Chapter 1: Defining Marketing for the 21st Century

CHAPTER

CHAPTER SUMMARY
1 DEFINING MARKETING
FOR THE 21ST CENTURY

From a managerial point of view, 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 and organizational goals. Marketing management is the art
and science of choosing target markets and getting, keeping, and growing customers through
creating, delivering, and communicating superior customer value.
Marketers are skilled at managing demand. They seek to influence the level, timing, and
composition of demand. Marketers are involved in marketing many types of entities: goods,
services, events, experiences, persons, places, properties, organizations, information, and
ideas. They also operate in four different marketplaces: consumer, business, global, and
nonprofit.
Businesses today face a number of challenges and opportunities including globalization, the
effects of advances in technology, and deregulations. They have responded by changing how
they conduct marketing in very fundamental ways.
There are five competing concepts under which organizations can choose to conduct their
business: the production concept, product concept, selling concept, marketing concept, and the
holistic marketing concept. The first three are of limited use today.
The holistic marketing concept is based on the development, design, and implementation of
marketing programs, processes, and activities, that recognizes their breadth and interdepend-
encies. Holistic marketing recognizes that “everything matters” with marketing and that a
broad, integrated perspective is often necessary. Four components of holistic marketing are
relationship marketing, integrated marketing, internal marketing, and social marketing.
Marketing management has experienced a number of shifts in recent years as companies seek
marketing excellence.
The set of tasks necessary for successful marketing management include developing
marketing strategies and plans, connecting with customers, building strong brands, shaping the
market offerings, delivering and communicating value, capturing marketing insights and
performance, and creating successful long-term growth.

DETAILED CHAPTER OUTLINE

Marketing is everywhere. Formally or informally, people and organizations engage in a
vast number of activities that could be called marketing. Good marketing is no accident,
but a result of careful planning and execution. Marketing is both an “art” and a

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“science”—there is constant tension between the formulated side of marketing and the
creative side.
THE IMPORTANCE OF MARKETING
Financial success often depends on marketing ability. Many firms have created a Chief
Marketing Officer (CMO) to put marketing on an equal footing with other Chief
Executives such as a CFO and CEO. Marketing is tricky and making the right
decisions is not always easy. Skillful marketing is a never-ending pursuit.

THE SCOPE OF MARKETING

To prepare to be marketers, you need to understand what marketing is, how it works,
what is marketed, and who does the marketing.
What Is Marketing?
Marketing deals with identifying and meeting human and social needs. One of the
shortest definition of marketing is “meeting needs profitably.”
A) The American Marketing Association offers the following formal definition:
“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 and organizational goals.”
B) Marketing management is the art and science of choosing target markets and getting,
keeping, and growing customers through creating, delivering, and communicating
superior customer value.
C) A social definition of marketing is that “marketing is a societal process by which
individuals and groups obtain what they need and want through creating, offering, and
freely exchanging products and services of value with others.”
Review Key Definitions here: marketing and marketing management

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Exchange and Transactions

Exchange is the process of obtaining a desired product from someone by offering
something in return. For exchange potential to exist, the following conditions must be
satisfied:
A) There are at least two parties.
B) Each party has something that might be of value to the other party.
C) Each party is capable of communication and delivery.
D) Each party is free to accept or reject the exchange offer.
E) Each party believes it is appropriate or desirable to deal with the other party.
F) Exchange is a value-creating process because it normally leaves both parties better off.
G) A transaction is a trade of values between two or more parties and involves several
dimensions:
1) At least two things of value.
2) Agreed upon conditions.
3) A time of agreement.
4) A place of agreement.
H) A transaction differs from a transfer. In a transfer, A gives X to B but does not
receive anything tangible in return.

I) Marketers seek to elicit a behavioral response from another party.

