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C H A P T E R O N E MARKETING: A FOCUS ON CUSTOMER RELATIONSHIPS AND VALUE Irwin/McGraw-Hill

AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO: • Define marketing and explain the importance of (1) discovering and (2) satisfying consumer needs and wants. • Distinguish between marketing mix elements and environmental factors. • Understand how organizations build strong customer relationships using current thinking about customer value and relationship marketing. (continued)

AFTER READING THIS CHAPTER YOU SHOULDBE ABLE TO: • Describe how today’s market orientation era differs from prior eras oriented to production and selling. • Understand the meaning of ethics and social responsibility and how they relate to the individual, organizations, and society. • Know what is required for marketing to occur and how it creates customer value and utilities for consumers.

PP1-AA Rollerblade Skates Conversations with in-line skaters indicated that using Rollerblade skates: • was incredible fun • was a great aerobic workout and made the skater stronger and healthier • was quite different from traditional skating, which was practiced alone, mostly inside, and by young girls • would have great appeal to people other than just off-season ice hockey skaters and skiers.

PP1-1 Number of in-line skaters in the United States 35 David Samuels and his Rollerblade team target new opportunities 30 25 20 15 10 5 0 29.1 First ExtremeGames features in-line skatingcompetition 27.5 Number of U.S.in-line skaterspasses 10,000,000 22.5 18.8 Number of U.S. in-line skate participants (millions) Two brothersreinventin-line skates Rollerblade’s “guerilla marketing” launches in-line skate industry 12.6 9.4 6.2 4.3 3.0 1994 1996 1980 1982 1984 1986 1988 1990 1992 1998 2000

PP1-2a The see-if-you’re-really-a-marketing-expert test 1. In a magazine article, a well-known actress said she often “Rollerbladed” for fun and exercise. What was Rollerblade, Inc.’s reaction? (a) delighted, (b) upset, or (c) somewhere in between. Why? 2. What is “Polavision”? (a) a new breathable contact lens, (b) a TV network that competes with Home Box Office, (c) special bifocal glasses, (d) instant movies, or (e) a political newspaper. (continued)

PP1-2b The see-if-you’re-really-a-marketing-expert test 3. Right after World War II, IBM commissioned a study to estimate the total market for electronic computers. The study’s results were (a) less than 10, (b) 1,000, (c) 10,000, (d) 100,000, or (e) 1 million or more. 4. True or false: Building good customer relationships is a critical marketing issue today, as illustrated by having a loyal Kleenex customer spending more than $1,000 during his or her lifetime, in today’s dollars. 5. True or false: “Grinding” done by city kids today uses a skateboard with bad wheels or bearings.

PP1-BB Definition of Marketing Marketingis . . . . the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

PP1-CC Definition of Market Orientation An organization that has a market orientation focuses its efforts on . . . . (1) Continuously collecting information about customers’ needs and competitors’ capabilities, (2) sharing this information across departments, and (3) using the information to create customer value.

PP1-DD Definition of Exchange Exchange is . . . . the trade of things of value between buyer and seller so that each is better of after the trade.

PP1-3 An organization’s marketing department relates to many people, groups, and forces The Organization Society Society Alliances Ownership Research and Development Human Resources Other Organizations Shareholders (owners) Information Systems Manufacturing Management Partnerships Relationships Suppliers Customers Finance Marketing Environmental Forces Social Economic Technological Competitive Regulatory

PP1-EE Requirements for Marketing to Occur For marketing to occur, at least 4 factors are required: 1. Two or more parties (individuals or organizations) with unsatisfied needs, 2. a desire and ability on their part to be satisfied, 3. a way for the parties to communicate, and 4. something to exchange.

PP1-FF Concept Check 1. What is marketing? 2. Marketing focuses on __________ and _________ consumer needs. 3. What four factors are needed for marketing to occur?

PP1-GG Some Product Disasters 1. New Coke 2. Polavision 3. The Edsel 4. Players Beer 5. Crystal Pepsi

PP1-HH Needs & Wants Should marketing try to satisfy consumer needs or wants? A need occurs when a person feels physiologically deprived of basic necessities such as food, clothing, and shelter. A want is a felt need that is shaped by a person’s knowledge, culture, and personality. What are the legal, ethical, and moral implications of satisfying wants and needs?

PP1-4 Marketing’s first task:discovering consumer needs Organization’s marketing department Discover consumer needs Information about needs Potential consumers: The market

PP1-II What is a Market? Potential consumers make up a market, which is: 1. People 2. with the desire and 3. with the ability to buy a specific product.

PP1-JJ The Target Market Because the organization obviously can’t satisfy all consumer needs, it must concentrate its efforts on certain needs of a specific group of potential consumers. This is the target market -- one or more specific groups of potential consumers toward which an organization directs its marketing program.

