Contents of the Chapter 1 Notes

• What is Marketing?
• Type of Organizations that use Marketing.
• Origins of Marketing.
• Exchange and Utility.
• Marketing Management Philosophies.
• Importance of the Marketing Concept.
• Test your knowledge
• Please Email alex@udel.edu any comments
• Return to Syllabus.
• Return to Homepage.

What is marketing?

Definition of marketing

Satisfying customer needs (creating utility) through the exchange process.
Create a Marketing Mix (4ps):

• Product. Chapter 11, Chapter 12
• Price. Chapt 13 & 14
• Promotion. Chapter 18, Chapter 19, Chapter 20
• Distribution (Place). Chapter 17

Handout...Taco Bell

• Product...Border Lights, a new menu of "light foods"
• Price.....Value Pricing as with their other menu items
• Promotion...Various media and methods, a commercial that appeared during the 1995 Superbowl to announce the arrival.
• Distribution...Taco Bell has increased its points of access (where you can by its products) by a factor of 4 over the last couple of years...including gas stations etc.

• Current fast food customers (typically male, 14 -34 year olds) and/or
• Health conscious who do not currently purchase fast food??

Type of organizations that use marketing.

• All!!
• Corporations: ie Pepsi, Coke, GM etc.
• Government: promoting the health plan, politicians during elections
• Hospitals: A Philadelphia hospital, competing for maternity patients, offered a steak and champagne dinner (sales promotion) with candlelight for new parents. Other hospitals, in an effort to attract physicians, have installed services such as saunas, chauffeurs, and private tennis courts.
• Schools: University of Delaware MBA program
• Churches: Many churches are redesigning their service offering to better meet the needs of their target audience so as to keep members and financial support.
• US Army: A marketing plan to attract recruits.
• Postal Service:1993 launch of the Elvis Presley stamp was a major media event. Fans in Nashville lined up at midnight, postmasters warned that sales were "first come first served, no limit", and one post office postmarked envelopes with the no longer used :Return to Sender--Address Unknown" message

Origins of Marketing.

When did marketing first evolve?

• Division of labor.
• Specialization. Led to the Exchange of goods etc.
• Exchange is key to marketing, without an exchange, there is no need to market.

Exchange and Utility

• Must have something of value to exchange
• Need to be able to communicate
• Must be able to exchange (under 21 drinking)
• Must want to exchange
• At least 2 people needed for an exchange to occur

There are four types of utility:

• Form--production of the good, driven by the marketing function. EXAMPLE?? Baskin Robbins turns cream, sugar and milk into icecream.
• Place--make product available where customers will buy the product. EXAMPLE?? Food truck at a construction site.
• Time--make product available when customers want to buy the product. EXAMPLE?? Pathmark, open 24 hours a day, 365 days a year, has time utility compared to Landhope Farms etc.
• Possession--once you own the product, do what you want with it, ie. eat it

Marketing performs the exchange functions that makes the total utility of the product a reality to consumers.

The Marketing Management Philosophies

There are a number a different philosophies that guide a marketing effort.

• Production Concept Demand for a product is greater than supply.
  • To increase profit, focus on production efficiencies knowing all output can be sold. Also useful concept when increasing production raises economies of scale etc. to reduce price. Henry Ford, "Doesn't matter what color car you want, as long as it is black."...A typical quote during the production era.
  • Dominant era: From mid C19th to early C20th, industrial revolution etc.

• Selling Concept Demand for a product is equal to supply.
  • Emphasis is needed to sell the product to increase profits. Focus on advertising.
  • Useful for unsought goods, i.e., encyclopedias, funeral plots. Political candidates, selling important, not post consumer satisfaction.
  • Dominant era: 1920's to Mid 1930's WWII to early 1950's

• Marketing Concept Supply for a product is greater than demand, creating intense competition among suppliers.
  • Company first determines what the consumer wants, then produces what the consumer wants, then sells the consumer what it wants.
  • Dominant era: 1930's to WWII 1950's to present.
  LL Bean 1912, founded on the marketing concept, in his first circular:
  "I do not consider a sale complete until goods are worn out and the customer still satisfied. We will thank anyone to return goods that are not perfectly satisfactory...Above all things we wish to avoid having a dissatisfied customer."

  To illustrate the marketing era/concept Peter Drucker, in 1954 said:
  "if we want to know what business is we must first start with its purpose...There is only one valid definition of business purpose: to create a customer. What business thinks it produces is not of first importance-especially not to the future of the business or to its success. What the customer thinks he/she is buying, what he/she considers "value" is decisive-it determines what a business is, what it produces, and whether it will prosper."
  -Peter Drucker, The Practice of Management, 1954, P.37

  John B McKitterick, President of General Electric, 1957, addressing the AMA said:
  "It is customer oriented, integrated, profit oriented philosophy of business."

  Still need to make a profit "meeting needs profitably"

  Handout...`Do Call Us': More companies...

  Example of using the marketing concept...1-800 #s listen to your customers, test product ideas on them etc.
  Improvements in technology have enabled marketers to become more consumer oriented, helping develop Relationship marketing 1:1 marketing

  For the launch of Windows 95, Microsoft has contracted five additional companies (including Unisys and DEC) to handle the anticipated overlaod in demand for the 1-800 #. They had the capacity available to handle 40,000 phone calls in the first day (twice their usual capacity), but still left customers waiting for service.

• Societal Marketing Concept: Focus on other stakeholders, as well as the business and its customers. Need to balance 3 items
  • Company profits
  • Customer wants
  • Society's interests
  The difference between short term consumer wants and long term consumer welfare.
  An example of a company adopting the Societal concept:
  Starkist...Dolphin Safe Tuna Actually more expensive than regular tuna, but is more appealing due to society's concerns.
  

  Handout...Hooters Tries to Do Good Work..

  An example of the societal marketing concept...although the ethics of accepting monies from Hooters may be questioned (i.e. exploitation of women??)
  For another example of Societal Marketing Concept...Visit the Body Shop and pick up some of their leaflets.
  

What era are we in now?

Importance of the marketing concept.

• According to the Customer Service Institute, it costs as much as five times as much to acquire a new customer than it does to service an existing one.
• Customers tell twice as many people about a bad experience over a good one.
• According to the American Marketing Association (AMA), for an average company, 65% of its business comes from its presently satisfied customers.