SECTION 20-1

OBJECTIVES
● Discuss the importance of marketing and its
role in the economy

● Describe the factors that are part of the nature

of marketing
 IMPORTANCE OF MARKETING
● Marketing activities, when performed well, help to match
production to consumers

● Marketing - The set of activities that gets products from

producers to consumers
 IMPORTANCE OF MARKETING
● Marketing includes:
○ Transporting products
○ Packaging
○ Developing brand names
○ Determining prices
○ Financing
○ Storing products until they are purchased
○ Promotion
 IMPORTANCE OF MARKETING
● When marketing is successful, businesses can sell their
products and services and consumers can purchase the
things they want

● The goals of effective marketing is to create and maintain

satisfying exchange relationships between buyers and
sellers
 IMPORTANCE OF MARKETING
● Every consumer comes into daily contact with marketing
○ When you see an advertisement on a television or on the
Internet

○ When you notice a truck being unloaded at a warehouse

○ When you use a gift card to purchase a product

 BUSINESS ENGAGING IN MARKETING
ACTIVITIES
● Millions of businesses worldwide engage in marketing as
their primary business activity
○ Retailers - Businesses that sell directly to final
consumers
■ Examples: Amazon, Walmart, Kroger
○ Wholesalers - Businesses that buy products from
businesses and resell them to retailers or other
businesses
THE ROLE OF THE MARKETING MANAGER
● Marketing Managers - Managers responsible for
coordinating marketing functions across departments to
meet customer needs

● There are a number of marketing career opportunities

○ Advertising and sales promotion, customer service,
credit, insurance

● Over 1/3 of all people employed in the U.S. work in a

marketing-related job or for a marketing-related business
THE ROLE OF THE MARKETING MANAGER
● Many consumer complaints today involve marketing
activities

● Misleading advertisements, poor customers service, high

prices, and poor delivery are all marketing problems
 NATURE OF MARKETING
● Many marketing activities must occur before a product can
be advertised and sold

● In the field of marketing, managers must understand the

major marketing activities, the cost of marketing
activities, and the role of marketing in business
 MARKETING ACTIVITIES
● Buying - Obtaining goods to be resold

● Selling - Providing personalized and persuasive information

to customers to help them buy the products and services
they need

● Transporting - Moving goods from where they were made

to where consumers can buy them

● Storing - Holding products until consumers need them

 MARKETING ACTIVITIES
● Financing - Providing money that is needed to perform various
marketing activities

● Researching - Studying buyer interests and needs, testing products,

and gathering facts needed to make good marketing decisions

● Risk Taking - Assuming the risk of losses that may occur from fire,
theft, damage, or other circumstance

● Grading and Valuing - Grouping goods according to size, quality, or

other characteristics, and determining an appropriate price for
products and services
 COST OF MARKETING
● Because performing marketing activities requires many people and
special equipment, the cost of marketing a product is sometimes
higher than the cost of making that product

● Sometimes, half or more of the price you pay for a product may result
from marketing expenses
○ This amount may appear high, but effective marketing spending
contributes much to the success of products and business as well
as to the satisfaction of customers
 ROLE OF MARKETING
● Marketing’s role changes as environmental conditions change

● In the early 1900s, business conditions were much different than they
are now
○ Customers only had a few products to choose from and a limited
amount of money to spend
○ Demand for many products was greater than the supply
○ Under these conditions, firms were production-oriented
○ Production-Oriented Firm - Focused on what and how to produce
 ROLE OF MARKETING
● When production becomes efficient and more businesses offer
similar products, competition among businesses increase

● Each business has to work harder to sell its products to customers

when customers have more options

● Companies must emphasize distribution, advertising, and selling

● Businesses may become more sales-oriented

○ Sales-Oriented Firm - Focused on widespread distribution and
promotion
 ROLE OF MARKETING
● Today, more and more businesses are focusing on customer needs
○ Customer-Oriented Firm - Focused activities toward satisfying
customers

● They keep the needs of the consumer foremost in mind

○ Marketing Concept - Keeping the needs of the consumer
foremost in mind during the design, production, and distribution
of a product
 ROLE OF MARKETING
● A company that has adopted the marketing has a marketing
executive who is part of top management and is involved in many
executive-level decisions

