Chapter 1

Defining Marketing for the 21st Century

The questions identified in the slide will be our focus.

Chapter Questions

What is Marketing?

Why is marketing important?

Marketing is an organizational function and a set of

processes for creating, communicating, and delivering value

What is the scope of marketing?

What are some fundamental marketing concepts?

How has marketing management changed?

What are the tasks necessary for successful marketing

management?

to customers and for managing customer relationships in

ways that benefit the organization and its stakeholders.
Marketing is about identifying and meeting human and
social needs. One of the shortest good definitions of
marketing is meeting needs profitably.
The American Marketing Association offers the following

Good marketing is no accident, but a result of careful

formal definition: Marketing is the activity, set of

planning and execution using state-of-the-art tools and

institutions, and processes for creating, communicating,

techniques. It becomes both an art and a science as

delivering, and exchanging offerings that have value for

marketers strive to find creative new solutions to challenges

customers, clients, partners, and society at large.

in a complex marketing environment.

In this book, the authors describe how top marketers
balance discipline and imagination to address these new
marketing realities. In the first chapter, they set the stage
by reviewing important marketing concepts, tools,
frameworks, and issues.

What is Marketing Management?

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.

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Marketing management takes place when at least one party

2. Nonexistent demandConsumers may be unaware of or

to a potential exchange thinks about the means of achieving

uninterested in the product.

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

3. Latent demandConsumers may share a strong need

that cannot be satisfied by an existing product.

through creating, delivering, and communicating superior

4. Declining demandConsumers begin to buy the product

customer value.

less frequently or not at all.

5. Irregular demandConsumer purchases vary on a

Marketers market 10 main types of entities as shown on

slides 1-5 and 1-6.
What is Marketed?
Goods Services Events Experiences Persons Places
Properties Organizations Information Ideas
Demand States
Negative Nonexistent Latent Declining Irregular
Unwholesome Full Overfull

seasonal, monthly, weekly, daily, or even hourly basis.

6. Full demandConsumers are adequately buying all
products put into the marketplace.
7. Overfull demandMore consumers would like to buy the
product than can be satisfied.
8. Unwholesome demandConsumers may be attracted to
products that have undesirable social consequences.
In each case, marketers must identify the underlying
cause(s) of the demand state and determine a plan of action

Eight demand states are possible:

to shift demand to a more desired state.

1. Negative demandConsumers dislike the product and

Negative Demand: Consumer dislikes the product and may

may even pay to avoid it.

pay to avoid it.

Nonexistent Demand: Consumer may be unaware of or

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uninterested in the product.

Latent Demand: Consumer may share a strong need that
cannot be satisfied by an existing product.
Declining Demand: consumer begin to buy the product less
frequently or not at all.
Irregular Demand: Consumer purchase vary on a seasonal,
Monthly, Weekly, daily, or even hourly basis.
Full Demand: Consumer are adequately buying all products
put into the marketplace.
Overfull Demand: More consumers would like to buy the
products than can be satisfied.
Unwholesome Demand: Consumer may be attracted to
products that have undesirable social consequences.

Traditionally, a market was a physical place where buyers

and sellers gathered to buy and sell goods. Economists

Figure 1.1 Structure of Flows in Modern Exchange

describe a market as a collection of buyers and sellers who

Economy

transact over a particular product or product class (such as

the housing market or the grain market).
Five basic markets and their connecting flows are shown in
Figure 1.1.
Manufacturers go to resource markets (raw material
markets, labor markets, money markets), buy resources and
turn them into goods and services, and sell finished
products to intermediaries, who sell them to consumers.

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Consumers sell their labor and receive money with which

Business Markets: Companies selling business goods and

they pay for goods and services. The government collects

services often face well-informed professional buyers skilled

tax revenues to buy goods from resource, manufacturer,

at evaluating competitive offerings. Global Markets:

and intermediary markets and uses these goods and

Companies in the global marketplace must decide which

services to provide public services. Each nations economy,

countries to enter; how to enter each (as an exporter,

and the global economy, consists of interacting sets of

licenser, joint venture partner, contract manufacturer, or

markets linked through exchange processes. Marketers use

solo manufacturer); how to adapt product and service

the term market to cover various groupings of customers.

features to each country; how to price products in different

They view sellers as constituting the industry and buyers as

countries; and how to design communications for different

constituting the market.

cultures. They face different requirements for buying and

Key Customer Markets

Consumer markets

Business markets

disposing of property; cultural, language, legal and political

differences; and currency fluctuations.
Nonprofit and Governmental Markets: Companies selling to
nonprofit organizations with limited purchasing power such
as churches, universities, charitable organizations, and

Global markets

Nonprofit/Government markets

Consumer Markets: Companies selling mass consumer

government agencies need to price carefully.

