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RSM219H1 (136)
Chapter 5

Chapter 5 Notes

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Department
Rotman Commerce
Course
RSM219H1
Professor
Chris Bovaird
Semester
Fall

Description
Chapter 5 What Is Marketing? o Marketing: planning and executing the development, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy both buyers’ and sellers’ objectives  Consumers are the essential ingredients in the marketing process  Needs and wants are the forces that drive marketing o Marketing concept: the idea that the whole firm is directed toward serving present and potential customers at a profit  The whole firm is coordinated to achieve one goal  A firm must get to know what customers really want and follow closely the changes in tastes that occur o Departments of the firm  Marketing  Production  Finance  Human resources o Four activities that comprise the marketing mix  Developing  Pricing  Promoting  Placing products  Providing Value and Satisfaction o Value and Benefits  Value: relative comparison of a product’s benefits versus its costs  Benefits include not only the functions of the product but also the emotional satisfactions associated with owning, experiencing, or possessing it  Costs include sales price, expenditure of the buyer’s time, and emotional costs of making a purchase decision o Value and Utility  Products provide consumers with utility  Utility: the ability of a product to satisfy a human want or need; marketing strives to provide four kinds of utility o Time utility  Christmas ornaments during Christmas time o Place utility  Annual Christmas department open in Christmas o Ownership utility  When store sells ornaments, it provides ownership utility by conveniently transferring ownership from store to customer o Form utility  By making products available in the first place—by turning raw materials into finished ornaments—the ornament maker creates form utility  Marketing determines timing, place, terms of sale and product features that provide utility and add value for customers  Marketers must begin with an understanding of customers’ wants and needs  Goods, Services, and Ideas  Consumer goods: products purchased by individuals for their personal use  Firms that sell products to consumers for personal consumption are engaged in consumer marketing  Industrial goods: products purchased by companies to use directly or indirectly to produce other products  Industrial marketing  Services: intangible products, such as time, expertise, or an activity that can be purchased  Service marketing: insurance companies, airlines, investment counselors, etc.  Marketers also promote ideas: teachers are “heroes” o Relationship Marketing  A type of marketing that emphasizes lasting relationships with customers and suppliers  Stronger relationships, including stronger economic and social ties, can result in greater long-term satisfaction and customer loyalty  The Marketing Environment  Marketing plans, decisions, and strategies are strongly influenced by powerful outside forces  Any marketing program must recognize the outside factors that comprise a company’s external environment o External environment: outside factors that influence marketing programs by posing opportunities or threats o Political and Legal Environment  Marketing managers try to maintain favourable political/legal environments in several ways because legislation on the use of cellphones and pollution can determine the destinies of entire industries  To gain publics support for their products and activities, marketing uses advertising campaigns for public awareness on issues of local, regional, or national importance o They also lobby and contribute to political candidates o Social and Cultural Environment  Values, beliefs, and ideas that form the fabric of Canadian society  Changing social values force companies to develop and promote new products for both individual consumers and industrial customers o Technological Environment  New technologies create new goods and services  They make some existing products obsolete; many of them change our values and lifestyles o Economic Environment  Economic conditions determine spending patterns by consumers, businesses and governments  Marketers are concerned with inflation, interest rates, recession and recovery- they must monitor the general business cycle, which typically features a pattern of transition from periods of prosperity to recession to recovery o Consumer spending increases as consumer confidence in economic conditions grows during periods of prosperity o It decreases during low-growth periods, when unemployment rises and purchasing power declines  Traditionally, analysis of economic conditions focused on the national economy and the government’s policies for controlling or moderating it  As nations form more and more economic connections, the “global economy” is becoming more prominent in the thinking of marketers everywhere o Competitive Environment  In a competitive environment, marketers must convince buyers that they should purchase their products rather than those of some other seller  Both consumers and commercial buyers have limited resources to spend, so every dollar spent to buy one product is no longer available for other purchases o Thus, each marketing program seeks to make its product the most attractive  A failed program loses the buyer’s dollar forever  By studying the competition, marketers determine how best to position their own products for three specific types of competition  Substation products o A product that is dissimilar from those of competitors but that can fulfill the same need  Brand competition o Competitive marketing that appeals to consumer perceptions of similar products  International competition o Competitive marketing of domestic against foreign products  Strategy: The Marketing Mix  Marketing, as business activity, requires management  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 plan: a detailed strategy for gearing the marketing mix to meet consumer needs and wants o Marketing begins when a company identifies a consumer need and develops a product to meet it  Marketing mix: the combination of product, price, place and promotion strategies used in marketing a product o Product  A good, service or idea that satisfies buyers’ needs and demands  conceiving and developing new products is a constant challenge for marketers, who must always consider the factor of change  meeting consumer needs means changing existing products to keep pace with emerging markets and competitors o mass-customization: allows marketers to provide products that satisfy very specific needs of consumers  product differentiation: the creation of a product or product image that differs enough from existing products to attract consumers o Price  That part of the marketing mix concerned with choosing the appropriate price for a product to meet the firm’s profit objectives and buyers’ purchasing objectives  The best price must support a variety of costs, but shouldn’t be so high that consumers turn to competitor products o Successful pricing means finding a profitable middle ground between these two requirements  Low prices generally lead to larger sales volumes  High prices usually limit market size but increase profits per unit  High prices may also attract customers by implying that a product is of high quality o Place (Distribution)  The part of the marketing mix concerned with getting products from the producer to the buyer, including physical transportation and choice of sales outlets  Placing a product in the proper outlet requires decisions about several activities , all of which are concerned with getting the product from the producer to the consumer o Decisions about warehousing and inventory control are distribution decisions, as are decisions about transportation options  Firms must also make decisions about the channels through which they distribute products  Many manufacturers sell goods to other companies that in turn, distribute them to retailers o Others sell directly to major retailers like Sears  Others sell directly to final consumers o Promotion  Techniques for communicating information about products  The most highly visible component of the marketing mix o Most important promotional tools include advertising, personal selling, sales promotions, and public relations o Product, price, place and promotion focus on seller’s perspective  From the buyer’s perspective, each of the 4 P’s are a mirror image of the buyer’s 4 C’s: customer solution (product), customer cost (price), customer convenience (place), and customer communication (promotion) Target Marketing and Market Segmentation o Target market: any group of people who have similar wants and needs and may be expected to show interest in the same product(s)  Target marketing clearly requires market segmentation: the dividing of a market into categories according to traits customers have in common  Once they have identified market segments, companies may adopt a variety of product strategies  Segmentation is a strategy for analyzing consumers, not products  It focuses on the uses of the product indirectly o In marketing, the process of fixing, adapting and communicating the nature of the product itself is called positioning  Identifying Market Segments 
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