CHAPTER 1

Introduction to marketing
LEA RNIN G OBJE CTIVE S

After studying this chapter, you should be able to:

1.1 provide an overview of marketing and the marketing process
1.2 recognise that marketing involves a mutually beneficial exchange of value
1.3 discuss the importance of ethics and corporate social responsibility in marketing
1.4 explain the elements of the marketing mix
1.5 discuss how marketing improves business performance, benefits society and contributes to
quality of life.
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 CASE STUDY

Do you see what I see?

For many, marketing has a bad reputation. It is
important for any aspiring marketing professional to
understand the views of marketing that are widely
held in the broader community. Marketing is viewed
by many people as an evil force; for some, it is viewed
as a business function that causes people to buy
things they don’t really need with money they don’t
have. For others, the marketing function is blamed
for flawed products that are sold in the marketplace.
Finally, others are concerned about the messages that
are communicated by marketers. Many marketing
messages include false or overstated claims, and
others fail to include complete information — leaving consumers largely in the dark about the short‐
and long‐term effects of a product. These are but a few of the concerns expressed by members of the
broader community about the marketing profession.
Let’s take a brief look at alcohol. Notwithstanding efforts to discourage heavy and binge drinking
and promote safe drinking habits, alcohol contributes to over 200 diseases and injury‐related health
conditions, most notably alcohol dependence, liver cirrhosis, cancers, and injuries.1 In 2012, 3.3 million
deaths globally, or 5.9 per cent, were attributable to alcohol consumption,2 and 5.1 per cent of the
burden of disease and injury worldwide (139 million disability‐adjusted life years) was attributable to
alcohol consumption.3
Alcohol misuse is the fifth‐highest risk factor for premature death and disability; among people between
the ages of 15 and 49, it is the first. Approximately 25 per cent of deaths among people aged 20–39 years
are attributable to alcohol.4
Drinking among underage and young adults is a problem in a number of countries. In the United
States in 2014 about 13.8 per cent of people aged 12–20 were binge drinkers.5 In Australia, although
there was an increased rate of abstinence among 12–17 year olds, around one in six (16 per cent)
people aged 12 or older reported consuming 11 or more standard drinks on a single drinking occasion
in the previous 12 months. Similarly, more than one in five (21 per cent) drinkers had put themselves or
others at risk of harm while under the influence of alcohol in the previous 12 months.6
Exposure to alcohol advertising, particularly among young people, is increasing due to the expansion
of alcohol advertising into digital media and through globalised platforms, and this is likely to have a
cumulative effect. Exposure is both direct (television and print media, official brand websites and alcohol
sponsorship of sports and cultural events) and indirect (product placement in films, music videos and
television programs, social media and in‐store promotions).7
UK statistics reported in 2011 demonstrate that industry‐funded efforts to promote safer drinking
(US$104 million) are greatly outgunned by alcohol advertising (US$4.9 billion).8 As a result, young
people are 239 times more likely to see an alcohol advertisement than an advertisement promoting safe
drinking (moderate drinking or abstinence).
Society as a whole is demanding that marketers work for the benefit of society and minimise
any adverse effects of marketing activities. At this point in time, it is more important than ever for
marketers to fully understand the products they are marketing, and the possible social and econ­
omic consequences of the misuse of these products. For the marketing industry’s reputation to
Copyright © 2017. Wiley. All rights reserved.

improve, the number of socially responsible messages will need to increase (remember, only 1 in
every 239 messages about alcohol promotes safe drinking). To achieve a long and fulfilling career in
marketing, it is best to align with socially responsible organisations that have the broader community’s
interests at heart. There are many examples of marketing contributing positively to society. It is surely
best to market a product or service that is needed, improves health and makes a positive contribution
to society.

QUESTION
Find one marketing message that concerns you. Why is this message concerning?

2  Marketing

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 Introduction
Through accident or intent, the most successful businesses throughout history have been those built
around and focused on making their customers happy — and doing it better than their competitors can.
Every person, thing and process within a market‐oriented organisation strives to create value for the
organisation’s customers. It is the creation of a mutually beneficial exchange of value between one party
and another that is the purpose of all marketing efforts.
Recognising the importance of a market orientation to success, this chapter introduces the concept of
marketing as a philosophy of how to do business. It explores the formal definition: ‘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’9 and explains how this definition reflects the
reality of marketing today.
A lot of people have the misconception that marketing is purely about selling. Marketing is most definitely
not well described as ‘the art of selling products to customers’. Not‐for‐profit organisations, community
groups, governments and even individuals use marketing practices. For example, the Council of Australian
Governments (COAG) Healthy Communities Initiative is an Australian government initiative that aims to
reduce the prevalence of overweight and obesity within target populations. The target populations consist of
individuals at high risk of developing chronic disease and who are not predominantly in the paid workforce.
For more information about the campaign, go to www.healthyactive.gov.au.
Marketing, done well, is an approach to business that influences and informs every activity of the
business or organisation. As you read through this chapter, think about how the ideas discussed can be
applied to the things you encounter in your everyday life. You will realise that there are some common
elements to each instance of marketing, such as product, price, promotion, place (distribution), people,
processes and physical evidence. How these factors come together to provide a complete marketing
experience is what differentiates one marketing effort from another; successful organisations from failed
ones; and having loyal, satisfied customers from having no customers at all.

1.1 What is marketing?

LEARNING OBJECTIVE 1.1 Provide an overview of marketing and the marketing process.
Marketing is everywhere and much of what you do every day is in some way affected by it. Marketing is
an evolving discipline and each marketer will have their own take on exactly what it is. Some people —
mistakenly — think that marketing is selling; some that marketing is advertising; and some that it is
making sure your business is listed at the top of every Google search that in some way relates to your
product. No doubt, you already have your own ideas about what marketing is.
The most recent formal definition of 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.10
Figure 1.1 expands on this definition and begins to explain what each part of it means.
The definition refers to ‘activity, set of institutions and processes’, recognising the broad scope of
marketing — that it is not just a function that exists as a ‘marketing department’ within an organisation,
Copyright © 2017. Wiley. All rights reserved.

and that marketing is about much more than advertising.

‘Creating, communicating, delivering and exchanging offerings that have value’ recognises that
marketing must involve an exchange that benefits both the customer who buys the product (a good, ser-
vice or idea) and the organisation that sells the product (a good, service or idea).
‘Customers, clients, partners and society at large’ recognises that organisations need to conduct their
marketing in such a way as to provide mutual benefit, not just for the users of their products, but also for
partners in the supply chain, and that marketers must consider their impact on society. Marketing brings
many benefits to societies, including employment and the creation of wealth. With careful planning, some
marketing activities can be good for customers, people in the supply chain and the environment. Consider

CHAPTER 1 Introduction to marketing  3

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 McDonald’s — one of many major coffee purchasers that changed their coffee buying practices in 2008.
Today, McDonald’s serves only Rainforest Alliance coffee. Rainforest Alliance coffee guarantees farms that
meet specific and holistic standards balancing all aspects of production — including protecting the environ-
ment, the rights and welfare of workers, and the interests of coffee growing communities.11 Marketers must
be aware of the impact that products and services sold have on society — and they must work towards min-
imising the negative impacts and maximising the positive impacts. This is referred to as corporate social
responsibility or sustainability. Corporate social responsibility is a commitment to behave in an ethical and
responsible manner, to ‘minimise the negative impacts and maximise the positive impacts’.12

FIGURE 1.1 Marketing defined

Marketing
is

the activity, set of the adoption of a way of doing business that

institutions and processes puts the market at the heart of decisions

for

developing a good, service or idea that is

creating, communicating,
promoted and distributed to customers in
delivering
the right place at the right time

and

exchanging offerings
a mutually beneficial exchange
that have value

for

individuals and organisations that benefit

customers from the products of:
– businesses and/or
clients – not-for-profit organisations
individuals and organisations that are part of
partners the marketer’s supply chain
the creation of employment, wealth and
society at large social welfare

Marketing is a relatively new discipline, which came into its own in the 1960s. Many of the ideas
that underpin marketing theories draw on other disciplines, including psychology, sociology, economics
and management. Many definitions of marketing have been proposed over the years and marketing, like
any new discipline, continues to evolve today. Figure 1.2 describes how our understanding of marketing
has changed in recent history, including the increasing importance of service‐dominant logic in the
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progression of marketing thinking.

FIGURE 1.2 The evolution of marketing

Trade
Throughout history people have exchanged what they have for what they have wanted. While some core
marketing ideas (such as mutually beneficial exchange) were at play, formal definitions of marketing did
not exist.

4  Marketing

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 Late 1800s/early 1900s
As technology and infrastructure were developed and built, businesses were able to produce greater
volumes of an ever‐increasing range of products. Demand for these goods was strong. Marketing at
this time could best be described by the concept of a ‘production orientation’. Marketers’ offerings were
largely determined by what could be made, and what people bought was largely determined by what
was available. This is summed up in the famous quotation of Henry Ford, ‘Any customer can have a car
painted any colour that he wants so long as it is black.’ (Black paint dried faster than any other colour,
so it was the most efficient colour to produce.)

1930s
As competition increased, companies could no longer rely on consumers to want and buy everything
they could make. This led to the ‘sales orientation’, which focused on increasing profits through adver­
tising and one‐to‐one selling. Consider the American Marketing Association marketing definition in
1935: ‘Marketing is the performance of business activities that direct the flow of goods and services
from producers to consumers.’13

Mid to late 1900s

In the second half of the 20th century, customers had so many products to choose from that they could
not buy them all. When they did want to buy a particular product, they could choose from many similar
items. In a new era of increased competition, businesses realised that customers would not automati­
cally buy any product that a business happened to devise. The approach to marketing changed to a
‘market orientation’ in which businesses worked to determine what potential customers wanted and
then made products to suit. Marketing became mainstream business practice. Successful businesses in
the late 1900s were those that adopted a market orientation throughout their operations and responded
to the market’s needs and wants.

The 2000s
Today businesses are increasingly faced with not only satisfying customer wants but ensuring they
are socially responsible corporate citizens. Businesses face well‐informed customers with an enor­
mous number of competing products vying for their attention. Marketers have broadened the concept
of market orientation to view the market as not just their customers, but also broader society. This
view is reflected in marketers’ consideration of issues such as the sustainability of their products
and the benefits their products might bring to society generally. This is known as a ‘societal market
orientation’. Examples of a societal market orientation in action include supermarkets offering to
pack groceries in reusable bags, potato chip marketers developing chips cooked in lower‐cholesterol
oils and health clinics offering free vaccinations. Companies with a societal market orientation have
practices and policies that seek to minimise their negative impact on society and maximise their
positive impact.

Where now/where next?

The most recent advancement in marketing is the idea of service‐dominant logic. Service‐dominant logic
represents a move away from a goods‐dominant mentality. Marketing inherited a model of exchange
from economics, and traditional definitions of marketing refer to the exchange of ‘goods’, or manufac­
tured output. Examples include cars, orange juice, tennis rackets — the list goes on. The traditional or
goods dominant logic focused on tangible resources (things that you can see and touch), embedded
value and transactions. Over the past several decades, as technology has improved and goods can be
Copyright © 2017. Wiley. All rights reserved.

rapidly copied by competitors, new perspectives have emerged. In 2004, Steve Vargo and Robert Lusch
published a paper in the Journal of Marketing introducing the idea of service‐dominant logic.
Since their seminal work in 2004, Lush and Vargo have further elaborated on the foundational con­
cepts of service‐dominant logic by emphasising the systemic base of value co‐creation and the role
of social institutions and institutional arrangements. Thus, value co‐creation emerges through service
exchanges modulated by institutional forces at multiple systemic levels.14,15
Companies following service‐dominant logic seek a deep understanding of their customers and aptly
utilise communication, particularly social media, to engage with their customers at all stages of the
marketing process.

CHAPTER 1 Introduction to marketing  5

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 As you study this text you will develop a deeper understanding of just what is meant by each com-
ponent of the definition that we have described and, more importantly, your own understanding of what
marketing is. Most importantly, though, you will understand that for successful organisations marketing
is a philosophy or a way of doing business.

The marketing approach to business

Marketing is an approach to business that puts the customer, client, partner and society at the heart of
all business decisions. Marketing requires customers to be at the core of business thinking. Rather than
asking which product should we offer, marketers who adopt best-practice marketing thinking ask which
product would our customers value or like us to offer.
We are using the word ‘business’ in a broad sense. Remember that marketing is used by:
•• small businesses and large multinational corporations
•• businesses selling goods and businesses selling services
•• for‐profit and not‐for‐profit organisations
•• private and public organisations, including governments.
As mentioned previously, it is important to recognise that marketing is not just about selling products
to customers. In fact, for many organisations, that is not what marketing is about at all. Think about the
following examples. They all involve marketing.
Cancer is a leading cause of death in Australia. An estimated 130  470 new cases of cancer will be
diagnosed in Australia in 2016, with that number set to rise to 150  000 by 2020. One in two Australian
men and one in three Australian women will be diagnosed with cancer by the age of 85. Cancer Council
Australia, a leading not‐for‐profit organisation with member organisations in all states and territories,
undertakes a broad range of activities, including funding cancer research in Australia. In 2016, the Cancer
Council directly funded $43.4 million in cancer research, and the organisation provides evidence‐based
up‐to‐date information to patients and healthcare professionals. Other activities include marketing a
range of skin care products and raising funds to support cancer patients.16
Copyright © 2017. Wiley. All rights reserved.