Core Concepts

Needs, wants, and demands

Target markets, positioning, segmentation

Offerings and brands

goods and services 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.

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Value and satisfaction

Marketing channels

5. Secret needs (The customer wants friends to see him or

her as a savvy consumer.)
Needs

Supply chain
Stated Needs: When the consumer state very clearly what

Competition

do they need such as buying unexpansive car.

Marketing environment

Real Need: When consumer wants a car whose operating

Marketing planning

This is a list of core marketing concepts. They will be

discussed further on the coming slides.
We can distinguish five types of needs:
1. Stated needs (The customer wants an inexpensive car.)
2. Real needs (The customer wants a car whose operating
cost, not initial price, is low.)
3. Unstated needs (The customer expects good service from
the dealer.)

cost, not the initial price is low.

Unstated needs: The consumer is expecting good services
from the car dealer.
Delights need: When the consumer asked for extra options
such as Leather seats,/GPS
Secret needs: Unstated want such as passing near his friend
house wanted his friend to see him or her.
Target Markets, Positioning & Segmentation
Not everyone likes the same cereal, restaurant, college, or
movie. Therefore, marketers start by dividing the market

4. Delight needs (The customer would like the dealer to

into segments. They identify and profile distinct groups of

include an onboard GPS navigation

buyers who might prefer or require varying product and

service mixes by examining demographic, psychographic,

system.)

and behavioral differences among buyers.

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After identifying market segments, the marketer decides

intangible benefits and costs to her. Value, a central

which present the greatest opportunities which are its

marketing concept, is primarily a combination of quality,

target markets. For each, the firm develops a market

service, and price (qsp), called the customer value triad.

offering that it positions in the minds of the target buyers as

Value perceptions increase with quality and service but

delivering some central benefit(s).

decrease with price. We can think of marketing as the

Offerings and Brands

identification, creation, communication, delivery, and

monitoring of customer value. Satisfaction reflects a

Companies address customer needs by putting forth a value

persons judgment of a products perceived performance in

proposition, a set of benefits that satisfy those needs. The

relationship to expectations. If the performance falls short of

intangible value proposition is made physical by an offering,

expectations, the customer is disappointed. If it matches

which can be a combination of products, services,

expectations, the customer is satisfied. If it exceeds them,

information, and experiences.

the customer is delighted. LL Bean consistently has high

satisfaction ratings.

A brand is an offering from a known source. A brand name

such as McDonalds carries many associations in peoples
minds that make up its image: hamburgers, cleanliness,
convenience, courteous service, and golden arches. All

Marketing Channels

companies strive to build a brand image with as many

To reach a target market, the marketer uses three kinds of

strong, favorable, and unique brand associations as

marketing channels. Communication channels deliver and

possible.

receive messages from target buyers and include

Value and Satisfaction

newspapers, magazines, radio, television, mail, telephone,

billboards, posters, fliers, CDs, audiotapes, and the Internet.

The buyer chooses the offerings he or she perceives to

Beyond these, firms communicate through the look of their

deliver the most value, the sum of the tangible and

retail stores and Web sites and other media. Marketers are

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increasingly adding dialogue channels such as e-mail, blogs,

suppliers and service suppliers, such as marketing research

and toll-free numbers to familiar monologue channels such

agencies, advertising agencies, banking and insurance

as ads.

companies, transportation companies, and

The marketer uses distribution channels to display, sell, or

telecommunications companies.

deliver the physical product or service(s) to the buyer or

Distributors and dealers include agents, brokers,

user. These channels may be direct via the Internet, mail, or

manufacturer representatives, and others who facilitate

mobile phone or telephone, or indirect with distributors,

finding and selling to customers.

wholesalers, retailers, and agents as intermediaries.

The broad environment consists of six components:

To carry out transactions with potential buyers, the marketer

demographic environment, economic environment, social-

also uses service channels that include warehouses,

cultural environment, natural environment, technological

transportation companies, banks, and insurance companies.

environment, and political- legal environment. Marketers

Marketers clearly face a design challenge in choosing the

must pay close attention to the trends and developments in

best mix of communication, distribution, and service

these and adjust their marketing strategies as needed.

channels for their offerings.

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. In the supplier group are material

Today, major, and sometimes interlinking, societal forces

have created new marketing behaviors, opportunities, and
challenges. Here are 12 key ones.
Major Societal Forces

Network information technology

Globalization

Deregulation

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Privatization

Heightened competition

Industry convergence

The selling concept holds that consumers and businesses, if

left alone, wont buy enough of the organizations products.
It is practiced most aggressively with unsought goods
goods buyers dont normally think of buying such as
insurance and cemetery plotsand when firms with

Retail transformation

Disintermediation

Consumer buying power

overcapacity aim to sell what they make, rather than make

what the market wants. The marketing concept emerged in
the mid-1950s41 as a customer-centered, sense-and
respond philosophy. The job is to find not the right
customers for your products, but the right products for your

Consumer participation

customers.

