PART 1 Understanding Marketing Management

In This Chapter, We Will Address the Following Questions

1. Why is marketing important?

2. What is the scope of marketing?

3. What are some core marketing concepts?

4. How has marketing management changed in recent years?

5. What are the tasks necessary for successful marketing management?

Marketing is about identifying and meeting human and social needs. One of the shortest good
definitions of marketing is “meeting needs profitably.” These two firms demonstrated marketing
savvy and turned a private or social need into a profitable business opportunity.

The American Marketing Association offers the following formal definition: 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.

Coping with these exchange processes calls for a considerable amount of work and skill.
Marketing management takes place when at least one party to a potential exchange thinks about
the means of achieving desired responses from other parties. Thus we see marketing
management as the art and science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, and communicating superior customer value.

Marketers market 10 main types of entities: goods, services, events, experiences, persons, places,
properties, organizations, information, and ideas. Let’s take a quick look at these categories.

Marketers are skilled at stimulating demand for their products. Eight demand states are possible:

1. Negative demand—Consumers dislike the product and may even pay to avoid it.
2. Nonexistent demand—Consumers may be unaware of 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, weekly, daily, or even

6. Full demand—Consumers are adequately buying all products put into the marketplace.

7. Overfull demand—More consumers would like to buy the product than can be satisfied.

8. Unwholesome demand—Consumers may be attracted to products that have undesirable social

In each case, marketers must identify the underlying cause(s) of the demand state and determine
a plan of action to shift demand to a more desired state.

MARKETS Traditionally, a “market” was a physical place where buyers and sellers gathered to
buy and sell goods. Economists describe a market as a collection of buyers and sellers who
transact over a particular product or product class (such as the housing market or the grain
market).
Figure 1.2 shows the relationship between the industry and the market. Sellers and buyers are
connected by four flows. Sellers send goods and services and communications such as ads and
direct mail to the market; in return they receive money and information such as customer
attitudes and sales data. The inner loop shows an exchange of money for goods and services; the
outer loop shows an exchange of information.

KEY CUSTOMER MARKETS Consider the following key customer markets: consumer,

business, global, and nonprofit.

Consumer Markets Companies selling mass consumer goods and services such as juices,
cosmetics, athletic shoes, and air travel spend a great deal of time establishing a strong brand
image by developing a superior product and packaging, ensuring its availability, and backing it
with engaging communications and reliable service.

Business Markets Companies selling business goods and services often face well-informed
professional buyers skilled at evaluating competitive offerings. Business buyers buy goods to
make or resell a product to others at a profit. Business marketers must demonstrate how their
products will help achieve higher revenue or lower costs. Advertising can play a role, but the
sales force, the price, and the company’s reputation may play a greater one.

Global Markets Companies in the global marketplace must decide which countries to enter; how
to enter each (as an exporter, licenser, joint venture partner, contract manufacturer, or solo
manufacturer); how to adapt product and service features to each country; how to price products
in different countries; and how to design communications for different cultures. They face
different requirements for buying and disposing of property; cultural, language, legal and
political differences; and currency fluctuations. Yet, the payoff can be huge.

Nonprofit and Governmental Markets Companies selling to nonprofit organizations with limited
purchasing power such as churches, universities, charitable organizations, and government
agencies need to price carefully. Lower selling prices affect the features and quality the seller can
build into the offering. Much government purchasing calls for bids, and buyers often focus on
practical solutions and favor the lowest bid in the absence of extenuating factors.
MARKETPLACES, MARKETSPACES, AND METAMARKETS The marketplace is physical,

such as a store you shop in; the marketspace is digital, as when you shop on the Internet.
Northwestern University’s Mohan Sawhney has proposed the concept of a metamarket to
describe a cluster of complementary products and services closely related in the minds of
consumers, but spread across a diverse set of industries.

Metamarkets are the result of marketers packaging a system that simplifies carrying out these
related product/service activities.

Needs, Wants, and Demands

Needs are the basic human requirements such as for air, food, water, clothing, and shelter.
Humans also have strong needs for recreation, education, and entertainment. These needs
become wants. when they are directed to specific objects that might satisfy the need. A U.S.
consumer needs food but may want a Philly cheesesteak and an iced tea. A person in
Afghanistan needs food but may want rice, lamb, and carrots. Wants are shaped by our society.

Demands are wants for specific products backed by an ability to pay. Many people want a
Mercedes; only a few are able to buy one. Companies must measure not only how many people
want their product, but also how many are willing and able to buy it. These distinctions shed
light on the frequent criticism that “marketers create needs” or “marketers get people to buy
things they don’t want.”

Marketers do not create needs: Needs preexist marketers. Marketers, along with other societal
factors, influence wants. They might promote the idea that a Mercedes would satisfy a person’s
need for social status. They do not, however, create the need for social status.