● Marketing personnel work closely with the other people in the business
to make sure the company keeps the needs of customers in mind in
all operations

● Profit is important, but long-term success depends on satisfying

customers so that they will continue to purchase from the company
 SECTION 20-2
OBJECTIVES
● Describe the role that market identification
plays in marketing

● Define basic marketing concepts and the four

elements of the marketing mix
 MARKET IDENTIFICATION
● Before a company decides to make and distribute a product,
marketing managers must identify the market to be served

● Market - The types of buyers a business wishes to attract and where

such buyers are located
 WHOM TO SERVE
● For cost reasons, it is usually unwise to try to reach all potential
customers
○ A business identifies several groups of potential customers and
then decides which group or groups will be the best markets for
the products
 WHOM TO SERVE
● Marketing managers often develop customer profiles based on
population characteristics such as age, gender, family status,
education, income, and occupation, as a way to group consumers

Example:
A clothing manufacturer, for example, could handle women’s or men’s
clothing, clothing for children or adults, casual clothing or the latest high
fashion, and so on.

The producer of cellular telephones may want to attract families,

businesspeople, or elderly customers
 WHOM TO SERVE
● A business can decide to serve one or more markets

● Companies choose a market based on the opportunities for success

the market presents
 WHERE TO SERVE
● Producers often limit the scope of their business operations to certain
geographic areas

● Marketing managers study sections of a city, state, country, or

continent to determine whether their product might sell more
successfully in one area or another

● Finding the best marketing locations enables a business to achieve

the most sales for its marketing dollar
IDENTIFYING TARGET MARKETS
● Companies can produce goods and services that meet consumers’
needs better if they know who their customers are, where they are
located, and what they want and need

● Market Research - The study of a company’s current and prospective

customers
IDENTIFYING TARGET MARKETS
● Companies use market research to identify their target markets

● Target Markets - Groups of customers with very similar needs to

whom the company plans to sell its product
 IDENTIFYING TARGET MARKETS
● Positioning Chart - Chart used to identify alternate market segments
with unique needs based on major choice criteria

Example
Imagine developing a product like a bicycle. It can be made in a variety of
sizes and shapes with a number of special features. No single bicycle will
satisfy everyone’s needs. A long-distance racer wants something very
different from the average mountain biker. However, if you could find a
group of people with very similar needs, you could successfully design a
bicycle for that group.
IDENTIFYING TARGET MARKETS
 MARKETING MIX
● Marketing managers make decisions based on the four elements of
marketing:
○ The product,
○ it’s price,
○ distribution (sometimes referred to as place), and
○ promotion
 MARKETING MIX
● Planning each element involves answering some important questions

○ Will you make the product in one size and color, or in several?

○ Will you price the product high, medium, or low?

○ Will you sell the product in retail stores or over the Internet?

○ What forms of advertising will you use?

 MARKETING MIX
● Marketing Mix - The blend of all decisions that are related to the four
elements of marketing

Example: The marketing mix for a new product may be to design the item
for young adults, give it a low price, sell it through retail stores, and
advertise it on the Internet.

Or it could be to produce a medium-priced item to be advertised on

television and sold door-to-door to senior citizens.
 MARKETING MIX
● Several companies marketing the same product may use very
different marketing mixes because they made different decisions

● Companies must review their decisions frequently because conditions

change constantly

● Changes in general economic conditions, changes in consumer

needs, and the development of new or improved products by
competitors are factors that may require a change in the marketing
mix
 MARKETING MIX: PRODUCT
● Product - All attributes, both tangible and intangible, that customers
receive in exchange for the purchase price

● Products include services as well as physical goods

 MARKETING MIX: PRODUCT
● Market information can help marketing managers develop a product
strategy that includes decisions such as:
○ 1) The number of items to produce

○ 2) The physical features or attributes the product should possess,

such as size, shape, color, and weight

○ 3) The quality preferred by the target market

○ 4) The number of different models and the features of each

model needed to serve the various markets the company wants
to attract
MARKETING MIX: PRODUCT
○ 5) The packaging features of the item, such as the color and the
shape of the package, as well as the information printed on it

○ 6) The brand name

○ 7) Product guarantee and services customers would value

○ 8) The image to be communicated to customers by the product’s

features, packaging, and brand name
 MARKETING MIX: PRICE
● Price - The amount of money needed to acquire a product