6  Marketing

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 Breast cancer is a major health issue, being the most common cancer to affect women and the second-
most common cause of cancer‐related death in Australian women. In 2011, a total of 1130 women
aged 50–69 died from breast cancer, equivalent to 44 deaths per 100  000 women. In 2010, 7449 new
cases of invasive breast cancer were diagnosed in Australian women aged 50–69, which is equivalent to
300 new cases per 100  000 women.
In June 1990, the ministers responsible for health in all states and territories joined the federal govern-
ment in funding a national mammography screening program. The national program, now known as
BreastScreen Australia, was established in 1991, and is recognised as one of the most comprehensive
population‐based screening programs in the world. BreastScreen Australia was initially targeted specifi-
cally at well women without symptoms, aged 50–69, although women aged 40–49 and 69 years and older
were also able to seek screening. Since 2013, an additional investment of $55.7 million over four years
has been made to expand the target age range for free breast screening by five years, to include women
aged 50–74. As of 2014, BreastScreen Australia operates in over 600 locations nationwide via fixed,
relocatable and mobile screening units. Screening has increased significantly since commencement of
BreastScreen Australia, and the program’s aim is to achieve a participation rate of 70 per cent among
women in the target age group. In 2011–2012, more than 1.4 million women aged 50–69 had a screening
mammogram through BreastScreen Australia, a participation rate of 55 per cent for the target age group.
Although the participation rate remained unchanged from those in 2009–2010 and 2010–2011, the abso-
lute number of women in the target age group has increased substantially.17
In 2011, a research report uncovered that consumers love their large, sleek, flat‐screen televisions, but
are becoming increasingly frustrated with their dusty and dirty screens. The 2012 Australian Marketing
Institute (AMI) Brand Revitalisation Award Winner Kimberly‐Clark launched Viva TV & Computer
Wipes in response.18 The wipes are cleaning products that have been specially designed to safely remove
dust, dirt, fingerprints and marks from a range of multimedia screens — from TVs and computers to
phones and tablets. It was the first TV screen cleaning product made available in Australian supermarket
cleaning aisles. At the time of winning the AMI award, the brand was forecast to deliver $4 million
to the cleaning category in its first 12 months.19 Follow‐up data in 2013 shows that sales of TV wipes
fell slightly below forecasts, achieving $2.6 million in retail sales20 and negative press exposure. For
example, CHOICE exposed Kimberly‐Clark for the environmental impact of its wipes, which have been
blamed for blocking drainage systems and waterways.21
Marketing is a science, a learning process and an art. Marketers need to learn what customers, clients,
partners and society want. This is an ongoing process as customer preferences are continually evolving.
Customers’ needs and wants change with each product purchased, magazine read, conversation had or
television program watched. Marketers must use information to maintain their understanding. Marketers
must be creative and able to develop new ideas. Markets are cluttered and there are many options
available to consumers. The best marketers are able to offer something that is unique or special to
consumers.
In January 2013, Maria Sharapova — at the time ranked second worldwide in women’s tennis —
launched a line of premium sweet and sour lollies called ‘Sugarpova’. With 12 flavours and lollies shaped
as high heels, purses and tennis balls, Sugarpova is a premium lolly brand with a story about reward for
success. The brand story is that Sharapova was awarded a lollipop after a good practice. It seems this is
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a product range that has been created specifically with girls in mind, with more than 1 million bags pre-
dicted to sell worldwide in 2013. Sharapova has a long history of working with brands — she’s been the
face of brands like TAG Heuer, Samsung, Evian and Head — and she has worked closely with Nike and
Cole Haan to design product lines for their brands. Her choice to align with a lolly was immediately crit-
icised as irresponsible and inappropriate, with a whopping 21 grams of sugar per serving (five pieces).
Following the launch, there were many questions about whether lollies were the kind of thing sport stars
should be promoting. In late 2013, Sharapova announced that she planned to officially change her name
to ‘Sugarpova’ for the two‐week duration of the US Open, so that commentators would be required to
refer to her by the brand name.22

CHAPTER 1 Introduction to marketing  7

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 Tennis player Maria Sharapova’s decision to align with a lolly brand has been criticised.

Mobile technology has opened up a huge opportunity for companies to collect information and data.
Marketers can use ‘active’ data collection — asking mobile users to answer surveys or ‘like’ something on
Facebook — or they can collect ‘passive’ information. Our devices are collecting data about us all the time. The
GPS feature on most smartphones offers one example. Apps such as FourSquare or our navigation apps track
our whereabouts passively, and this information can be used by marketers to track the habits of consumers.

The marketing process

The marketing process involves understanding the market to create, communicate and deliver an offering
for exchange. The marketing process is an ongoing cycle and often marketers will be undertaking mul-
tiple tasks simultaneously. However, when you start your first marketing job, you will have to start with
‘understanding’, and, for this reason, we will look at the marketing process sequentially. Marketers start
by understanding the consumers, the market and how they are currently situated. This may involve under-
taking some market research to gain insights into a problem the marketer currently faces or reviewing
sales data to understand how the company is currently performing. Marketers need to undertake a situation
assessment to understand how their company is positioned relative to the competition.
The understanding phase of the marketing process involves an analysis and assessment of the marketing
environment and markets (local and/or international), as well as consumer and business buying behav-
iour. Marketers must start by understanding the situation they currently face, including both internal and
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external factors, in order to create a solution to meet the needs and wants of customers. Marketers use
market research to understand consumer motivations, abilities and opportunities to act. For example,
wine marketers can access market insight reports from a market research company, such as the Nielsen
Company, in order to understand which wines they should range in their stores, how their wines should
be branded and which consumers they should target with promotions. For example, a Nielsen report
revealed that buyers of New Zealand wine are:
•• more likely to be in their thirties
•• more likely to live in metropolitan areas
•• more likely to have a household income of over A$100  000 per annum

8  Marketing

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 •• more likely to experiment within the wine category
•• less likely to be brand loyal.23
Armed with this knowledge, marketers would understand that placing several varieties under one
umbrella brand might be the best way to generate brand loyalty for New Zealand wines in Australia, and
they could take steps to create, communicate and deliver such an offering to the market.
Let’s take another example to illustrate the marketing process. Imagine that a food marketer, based on
research and an understanding of current trends, determines that his company needs to create a new flavour
of yoghurt in order to maintain or grow sales in this product category in the dairy aisles of supermarkets
relative to competitors. Once testing and creation of the new flavour variant is complete, the food mar-
keter needs to communicate the offering to the market. This could be achieved, perhaps, via mass media
advertising and/or a point‐of‐sale campaign, in order to change the way a group of target customers think
and purchase. The food marketer must constantly ensure their product is delivered and available at a
time and place that is convenient for the customer. The new flavour yoghurt variant in this example has
therefore progressed from the food marketer’s initial understanding of market requirements through the
production process and distribution chain — ultimately ending up on supermarket shelves, with target cus-
tomers hopefully being fully aware of the new product offering. Marketers need to constantly monitor and
understand their effectiveness in all aspects of this process, as this cycle is ongoing. Figure 1.3 visually
represents these four broad components of the marketing process and the interrelationships between each.

FIGURE 1.3 The marketing process involves understanding, creating, communicating and delivering an
offering for exchange of value.

Understand

Deliver Create

Communicate
Copyright © 2017. Wiley. All rights reserved.

It is important to note that delivery in the process outlined in figure 1.3 is also concerned with quality and
satisfaction. Marketers need to ensure the offering (product, service or idea) satisfies the customer. Customers
want products and brands that are reliable and services that fulfil promises. Many companies track quality to
ensure they are delivering a product that is consistent, and which meets consumers’ expectations. Marketers
that are able to consistently satisfy their customers can build loyalty and, in turn, this can lead to word‐of‐
mouth. It is commonly accepted in marketing that keeping customers loyal is cheaper than gaining new cus-
tomers and that brands with a loyal base of customers have a value that is an asset for a company. For this
reason, branding is studied by many marketing academics to understand how to build and maintain brands.

CHAPTER 1 Introduction to marketing  9

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 SPOTLIGHT

Boost Juice bars in a global, digital marketplace

After identifying a trend for juice bars in the United
States, and studying the local retail sector to find
there was a lack of healthy fast‐food choices,
Boost Juice founder Janine Allis decided to open
a juice bar in Adelaide in 2000. This flagship store
was so popular that Australians demanded Boost
Juice stores in their own towns, and new franchises
were rapidly opened all over Australia. The chain
soon expanded globally, resulting in a group turn­
over of $158 million in 2015 from over 350  stores
across Australia and in the United Kingdom, Ireland,
Thailand, Chile, Singapore, Malaysia, the Baltics,
South Africa and more.24 Boost Juice’s international
strategy aims to respect ‘the different values, tastes,
customs, purchasing powers and media habits’
of their global customers. To that end, Boost Juice works with their franchising partners, who are
experts in their own regions, to adapt, localise and customise their drinks for each local market.25 In
an example of just how adaptive to local markets they can be, their juice bars are known as ‘Joost
Juice Bars’ in India.
Boost Juice has adapted well to a changing digital landscape, both in their marketing and media
strategy and in‐store. The brand boasts well over 650  000 likes on Facebook, more than 70  000 Insta­
gram followers and over 10  000 Twitter followers. Boost has become an industry leader for two‐way
communication and viral marketing. When it ran its famed ‘What’s Your Name Game’ in October 2016, a
combination of promotions and witty, engaging posts garnered more than 140  000 Facebook comments
over the course of the month.26
In‐store, Boost has electronic tills, payWave capability, digital posters and a Boost app that enables
customers to order a juice in advance. The Boost app was downloaded over 250  000 times in its first
three months and was the first Australian retail application to be integrated with the in‐store point of
sale system. Another Boost‐branded app, ‘Free the Fruit’, was launched in response to Nielsen research
that revealed that 12 per cent of the time spent on smartphones is in games apps. Of the game release,
Boost marketing manager Nikki Price said:
The game has been designed to drive new and current customers to interact with the brand on a new platform
different to that of our current mobile ordering app and social platforms.27

In 2016, a Boost Juice Bars staff member leaked the recipes of several top‐selling smoothies on
Facebook.28 Responding to the leak in a statement on her website, Janine wrote that rather than melting
down and worrying that competitors would replicate her product, she was instead questioning whether
product secrets really mattered in business.
I was a bit disappointed at the fact that a staff member was not loyal enough to keep our recipes secret, but
as for the leak itself, I was not really concerned. Why? Because businesses are more than one element. Think
of your favourite brand and ask yourself why you like them, of course the product is something you love, but
it is also the service, the experience, how you feel when you interact with them and what they do when things
go wrong.29
Copyright © 2017. Wiley. All rights reserved.

Embedded in the same statement were five videos featuring Janine talking the audience through the
recipes to five of her most popular juices, even discussing the various health benefits and reasoning
behind the pairing of flavours — an interesting move, but one that doesn’t seem to have affected the
company’s success one inch.

QUESTION
Visit the Boost Juice website (www.boostjuice.com.au). In terms of what you have read in the chapter so
far, how would you describe Boost’s approach to business and the marketing process?

10  Marketing

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 CONCEPTS AND APPLICATIONS CHECK

1. Find an example of marketing in action and analyse the extent to which you think the marketer has
adopted ‘marketing thinking’.
2. Find an example of a socially responsible company. Explain why you feel this company is socially
responsible.
3. Find an example of a company that is co‐creating with customers. Explain why you feel this is an
example of co‐creation.
4. Define marketing in your own words. How has your understanding of marketing changed after
reviewing the first part of this chapter?
5. Explain how marketing can be used by not‐for‐profit organisations. Discuss an example in your answer.

1.2 The exchange of value

LEARNING OBJECTIVE 1.2 Recognise that marketing involves a mutually beneficial exchange of value.
The aim of marketing is to develop mutually beneficial exchanges. Consider this example. A customer buys
an 127-centimetre, ultra high‐definition 3D television for $3299. The retailer and manufacturer receive
money for the purchase and clear one stock unit, which contributes to their profits. The customer receives
their much‐wanted television, which they hang on their wall at home. The customer enjoys better quality
sound and picture and a more aesthetically pleasing television, along with many other benefits. Both
parties have received a benefit and both parties had to give something up to receive something in return.
To be considered a successful marketing exchange, the transaction must satisfy the following
conditions:
•• two or more parties must participate, each with something of value desired by the other party
•• all parties must benefit from the transaction
•• the exchange must meet both parties’ expectations (e.g. quality, price).
Once again, exchange can occur for all different types of organisations: large and small, for‐profit and
not‐for‐profit, and private and public. Consider the following examples of exchange:

Electricity is sold to an electricity retailer. A wholesaler sells electricity to an electricity retailer for between
$50 and $97 per megawatt hour.30 Wholesale electricity prices are impacted by weather, demand for power
by manufacturers, energy use levels by households and electricity supply. The electricity retailer operates a
network that is used to supply and sell electricity to households and/or manufacturers for a profit.

Sales of Snickers bars surged from $3.3 billion in global sales in 2011 to $3.6 billion for 2012,
capturing a 1.8 per cent share of the global candy market, according to Euromonitor. The brand —
supported by the BBDO-developed ‘You’re not you when you’re hungry’ advertising campaign that first
featured Betty White being crash‐tackled in a Super Bowl advertisement — has brought Snickers back
to the top of consumers’ minds.31 More than seven years later, the campaign is still being used in various
iterations, and has won several major advertising awards, including the coveted Cannes Lions.32
Both parties need to feel the exchange will leave them better off. Without this, exchange will not
Copyright © 2017. Wiley. All rights reserved.

take place. Think about our first example again. The customer was quite happy to spend $3299 on
a 127-centimetre, 3D television because the benefits received (3D picture, sound and aesthetics) out-
weighed the cost of purchasing the television. Further, the retailer only sold the television because it
could make a profit that could be paid to the business’s owners. Exchange is a value‐creating process
because it leaves both parties better off.
Like exchange, value is a core marketing concept. Value is a customer’s overall assessment of the
utility of an offering based on perceptions of what is received and what is given.33 Some marketers view
this simply as a ratio between quality and price. This is the economic view of value. According to this
view, value is a comparison between what a customer gets and what a customer gives; in other words,

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 the benefits a customer receives from a product in relation to its price. Other marketers view value as
unique and determined by the beneficiary. According to this view, value is idiosyncratic, experiential,
contextual and meaning laden. When value is viewed this way, it is not thought of in terms of one trans-
action. Rather, value is thought of in a way that helps to promote customer loyalty and to consider the
lifetime value of the customer to the firm.
The idea that value is a ratio between quality and price is a simple view of value to help you to under-
stand the concept. Marketers know that the idea of value is more complicated. Value refers to the ‘total
offering’. This includes all aspects, from the reputation of the organisation to how the employees act, the
features of the products, the after-sales service, quality and price. Most companies have competitors and
value is relative to the competition as the competing offerings influence how a customer perceives value.
For example, say two different brands of diet yoghurt are available for purchase this week at Coles
Online Supermarkets. Nestlé Diet Apricot Yoghurt 2 × 200-gram packs sell for $2.58 while Yoplait
Formé Yogurt Banana Honey 2 × 175-gram packs sell for $2.91. It is likely that Nestlé will be perceived
as offering more value with a cheaper price and larger pack size than Yoplait.
Value evolves continually. Value changes with each purchase, experience and conversation that a
person has. For example, a student purchases a laptop online and tells her friend that by purchasing
online she saved $100. Her friend had purchased the same model laptop at the recommended retail price
at a department store near campus. She chose the department store because it was convenient and she
does not have a credit card. While she was happy with her purchase at the time because it was quick and
convenient, she no longer feels satisfied with her purchase because her perception of value has changed.
Going back to the yoghurt example, the Nestlé yoghurt was on sale this week. It usually retails for
$3.15. The Yoplait yoghurt may now be perceived to be better value.
Value means different things to different people. Value is unique for each individual.34 Some customers
perceive value when there is a low price while others perceive value when there is a balance between
quality and price.35 Going back to the flat screen television example used earlier, the customer paid $3299
for a 127-centimetre, 3D television. Another person might think that $3299 is an outrageous price for a
television. It is clear then that value is a matter of individual perception. This is where marketing becomes
a little more complicated, because marketers have to understand the perceptions of the market.

