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Chapter 5

chapter five book/ class notes


Department
Management (MGT)
Course Code
MGTA02H3
Professor
Chris Bovaird
Chapter
5

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Chapter 5: Understanding Marketing Processes and Consumer Behavior
What is Marketing
-marketing: planning and executing the development, pricing, promotion and distribution of ideas, goods, and
services to create exchanges that satisfy both buyers’ and seller’ objectives
Value and Utility
-value: relative comparison of a product’s benefit versus its costs (benefit of high value products is greater than
cost
value = benefits ÷ costs
-benefits: the functions of a product and emotional satisfaction associated with owning, experiencing or
possessing it
-focus of marketing is to increase value to customers by using marketing resources (value can be added by
keeping store opened for longer hours, reducing price, etc)
-utility: ability of a product to satisfy a human want or need (marketers strive to provide 4 types of utility)
otime utility: availability of products when customers want them (ornaments in time for Christmas)
oplace utility: availability of products where customers can conveniently purchase them (department
stores have different sections for different types of products)
oownership utility: convenient transfer of ownership from store to customer
oform utility: availability of products themselves (raw materials into finished goods)
Goods, Services, Ideas
-consumer goods: products purchased by individuals for their personal use (perfume)
ofirms that sell products to consumers for personal consumption are involved in consumer marketing
-industrial goods: products purchased by companies to use directly or indirectly to produce other products (raw
materials, earth move, etc)
ofirms that sell products to other marketers are involved in industrial marketing
-services: intangible products, such as time, expertise, or an activity that can be purchased (insurance)
ofirms that provide services are involved in service marketing
-markets also promote ideas (don’t drink and drive)
Relationship Marketing
-relationship marketing: a type of environment that emphasizes lasting relationships with customers and
suppliers (can result in long term satisfaction and customer loyalty) < Harley Owners Group (H.O.G)
Marketing Environment
-external factors: outside factors that influence marketing programs by posing opportunities or threats (5
environments- political/legal, social/cultural, technological, economic, competitive
opolitical/legal environment: ex. Cell phone bans in cars; to gain public support marketing uses ad
campaigns for public awareness on issues of local, regional or national importance; they also lobby and
contribute to political candidates (although contributions are restricted, they can help change laws)
osocial/cultural environment: ex. Women entering workforce, environmental movement; companies must
adapt to changing social forces and they have to develop and promote new products
otechnological environment: creation of new goods and services (satellite dish, home television
shopping); new products replace old ones (CDs replace cassettes)
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oeconomic environment: determine consumer, business and government spending patterns; marketers
plans for product offerings, pricing, and promotional values depend on these variables; marketers must
be aware of business cycle (unemployment, recessions, etc)
ocompetitive environment: marketers must convince buyers to purchase their products instead of those of
other customers; each marketing program tries to make its product look more attractive
marketing concept: the idea that the whole firm is directed toward serving present and potential
customers at a profit
-three types of competition:
osubstitute product: a product that is dissimilar from those of competitors but that can fulfill the same
need (physical fitness programs and drugs can lower cholesterol)
obrand competition: competitive marketing that appeals to consumer perceptions of similar products
ointernational competition: competitive marketing of domestic against foreign products (competition is
affected by alliances such as NAFTA) < ex. Air Canada vs. Swissair
Strategy: The Marketing Mix
-marketing managers: managers responsible for planning and implementing all the marketing-mix activities
that result in the transfer of goods or services to customers (marketing requires management)
-marketing plan: a detailed strategy for gearing the marketing mix to meet consumer needs and wants
(marketing begins when a company identifies a consumer need and develops a product to meet it)
-marketing mix: the combination of product, pricing, promotion, and distribution strategies used in marketing a
product
Product
-product: a good, service or idea that satisfies buyers’ needs and demands (conceiving an idea is a constant
challenge, marketers must also consider the factors of change *discussed above)
-product differentiation: the creation of a product or product image that differs enough from existing products
to attract consumers (Volvo has newer, better safety features)
Price
-price: that part of the marketing mix concerned with choosing the appropriate price for a product to meet the
firm’s objectives and buyers’ purchasing objectives (price must cover cost and make profit, but cant be too high
that consumers turn to competition)
-price strategies can be effective in different situations> low prices = higher sales, high prices = limited market
size but increase profit per sale
Place (distribution)
-distribution: that part of the marketing mix concerned with getting products from the producer to the buyer,
including the physical transportation and choice of sale outlets (firms decide on outlets, warehouses, channels
of distribution)
Promotion
-promotion refers to techniques for communicating information about products; promotional tools include
advertising, personal selling, sales promotion and public relations
-product, price, place and promotion (4 Ps) are the sellers perspective they are a mirror image of the buyer’s 4
Cs: customer solution (product), customer cost (price), customer convenience (place) and customer
communications (promotion)
Target Marketing and Market Segmentation
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