PP1-KK The Four Ps: Controllable Marketing Mix Factors Product Price Promotion Place

PP1-LL The Uncontrollable, Environmental Factors Social Factors Economic Factors Technological Factors Competitive Factors Regulatory Factors

PP1-A Summary of factors that affect an organization’s marketing program Competitive forces Economic forces Marketing program Product Promotion Consumer Regulatory forces Social forces Price Place Technological forces Environmental forces

PP1-MM Customer Value Customer value is. . . . the unique combination of benefits received by target buyers that includes quality price convenience on-time delivery after-sale service

PP1-NN Relationship Marketing Relationship marketing is linking the organization to its individual customers, employees, suppliers, and other partners for their mutual long-termbenefits. Mutual long-term benefitsbetween the organization and its customers require links to other vital stakeholders-- including suppliers, employees, and “partners” such as wholesalers or retailers in a manufacturer’s channel of distribution.

PP1-OO Mass Customization Mass Customizationis tailoring goods or services to the tastes of individual customers in high volumes at a relatively low cost.

PP1-PP Definition of Marketing Program A marketing programis. . . . a plan that integrates the marketing mix to provide a good, service, or idea to prospective buyers.

PP1-5 Marketing’s Second Task: Satisfying Consumer Needs Organization’s marketing department Concepts for products • Satisfy consumer needs • Find the right combination of: • Product • Price • Promotion • Place Discover consumer needs Information about needs Goods, services, ideas Potential consumers: The market

PP1-6a Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Product Offer the Xten-plus Offer the Outback Use new-product skate for children that X skate with research, the latest “extends” so that it trapped air filled technology, and changes four shoe sizes wheels & a full- extensive testing to as the children grow suspension frame offer high-quality that cushions the skates that satisfy ride on rough the wants & needs roads & cracked of carefully defined pavement customer segments (continued)

PP1-6b Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments -- Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Price Price @ $99/pair Price @ $199/pair Attempt to set prices that provide genuine value to the customer segment that is targeted

PP1-6c Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Promotion Use demo vans & blade- Feature R’blade Continue to increase mobiles to introduce brand in ESPN awareness of in-line children to in-line in-line sports skating to those new skating while working competitions & to the sport while with R’blade dealers magazines such offering specific to place ads in local as Shape, Fitness, skate designs for newspapers Mademoiselle, and more advanced inline & local segments want them newspapers (continued)

PP1-6d Marketing Program for two of Rollerblade, Inc.’s skates, target at two distinctly different segments Marketing Program Activity to Reach Rationale for Marketing Fast-Growing “Rough-Road” Marketing Program Mix Element Kids Segment Segment Activity Place Distribute the Xten- Distribute the Make it easy for plus through sporting Outback X buyers in the goods stores through specially segment to buy in-line sporting at an outlet that is goods stores convenient and where they feel comfortable

PP1-B A Rollerblade Ad to Show In-Line Skating as Giving Both Exercise and Fun from the Early 1990’s Courtesy Rollerblade, Inc.

PP1-C A Rollerblade Ad From the Late 1990’s to Show Specific Benefits of a Rollerboard Skate Courtesy Rollerblade, Inc.

PP1-D An UltraWheels Ad for Its Expander Line of Expandable Skates Courtesy First Team Sports

BASIS OFCOMPARISON SITUATION IN 1986 SITUATION TODAY • Number of competitors Almost none Over 30 • Main Rollerblade marketing objective Inform/educate potential buyers; gain awareness Stress Rollerblade’s brand differences from competitors; maintain brand loyalty • Product Only a few models Many models targeted at different market segments • Price Relatively high, narrow range Wide variations, depending on model and retail outlet Main marketing mix actions • Promotion “Guerilla marketing” promotions on tiny budget to gain product exposure More diverse promotions, ads to stress Rollerblade’s brand differences/advantages • Place Sporting goods stores Broadened distribution to include chains, mass retailers PP1-E How Rollerblade®, Inc.’s marketing mix actions today differ from those in 1986

PP1-QQ Concept Check 1. An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its ______________. 2. What are the four marketing mix elements that make up the organization’s marketing program? 3. What are uncontrollable variables?

PP1-7 Four different orientations in the history of American business Production era Sales era Marketing concept era Market orientation era 1860 1880 1900 1920 1940 1960 1980 2000

PP1-RR Ethics & Social Responsibility -- Key Terms ethics social responsibility societal marketing concept macromarketing micromarketing

PP1-SS The Breadth & Depth of Marketing How marketing affects every person and organization Who markets? What do they market? Who buys and uses what is marketed? Who benefits from these marketing activities? How do they benefit?

PP1-TT Who buys and uses what is marketed? Ultimate Consumers Organizational Buyers

PP1-UU How Do Consumers Benefit? Utility Examples of Marketing Actionsthat Create Utility Form Place Time Possession Product design, packaging Distribution, store location Inventory management, warehouses, delivery Transactions, transfer of ownership

PP1-F American Liver Foundation Ad

PP1-VV Concept Check 1. Like Pillsbury, many firms have gone through four distinct orientations for their business: starting with the _______ era and ending with today’s _______ era. 2. What are the two key characteristics of the marketing concept? 3. In this book the term product refers to what three things?

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