The market
A market is a group of customers with different needs and wants. Markets cover varying groups of
customers from geographic markets (e.g. the Malaysian market), product markets (e.g. the smartphone
market) and demographic markets (e.g. seniors), to name a few.
Markets can also cover different types of customers. Remember from our definition of marketing that
marketing is aimed at ‘customers, clients, partners and society at large’. The term ‘customer’ is used
most frequently in this text to help you to better understand marketing because you are a customer. You
are a customer who buys goods and services for your own and maybe others’ use and you are already
able to understand marketing from a customer’s point of view. Our aim in this text is to teach you to
understand marketing from a marketing organisation’s or manager’s point of view. While there are dif-
ferent groups that marketers cater to, the underlying principles of marketing remain the same.
Different marketers have to market to different groups. Some have to market to customers or con-
Copyright © 2017. Wiley. All rights reserved.

sumers, others market to businesses or clients, while other marketers have to consider the needs and
wants of society in general. The group that the marketer has to market to is the focus of all marketing
activities.
Successful marketers are those who view their products in terms of meeting customer needs and
wants. For example, a company that operates vending machines that serve hot drinks should view its
business as one that quenches people’s thirst, warms them when out on chilly winter nights and gives
them a caffeine boost when they are feeling tired; not as a business that places machines on train station
platforms and mixes lukewarm water with powdered flavouring in a cardboard cup.
We will now discuss each group — customers, clients, partners and society — in turn.

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 Customers
Customers are those people who purchase products for their own or someone else’s use, while
consumers are people who use the good or service. For example, a mother buys hair shampoo and con-
ditioners for her own use. Her two children also use the hair shampoo and conditioner when they need to
wash their hair. The children use or consume the products but they did not purchase them.

Clients
In the general sense, the word ‘client’ is often used as a synonym for ‘customer’, especially with regards
to professional services such as those provided by lawyers, accountants and architects. In the formal
definition of marketing, however, clients refers specifically to ‘customers’ of not‐for‐profit organisations
or social marketers (i.e. those seeking to encourage social changes), thus serving as a differentiator from
customers of businesses. ‘Customers’ of Medicare, Centrelink or a public hospital and the viewers of
anti‐drug advertisements are all examples of clients.

Partners
Partners are organisations or individuals who are involved in the activities and processes for creating,
communicating and delivering offerings for exchange. For example, a partner may be an advertising
consultant who is hired to develop marketing communications to raise awareness for a sports club that
wants to recruit new players for next year. A partner might be a supplier of raw materials or a retailer in
the distribution channel. Thinking back to our flat screen television example, partners of the flat screen
television manufacturer would include the retailer who sells the flat screen televisions to customers and
the manufacturing company that supplies television screens to the television manufacturer. Marketers
need to understand how their partnership will benefit the partner. For example, say a wine marketer
wants retailers to stock their new wine. Before agreeing to stock the new range of wine, the retailer
needs to be convinced by the wine marketer that including this wine in their product range will benefit
their business.

Society
Society is a body of individuals living as members of a community. A society is a highly structured
system of human organisation for large‐scale community living that normally furnishes protection, con-
tinuity, security and an identity for its members. Marketers must understand the needs of the societies
in which they operate. For example, Toyota developed the Prius (a hybrid car that generates its own
electrical power, thus reducing the amount of petrol it consumes) in response to growing concerns about
the environmental impact of cars. Successful marketers demonstrate an awareness of community con-
cern about the natural environment, responsible use of resources, sustainable practices and social equity.
Studies suggest that companies that demonstrate social responsibility have higher profits and market
capitalisation.36

SPOTLIGHT
Copyright © 2017. Wiley. All rights reserved.

Why ‘free’ will eventually cost you

ANDREW HUGHES, AUSTRALIAN NATIONAL UNIVERSITY
Remember the days when free really was free? When reading a news article to the end didn’t mean
having to get over, around or through a paywall. Or when loyalty schemes actually rewarded loyalty with
decent rewards, not ‘spend $200 get a $20 reward voucher that can only be spent with us’.
The suggestion by Australia Post that letter delivery should be slowed unless Australians pay for a
‘priority service’ is the latest signal that what has been considered free or ‘regular’ can easily be bumped
up by marketers to ‘premium’, with the associated cost. Marketing is changing in response to a new

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 world order in markets. The era of the liquid and
dynamic market, as Coke calls it, is here. Markets
move quickly. Getting a competitive advantage is
becoming more difficult, but so is sustaining old busi­
ness models that are unable and too rigid to keep up
with the pace of change.
Banks were among the first to feel these forces.
Online competitors, globalisation and more open
competition forced them to move us firstly away
from tellers to ATMs, then to the internet and now of
course to mobile devices, where the cost of a trans­
action to the brand is in the range of a few cents.
Credit card rewards became harder and harder to get
and the three-tier system was replaced with five tiers — low‐fee no rewards, low‐rate with rewards,
silver rewards/low rate, gold rewards/low rate, platinum, and WOW, you have that card!
Airlines had the same dilemma. In the face of smarter competitors entering the market with deeper
pockets (just ask Qantas), they sought more agile strategies and different service offerings in a drive
to change customer expectations and perceptions and raise new revenue while simultaneously
reducing cost.
Enter premium economy. Cattle class made stylish. If the customer would like not to be elbowing or
having their fellow passenger fall asleep on their shoulder they could pay just a little extra and fly in a bit
more comfort. Or basically get the same experience they had before the introduction the 3‐4‐3 config­
uration, the bane of so many of us on long‐haul flights. While it failed on the uptake, it did reinforce that
if you wanted what you had before then you had to pay futuristic prices.
The illusion of free
And now the internet. It’s all free right? No. At the moment it’s the selling of our private information on a
scale surpassing anything seen before that is paying for our ‘free’. Remember condition 57f of the terms
and conditions that you quickly scrolled to the end of and accepted?
Paywalls changed the media model. Now newspapers are meant to be prestige products, but feel
very much like low‐cost promotions of their online sites. Someone needs to get that marketing right. In
digital media, it’s data that is helping the giants monetise and grow on a massive scale. Just take a look
at the type of location information Google collects — it’s a marketer’s dream. At the same time more
ads are jumping into our social media feeds.
Those big social media apps and sites that so many of us now deem essential to life on Earth have
got us hooked on the free offering, but the social value they provide to us means many of us would
potentially pay a nice monthly fee to keep that access alive 24/7.
It was never free
In 2004 two now very famous marketing academics by the names of Vargo & Lusch wrote a seminal
paper arguing that essentially we will never own a product but merely lease it. Companies loved this.
They have been working to make us accept this concept ever since. In other words, it never was free.
That was just the basic value offering you had accepted. It wasn’t meant to last. As they say, all good
things come to an end.
The ‘better value’ offering isn’t based on price alone anymore, but more the value that we derive
from it in so many ways — be they social, financial, psychological, or whatever. The experience
factor. What you thought was free but now pay extra to have. Australia Post will by no means be
Copyright © 2017. Wiley. All rights reserved.

the last company to move down this path. The marketing world is destroying old business models
without fear or favour. And with that destruction will come changed perceptions of what ‘free’
really is.
Source: Originally published on The Conversation.

QUESTION
Do you agree with the sentiment that value is no longer based on price alone? Provide an example of
when you have derived non‐financial value from a product or service.

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 CONCEPTS AND APPLICATIONS CHECK

1. Provide three examples of products for which the customer may not necessarily be the consumer.
Briefly outline how this would affect the marketing of each product.
2. In your own words, define ‘value’.
3. Our perceptions of value are constantly changing. Describe the last time that your perception of
value changed for mobile phone packages (either pre‐paid or plan). To answer this question you
might want to describe your most recent mobile phone plan, the factor(s) that led to your change in
perception and how your perception changed.
4. You are applying for a graduate marketing job. How is a graduate marketing job mutually beneficial
(for you and your new employer)?
5. Go to the Apple website. Print a picture and the specifications of the latest iPad or iPhone release.
Interview two people, showing them the information you have obtained and the picture. What are their
perceptions of value? Do they view value as an economic function, or is value viewed differently?

1.3 Ethics, corporate social responsibility and

sustainable marketing
LEARNING OBJECTIVE 1.3 Discuss the importance of ethics and corporate social responsibility
in marketing.
In the first two sections of this chapter, we have learned that a marketing transaction is an exchange of
value that benefits the marketer, customers, clients, partners and/or society at large. Today’s managers
face volatile economic forces, differences in organisational and cultural values, cultural diversity among
customers, rapidly changing technology, environmental issues and finite resources. Humanity is facing
a variety of serious sustainability challenges. The crises that we are facing globally include climate
change; rising sea levels; peak oil; ocean acidification; loss of biodiversity and forests, fisheries, soil and
fresh water; and extreme poverty and inequity.37
Standards such as those published by the UK’s Marketing and Sales Standards Setting Body (MSSSB)
suggest that a principal activity that marketers must undertake is ‘to ensure that an organization’s strat-
egies and policies are centered upon customers and an organization’s corporate social responsibilities’.38
As noted by the UK Chartered Institute of Marketing (CIM), marketers have a key role to play in shaping
the sustainable agenda. Marketers are the employees that are closest to the customer, and much of the
growing interest in social responsibility and sustainability is coming from consumers. Consumers want
to know where a product is coming from and who made it. Consumers want to know what is behind the
brand. Customers want to know how to safely dispose of a product when used, and whether the product
can be recycled. In this section of the chapter we will explore these concepts in more detail.
The primary purpose of a business is to generate profits and long‐term wealth for the owners.
Businesses do, however, have many secondary purposes, including providing products and creating
employment, and have many secondary stakeholders, including employees, customers and the commu-
nity at large. Many organisations exist in which the profit motive is not the primary consideration. Public
Copyright © 2017. Wiley. All rights reserved.

sector organisations and charities are examples of these. For businesses, it has long been debated just
where the balance should be between profit‐motivated activities and secondary purposes — and whether
it is appropriate to consider them ‘secondary’ at all. To explore this problem, we will look at ethics, law,
corporate social responsibility and sustainable marketing.

Ethics
Ethics refers to a set of moral principles that guide attitudes and behaviour. More simply, ethical behav-
iour involves doing what is ‘right’. It is clear then that what is ethical cannot be summarised in a simple
set of rules. Rather, ethics is subjective and depends on social, cultural and individual factors.

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 Many marketing decisions involve ethical issues, in which a choice must be made between mul-
tiple possible courses of action, which each involve different ethical, legal, social, economic and
environmental considerations. Competing priorities are the source of many ethical dilemmas in busi-
ness. Some of the most common that arise in marketing are truth in advertising, the marketing of
products that may be dangerous or contribute to poor health, and engaging in fair competition with
rival businesses.
Responsible businesses often implement a code of ethics or code of conduct to help govern their
actions and guide the decisions of those who work in the business. The Australian Marketing Institute,
a peak body representing marketers, has developed a code of conduct to guide marketing activities. The
code is represented in figure 1.4.

FIGURE 1.4 The Australian Marketing Institute code of professional conduct

Code of professional conduct

  1. Members shall conduct their professional activities with respect for the public interest.
  2. Members shall at all times act with integrity in dealing with clients or employers, past and present,
with their fellow members and with the general public.
 3. Members shall not intentionally disseminate false and misleading information, whether written,
spoken or implied nor conceal any relevant fact. They have a duty to maintain truth, accuracy and
good taste in advertising, sales promotion and all other aspects of marketing.
  4. Members shall not represent conflicting or competing interests except with the express consent of
those concerned given only after full disclosure of the facts to all interested parties.
  5. Members, in performing services for a client or employer, shall not accept fees, commissions or any
other valuable consideration in connection with those services from any other than their client or
employer except with the consent (express or implied) of both.
  6. Members shall refrain from knowingly associating with any enterprise which uses improper or illegal
methods in obtaining business.
  7. Members shall not intentionally injure the professional reputation or practice of another member.
  8. If a member has evidence that another member has been guilty of unethical practices it shall be
their duty to inform the Institute.
  9. Members have a responsibility to continue the acquisition of professional skills in marketing and to
encourage the development of these skills in those who are desirous of entry into, or continuing in,
the profession of marketing management.
10. Members shall help to improve the body of knowledge of the profession by exchanging information
and experience with fellow members and by applying their special skill and training for the benefit
of others.
11. Members shall refrain from using their relationship with the Institute in such a manner as to state or
imply an official accreditation or approval beyond the scope of membership of the Institute and its
aims, rules and policies.
12. The use of the Institute’s distinguishing letters must be confined to Institute activities, or the state­
ment of name and business address on a card, letterhead and published articles.
13. Members shall co‐operate with fellow members in upholding and enforcing the Code.
Copyright © 2017. Wiley. All rights reserved.

In New Zealand, the Marketing Association has developed a series of best practice guidelines and
codes for specific marketing activities, such as direct marketing; telemarketing and email marketing. The
Marketing Association’s Network of Digital Marketers developed six guiding principles to safeguard
people from receiving unwanted, erroneously labelled or intentionally deceptive email:
1. send only relevant offers to consenting recipients
2. include an unsubscribe function
3. tell the recipient who you are
4. apply the basic ‘truth in advertising’ doctrine

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 5. do not abuse permission
6. do not harvest email addresses.
Most marketing situations do not involve a simple choice between one ethical and one unethical path.
The very nature of ethics is imprecise. In addition to codes of conduct and other guiding principles that a
business may adopt, society imposes laws to govern the conduct of individual and organisational behav-
iour. The law’s relationship to ethics is discussed next.
Law
In addition to ethics, the way individuals and organisations conduct themselves in society is governed
by law. Most law is derived from ethics, but it is quite possible to act unethically within the law, and —
many would argue — to act illegally but nonetheless ethically. Laws represent society’s attempt to
ensure individuals and organisations act in a way that the society deems beneficial, or at least acceptable.
In Australia, business conduct is governed by numerous laws, including, for example, the Competi-
tion and Consumer Act (formerly the Trade Practices Act) and the Privacy Act. In addition, there are
regulatory bodies at the state and federal levels; for example, the various state Offices of Fair Trading,
and, federally, the Australian Competition and Consumer Commission. New Zealand has similar laws
and regulatory bodies. The main New Zealand laws governing business conduct are the Sale of Goods
Act, the Fair Trading Act, the Consumer Guarantees Act and the Commerce Act.39 The New Zealand
regulatory body equivalent to the Australian Competition and Consumer Commission is the Commerce
Commission.40

Corporate social responsibility

The concept of corporate social responsibility is simply that businesses have an obligation to act in the
interests of the societies that sustain them. This is an overarching responsibility that affects all aspects of
a business’s operations and involves all of its stakeholders, including:
•• owners: the business must generate long‐term wealth by acting profitably and sustainably
•• employees: businesses and not‐for‐profit organisations provide jobs that ensure wealth is shared
among members of society, and provide employees with reasonable working conditions
•• customers (and clients): the business must attract and retain customers by offering products of value
•• partners: the business must act in such a way towards its partners that those partners can achieve their
own business aims and meet their own corporate social responsibilities
•• government: the business must abide by laws and regulations.
At the heart of corporate social responsibility is a business’s obligation to act ethically, lawfully and in
the best interests of all of its stakeholders, including the society — increasingly the global society — in
which it operates. We should ask what motivates ‘good corporate citizenship’. Is it to create benefits that
ultimately serve the primary goal of generating profits and wealth, or is it a goal in its own right? We
should also ask ourselves to what extent it matters.
Many businesses place a great deal of importance on being — and being seen to be — a ‘good
corporate citizen’ and, increasingly, are devoting resources to ensure their operations act in the inter-
ests of all stakeholders. A business that meets its corporate social responsibilities can expect benefits
from good public relations and the absence of restrictive regulations. In November 2016 Woolworths
Copyright © 2017. Wiley. All rights reserved.

announced a long‐term partnership with the Salvation Army.41 ‘Support Through Australian Natural
Disasters’ (S.T.A.N.D.) will raise funds to assist the work of The Salvation Army Emergency Services
(SAES) during natural disasters. Woolworths also provides support to FoodBank, OzHarvest, Variety
The Children’s Charity and children’s hospitals around Australia.42
Involvement with such activities can also help companies to attract high‐quality employees —
particularly high‐quality younger employees. This is because individuals have come to ask not just what
their employer can offer them, but also whether they can believe in what their employer does. Such
activities extend philanthropic (i.e. giving) actions to make them of strategic benefit to the business —
the voluntary acts benefit parts of society and benefit the business.