Consumer resistance

Holistic Marketing

Company Orientations
The production concept is one of the oldest concepts in
business. It holds that consumers prefer products that are
widely available and inexpensive. Managers of productionoriented businesses concentrate on achieving high
production efficiency, low costs, and mass distribution.
The product concept proposes that consumers favor
products offering the most quality, performance, or
innovative features.

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The holistic marketing concept is based on the

and desires. The ultimate outcome of relationship marketing

development, design, and implementation of marketing

is a unique company asset called a marketing network,

programs, processes, and activities that recognize their

consisting of the company and its supporting stakeholders

breadth and interdependencies.

customers, employees, suppliers, distributors, retailers, and

Holistic marketing acknowledges that everything matters in

marketingand that a broad, integrated perspective is often
necessary. Figure 1.3 provides a schematic overview of four
broad components characterizing holistic marketing:
relationship marketing, integrated marketing, internal
marketing, and performance marketing.
Relationship Marketing
Relationship marketing aims to build mutually satisfying
long-term relationships with key constituents in order to
earn and retain their business.
Four key constituents for relationship marketing are
customers, employees, marketing partners (channels,

otherswith whom it has built mutually profitable business

relationships. The operating principle is simple: build an
effective network of relationships with key stakeholders, and
profits will follow.
Integrated Marketing
Integrated marketing occurs when the marketer devises
marketing activities and assembles marketing programs to
create, communicate, and deliver value for consumers such
that the whole is greater than the sum of its parts. Two
key themes are that
(1) Many different marketing activities can create,
communicate, and deliver value and

suppliers, distributors, dealers, agencies), and members of

(2) Marketers should design and implement any one

the financial community (shareholders, investors, analysts).

marketing activity with all other activities in mind.

Marketers must create prosperity among all these

constituents and balance the returns to all key stakeholders.
To develop strong relationships with them requires
understanding their capabilities and resources, needs, goals,

Internal Marketing

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Internal marketing is the task of hiring, training, and

Performance marketing requires understanding the

motivating able employees who want to serve customers

financial and nonfinancial returns to business and

well.

society from marketing activities and programs. Top

Snowshoe Mountain in Snowshoe, West Virginia, embarked

on a marketing program based on internal marketing to
better brand the ski resort with a promise of an authentic,
rustic and engaging wilderness experience. In launching a
branding initiative to define their goals and articulate what
they wanted the Snowshoe Mountain brand to represent to
visitors, the resorts marketers started inside. They
incorporated the new brand promise in a 40-page brand

marketers are increasingly going beyond sales

revenue to examine the marketing scorecard and
interpret what is happening to market share,
customer loss rate, customer satisfaction, product
quality, and other measures. They are also
considering the legal, ethical, social, and
environmental effects of marketing activities and
programs.

book that contained the history of the resort and a list of

seven attitude words that characterized how employees
should interact with guests. On-mountain messaging and
signs also reminded employees to deliver on the brand
promise. All new hires received a brand presentation from

Financial

the director of marketing to help them better understand

Accountability

the brand and become effective advocates.

Performance Marketing

Social Responsibility
Marketing

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holistic marketingclearly these four Ps are not the

Types of Corporate Social Initiatives

Corporate social marketing

Cause marketing

Cause-related marketing

Corporate philanthropy

Corporate community involvement

Socially responsible business practices

whole story anymore.

In Table 1.2 these forms of social activity are

defined and examples from McDonalds are
provided.
The Marketing Mix
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. The marketing variables under each P are
shown in Figure 1.4. Given the breadth, complexity, and
richness of marketing, howeveras exemplified by

The New Four Ps

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, as in Figure 1.5.

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People reflects, in part, internal marketing and the fact that

employees are critical to marketing success.
Processes reflects all the creativity, discipline, and structure
brought to marketing management. Programs reflects all the
firms 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.
We define performance as in holistic marketing, 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).

Marketing Management Tasks

Develop market strategies and plans

Capture marketing insights

Connect with customers

Build strong brands

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Shape market offerings

Why is marketing important?

Deliver value

What is the scope of marketing?

Communicate value

What are some fundamental marketing concepts?

Create long-term growth

How has marketing management changed?

What are the tasks necessary for successful marketing

With the holistic marketing philosophy as a backdrop, we

can identify a specific set of tasks that make up

management? This chapter has covered the content

successful marketing management and marketing

needed to answer the chapter questions. Use this slide

leadership.

to review and identify problem areas.

For Review