford it, so he worked a few extra hours every evening for a few weeks so that he could make an extra chair each week. By working a little longer, he could produce more, thereby generating higher profits.

Geseppi's son, Alvin, eventually went to college and earned an engineering degreee. For his senior internship project, Alvin developed a way to power wood working machinery with a water wheel. When this machinery was installed in Geseppi's shop, he was able to increase production to twenty five chairs per day. Unfortunately, he was now able to supply many more chairs than could be consumed locally, so Geseppi hired a sales representative to find new customers.

Herb, the sales rep, traveled to nearby cities where people very much needed new chairs. Geseppi hired a few more reps and found that he could increase sales simply by sending more reps to more distant cities.

Eventually, however, competitors began to install water powered chair making machinery and hired manufacturer's representatives to travel to distant cities to sell their chairs. Although there were still plenty of prospective buyers who needed chairs, these buyers now had choices. Selling more was no longer a matter of producing more or a matter of sending out more sales reps. It was now important to anticipate the needs of potential buyers before even making the product, thereby producing a product that best meets the needs of the buyer.

Geseppi's competitors were all selling black chairs, whereas Geseppi was selling red, yellow, and blue chairs after focus goup research indicated that these were the most favored colors of the day. Geseppi quickly cornered the chair market, thereby making greater profits which could in turn be used to pay higher salaries to employees such as his sales people. Competitors who maintained a mere production orientation or a selling orientation eventually declared bankruptcy.

Production Era:
make things and people will buy them

• Sales are increased by producing more.
• Profits are increased by cutting expenses (scientific management).
• Works if demand exceeds supply.

Sales Era:
find people who need what you have because supply exceeds demand

• Sales are increased with greater selling efforts.
• Profits are increased by selling more.
• Works if there are a lot of people who need what you have and they aren't aware of many choices.

Marketing Era:
find out what people need before you make something because they have many choices.

• Sales and profits are increased by better meeting customers' needs than is done by competitors.

During the evolution of an economy or social system, if there are not enough products available to meet consumer demand, organizations can produce whatever they want without regard to consumer needs (production orientation). But if prospective buyers have knowledge products and competition, as when sales people visit prospective buyers to promote competing products, then buyers with choices will buy the products which best suit their needs and wants (selling orientation). When prospective buyers have enough choices, only those organizations which can anticipate buyer needs before production will be able to make the best product at the lowest cost, and will, therefore, achieve higher sales (marketing orientation).

Most successful organizations in the U.S. now maintain a marketing orientation. Note, however, that it is possible in some situations to still hold a production or sales orientation.

CUSTOMER CONTACT
interaction between provider and customer needed to deliver the service

internal markeging
training and motivating customer-contact employees to work as a team to provide customer satisfaction

we often have to explain to employees within the organization how and why it is that they perform important boundary spanning functions

boundary spanning
a boundary spanning employee is the point of contact between an organization and its customers

Consider a visit to a bank in which the teller is not only rude, but makes a mistake. After a brief argument, you are able to convince the teller that a mistake has been made, but you receive no apology for the error. How are you likely to respond:

• "I bet the teller is merely a temporary employee to replace someone who is sick today. It must be very frustrating."

• " That bank made a mistake and never apologized to me. How can it treat me so poorly?"

When we visit a bank, the teller is the bank in our perceptions at that point in time. All of that person's behaviors, good and bad, are ascribed to the institution. This person is a boundary spanner and plays a crucial role in our perceptions of the entire institution. When you call a large organization and reach a receptionist, the behaviors of that receptionist affect your perceptions of the entire organization - his or her voice and ability to respond to your request is the organization to you at the time. It makes absolutely no sense that the receptionist is generally one of the most mistreated and lowest paid employees of many organizations!

On the other hand, it is no wonder that many organizations have dress codes for salespeople and supply company cars. A salesperson who drives a sporty convertable might represent an image of youth, success, and quick response for one company, but might imply immaturity and inappropriate priorities to customers of another company. Whatever a sales representative does and says, s/he is the company whenever in contact with prospects and customers.