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 Conversely, a business that acts with dis-
regard for its society can expect a customer
backlash and the imposition of rules to force
it to comply with society’s expectations. This
is demonstrated by the ongoing public debate
about food advertising during children’s tele-
vision programming. Current regulation does
not protect children from being bombarded
with ads for junk food, although childhood
obesity continues to be a significant issue
in many OECD countries. According to
Nutrition Australia, in 2009 approximately
30 per cent of non‐program content during
children’s television viewing hours (early
morning, post‐school and early evening) in
Australia and New Zealand was for food,
especially unhealthy food.43 A more recent
study by Auckland University found that an
average of 6.3 ads were screened per hour on
television in New Zealand, with 60–70 per cent
of them advertising unhealthy foods.44
Although there are different estimates of
children’s exposure to junk‐food advertising
on television, the evidence of the role of
advertising in childhood obesity rates is com-
pelling.45 Tighter regulation of food adver-
tising is a key preventative measure.46 The
marketers of food aimed primarily or partly
at children (a very broad range of products, Adam Goodes is an ambassador for the S.T.A.N.D. program,
including fruit juice, biscuits, hamburgers, a partnership between Woolworths and the Salvation Army.
pizza, muesli bars, lollies and bread) argue
that it is important to advertise their products to their target market (which is not only the children, but
also the likely purchaser — their parents or guardians). Some healthcare organisations, however, argue
that advertising high‐fat, high‐calorie foods to children is a major contributor to the increasing rate of
childhood obesity evident in most Western societies. Various organisations are, thus, lobbying  govern-
ments to introduce regulations that restrict or ban the advertising of certain types of food during children’s
television broadcasts.
Most businesses have more power and resources than the customers and many of the other stake-
holders with which they interact. As a result, the business tends to be the more powerful party in any
marketing exchange. In a bid to create more of a level playing field and ensure consumers are not taken
advantage of, various groups have been formed to play the role of consumer watchdogs or consumer
Copyright © 2017. Wiley. All rights reserved.

advocates. The best known in Australia is CHOICE, which reviews and compares products, aims to edu-
cate consumers about their rights, and campaigns in consumers’ interests. It publishes a magazine by the
same name. In New Zealand, a similar organisation known as Consumer NZ acts on consumers’ behalf.
It publishes a magazine titled Consumer.
A popular way of thinking about good corporate citizenship is the Triple Bottom Line, which is com-
prised of social, environmental and profit considerations. There are many avenues available for companies
to increase their Triple Bottom Line, and some are outlined in figure 1.5.47 Good corporate citizenship
involves looking after the environment and employees; this approach, if taken, can assist a company to
maintain or increase profits.

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 FIGURE 1.5 The Triple Bottom Line

Environmental

● Reduce the ‘footprint’ that

negatively impacts on environment
● Lower pollutants and emissions
● Reduce energy wastage
● Reduce usage of non-renewable
energy
● Minimise climate change agents
● Use sustainable packaging (e.g.
wood pulp from managed forests)
● Recycle
● Source produce locally

Social Economic

● CSR initiatives ● Ensure future economic

● Fair trading development of company
● Support local suppliers ● Create sustainable financial
● Reduce promotion of addictive bottom line
substances and foods that ● Minimise negative impact on other
contribute to obesity, and focus countries’ economics
on healthier alternatives ● Save money by reducing energy
use

A key issue faced by any manager in the 21st century is potential for corporate greed. Some exec-
utives are accused of being paid excessive amounts of money that are difficult to justify. Consider
Macquarie Bank head Nicholas Moore, who received a salary package of $15.5 million in 2015, or
ANZ Bank CEO Michael Smith, who earned $10.55 million, or around $200  000 per week, in that
same year.48 Given that salaries of top paid executives can be more than 100 times the average of
a full‐time adult worker, these amounts of money are difficult for consumers to accept, particularly
Copyright © 2017. Wiley. All rights reserved.

when they are faced with increasing fees on their banking accounts year in and year out. While it is
acceptable to make profit as a return for the risk of investing capital in a business, companies need
to operate in a transparent way to avoid consumer cynicism. Let’s stay with banking for the moment.
Interest rate movements by the Reserve Bank of Australia (or New Zealand) are usually the precursor
to interest rate movements by the major banks in both countries. When banks such as the Common-
wealth, NAB, Westpac or ANZ increase the interest rates on home loans by more than any increase
announced by the Reserve Bank, there is usually a media and public outcry of corporate greed. The
accusation is generally that the banks are putting profits and the interests of shareholders ahead of
their borrowing customers.

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 Business models are built on constant growth, and it is this very model that is now being ques-
tioned in some quarters. From an economic perspective, the continual strive for greater efficiency
is based on increasing production, profits and standards of living. But is it always realistic for busi-
nesses to expect to grow year in and year out? Can marketers increase prices each year to meet ever
larger budget targets that are forced on them by managers who want more growth in profit? Can
governments continue to raise taxes over time? Can you continue to gain more and more credit?
The answer should be ‘no’, without a rising income! People generally have a fixed income level
that, in time, rises with inflation or a job promotion. It is not possible for a person or a household to
continually absorb more and more and more. There is a finite limit for consumption. Individuals are
increasingly beginning to question companies and whether the values of their employer are consistent
with what they want for their children, grandchildren and so forth. In order for future generations to
live in the same style as we do today, traditional business practices and ways of thinking may need
to be challenged to ensure that we can continue to survive — and indeed thrive — in a world of
finite resources.

Sustainability
Sustainability is currently being widely debated as a business philosophy that is needed to ensure our
future. According to sustainability experts the Earth needs our help. With a growing human popu-
lation and a shrinking resource base, the planet simply cannot supply the materials demanded by our
consumption‐oriented society. During the last century, there was rapid growth in the Earth’s human
population, surpassing 7.4 billion in 2016 and placing other animal species and habitats in jeopardy.
Today, the human population is growing at the rate of a quarter of a million people each day,49 and along
with this growth comes an increase in the global material consumption. The 1990s and 2000s were a time
of consumption growth for nearly every standard household. Growth in consumption is a leading factor
in human‐induced environmental change. The ever‐growing industrial and social metabolism requires
increasing amounts of raw materials to support the consumer demand. In past decades consumers have
shifted towards home luxuries, vehicles, televisions, refrigerators and other products that require greater
amounts of energy and materials to make, operate and maintain.50 For example, consumers expect their
homes to contain a variety of standard features that were once considered to be luxuries, such as en suite
bathrooms in every bedroom, double garages and media rooms.51
Sustainable development is defined by the Brundtland Report as ‘development that meets the needs
of the present without compromising the ability of future generations to meet their own needs’.52
Achieving sustainable development includes strategies to reach economic (profit), social (people)
and environmental (planet) goals. These include factors such as a reduction in consumption (pur-
chasing less), changing purchasing (e.g. moving from finite energy resources to renewable energy
resources), downsizing of the products consumed (e.g. purchasing smaller homes and smaller cars),
the reuse of materials (e.g. recycling shopping bags into furniture) and the marketing of green prod-
ucts. In countries such as Australia and New Zealand, it is difficult to find a recent policy or strategic
government plan that does not include the concept of sustainability. However, continued unchecked
non‐sustainable growth in consumption will inhibit our ability to guarantee that future generations
will be able to enjoy the same lifestyles as we do today. Consumers who practise green or ethical con-
Copyright © 2017. Wiley. All rights reserved.

sumerism can help achieve sustainability. The ability of consumers to choose responsibly produced
or environmentally friendly products is seen as a ‘promising means’ to help persuade companies to
change their production methods to be more environmentally friendly. Of course, businesses and
marketers can proactively change current marketing practice ensuring that, in the future, some (if not
all) marketing is sustainable.
Until recently, sustainability was the primary focus of a company’s CSR (corporate social responsi-
bility) department. But as the global community struggles with the issues of overpopulation, increasing
energy demands, loss of biodiversity and the wide‐ranging impacts of climate change, the sustainability
issue is now a priority across boundaries — political, cultural and professional. Examining ways in

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 which our marketing practices can become more sustainable is an industry issue of key importance, and
one which all organisations, large and small, must tackle if they want to thrive. Pioneering companies
have proved that moving towards more sustainable marketing practices can be a shrewd business move.
For many, operating in an ethically and environmentally responsible way is proving to be a cost‐effective
hit with customers.53
Sustainable marketing
As influencers, communicators and shapers of culture, marketers can ensure that they make a signifi-
cant difference both to their customers, the planet and to the bottom line. The concept of sustainable
marketing refers to the marketing profession’s obligation to change marketing processes in which the
exploitation of resources, the direction of investments, the orientation of technological development and
institutional change are made consistent with future as well as present needs. In practice, sustainable
marketing is simply about looking at your products and/or services, assessing how your products and/or
services impact the environment, and then taking steps to minimise those impacts.
Since 2006 News Corp has implemented a Global Environmental Initiative with specific regional
programs (e.g. ‘1 degree’ in Australia) that aim to increase the company’s overall environmental sustain-
ability through three action areas: reducing its carbon footprint by 40 per cent by the year 2020; sourcing
responsibly from mills with certified forest‐management policies and using clean energy where possible;
and engaging with employees, customers, partners and suppliers to advance environmentally sustainable
outcomes. In 2015, News Corp reported a carbon footprint of 241  886 metric tonnes of carbon dioxide
equivalents (CO2e), which represented a 35 per cent reduction since 2006.
Similarly, Dell has adopted a 2020 Legacy of Good Plan, which outlines its goals and strategies
in several areas of corporate social responsibility, including environmental sustainability. Dell is
addressing its footprint at all levels of its operations, including manufacturing, the supply chain, and
consumer use of its technology. In 2016, Dell reported a recycle and reuse rate of 95 per cent in
manufacturing, continued to reduce total consumption of electricity and obtained 41.1 per cent of its
electricity from renewable sources. Overall, Dell has reduced the energy intensity of its products by
43 per cent since 2011.54
There are many ways that marketers can implement sustainable practices (see the sustainability
checklist in table 1.1). Examples include printing using only environmentally friendly inks and recycled
paper; reducing the use of direct mail and increasing the use of online communications; creating online
catalogues instead of printed catalogues; and using virtual communications such as Skype, video
conferencing and webinars where possible to replace personal travel.

Implementation of CSR and sustainability

The idea that a business should act in such a way that it creates the most benefit possible for society
and meets today’s needs without compromising the ability of future generations to meet their own needs
sounds simple — but in practice it can be very complex. Once management decides to commit to an
ethical and responsible way of conducting business that is sustainable, it should implement policies and
processes. It should also seek to build a culture guided by ethics and consideration of all stakeholders
that understands how to meet today’s needs without compromising the ability of future generations to
Copyright © 2017. Wiley. All rights reserved.

meet their own needs. As discussed earlier, sometimes the policies and culture can be embodied in a
formal code of conduct.
A business must also ensure that it empowers its stakeholders to achieve the ideals included in its pol-
icies, processes and codes. For example, a business that commits that it will not exploit workers but then
sets production targets that require excessive overtime is not meeting its corporate social responsibilities.
A business must not send mixed messages, nor adopt codes or policies that are no more than public
relations tools. Marketers are often accused by consumer rights groups of greenwashing. Greenwashing
is the dissemination of questionable or potentially misleading information by an organisation in relation
to its products, in order for the organisation and its products to be perceived as environmentally friendly.

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 This practice should be avoided at all costs. International standards are in place for marketers seeking
to make environmental claims (such as compostable, recyclable, reduced energy consumption, reusable
and refillable). The International Organization for Standardization (ISO) develops such guidelines. For
example, ISO14012 specifies requirements for self‐declared environmental claims, including statements,
symbols and graphics regarding products. ISO14012 further describes selected terms commonly used in
environmental claims and gives qualifications for their use. This standard also describes a general evalu­
ation and verification methodology for self‐declared environmental claims, and specific evaluation and
verification methods for the selected claims in this standard.55

TABLE 1.1 Sustainability checklist56

Product Reduce Reuse Recycle

What is it made from?

Who makes it?

How is it packaged?

Is the packaging reusable?

What is its lifespan?

Can the product be repaired/reused?

How will the product be disposed of?

Where is it made?

How is it transported?

Is the transportation as efficient as possible?

Is packaging used for transportation reusable or

recyclable?

Where/how is the product sold to the consumer?

How does the product finally reach the consumer?

Price Reduce Reuse Recycle

Does the price include a warranty for repair or

replacement?

Does pricing reflect the sustainability values of the

organisation?

Are pricing incentives being used to stimulate

over‐consumption?

Promotion Reduce Reuse Recycle

Copyright © 2017. Wiley. All rights reserved.

What resources are being used to communicate?

Are the products accurately and honestly communicated?

Business partners Reduce Reuse Recycle

Business partners should also be audited using the

questions above. Business partners that are aligned
to your sustainability goals help you to better reach
your goals.