Target Markets, Positioning, and Segmentation

Not everyone likes the same cereal, restaurant, college, or movie. Therefore, marketers start by
dividing the market into segments. They identify and profile distinct groups of buyers who might
prefer or require varying product and service mixes by examining demographic, psychographic,
and behavioral differences among buyers. After identifying market segments, the marketer
decides which present the greatest opportunities— which are its target markets. For each, the
firm develops a market offering that it positions in the minds of the target buyers as delivering
some central benefit(s). Volvo develops its cars for buyers to whom safety is a major concern,
positioning its vehicles as the safest a customer can buy.

Offerings and Brands

Companies address customer needs by putting forth a value proposition, a set of benefits that
satisfy those needs. The intangible value proposition is made physical by an offering, which can
be a combination of products, services, information, and experiences. A brand is an offering
from a known source. A brand name such as McDonald’s carries many associations in people’s
minds that make up its image: hamburgers, cleanliness, convenience, courteous service, and
golden arches. All companies strive to build a brand image with as many strong, favorable, and
unique brand associations as possible.

Value and Satisfaction

The buyer chooses the offerings he or she perceives to deliver the most value, the sum of the
tangible and intangible benefits and costs to her. Value, a central marketing concept, is primarily
a combination of quality, service, and price (qsp), called the customer value triad. Value
perceptions increase with quality and service but decrease with price. We can think of marketing
as the identification, creation, communication, delivery, and monitoring of customer value.
Satisfaction reflects a person’s judgment of a product’s perceived performance in relationship to
expectations. If the performance falls short of expectations, the customer is disappointed. If it
matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted.

Marketing Environment
The marketing environment consists of the task environment and the broad environment. The
task environment includes the actors engaged in producing, distributing, and promoting the
offering. These are the company, suppliers, distributors, dealers, and target customers.

The broad environment consists of six components: demographic environment, economic

McCarthy classified various marketing activities into marketing-mix tools of four broad kinds,
which he called the four Ps of marketing: product, price, place, and promotion.

Given the breadth, complexity, and richness of marketing, however—as exemplified by holistic
marketing—clearly these four Ps are not the whole story anymore. If we update them to reflect
the holistic marketing concept, we arrive at a more representative set that encompasses modern
marketing realities: people, processes, programs, and performance
People reflects, in part, internal marketing and the fact that employees are critical to marketing
success. Marketing will only be as good as the people inside the organization. It also reflects the
fact that marketers must view consumers as people to understand their lives more broadly, and
not just as they shop for and consume products and services.

Processes reflects all the creativity, discipline, and structure brought to marketing management.
Marketers must avoid ad hoc planning and decision making and ensure that state-of-the-art
marketing ideas and concepts play an appropriate role in all they do. Only by instituting the right
set of processes to guide activities and programs can a firm engage in mutually beneficial long-
term relationships. Another important set of processes guides the firm in imaginatively
generating insights and breakthrough products, services, and marketing activities.

Programs reflects all the firm’s consumer-directed activities. It encompasses the old four Ps as
well as a range of other marketing activities that might not fit as neatly into the old view of
marketing. Regardless of whether they are online or offline, traditional or nontraditional, these
activities must be integrated such that their whole is greater than the sum of their parts and they
accomplish multiple objectives for the firm.

Performance in holistic marketing, is to capture the range of possible outcome measures that
have financial and nonfinancial implications (profitability as well as brand and customer equity),
and implications beyond the company itself (social responsibility, legal, ethical, and community
related). Finally, these new four Ps actually apply to all disciplines within the company, and by
thinking this way, managers grow more closely aligned with the rest of the company.
Market-oriented strategic planning is the managerial process of developing and maintaining a
viable fit between the organization’s objectives, skills, and resources and its changing market
opportunities. The aim of strategic planning is to shape the company’s businesses and products
so they yield target profits and growth. Strategic planning takes place at four levels: (1)
corporate, (2) division, (3) business unit, and (4) product. Corporate headquarters is responsible
for designing a corporate strategic plan to guide the whole enterprise; it makes decisions on the
amount of resources to allocate to each division, as well as on which businesses to start or
eliminate. Each division establishes a plan covering the allocation of funds to each business unit
within the division. Each business unit develops a strategic plan to carry that business unit into a
profitable future. Finally, each product level (product line, brand) develops a marketing plan for
achieving its objectives.

SWOT Analysis

The overall evaluation of a company’s strengths, weaknesses, opportunities, and threats is called
SWOT analysis. It’s a way of monitoring the external and internal marketing environment. Once
the company has performed a SWOT analysis, it can proceed to goal formulation, developing
specific goals for the planning period. Goals are objectives that are specific with respect to
magnitude and time.
Goals indicate what a business unit wants to achieve; strategy is a game plan for getting there.
Every business must design a strategy for achieving its goals, consisting of a marketing strategy
and a compatible technology strategy and sourcing strategy. The marketing plan should define
how progress toward objectives will be measured. Managers typically use budgets, schedules,
and marketing metrics for monitoring and evaluating results. With budgets, they can compare
planned expenditures with actual expenditures for a given period. Schedules allow management
to see when tasks were supposed to be completed and when they actually were. Marketing
metrics track actual outcomes of marketing programs to see whether the company is moving
forward toward its objectives.