What Is Marketed?
Marketing people are involved in marketing ten types of entities: goods, services, events,
experiences, persons, places, properties, organizations, information, and ideas.
A) Goods
Physical goods constitute the bulk of production and marketing efforts.
B) Services
A growing portion of business activities are focused on the production of services. The
U.S. economy today consists of a 70–30 services to goods mix.
C) Events
Marketers promote time-based events such as trade shows, artistic performances, and
the Olympics.
D) Experiences
By orchestrating several services and goods, a firm can create and market experiences
such as Walt Disney World’s Magic Kingdom.

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E) Persons
Celebrity marketing is a major business.
F) Places
Cities, states, regions, and whole nations compete actively to attract tourists, factories,
and new residents.
G) Properties
Are intangible rights of ownership of either real property (real estate) or financial
property (stocks and bonds).
H) Organizations
Actively work to build a strong, favorable, and unique image in the minds of their
target publics.
I) Information
Can be produced and marketed as a product. Schools, universities, and others produce
information and then market it.
J) Ideas
Every market offering includes a basic idea. Products and services are platforms for
delivering some idea or benefit.
Who Markets?
Marketers and Prospects
A marketer is someone seeking a response (attention, purchase, vote, donation, etc.)
from another party called the prospect.
A) Marketers are responsible for stimulating demand for a company’s product.
B) Marketing managers seek to influence the level, timing, and composition of
demand to meet the organization’s objectives. Eight demand states are possible:
1) Negative demand—consumers dislike the product and may even pay a price
to avoid it.
2) Non-existent demand—consumers may be unaware or uninterested in the
product.
3) Latent demand—consumers may share a strong need that cannot be satisfied
by an existing product.
4) Declining demand—consumers begin to buy the product less frequently or
not at all.
5) Irregular demand—consumer purchases vary on a seasonal, monthly, daily,
or even an hourly basis.
6) Full demand—consumers are adequately buying all product put into the
marketplace.

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7) Overfull demand—too many consumers would like to buy the product that
can be satisfied.
8) Unwholesome demand—consumers may be attracted to products that have
undesirable social consequences.
Markets
Economists describe a market as a collection of buyers and sellers who transact over a
particular product or product class.
Marketers use the term “ market” to cover various groups of customers. They view the
sellers as constituting the industry and the buyers as constituting the market. They talk
about need markets, product markets, demographic markets, and geographic markets.

A) Sellers and buyers are connected by flows:

1) Seller sends goods, services, and communications to the market.
2) In return they receive money and information.
3) There is an exchange of money for goods and services.
4) There is an exchange of information.
Review Key Definitions here: negative demand, non-existent demand, latent demand,
declining demand, irregular demand, full demand, overfull demand, and unwholesome
demand.
Key Customer Markets
A) Consumer Markets
Consumer goods and services such as soft drinks and cosmetics, spend a great deal of
time trying to establish a superior brand image.
B) Business Markets
Companies selling business goods and services often face well-trained and well-
informed professional buyers who are skilled in evaluating competitive offerings.
C) Global Markets
Companies face challenges and decisions regarding which countries to enter, how to
enter the country, how to adapt their products/services to the country, and how to price
their products.
D) Nonprofit and Governmental Markets
Companies selling to these markets have to price carefully because these organizations
have limited purchasing power.

MARKETPLACES, MARKETSPACES, AND METAMARKETS

The marketplace is physical; the marketspace is digital.

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Mohan Sawhney has proposed the concept of metamarkets to describe a cluster of

complementary products and services that are closely related in the minds of consumers
but are spread across a diverse set of industries. An example is the automobile industry
that consists of physical locations (car dealers) and marketspace locations (Internet
locations) that consumers use in deciding what car to purchase.
Review Key Definitions here: marketplace—physical, marketspace—digital,
metamarket—both physical and digital
How Business and Marketing Are Changing
A) Changing technology.
B) Globalization.
C) Deregulation.
D) Privatization.
E) Customer empowerment.
F) Customization.
G) Heightened competition.
H) Industry convergent.
I) Disintermediation.
COMPANY ORIENTATIONS TOWARD THE MARKETPLACE
The competing concepts under which organizations have conducted marketing
activities include; the production concept, product concept, selling concept, marketing
concept, and holistic marketing concept.
Production Concept
A) The production concept holds that consumers will prefer products that are widely
available and inexpensive.
Product Concept
A) The product concept holds that consumers will favor those products that offer the most
quality, performance, or innovative features.
Selling Concept
A) The selling concept holds that consumers and businesses, will ordinarily not buy
enough of the organization’s products, therefore, the organization must undertake
aggressive selling and promotion effort.