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 SPOTLIGHT

Coke’s attempt at health‐washing a fizzer

Coca‐Cola raised eyebrows with the 2015 release
of ‘Coca‐Cola Life’, the brand’s first new product
since the introduction of Coke Zero in 2006. Con­
taining 35 per cent less calories than regular Coke,
Coke Life uses a combination of stevia and sugar
as sweeteners. A 330  ml can contains the equiv­
alent of 6 teaspoons of sugar, compared to the
10 teaspoons found in a can of regular Coke. Despite
Coke marketing the product as a healthier option
for consumers, experts are adamant that Coke Life
is anything but healthy, with University of Sydney
nutritionist Dr Kieron Rooney saying:
Coke Life should not be considered a healthy option  .  .  .  it should not even have a seat at the table. This is
health washing, yes it is less sugar than the original but that is still an excessive amount — it is still a sugar
sweetened beverage and is no way part of a healthy life or lifestyle.57
Australian Catholic University’s Professor Sandra Jones agreed:
While stevia is safe to consume, nutritionists have noted that simply removing some sugar and replacing it with
stevia doesn’t make a drink (or food) healthy.58
There may have been an ulterior motive for the product’s distinctive green packaging. Researchers
agree that adults and children perceive products with green packaging as healthier than the same
product in a different colour. But in this case, it seems the strategy didn’t work. By late 2016 it was
clear that Coke’s attempt at health‐washing was a fizzer, with consumers seeing through the attempt.
Bottled water sales continued to increase as health‐conscious consumers veered away from soft drinks.
In America, bottled water sales have increased for ten years straight, and it’s clear that Coke isn’t the
powerhouse it once was.
Brand consultant Richard Clearing says that:
The brands that are creating the biggest traction have authenticity at their core. While Coke Life is clearly
better for you than Coke, it’s still not a healthy product. It’s a step in the right direction, but truth and authen­
ticity needs to be central for the product to succeed.
The question remains: is Coke already past its use‐by date?

QUESTION
Undertake additional internet research into the release of Coke Life. As the marketing manager for
Coca‐Cola, would you have endorsed its release? Consider what marketers could have done differently
to change public perception of the product.

CONCEPTS AND APPLICATIONS CHECK

1. Distinguish between ethics, sustainable marketing and corporate social responsibility.

Copyright © 2017. Wiley. All rights reserved.

2. Conduct an audit on a product or service that you are familiar with using the sustainability checklist
(table 1.1).
3. Visit the website of a business that you have dealings with (e.g. your university, your bank or your
supermarket) and identify the key elements of its approach to corporate social responsibility.
4. To what extent do you think businesses adopt corporate social responsibility as ‘the right thing to
do’ versus seeking some type of public relations benefit? Find an example of a business undertaking
some type of philanthropic activity. How might the business benefit from this activity?
5. If a marketing campaign operates entirely within the law, has the marketing organisation necessarily
fulfilled its obligations to its stakeholders?

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 1.4 The marketing mix
LEARNING OBJECTIVE 1.4 Explain the elements of the marketing mix.
The marketing mix is the term given to a set of variables that a marketer can exercise control over in cre-
ating an offering for exchange. Various frameworks for the marketing mix have evolved over time, including:
•• the 4 Ps framework, which is product, price, promotion and place (place is more easily understood as
distribution) — the 4 Ps framework was the first approach to the marketing mix
•• the 5 Ps framework, which evolved from the 4 Ps model by adding a fifth P, ‘people’, to the 4 Ps
framework
•• the 6 Ps framework, which added ‘process’ to the 5 Ps framework
•• the 7 Ps framework, which added ‘physical evidence’ to the 6 Ps framework.
To frame their thinking, marketers often choose to target certain types of customers. Markets are
heterogeneous — they are made up of many different people with many different needs and wants.
A target market is a group of customers with similar needs and wants. Not all customers in a target
group will have exactly the same needs and wants but they are more similar than different. By narrowing
their thinking to a target group, marketers can think about how they can best communicate, deliver and
exchange their offerings with customers. For example, the target market of this text is first‐year under-
graduate marketing students. A business can also aim for multiple target markets. For example, Subaru
targets different groups with various cars: its Outback range of station wagons is aimed at families and
couples who value comfort, safety and life in the great outdoors, while its Impreza WRX STi hatch is
aimed at performance car enthusiasts (with a lot of money).
Marketers cannot act with complete freedom in determining their marketing mix. They are governed
by the costs of implementing the various marketing mix options, as well as the forces at play in the
marketing environment. They are also governed by the people in their organisation. There is little point
creating something that is simply not possible to implement.
We will now examine each of the elements of these various marketing mix frameworks. It is impor-
tant to remember that marketing — whatever marketing mix framework you apply or consider — is
ultimately about a total focus on servicing the needs and wants of the customer.

Product
A product is anything offered to a market. It can be a good, a service, an idea or even a person. Mar-
keters have to market goods such as batteries, milk and shoes. Marketers can market services such as
hairdressing, legal representation, air travel and beauty therapy. Some marketers have to market ideas
such as ‘Quit’ smoking while others have to market people such as celebrities and politicians.
Some products are branded and others are not. A brand is a collection of symbols such as a name,
logo, slogan and design intended to create an image in the customer’s mind that differentiates a product
from competitors’ products.
Products can be best understood as a ‘bundle of attributes’ that when exchanged have value for cus-
tomers, clients or society. Bundle of attributes refers to the features and functions of a product, which
benefit the customer. In the marketing mix, the product variable is concerned with creating an offering
Copyright © 2017. Wiley. All rights reserved.

that anticipates and meets the needs and wants of customers.

To help you to understand what is meant by a bundle of attributes, think about an Apple iPhone. It is
a handset that is designed to look good. It has a battery, which means you can use the phone anywhere
for a certain period of time. Features on the mobile phone include a camera, music, maps, internet, note
pages, a calendar and, of course, a phone. These features mean you can talk to friends, send messages
and photos to your friends, find your way and listen to music. Some of the benefits that you receive
from your mobile phone include staying connected with friends, the ability to communicate whenever
and wherever you want, entertainment, and prestige if you own the latest phone. The Apple brand name
might mean that you feel you have purchased a mobile phone that will be reliable.

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 Marketers understand that customers have needs and wants, and this thinking is based on econ-
omics. You will study needs and wants in both economics and marketing. Needs are day‐to‐day survival
requirements. People need food, shelter and clothing, personal growth and the social need of a sense of
security. People also have wants. Wants are desires, and are not necessary for day‐to‐day survival. Wants
cover products such as new television sets, iTunes playlists and perfume. Marketers provide products
to satisfy customer needs and wants. People have unlimited wants and they do not have the resources to
satisfy them all. They must therefore make a choice between competing alternatives. When a consumer
has the ability (money) to buy something they want, the want is said to be a demand. Consumers choose
among demands by finding the product that offers the most value in exchange for their money.
Products can also be categorised as either goods or services. Goods are physical (tangible) offerings
that are capable of being delivered to a customer. The purchase of goods typically involves transfer of
ownership from business to customer. You can see, smell, touch and sometimes taste goods. To buy a
good you often become the owner of a good. You own the orange juice before you drink it. Services are
intangible offerings. If you think about a hair cut or travel advice, you realise you cannot hold it; nor can
you own it. You experience service. We will go into more detail about goods and services in the chapters
on product and services marketing.
For exchange to occur, marketers must develop new products and modify their existing offerings so
that they have value for customers, clients, partners and society at large. They must also know which
products are not mutually beneficial. This means that marketers must be prepared to discontinue offer-
ings because consumers no longer value them, because they are not profitable or because they have a
negative impact on society. What is important to remember is that marketers need to understand value
through a customer lens. Marketers need to understand where the value comes from. Does the value
come from owning the offering, using the offering, or does the value come from both ownership and use
of the offering? Consider any typical product. If you purchase it, do you get value simply by owning it?
Do you get value from just sitting and looking at it? Your answer is likely to be no. You can only get
value from using the product.
While this may sound simple it is often not applied well in practice. Too many marketers remain
product rather than customer focused. It is important to understand that marketing thinking starts with
the customer and ends with the customer. Marketers must consider offerings from a customer’s point of
view. For example, a marketer of the Master of Business Administration (MBA) course at your univer-
sity should be able to tell graduates about the MBA (the offering) and importantly how the MBA can
help them (how the offering has value for graduates); for example, by leading to a higher income.

Price
Price is the amount of money a business demands in exchange for its offerings. Pricing is a complex
marketing decision that must take account of many factors, including:
•• production, communication and distribution costs
•• required profitability
•• partners’ requirements
•• competitors’ prices
Copyright © 2017. Wiley. All rights reserved.

•• customers’ willingness to pay.

Remember that marketing is about creating and exchanging offerings that have value for customers,
clients, partners and society at large. While price plays an important role in value, it is not alone in
creating value perceptions. Marketers need to understand the relationship between price and quality to
understand value from a customer’s point of view. They need to understand what customers would like
to get and what they are prepared to give in return. For example, car marketers understand that cus-
tomers are concerned about rising fuel costs and exhaust emissions and this is reducing their interest in
buying larger cars. To overcome concerns about rising fuel costs, some car marketers offer customers
one year of fuel for free, overcoming customer concerns about the expense of fuel.

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 Consider another pricing decision. In a brave move, alternative rock group Radiohead chose to make
their In Rainbows album available for download from their website, giving fans the choice of how
much to pay — or whether to pay at all. Essentially fans were able to decide just what the new album
was worth to them (although they would not have heard the album until they had paid for it). This
move helped Radiohead to gain a lot of publicity and media sources report that it helped them to gain
$6–$10 million in sales, with 1.2 million people downloading the album from their website at an average
of $8 per album.59 This is reflective of a growing trend for value and the marketing mix to be negotiated
more and more closely between marketers and customers. Price will be discussed in more detail in a
later dedicated chapter.

Promotion
Promotion describes the marketing activities that make potential customers, partners and society aware
of and attracted to the business’s offering. The product might be:
•• already established — such as Fernwood, where the aim of promotion is to remind customers that
Fernwood is a female‐only fitness centre
•• modified — such as a new variation of Coke, where the aim of promotion is to inform existing cus-
tomers about the improvement or new variety and to attract potential new customers
•• new — such as a new‐release movie, where the aim is to make customers aware of the product for the
first time
•• information or education — such as advertisements designed to persuade youth not to take illegal drugs.
Promotion should not be thought of merely as advertising. While advertising is an important com-
ponent of promotion, many organisations use other methods to promote products as well. For example,
some businesses use loyalty schemes to try to encourage repeat business and word‐of‐mouth to gain
new customers. Others may give away trial packets of new products when an existing customer makes a
purchase of one of their other products. Promotional activities include such sales promotions, as well as
personal selling efforts and public relations campaigns. Online communications such as blogs, YouTube
and Twitter are also used by marketers to increase awareness. Of course, there are many other inter-
esting ways to communicate, including ambient forms of advertising such as a painting on a building or
a display in a town square. Marketers have to think of ways to stand out in a cluttered market to raise
awareness. Often, a combination of promotional methods is used, and in such cases it is crucial that they
be carefully combined and coordinated to achieve a consistent message. Promotion will be discussed in
detail in a later dedicated chapter.

Distribution (place)
Distribution (or place) refers to the means of making the offering available to the customer at the right
time and place. It is largely a logistics function and marketers need to understand how logistics impact
their ability to deliver a product at a time and place that suits customer needs or wants. The marketer
must ensure products are available to the target market in the right amount and at the right time while
managing the costs of making the products available. Such costs include inventory, storage and transport.
Many businesses sell their products directly to the public through catalogues, a shop front or a website,
Copyright © 2017. Wiley. All rights reserved.

but distribution, especially for larger businesses, usually also involves partners such as wholesalers and
retailers. Technology, particularly the internet and associated communications innovations, has dramat-
ically changed distribution, particularly for products that have been digitally enabled, such as recorded
music. Not so long ago, the only option to purchase music was as a physical product on CD, cassette
or vinyl. Now, consumers can download their favourite songs via a streaming service such as Spotify or
Pandora. Nevertheless, physical distribution remains a key element in the marketing of many products.
The science (or art) of ensuring products are in the right place at the right time in the right quantity is
known as logistics and the various partners that contribute to the process make up what is called the
supply chain. Distribution is discussed in more detail in a later dedicated chapter.

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 People
Marketers must think about people, including employees and other customers. In the marketing frame-
work, ‘people’ refers to any person coming into contact with customers, who can affect value for cus-
tomers. For example, customer experiences with services are affected by the people who deliver the
service. Think about the last time someone served you and they were not friendly. How did you feel?
You would most likely have judged the offerings based on the employees you interacted with. Successful
organisations that want to create and maintain a competitive advantage must recruit and retain the right
staff. They must have the appropriate interpersonal skills, aptitude and knowledge to deliver offerings
that customers value. Fellow customers can also affect the customer’s service experience. For example,
crowd behaviour at a sporting event or complaining customers who loudly voice their opinion can put
off others who are waiting in a service queue.
You will study employee issues in human resources and management courses. The concepts studied
in these courses are also important for marketers. For example, for services, highly motivated staff are
important because in the customer’s eyes they are inseparable from the total service.

Process
Process refers to the systems used to create, communicate, deliver and exchange an offering. Marketers
must understand the systems that are used to create, communicate and deliver offerings for exchange. This
understanding is needed to understand how the systems affect value for customers. Imagine that you walk
into Domino’s and order a Hawaiian pizza and it is handed to you three minutes later. What was the system
that enabled such efficient service delivery? The motor registry mails out a vehicle registration renewal
form about a month before a driver’s registration expires. Efficient systems ensure the driver has time to
budget for and pay their renewal. Processes can also be viewed more broadly to take into account almost
everything the marketing organisation does, from market research to innovation to mailing out catalogues.

Physical evidence
Physical evidence refers to the tangible cues, including the physical environment, that customers use
to evaluate products, particularly services. Because services are intangible, it is difficult to assess their
quality and suitability until they are consumed. Marketers can use physical evidence to reassure potential
customers as to the quality of the service. Tangible cues should inspire confidence in the likely service
product. Physical evidence includes architectural design, furniture, décor, shop fittings, colours, back-
ground music, staff uniforms, brochures, service or delivery vehicles and stationery.

SPOTLIGHT

Phantom brands haunting our supermarket shelves as home brand

in disguise
GARY MORTIMER, QUEENSLAND UNIVERSITY OF TECHNOLOGY
There was a time when shoppers could easily differentiate between supermarket private labels and
proprietary branded products, however  new ‘phantom brands’  appearing on supermarket shelves are
Copyright © 2017. Wiley. All rights reserved.

clouding the waters. These are private supermarket label products without any reference to the super­
market’s brand or logo.
Despite significant improvements in the quality of private label ranges, supermarkets still face the
challenge [of] convincing customers of value perceptions. While supermarket private label ranges
generally offer low price; low price is frequently associated with lower quality, and therefore less value.
Phantom brands  are a way for supermarkets to overcome this challenge. While this strategy provides
significant benefits to supermarkets, it comes with the inherent risk that shoppers may feel duped into
buying a brand which is not really a brand. How supermarkets communicate the introduction of these
new brands will be vitally important to their success.