● The price must be high enough to cover the costs of producing and
marketing the product

● The number of competing products and their prices, the demand for
the product, and whether the product will be sold for cash or credit
are some of the many other factors that influence price decisions
 MARKETING MIX: PRICE
● A company must decide what price to charge other companies that
buy and resell it’s product

● Companies must determine if the company will offer coupons,

discounts, or other sales promotions to attract customers

● Companies must decide if the company will allow customers to

bargain for a lower price or trade in product for a new one
MARKETING MIX: DISTRIBUTION
● Distribution (Place) - The set of activities required to transport and
store products and make them available to customers

● Distribution decisions relate to the economic concept of place utility

○ Place utility means that the product must be in a place where
customers need or want it
MARKETING MIX: DISTRIBUTION
● Many manufacturers prefer to use other businesses to sell their
products rather than to reach individual consumers directly
○ They may sell their products to retailers, or to wholesalers who
then sell to retailers

● Planning distribution also includes the actual physical handling of the

products and the customer service provided when orders are
processed
 MARKETING MIX: PROMOTION
● Promotion - Providing information to consumers that will assist them
in making a decision to purchase a product or service

● Marketing managers decide when and how frequently to advertise

● Managers must also decide the type of information to communicate

to consumers and whether to try to communicate directly with each
customer or use more impersonal messages that can reach a larger
pool of potential customers
 MARKETING MIX: PROMOTION
● The type of product and its price influence promotional decisions

○ Example - The strategy for promoting an expensive piece of

jewelry will be much different from that for promoting athletic
shoes
 MARKETING MIX: PROMOTION
● Although the product and its price provide general guides for
promotion, marketing managers must consider many other factors
before developing the actual promotions

● Managers must decide when to spend the money and how much to
spend on advertising, displays, and other types of promotion

● Managers must consider what promotions competitors are using and

what information consumers need in order to make a purchasing
decision
 SECTION 20-3
OBJECTIVES
● Describe the role of a marketing plan

● Explain the four stages of the product life cycle

● Identify the consumer goods categories

DEVELOPING A MARKETING PLAN
● To help coordinate marketing activities, businesses develop
marketing plans
○ Marketing Plan - A detailed written description of all marketing
activities that a business must accomplish in order to sell a
product
DEVELOPING A MARKETING PLAN
● A marketing plan:
○ Describes the goals the business wants to accomplish, the target
markets it wants to serve, the marketing mixes it will use for each
product, and the tactics that make up the marketing strategy

○ Identifies the ways in which the business will evaluate its

marketing to determine if the activities were successful and the
goals were accomplished

● The marketing plan is written for a specific time period, such as one
year
SUCCESSFUL MARKETING STRATEGIES
● Marketing managers cannot afford to guess about which types of
marketing mixes to use

● Marketing is too expensive and customers have too many choices for
businesses to risk making mistakes

● Marketers use concepts such as the product life cycle and consumer
goods categories to plan effective marketing mixes
CONCEPT #1: THE PRODUCT LIFE CYCLE
● Product Life Cycle - The four stages of sales and profit performance
through which all brands of a product progress

● The product life cycle usually describes an industry’s progression

 INTRODUCTION STAGE
● Introduction Stage - Stage of the product life cycle when a new
product enters the market

● The new product is quite different from, and expected to be better

than, products customers are currently using
 INTRODUCTION STAGE
● The company needs to inform prospective customers about the new
product and its uses because people will be unfamiliar with it
○ There is no competition from an identical type of product, but
customers are probably using other, older products

○ The company must show customers how the new product is

better than the products they are currently using

● The costs of producing and marketing a new product are usually very
high, resulting in a loss or very low profits for the firm initially
 GROWTH STAGE
● Growth Stage - Stage of the product life cycle when several brands of
the new product are available

● Each company tries to attract customers to its own brand

○ Companies attempt to improve their brands by adding features
that they hope will satisfy customers

● Companies increase distribution to make the product more readily

available to the growing market

● Profits are likely to increase as companies sell enough of the product

to cover the research and development costs
 MATURITY STAGE
● Maturity Stage - Stage of the product life cycle when there are many
competing brands with very similar features