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Marketing Concept
A) The marketing concept holds that the key to achieving organizational goals consists of
the company being more effective than competitors in creating, delivering, and
communicating superior customer value to its chosen target markets.
1) Reactive market orientation—understanding and meeting consumers’
expressed needs.
2) Proactive marketing orientation—researching or imagining latent consumers’
needs through a “probe-and-learn” process.
a. Companies that practice both reactive and proactive marketing orientation are
implementing a total market orientation.
Holistic Marketing Concept
Holistic marketing can be seen as the development, design, and implementation of
marketing programs, processes, and activities that recognizes the breath and
interdependencies of their efforts. Holistic marketing recognizes that “everything
matters” with marketing—the consumer, employees, other companies, competition, as
well as society as a whole.
Review Key Definition here: holistic marketing
Relationship Marketing
)A Relationship marketing has the aim of building mutually satisfying long-term
relationships with key parties—customers, suppliers, distributors, and other marketing
partners. Relationship marketing builds strong economic, technical, and social ties
among the parties.
)1 Marketing must not only do customer relationship management (CRM) but
also partnership relationship management (PRM).
)2 Four key constituents for marketing are:
.a Customers.
.b Employees.
.c Marketing partners (channel partners).
.d Members of the financial community.
)3 The ultimate outcome of relationship marketing is the building of a unique
company asset called a marketing network.
A marketing network consists of the company and its supporting stakeholders
(customers, suppliers, distributors, retailers, ad agencies, university scientists, and
others) with whom it has built mutually profitable business relationships.
Review Key Definitions here: relationship marketing and marketing network
Integrated Marketing

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)A The marketer’s task is to devise marketing activities and assemble fully integrated
marketing programs to create, communicate, and deliver value for consumers.
)B The 4Ps of marketing: product, price, place, and promotion.
Marketing—mix decisions must be made for influencing the trade channels as well as
the final consumers.
)1 Robert Lauterborn suggests that the sellers 4Ps correspond to the customers’
4Cs:
4Ps 4Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
)C Two key themes of integrated marketing are:
)1 Many different marketing activities are employed to communicate and deliver
value.
)2 All marketing activities are coordinated to maximize their joint efforts.

Internal Marketing
)A Holistic marketing incorporates internal marketing, ensuring that everyone in the
organization embraces appropriate marketing principles.
)B Internal marketing must take place on two levels:
)1 At one level, the various marketing functions (sales force, advertising,
customer services, product management, and marketing research) must work
together.
)2 Secondly, marketing must be embraced by the other departments—they must
“think customer.” Marketing is not a department so much as a company
orientation.

Review Key Definition here: internal marketing

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Social Responsible Marketing

A) Holistic marketing incorporates social responsibility marketing and
understanding broader concerns, and the ethical, environmental, legal, and social
context of marketing activities and programs.

FUNDAMENTAL MARKETING CONCEPTS, TRENDS, AND TASKS

To understand the marketing function, we need to understand certain fundamental
concepts and tasks, along with current trends.

Core Concepts
Creates foundations for marketing management and holistic marketing orientation.

Needs, Wants, and Demands

Marketers must try to understand the target market’s needs, wants, and demands.
A) Needs are basic human desires.
B) Wants are shaped by one’s society.
C) Demands are wants for specific products backed by an ability to pay.
D) Marketers do not create needs—needs pre-exist marketers.
E) Marketers, along with society influence wants.
1) There are five types of needs that marketers must understand:
a. Stated needs.
b. Real needs.
c. Unstated needs.
d. Delight needs.
e. Secret needs.