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 Woolworths the latest to try this
The introduction of phantom brands  by Australia’s
largest food retailer, Woolworths, is a strategic move
away from the deepening price wars and offers many
commercial benefits. Firstly, such brands will attract a
new shopper who is seeking value and willing to pay
a little more for a better quality product, while existing
Woolworths Essentials products  will continue to sat­
isfy the budget shopper.
Secondly, new brand names like Your Majesty Cat
Food, Apollo Dog Food, Bell Farms and Baxter’s will
give the impression there is a greater choice within the
store. Supermarkets expect shoppers will welcome
more choice and these new brands.
Thirdly, as these new phantom brands are essentially supermarket‐owned brands, higher profits
should be achieved. It also allows Woolworths to capture a larger slice of category sales where private
labels have traditionally had little penetration, like health and beauty, haircare, pet food and baby needs.
The risk Woolworths will face is in communicating the launch of such brands. While shoppers under­
stand the Aldi offer, brands that aren’t really brands, they may feel with Woolworths they’ve been
dudded into buying a brand.

Why phantom brands work

As grocery shopping remains a mostly low involvement, routine shopping task, consumers will employ
simple strategies to reduce time and cognitive effort. This involves often referring to only brand or price,
to  determine quality and value and aid in selection. Supermarket shoppers presented with proprietary
brands think higher priced means excellent quality and good value. At the other end of the spectrum,
shoppers also encounter supermarket private label products and reason that lower price means accept­
able quality and better value.
Phantom brands combine these two different sets of logic. Priced a little higher than supermarket pri­
vate labels, but under national branded products, shoppers will perceive this new brand as moderately
priced, quality comparable to the leading brand and therefore, excellent value.
Aldi provides an excellent example of this strategy at work. Aldi’s private label ranges do not carry
the Aldi moniker, instead a wide range of ‘exclusive’ brand names like Lacura Skincare, Choceur Finest
European Chocolate, Belmont Biscuits and Mamia Baby. Aldi’s private label ranges mimic the packaging
of nationally branded products — take a look at Aldi’s copy of Kellogg’s Nutri‐Grain called Power‐Grain
or its Sunny Crumpets, that look remarkably like Tip Top’s Golden Crumpets. Such phantom brands
infer perceptions of quality as packaging is comparable to the proprietary brands. Aldi’s low prices then
create the perception of value.

Private label growth and its challenges

Australian shoppers have warmed to the supermarkets’ private label products.  Research by market
research company Canstar Blue earlier this year found the number of Australians who purchased private
label groceries rose from 44 per cent to 65 per cent in the space of just six months. Market  research
firm Nielsen estimates  supermarket revenue growth will come mostly from private label products. In
comparable markets like the UK, the  proportion of private label sales is almost at parity  with national
branded products and across Europe.
Despite shoppers’ apparent  appetite for private label products, there is still a stigma attached to
Copyright © 2017. Wiley. All rights reserved.

buying private label. Much of this  stigma stems from history, as supermarket private labels evolved
from no-name generic products. Ultimately, there are supermarket categories where private label simply
doesn’t work, like confectionery, baby food, health and hygiene, haircare. Such categories are domi­
nated by market leaders Coke  (with 53 per cent market share)  and Cadbury  (with 30 per cent market
share). Phantom brands will fill this space between private and proprietary brands.
Aldi’s entry into the Australian market in 2001 changed the way shoppers looked at private label
products. While Woolworths Homebrand and Coles Smart Buys were generally seen as cheap, if not
cheaper than similar Aldi products, consumers considered the quality of these no‐name generics to be
substandard.

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 As a result,  supermarkets implemented a ‘good, better, best’  strategy for private labels. This is
all despite the recent efforts of the big two supermarkets to  re‐launch their private label ranges  by
essentially removing this bottom rung of no‐name generics. Even the supermarkets’ very best offers,
Select and Finest, are still adorned with the supermarket brand and logo. Where these current pri­
vate label ranges fall short of convincing sceptical shoppers of quality and value, phantom brands
will succeed.
Source: Originally published on The Conversation.

QUESTION
Analyse supermarket private label brands in terms of as many of the elements of one of the marketing
mix frameworks as possible.

CONCEPTS AND APPLICATIONS CHECK

1. Describe a business class return airfare from Sydney to Los Angeles as a bundle of attributes.
2. Describe Sunny Queen’s broad product offering in terms of a bundle of attributes that benefit
customers. Refer to the difference between needs and wants in your answer.
3. Find one example of an advertisement that is product focused and one example of an advertisement
that is customer focused. Explain how the focus is evident.
4. Think about the last time you went to a restaurant and describe the process. How could this process
be improved to offer better value to customers?

1.5 Why study marketing?

LEARNING OBJECTIVE 1.5 Discuss how marketing improves business performance, benefits society
and contributes to quality of life.
Marketing is an interesting and rapidly changing field that has an enormous influence on the world. Mar-
keting improves business performance, benefits society and contributes to a higher quality of life. It can
also be a rewarding career choice.

Improve business performance

Since Theodore Levitt proposed a link between a market orientation and business survival in a paper
called ‘Marketing Myopia’,60 marketing has, indeed, become the driving force in many successful
organisations. Firms with a market orientation perform better than firms without a market orientation.61
Research shows that companies who have a well‐defined marketing strategy perform better than com-
panies that do not have a well‐defined marketing strategy.62
A range of marketing practices have been linked to company performance. Specifically, research
Copyright © 2017. Wiley. All rights reserved.

shows that companies using certain marketing practices have better profits, sales volumes, market share
and return on investment when compared to their competitors. Organisations that undertake the following
marketing practices perform better than companies that do not:
•• conduct formal marketing planning
•• undertake comprehensive situation analysis
•• adopt a proactive approach to the future
•• conduct frequent market research studies

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 •• set more aggressive marketing objectives
•• offer superior products and services at comparable or lower prices than their competitors
•• introduce new ways of doing business
•• innovate
•• use a market intelligence gathering system to monitor changes in competitive and customer behaviour,
technology and general trends.
You will be introduced to all of these key practices in this text. While the implementation of
marketing practices has been linked to business performance, many companies do not implement
these performance‐enhancing marketing practices. Research shows that nearly half of all businesses in
New Zealand undertake little or no formal marketing planning and over half attach little importance to a
comprehensive situation analysis.63 Market research is mainly outsourced.
The marketing department does not work in isolation in any organisation. The different business func-
tions are closely interwoven to assist the organisation to reach its goals. For example:
•• human resources is responsible for attracting, recruiting and retaining the right people to reach the
organisation’s objectives
•• finance supports marketing with the funds required to achieve the organisation’s objectives
•• accounting provides marketing with some of the information (e.g. sales, costs) needed to analyse the
current situation to inform strategy development
•• logistics assists in delivering the offering to the customers.
In order to reach their goals, marketers must be able to work with all facets of an organisation. The
foundation courses that you take in your business or commerce degree are interlinked in business prac-
tice. If you are fortunate enough to gain employment in an employer graduate program that provides
experience in each area in your first 12 months, you will quickly gain an appreciation of the links
between the different business disciplines.
Ultimately, every employee is a stakeholder in the success of their organisation. They influence its
success by working towards providing value to the market — and its success or otherwise has conse-
quences for both the individual and the organisation. A salesperson can only successfully sell products
if the production department is focused on providing the salesperson with the right products at the right
time. In a market‐oriented organisation, the production department will be focused on doing just that.
The production department can only service the sales force well if its suppliers provide raw materials of
the right quality in the right quantity. By examining the relationships such as these that exist throughout
organisations, it can be seen that the entire marketing effort is made up of numerous networks of internal
and external stakeholders, all coordinated and focused on exchanging offerings that have value.

Higher quality of life

As explained earlier in the text, marketing is often criticised and is viewed negatively by many people.
This is because marketing is a high‐profile business function. Marketing creates, communicates and
delivers an organisation’s offering. Marketing does not achieve this alone and all other business func-
tions are involved, from human resources, to accounting and finance, production, and logistics. Mar-
keting often bears the brunt of criticism for bad company practices.
Copyright © 2017. Wiley. All rights reserved.

It is easy for people to criticise marketing and brands. As consumers we are exposed to advertisements
every day, and some more credible than others. As consumers we see brands whenever we shop in a
supermarket, pharmacy or clothing store. While marketing’s role is to create, communicate and deliver
offerings that have value for customers, consumers and a purchase are needed for exchange to take
place. Marketers cannot buy products for their customers; they can only offer products that consumers
may consider and purchase. While there is definitely bad practice, marketing is not an evil force. Let’s
take a brief look at how marketing has benefited society.
Marketing has helped to drive economic growth. Consumer demand is a key driver of economic growth,
and marketers play a role in stimulating consumer demand. Economic growth creates employment and

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 wealth for the benefit of individuals and society as a whole. Marketing can play a role in improving peo-
ple’s quality of life through providing better or safer products and the promotion of consumer and social
welfare. Consider McDonald’s, which provides some healthy meal options today in response to public
criticism linking fast‐food restaurants to the obesity epidemic being experienced in many Western nations.

Contribute to a better world

Marketing is often criticised for its role in stimulating excessive and often unnecessary consumption,
and the consequent social issues that arise. The global financial crisis provided a stark reminder that
sustainable models are required for business practice. The marketing discipline has much to offer to
the social arena. Marketing seeks to understand what customers want, in order to deliver a solution that
meets their needs and wants. Marketers make alternatives available for consumers to purchase. Mar-
keting can, therefore, be viewed as part of the solution, rather than as the problem.
Indeed, many marketers work in the not‐for‐profit sector and/or in social marketing, where their
work is directed towards social good. For example, in 2013 there were 56  894 registered not‐for‐profit
organisations in Australia,64 and 114  110 in 2013 in New Zealand65 that employ staff, many of whom
are engaged in marketing activities or roles to raise funds and awareness for a host of worthy causes.66
Social marketing will be explained in full in a dedicated chapter. Central elements of social marketing
include:
•• behaviour change as the benchmark for designing and evaluating interventions
•• the development of attractive and motivational exchanges to encourage desired behaviours of the
target audience
•• formative research to understand the characteristics and the behaviours of the target audience
•• the segmentation of the target audience to guide the development of intervention elements
•• pre‐testing and monitoring these elements during implementation.67

Be a better customer
By studying marketing you can become a better customer. By understanding the activities and processes
for creating, communicating, and delivering offerings, you can make better decisions as to the relative
value of products offered to you. For example, Aldi customers understand that products offered in Aldi
supermarkets are cheaper than those offered by Woolworths or Coles because of Aldi’s processes. Aldi’s
philosophy is that all people, wherever they live, should have the opportunity to buy everyday groceries
of the highest quality at the lowest possible price. The products available for sale under the Aldi brand
are manufactured by leading food manufacturers. Aldi keeps prices low by selling products under the
Aldi brand wherever possible, and by limiting the product range to reduce costs associated with logis-
tics. Other activities assist to achieve low prices.
Having studied marketing you will understand that companies that are serious about marketing
welcome customer feedback. After studying marketing if you have a poor experience with a product or a
service, you will know that by giving feedback you may help to persuade the marketer to do something
to address your concerns, which may benefit yourself or other future customers.
Copyright © 2017. Wiley. All rights reserved.

A rewarding career
Marketing can be a rewarding career path. Marketing offers a wide range of specialist areas including
advertising, public relations, market research, product development, personal selling and market analysis.
Marketers can work in the business sector or for not‐for‐profit organisations such as charities, govern-
ments and cultural institutions. Marketing skills are transferable overseas, and many marketing graduates
travel and work abroad.
Marketers need good analytical, communication and negotiation skills, and the power of persuasion.
Those who want to work in a professional marketing position will usually also require a degree in

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 marketing, or in a related area with a major in marketing. The recruitment process has lengthened, with
many companies now asking candidates to make presentations as part of the interview process. There
is a very competitive candidate market for marketing roles. Looking to the future, key areas with strong
potential for growth include online marketing and digital marketing.68 Almost 60 per cent of people
employed in marketing in Australia and New Zealand are women.69 The median age in advertising and
marketing is 34, with the main age group being 25–34 years, which suggests marketing is a profession of
younger people.70 The majority (81.2 per cent) of advertising and marketing professionals work full time.
The average salary for bachelor degree graduates entering full‐time positions is $53  000 per year.71 With
more experience, marketing professionals can progressively expect to earn more. In Australia, marketing
managers earn on average $111  527,72 and experienced marketing directors up to $300  000 per annum.73
While marketing can be a lucrative career, it requires dedication and hard work. Marketers often have
specific targets that must be met. The measurement of such targets involves ‘marketing metrics’. Mar-
keting metrics are discussed regularly throughout the text and in more detail in the chapter on marketing
planning, implementation and evaluation. For example, a marketer responsible for an organisation’s
advertising strategy will need to achieve a certain level of brand awareness among the target market.
A  salesperson will usually have a specific level of sales revenue that they must meet. A production
department will have quality and quantity standards that they must maintain.

Marketing yourself
An understanding of marketing can assist you in your own life. When you apply for your next job you
can apply the principles of marketing. Rather than simply telling your employer how good you are
and the experience that you have (a product focus) you can tell your future employer how employing
you will deliver value for them. You may do this by outlining successes achieved in recent marketing
campaigns. For example, you might explain how a $1 investment in your marketing campaign returned
$4 to the company, or how your marketing communications campaign increased customer enquiries by
50 per cent and sales volume by 20 per cent. The principles of marketing can help you to consider how
you are different from the other people who would be applying for the same job. Let’s consider your
first graduate job application. There are 300 students enrolled in your degree and 150 of them have the
same major as you. There are also many other universities offering the same degree in your country
and abroad. Everyone has a degree; 20 per cent of students have the same grades as you. There could
be 300 people with the same degree and performance in their degree as you. How can you show that
you are different? How can you make yourself stand out from the crowd? The principles of marketing
teach you how to do this. Marketing thinking can help you. It is important that you keep evidence of
success from now on.

SPOTLIGHT

Thankyou
In 2008, Daniel Flynn — then a university student —
was studying for an assignment when he came across
statistics about the world water crisis. At the time,
Copyright © 2017. Wiley. All rights reserved.

900 million people didn’t have access to safe water. He

did some further research and found that the Australian
bottled water industry was worth $50 billion. He felt
compelled to try to make a difference. Flynn shared
his thoughts with his then-girlfriend (now‐wife), Justine
Flynn, and his friend, Jarryd Burns, and together they
devised the concept for Thankyou. ‘We wanted to tackle
a huge global problem with a huge global product, and
the product to get us there was bottled water.’74

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 At the time, the three had a combined net worth of $1000 and they admit to not knowing a thing
about starting a company. ‘We did what any good young person would do: we just googled it.’ Flynn
embraced the belief that ‘if an idea’s good enough, the money will come’. Their concept gradually
gained traction. A ten‐minute meeting with the director of the largest beverages distributor in Australia
lasted an hour — and ended with an order for 50  000 bottles. Of course, there were also setbacks —
many potential investors claimed Thankyou didn’t have the stamina needed to shake up the global
beverage industry.75
Undeterred, the team harnessed the power of social media to prove there was consumer demand,
subsequently landing a deal with 7‐Eleven. From there, the team decided to expand, adding food
and body care products to their offering. Another successful social media campaign with a reach of
15.51 million, combined with guerrilla marketing tactics, convinced retail giants Coles and Woolworths
to stock the Thankyou range.76
By the end of 2016, Thankyou had over 50 products across the water, food, body care and baby
ranges and had given over $4.6 million to funding initiatives in 18 countries; providing safe water and
sanitation access, child and maternal health programs and food aid to hundreds of thousands of people
in need.77
In recent years Daniel’s efforts have been rewarded. He was declared the Young Victorian of the Year
in 2014 and the Ernst & Young Southern Region Entrepreneur of the Year in 2015. However, he says he
didn’t set out to win awards. ‘I was just a kid who got an idea, got a great team and made it happen,
and anyone can.’78

QUESTION
Research the history of the Thankyou Group online. Explain how the founders used marketing to both
launch the company and continue to improve business performance.