● Customers have most likely developed a loyalty to one brand, or very

few brands

● Companies emphasize the promotion of their brand name,

packaging, a specific image, and often the price of the product
 MATURITY STAGE
● Competition becomes intense

● Companies spend a lot on promotion and reduce prices

● Profits usually fall even though sales may still rise

● Businesses respond to the maturity stage of the life cycle by looking

for new markets
○ They will often move into international markets as competition
increases
 DECLINE STAGE
● Decline Stage - Stage of the product life cycle when a new product is
introduced that is much better or easier to use and customers begin
to switch from the old product to the new product

● The companies selling the old product see declines in profits and
sales

● The companies may not be able to improve the older products

enough to compete with the new products, so they drop them from
the market when declining profits no longer support their existence
 DECLINE STAGE
● Some companies have been able to move old products out of the
decline stage by finding new uses for them
○ Example: Petroleum vapor rubs are being used to treat some
fungal infections, and baking soda is used in toothpaste and to
remove odors from refrigerators

● If companies cannot save a product from the decline stage, they

attempt to sell their remaining inventory to the customers who still
prefer it
CONCEPT #2: PRODUCT CATEGORIES
● When making marketing decisions, marketing managers need to
understand how customers shop for and use products

● Products can be classified as either industrial goods or consumer

goods
 INDUSTRIAL GOODS
● Industrial Goods - Products designed for use by another business

● Frequently, industrial goods are purchased in large quantities, are

made to special order for a specific customer, or are sold to a
selected group of buyers within a limited geographic area

Example: Bricks purchased by a building contractor, aluminum purchased

by an aircraft manufacturer, and various forms of technology purchased
by accounting firms
 CONSUMER GOODS
● Consumer Goods - Products designed for personal or home use

● Consumer goods require careful marketing attention, because there

are so many products and brands available for the many potential
customer markets throughout the world

Example: Jewelry, furniture, magazines, soft drinks, and computer games

 PRODUCT CATEGORIES
● Depending on who is making the purchase and how they will use it, a
product may be both a consumer good and an industrial good

Example: Gasoline and tablet computers may be purchased by

consumers in small quantities or by businesses in large quantities
TYPES OF CONSUMER PRODUCTS
● Marketers group consumer goods into four categories based on
attributes

● The categories are based on:

○ 1) How important the product is to the customer

○ 2) Whether the customer is willing to spend time to compare

products and brands before making a decision to buy
 CONVENIENCE GOODS
● Convenience Goods - Inexpensive items that consumers purchase
regularly without a great deal of thought

● Consumers are not willing to shop around for these products

because:
○ 1) They purchase them too often
○ 2) The many competing products do not differ much from each
other
○ 3) They don’t cost much money

● Marketers must sell their convenience goods through many retail

outlets that are conveniently located near where people work and live
 CONVENIENCE GOODS
● Example - Candy, milk, soft drinks, toothpaste, soap, and many other
inexpensive household items
 SHOPPING GOODS
● Shopping Goods - Goods that are bought less frequently than
convenience goods, usually have a higher price, and require some
buying thought

● Consumers see important differences between brands in terms of

price and features
○ Therefore, they are willing to shop at several businesses and
compare products and brands before making a purchase

● Shopping goods do not have to be sold in as many places as

convenience goods
 SHOPPING GOODS
● Example - Cars, furniture, large appliances, and houses
 SPECIALTY GOODS
● Specialty Goods - Products that customers insist upon having and
are willing to search for until they find them

● Customers who decide that only one product or brand will satisfy
them will shop until they locate and buy that brand

● Marketers place their specialty goods in fewer businesses within a

shopping area, price them higher than competing products and
brands, and spend comparatively less on promotion as compared to
other types of consumer products
 SPECIALTY GOODS
● Examples - Designer clothing, expensive jewelry, and certain brands
of cameras, gaming computers, and automobiles
 UNSOUGHT GOODS
● Unsought Goods - Products that many customers will not shop for
because they do not have a strong need for the product in the near
future

● A company marketing unsought goods usually has to go to the

customer and use personal selling to discuss the need for the product
○ Unless the customer recognizes a need that the product can
satisfy, the product will remain unsold

● Examples - Life insurance, cemetery plots, and funeral services