Target Markets, Positioning, and Segmentation

A) A marketer can rarely satisfy everyone in a market therefore the marketers must divide
the market into segments.
B) The marketer then decides which segment presents the greatest opportunity—which
are its target markets.
C) For each chosen target market, the firm develops a market offering.
D) The offering is positioned in the minds of the target buyers as delivering some central
benefit(s).

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Offerings and Brands

A) Companies put forth a value proposition, a set of benefits they offer to customers to
satisfy their needs.
B) The intangible value proposition is made physical by an offering that can be a
combination of products, services, information, and experiences.

Value and Satisfaction

A) The offering will be successful if it delivers value and satisfaction to the target buyer.
B) The buyer chooses between different offerings based on which is perceived to deliver
the most value.
C) Value reflects the perceived tangible benefits and costs to customers.
D) Value can be a combination of quality, service, and prices called the customer value
triad.
E) Value is a central marketing concept.
F) Marketing can be seen as the identification, creation, communication, delivery, and
monitoring of customer value.
1) Satisfaction reflects a person’s comparative judgment resulting from a
product’s perceived performance (or outcome) in relation to his or her
expectations.

Marketing Channels (three kinds of marketing channels)

A) Communication channels deliver and receive messages from target buyers.
B) Distribution channels to display, sell, or deliver the physical product or service(s).
C) Service channels to carry out transactions with potential buyers (warehouses,
transportation companies, banks).

Supply Chain
A) Describes a longer channel stretching from raw materials to finished goods.
B) Represents a value delivery system.

Competition
A) Includes all the actual and potential rival offering and substitutes that a buyer might
consider.

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Marketing Environment
A) Consists of the task environment and the broad environment.
B) Task environment includes the immediate actors involved in producing, distribution,
and promoting the offering: suppliers, company, dealers, and target customers.
C) The broad environment consists of six components:
1) Demographic.
2) Economic.
3) Natural.
4) Technological.
5) Political-legal.
6) Social-cultural.

Marketing Planning
A) Consists of analyzing marketing opportunities.
B) Selecting target markets.
C) Designing marketing strategies.
D) Developing marketing programs.
E) Managing the marketing effort.

Shifts in Marketing Management

A) A number of important trends and forces are eliciting a new set of beliefs and practices
on the part of business firms. These fourteen major shifts are:
1) From marketing does the marketing to everyone does the marketing.
2) From organization by products units to organizing by customer segments.
3) From making everything to buying more goods and services from outside.
4) From using many suppliers to working with fewer suppliers in a “partnership.”
5) From relying on old market positions to uncovering new ones.
6) From emphasizing tangible assets to emphasizing intangible assets.
7) From building brands through advertising to building brands through
performance and integrated communications.
8) From attracting customers through stores and salespeople to making products
available online.
9) From selling to everyone to trying to be the best firm serving a well-defined
target market.

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10) From focusing on profitable transactions to focusing on customer lifetime

value.
11) From a focus on gaining market share to a focus on building customer share.
12) From being local to being “glocal”—both global and local.
13) From focusing on the financial scorecard to focusing on the marketing
scorecard.
14) From focusing on shareholders to focusing on stakeholders.

Marketing Management Tasks: Zeus Inc.

A) Developing marketing strategies and plans (Chapter 2).
B) Connecting with customers (Chapters 3, 4, and 5).
C) Building strong brands (Chapters 7, 8, and 9).
D) Shaping the market offerings (Chapters 10, 11, and 12).
E) Delivering value (Chapters 13 and 14).
F) Communicating value (Chapters 15, 16, and 17).
G) Capturing marketing insights and performance (Chapters 18 and 19).
H) Creating successful long-term growth (Chapters 20, 21, and 22).

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