CONCEPTS AND APPLICATIONS CHECK

1. Find one case study that explains how marketing has improved business performance.
2. Find and discuss one example that illustrates how marketing contributes to quality of life.
3. Research the history of razors. How was demand for razors stimulated? Explain how they did it.
4. Marketing is often criticised and is viewed negatively by many people. What was your view of
marketing prior to starting this course? Has your view changed? Why? Why not?
5. Using company annual or corporate social responsibility reports, find an example of a company that
has improved its business performance both economically and socially. (Note: annual reports or
summaries are usually found in the investor section of corporate websites.)
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 SUMMARY
1.1 Provide an overview of marketing and the marketing process.
Marketing is a philosophy or a way of doing business that puts the market — the customer, client,
partner and society, and competitors — at the heart of all business decisions. The marketing process is
cyclical in nature and involves understanding the market to create, communicate and deliver an offering
for exchange. Marketers start by understanding the consumers, the market and how they are currently
situated. Armed with this understanding, marketers are next tasked with creating solutions, communi-
cating the offering to the market, and delivering it at a time and place that is convenient for the customer.
1.2 Recognise that marketing involves a mutually beneficial exchange of value.
The essence of marketing is to develop mutually beneficial exchange. Exchange involves value
creation for all parties to the exchange. Marketers must understand how customers perceive value.
Value perceptions vary from one individual to another and they are ever changing.
The customer is the focus of all marketing activities and successful marketers are those who view
their products in terms of meeting customer needs and wants.
1.3 Discuss the importance of ethics and corporate social responsibility in marketing.
Businesses exist primarily to generate profits and wealth for their owners. It is increasingly recognised,
however, that businesses have an obligation to act in the best interests of the society that sustains them.
They are obliged to act ethically, within the law, and to fulfil corporate social responsibility require-
ments, which may include philanthropy, protecting the natural environment, providing products that
benefit society and generating employment and wealth. Businesses also need to be sustainable to ensure
our future by meeting the needs of the present without compromising future generations.
1.4 Explain the elements of the marketing mix.
The marketing mix describes the different elements that marketers need to consider. Many different
frameworks have been used by marketing scholars to teach marketing and all have been designed to
be memorable. Frameworks include the 4 Ps, 5 Ps, 6 Ps and 7 Ps.
A product is a bundle of attributes that when exchanged have value for customers, clients or society.
A product can be a good, a service, an idea or even a person. Products cater to needs and wants. Needs
are day‐to‐day survival requirements, while wants are desired but not required for survival.
Price is the amount of money a business demands in exchange for its offerings. Pricing is a
complex marketing decision that must take account of many factors, including production,
communication and distribution costs, required profitability, partners’ requirements, competitors’
prices, and customers’ willingness to pay. Marketers need to understand the relationship between
price and quality to understand value from a customer’s point of view. Marketers need to understand
what customers would like to receive and what they are prepared to give in return.
Distribution or place refers to the means of making the offering available to the target market at
the right time and place while managing the costs of making the products available. Many busi-
nesses sell their products directly to the public, but distribution usually also involves partners such
as wholesalers and retailers.
Promotion describes the marketing activities that make potential customers, partners and society
Copyright © 2017. Wiley. All rights reserved.

aware of and attracted to the benefits of a business’s products. The product might be already
established, modified, new, or information designed to persuade. Promotional activities include
advertising, direct selling, sales promotions and loyalty schemes.
In the marketing framework, ‘people’ refers to all the people that may come into contact with
the customer and affect their experience of the product. Like the other factors, the people must be
managed to maximise value for the customer.
Process refers to the systems used to create, communicate, deliver and exchange an offering.
Physical evidence refers to the tangible cues and physical environment a marketer can provide to
help potential customers evaluate service quality.

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 1.5 Discuss how marketing improves business performance, benefits society and contributes to
quality of life.
Organisations with a market orientation perform better than other organisations. Marketing creates
employment and wealth for the benefit of individuals and society as a whole. It improves people’s
quality of life through better products and the promotion of consumer and social welfare. An under-
standing of marketing helps you make better decisions as to the relative value of products offered
to you. Marketing can be a rewarding career path. While it can be lucrative work, it requires dedi-
cation and effort. Marketers need good analytical, communication, and negotiation skills, the power
of persuasion, and often a tertiary qualification in marketing or a related discipline.

KEY TERMS
brand  A collection of symbols such as a name, logo, slogan and design intended to create an image in
the customer’s mind that differentiates a product from competitors’ products.
bundle of attributes  The features and functions of a product that benefit the customer.
clients  ‘Customers’ of the products of not‐for‐profit organisations.
consumers  People who use the good or service.
corporate social responsibility  The obligation of businesses to act in the interests of the societies that
sustain them.
customers  People who purchase goods and services for their own or other people’s use.
demand  A want that a consumer has the ability to satisfy.
distribution (or place)  The means of making the offering available to the customer at the right time and place.
ethics  A set of moral principles that guide attitudes and behaviour.
exchange  The mutually beneficial transfer of offerings of value between the buyer and seller.
good  A physical (tangible) offering capable of being delivered to a customer.
greenwashing  The dissemination of questionable or potentially misleading information by an
organisation in relation to its products, in order for the organisation and its products to be perceived
as environmentally friendly.
logistics  That part of the marketing process concerned with supply and transport.
market  A group of customers with heterogeneous needs and wants.
marketing  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.
marketing mix  A set of variables that a marketer can exercise control over in creating an offering for
exchange.
marketing process  A process that involves understanding the market to create, communicate and
deliver an offering for exchange.
need  A day‐to‐day survival requirement: food, shelter and clothing.
partners  Organisations or individuals who are involved in the activities and processes for creating,
communicating and delivering offerings for exchange.
physical evidence  Tangible cues that can be used as a means to evaluate service quality prior to purchase.
Copyright © 2017. Wiley. All rights reserved.

process  The systems used to create, communicate, deliver and exchange an offering.
product  A good, service or idea offered to the market for exchange.
promotion  The marketing activities that make potential customers, partners and society aware of and
attracted to the business’s offerings.
service  An intangible offering that does not involve ownership.
social marketing  A process that uses commercial marketing principles and techniques to influence
target audience behaviours that will benefit society, as well as the individual.
stakeholders  Individuals, organisations and other groups that have a rightful interest in the activities
of a business.

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 supply chain  The parties involved in providing all of the raw materials and services that go into
getting a product to the market.
sustainable development  Development that meets the needs of the present without compromising the
ability of future generations to meet their own needs.
sustainable marketing  The ‘way and means’ for combining ecological and economic elements
through innovative products and systems.
target market  A group of customers with similar needs and wants.
value  A customer’s overall assessment of the utility of an offering based on perceptions of what is
received and what is given.
want  A desire, but not necessary for day‐to‐day survival.

CASE STUDY
WHEN ‘HAND CRAFTED’ IS REALLY JUST CRAFTY MARKETING
KATHERINE WILSON, SWINBURNE UNIVERSITY OF TECHNOLOGY
In their attempts to cash in on peak hipster, fast‐food giants are passing off assembly‐line products as
small scale, bespoke creations that carry an aura of moral authority.
Six months ago, McDonald’s opened a café in Sydney’s inner‐west, where chambray‐shirted baristas
serve single‐origin coffee alongside quinoa salads on wooden boards. The café is called The Corner, but
The Guardian soon described it as ‘McDonald’s disguised as a hipster café’.
And to customers worldwide, McDonald’s launched its ‘artisan grilled chicken’, its ‘artisan roll’ and
other artisan‐manque products. Domino’s released ‘Artisan Pizza’, and PepsiCo released Kaleb’s Cola, a
‘craft soda’ in a glass bottle bearing the notation, ‘Honor in Craft’. Nowhere on the bottle is mention of
the multinational behind it.
In Australian Coles supermarkets, the Always Fresh brand is promoting its ‘Artisan Collection’ lines as
‘authentic, carefully‐crafted’. Its biscuits and preserves are ‘hand‐crafted’; its crackers are ‘thoughtfully
baked’. In the drinks aisle Cascade’s ‘crafted’ range of fizzy drinks includes (inexplicably) a ‘crafted for
Australians’ plain soda water.
These descriptors are lies, because mass‐producers simply can’t make ‘craft’ or ‘artisanal’ products.
These words refer to autonomous human‐scale production that’s too mindfully‐ and bodily‐involved for
the assembly line. To a craftsperson, conception and physical production are inseparable, and their rela-
tionship with their craft — be it breadmaking, songwriting or neurosurgery — is somatic. Division of
labour completely wipes ‘crafting’ from the fabrication process. Craft involves risk and unpredictability;
manufacturing, on the other hand, involves predictable and uniform outcomes.
So consider the significance of McDonald’s’ current ‘How Very Un‐McDonald’s’ and ‘Not So Fast Food’
campaigns. These campaigns invite us to custom‐select ingredients on a touchscreen and enjoy table service
by — who knew? — a person. Faced with a slump in profits, the fast‐food giant is experimenting with ways
to shed brand‐staleness and seduce a 20s‐to‐30s demographic that regards McDonald’s as distinctly uncool.
But this seems less a gesture towards slow food values and more an admission that the brand and all
it represents has become déclassé. When they trade on artisanal notions of authenticity, industrial food
giants deny their own, which lies in cheap, standard products manufactured with alienated labour and
Copyright © 2017. Wiley. All rights reserved.

dispersed supply chains. You can’t be an authentic Tim Tam if you were ‘thoughtfully crafted’ from
seasonal local ingredients.
Spot the difference
Corporate craft‐washing campaigns may deceive some, but their mawkish descriptors betray them as
sops. McDonald’s ‘artisan’ chicken contains ‘pantry seasonings’ (distinct from industrial flavours) and
‘100% chicken’ (distinct from who knows what). Pepsi’s craft soda has ‘quality ingredients’, no less,
devised after ‘months talking and tasting’ (more artisanal than ‘focus‐grouping’). Genuine craft pro-
ducers aren’t inclined to spruik these ways, because their customers have the culinary literacy to discern
a local sourdough from an industrial soda bread.

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 In his 2014 book, The Language of Food, Stanford University professor Dan Jurafsky observes that
good quality food labels and menus tend to be short on adjectives. Marketers of industrial food, on the
other hand, oversell with such descriptors as ‘real’, ‘artisan’, ‘quality’, ‘authentic’ and ‘passionately
crafted’.
But a backlash is mounting. Following recent complaints against the craft claims of Byron Bay Beer,
ACCC Chairman Rod Sims said: ‘We judged that any reasonable consumer would think that it was
brewed in Byron Bay by a small Byron Bay brewing company.’ But the beer ‘was a actually brewed by
Carlton and United Brewery out of its large Warnervale brewery.’
David Hollier, president of the Australian Real Craft Brewers Association, said craft beer drinkers
believe they are ‘supporting authentic small, independent  .  .  .  local family‐owned breweries. The big
two brewers have capitalised on that’. But CUB was fined A$20  400, and similar cases are emerging
overseas. Californian man Evan Parent recently sued brewing giant MillerCoors for claiming its
Blue Moon beer is ‘artfully crafted’. His lawyer Jim Treglio told reporters: ‘People think they’re buying
craft beer and they’re actually buying crafty marketing.’
Even insiders are rebelling against such marketing. Last year, the ACCC received ‘industry intelli-
gence’ that Saskia Beer’s ‘Black Pig’ products contained white pig meat. Heritage black pig breeds can
be more free‐ranging than white pigs, as they are less susceptible to sunburn. The company was ordered
to undergo compliance training and publish a corrective notice.
Similarly, Pirovic Enterprises was fined A$300  000 for claiming its eggs were free‐range. ‘Although
there were no strict legal definitions of free‐range, the court was able to base its findings on consumers’
expectations about what that particular form of farming should involve,’ said Associate Professor Jeannie
Paterson from the University of Melbourne’s Law School.
The same principle, she says, was applied when Coles was fined A$2.5 million over ‘freshly baked’
bread claims, when the bread was first par‐baked in Ireland. Over there, the Food Safety Authority is
reportedly clamping down on ‘artisan’, ‘traditional’ and ‘farmhouse’ claims, warning that these should
only describe products made ‘in limited quantities by skilled craftspeople’ at a ‘micro‐enterprise’, and
ingredients should be local where possible. Last week, the Authority ordered McDonald’s to remove
artisan claims. This is a regulatory trend moving across Europe and the US, and in Australia, the ACCC
is also devising guidelines.
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Coles was fined for claiming that its bread was freshly baked, when it was first par‐baked in Ireland.

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 Artisan‐posturing by industrial producers isn’t just a matter of regulatory transgressions. Industrial
food giants who ‘craft‐wash’, or use idioms of craft while trashing its essential values, are actively
obscuring a set of political issues. Ethical consumers are often well‐heeled, for sure, but their deep
pockets attend to a deeper commitment to small enterprise, localism, fair trade, ethical supply chains,
seasonal produce, farm animal welfare, workers’ freedoms and low environmental impact.
Australian consumer law prohibiting deceptive conduct ‘does not just apply to deliberate lies,’ says
Paterson. ‘It also covers conduct that creates a misleading impression by manipulating common com­
munity understandings.’ So as artisanal deceptions continue to mount, so, too, do the legal precedents for
a foodie‐pundit backlash.
Source: Originally published on The Conversation.

QUESTIONS
1 Do you believe that true artisan products have a competitive advantage? Why or why not?
2 List three examples of corporate craft‐washing not discussed in this case.

ADVANCED ACTIVITY
Think of all the products and services you consumed today. Which products have negative social and
economic consequences?

MARKETING PLAN ACTIVITY

Think of an organisation that you would like to be the focus of a marketing plan that you will prepare
during this semester. Collect some background information on this organisation and its products (goods
and/or services). Each week you will have the opportunity to develop and refine a draft of this plan as
your marketing knowledge increases. By the end of the semester, by following the steps outlined in
each chapter of the text, you will have developed a professional ‘industry standard’ marketing plan, and
enhanced your practical marketing skills in the process.
A sample marketing plan has been included in the appendix to give you an idea where this infor­
mation fits in an overall marketing plan.

WEBSITES
The Australian Marketing Institute (AMI) is Australia’s peak body for professional marketers in Australia.
AMI offers accreditation of tertiary courses, training programs and events and recognises leading mar-
keting efforts in Australia annually through an annual awards program: www.ami.org.au/iMIS15/AMI
The Marketing Association is New Zealand’s peak body for professional marketers. Courses, training
programs and events are offered for marketers: www.marketing.org.nz
Marketing Magazine will help you stay in touch with the latest trends, campaigns and movements within the
Copyright © 2017. Wiley. All rights reserved.

marketing industry: www.marketingmag.com.au

ENDNOTES
  1. World Health Organization (2014), Global status report on alcohol and health, www.who.int.
 2. ibid.
  3. World Health Organization (2014), Global status report on alcohol and health, p. xiii, 2014 ed, www.who.int.
  4. S. S. Lim, T. Vos, A. D. Flaxman, G. Danaei, K. Shibuya, H. Adair‐Rohani, and M. Aryee (2013), ‘A comparative risk
assessment of burden of disease and injury attributable to 67 risk factors and risk factor clusters in 21 regions, 1990–2010: a
systematic analysis for the Global Burden of Disease Study 2010’, The Lancet, 380(9859), pp. 2224–60.

38  Marketing

Elliott, Greg. Marketing, 4th Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/mqu/detail.action?docID=5049568.
Created from mqu on 2018-02-26 20:58:34.
   5. Center for Behavioral Health Statistics and Quality (2015), Behavioral health trends in the United States: Results from the 2014
National Survey on Drug Use and Health, HHS Publication No. SMA 15‐4927, NSDUH Series H‐50, www.samhsa.gov.
  6. Australian Institute of Health and Welfare (2014), National Drug Strategy Household Survey detailed report 2013, Drug
statistics series no. 28, Cat. no. PHE 183, Canberra: AIHW, www.aihw.gov.au.
  7. Australian National Health Preventative Agency (2014), Draft Report — Alcohol Advertising: The effectiveness of current
regulatory codes in addressing community concern, http://health.gov.au.
  8. G. Hastings and K. Angus (2011), ‘When is social marketing not social marketing?’, Journal of Social Marketing, 1(1), pp. 45–53.
  9. This definition was adopted by the American Marketing Association in October 2007.
10. American Marketing Association, October 2007. The AMA reviews the definition every few years to ensure it reflects current
marketing practice. See L.M. Keefe (2008), ‘Marketing defined’, Marketing News, 15 January, pp. 28–9.
11. ‘Rainforest Alliance’, McDonalds Australia website, www.mcdonalds.com.au/mccafe/rainforest‐alliance.
12. I. Maignan and O.C. Ferrell (2004), ‘Corporate social responsibility and marketing: an integrative framework’, Journal of the
Academy of Marketing Science, 32(1), pp. 3–19.
13. Keefe (2008), op. cit.
14. R. F. Lusch and S. L. Vargo (2014), Service‐dominant logic: Premises, perspectives, possibilities, New York: Cambridge
University Press.
15. S. L. Vargo and R. F. Lusch (2016), ‘Institutions and axioms: an extension and update of service‐dominant logic’, Journal of
the Academy of Marketing Science, 44(4), pp. 5–23.
16. Cancer Council Australia, Breast cancer, website, www.cancer.org.au.
17. Australian Institute of Health and Welfare (2014), BreastScreen Australia monitoring report 2011–2012, Cancer series no. 86.
Cat. no. CAN 83. Canberra: AIHW.
18. Viva (2013), Viva TV & Computer Screen Wipes Kit, www.viva‐cleaning.com.au, www.kimberly‐clark.com.au.
19. Australian Marketing Institute, ‘The winners: 2012 AMI Awards for Marketing Excellence’, www.ami.org.au; and
Viva, op. cit.
20. Anon (2013), ‘Clean on the go with VIVA’, Kimberly‐Clark, 23 January, www.kimberly‐clark.com.au.
21. K. Browne (2016), ‘“Flushable” wipes block pipes’, Choice, 12 December, www.choice.com.au.
22. K. Midena (2013), ‘Sharapova’s Sugarpova lolly range “smacks of irresponsible marketing”’, The Australian, 11 January,
www.theaustralian.com.au; and C. Chase (2013); ‘Maria Sharapova’s candy line, Sugarpova, is taking off’, USA Today
Sports, 10 January, www.usatoday.com; N. Harman (2013), ‘Maria Sharapova to become “Sugarpova” to promote sweets
brand’, The Australian, 20 August, www.theaustralian.com.au.
23. Market Data (2010), ‘Battle of the bottle: Aussies love of NZ wines continues’, Professional Marketing, pp. 38–9.
24. ‘Boost around the world’, Boost Juice, www.boostjuice.com.au.
25. ‘Boost international strategy’, Boost study kit 2015, Boost Juice, www.boostjuice.com.au.
26. T. Hill (2016), ‘How retail brands are using social media to improve performance’, Mumbrella, 1 December,
https://mumbrella.com.au.
27. L. Bennett (2016), ‘Boost Juice’s new squeeze — branded games app launched’, AdNews, 31 March, www.adnews.com.au.
28. M. Hore and S. Liu (2016), ‘Boost juice recipes revealed online, founder Janine Allis confirms’, Herald Sun, 25 April.
29. J. Allis (2016), ‘Secret recipes revealed  .  .  .  do secrets matter in business?’, Janine Allis, 28 April, www.janineallis.com.au.
30. Australian Electricity Regulator (2016), ‘Volume weighted annual average spot electricity prices’, www.aer.gov.au.
31. E.J. Schulz (2012), ‘Snickers surging to top of global candy race’, Advertising Age, 20 September, www.adage.com.
32. J. Miller (2016), ‘Case study: How fame made Snickers’ “You’re not you when you’re hungry” campaign a success’,
Campaign, 26 October, www.campaignlive.co.uk.
33. V.A. Zeithaml (1988), ‘Consumer perceptions of price, quality and value: a means end model and synthesis of evidence’,
Journal of Marketing, 52 (July), pp. 2–22.
34. K. Miller (2007), ‘Investigating the idiosyncratic nature of brand value’, Australasian Marketing Journal, 15(2),
pp. 81–96.
35. J.C. Sweeney and G. Soutar (2001), ‘Consumer perceived value: the development of a multi‐item scale’, Journal of
Retailing, 77, pp. 203–20.
36. X. Luo and C.B. Bhattacharya (2006), ‘Corporate social responsibility, customer satisfaction and market value’, Journal of
Copyright © 2017. Wiley. All rights reserved.

Marketing, 70(4), pp. 1–18.

37. United Nations Secretary‐General’s High‐level Panel on Global Sustainability (2012), www.un.org/gsp.
38. Marketing and Sales Standards Setting Body (2006), Functional map.
39. Business New Zealand Government Information Site (2009), www.business.govt.nz.
40. Ministry of Economic Development (2009), Competition policy, www.med.govt.nz.
41. E. Pinn (2016), ‘Salvos and Woolworths take a S.T.A.N.D. for disaster victims’, The Salvation Army Pipeline Online,
16 November, http://my.salvos.org.au.
42. Woolworths website, www.woolworths.com.au.
43. Nutrition Australia (2009), ‘Food advertising directed at children’, www.nutritionaustralia.org.
44. B. Kelly, S. Vandevijvere, B. Freeman, G. Jenkin (2015), ‘New media but same old tricks: Food marketing to children in the
digital age’, Current Obesity Reports, 2015; 4(1), pp. 37–45, doi: 10.1007/s13679‐014‐0128‐5.

CHAPTER 1 Introduction to marketing  39

Elliott, Greg. Marketing, 4th Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/mqu/detail.action?docID=5049568.
Created from mqu on 2018-02-26 20:58:34.
 45. American Psychological Association (2016), The impact of food advertising on childhood obesity, www.apa.org.
46. OECD (2014), Obesity Update, www.oecd.org.
47. The Chartered Institute of Marketing (2007), ‘Shape the agenda: the good, the bad and the indifferent — marketing and the
Triple Bottom Line’, www.cim.co.uk.
48. Seek Learning website, www.seeklearning.com.au.
49. D. Attenborough (2011), ‘This heaving planet’, New Statesman, 25 April, pp. 28–32.
50. J. Schor (2005), ‘Prices and quantities: unsustainable consumption and the global economy’, Ecological Economics, 55,
pp. 309–20; and J. Palmer (2011), ‘An empirical test of the theory of planned behavior in detecting greenwash’, unpublished
dissertation, Griffith University.
51. ibid.
52. World Commission on Environment and Development (1987), Our common future, Oxford University Press, Oxford.
53. CSR Europe, Sustainable marketing guide, www.csreurope.org.
54. Dell (2016), ‘An annual update on our 2020 Legacy of Good Plan’, http://i.dell.com/sites.
55. Checklist adapted from CSR Europe, op. cit.
56. International Organization for Standardization website, www.iso.org.
57. S. Dean (2015), ‘Coca‐Cola accused of “health washing” because a single can of Coke Life maxes the daily recommended
amount of SIX teaspoons of sugar’, Daily Mail, 31 March, www.dailymail.co.uk.
58. S. Jones (2014), ‘A rose by any other name: the lowdown on “healthy” Coke’, The Conversation, 31 October,
https://theconversation.com.
59. S. Colothan (2007), ‘Exclusive: Radiohead sell 1.2 million copies of “In Rainbows”, Gigwise, www.gigwise.com; Digital Journal
(2007), ‘The end of record labels: Radiohead clears an estimated $8 million in first week’, 16 October, www.digitaljournal.com.
60. T. Levitt (1960), ‘Marketing myopia’, Harvard Business Review, 38(4), (July/August), pp. 45–56.
61. J.C. Narver and S.F. Slater (1990), ‘The effect of a market orientation on business profitability’, Journal of Marketing, 54(4),
(October), pp. 20–35.
62. R. Cooper, C. Easingwood, S. Edgett and E. Kleinschmitt (1996), ‘What distinguishes the top performing products
in financial services?’, Journal of Product Innovation (September), pp. 281–99; B. Gosh, K. Meng and L. Meng
(1993), ‘Factors contributing to the success of local SMEs: an insight from Singapore’, Journal of Small Business and
Entrepreneurship, 10(3), pp. 33–45; J. Huck and T. McEwen (1991), ‘Competencies needed for small business success:
perception of Jamaican entrepreneurs’, Journal of Small Business Management, 3, pp. 90–3.
63. R. Brooksbank and D. Taylor (2002), ‘The adoption of strategic marketing and its contribution to the competitive success of
New Zealand companies’, Marketing Intelligence and Planning, 20(7), MCB UP Limited, pp. 452–61.
64. Australian Bureau of Statistics (2015), Australian National Accounts: Non‐Profit Institutions Satellite Account, 2012–13,
www.abs.gov.au.
65. Statistics New Zealand (2015), Non‐profit institutions satellite account: 2013, www.stats.govt.nz.
66. Caution should be exercised in directly comparing the number of non‐profit institutions between the two countries. In order
to be defined as a non‐profit institution in Australia and New Zealand, an organisation must be not‐for‐profit and non‐profit‐
distributing; institutionally separate from government; self‐governing; and non‐compulsory. However, the two countries
employ different methods for counting NPIs in their National Accounts: Australia includes only those registered for an
Australian Business Number (ABN); New Zealand includes NPIs identified in the business register as well as those not
in the Business register. Further information at: Australian Bureau of Statistics (2015), Appendix 5: Scope of Australian
NPI Satellite Account, Australian National Accounts: Non‐Profit Institutions Satellite Account, 2012–13, www.abs.gov.au;
Statistics New Zealand (2016), Non‐profit institutions satellite account: 2013, www.stats.govt.nz.
67. A.R. Andreasen (2002), ‘Marketing social marketing in the social change marketplace’, Journal of Public Policy and
Marketing, vol. 21, pp. 3–13.
68. Hays (2010), The 2010 Hays salary guide: sharing our expertise, Hays, Sydney, NSW, www.hays.com.au.
69. Australian Government (2014), Job Outlook: Advertising and Marketing Professionals, http://joboutlook.gov.au.
70. ibid.
71. Open Universities Australia (2016), ‘Marketing Professionals’, www.open.edu.au.
72. Seek Learning (2016), ‘Marketing Manager’, www.seeklearning.com.au.
Copyright © 2017. Wiley. All rights reserved.

73. Michael Page International (2016), Michael Page salary centre, www.michaelpage.com.au.
74. S. Kimmorley (2015), ‘In good company: How Thankyou water got the attention of Australia’s biggest retailers’, Business
Insider Australia, 5 May, www.businessinsider.com.au.
75. Anonymous (2014), ‘Young entrepreneur offers lessons to new advisers’, Riskinfo, 16 October, www.riskinfo.com.
76. H. Edensor (2016), ‘Turning a dumb moment into changing the world: Thankyou water co‐founder’, Bandt, 12 August,
www.bandt.com.au.
77. Correspondence with Melissa Morris, PR & Communications Manager at Thankyou.
78. ibid.

40  Marketing

Elliott, Greg. Marketing, 4th Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/mqu/detail.action?docID=5049568.
Created from mqu on 2018-02-26 20:58:34.
 ACKNOWLEDGEMENTS
Photo: © Monkey Business Images / Shutterstock.com
Photo: © AtnoYdur / iStockphoto
Photo: © manwithacamera.com.au / Alamy Stock Photo
Photo: © Ray Warren Backgrounds / Alamy Stock Photo
Photo: © Igor Stepovik / Shutterstock.com
Photo: © Salvation Army
Photo: © Richard Levine / Alamy Stock Photo
Photo: © DAVE HUNT / AAP Image
Photo: © Thankyou
Photo: © Nils Versemann / Shutterstock.com
Figure 1.4: © Australian Marketing Institute
Figure 1.5: From ‘CIM (2007) ‘Shape the Agenda: The good, the bad and the indifferent — Marketing and
the Triple Bottom Line’. Cookham, The Chartered Institute of Marketing. Available at www.cim.co.uk.
Reproduced with kind permission.
Text: © The Conversation, Andrew Hughes, 15 September 2014, http://theconversation.com/why-free-will-
eventually-cost-you-31336
Text: © The Conversation, Gary Mortimer, 27 October 2016, http://theconversation.com/phantom-brands-
haunting-our-supermarket-shelves-as-home-brand-in-disguise-67774
Text: © The Conversation, Katherine Wilson, 21 September 2015, http://theconversation.com/when-hand-
crafted-is-really-just-crafty-marketing-47749
Copyright © 2017. Wiley. All rights reserved.

CHAPTER 1 Introduction to marketing  41

Elliott, Greg. Marketing, 4th Edition, Wiley, 2017. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/mqu/detail.action?docID=5049568.
Created from mqu on 2018-02-26 20:58:34.