Marketing Begins with Economics

1. Marketing Begins with Economics Chapter 3

2. The Basic Economic Principle • Unlimited wants and needs, combined with limited resources result in scarcity • How will the resources available be used? Who will receive and who won’t? How much will they get? • The way those decisions are made depends on the type of economic system the person is in

3. Who make the decisions? • Controlled Economy – gov’t owns and controls important resources and decides what will be produced and consumed (Communist) • Regulated Economy – shared btwn gov’t and certain groups • Free Economy – resources are owned by individuals and decisions are made individually with limited gov’t control • Mixed Economy – some individual – some government

4. America’s Private Enterprise • Based on independent decisions with limited gov’t role • Resources of production and owned and controlled by individual producers • Producers use profit motive to decide what to produce • Individual consumers make decisions about what will be purchased to satisfy needs • Consumers use value in deciding what to consume • The gov’t only steps in when society could be harmed

5. Supply and Demand play a large role in a private enterprise system • If the supply is large items are going to cost less, if the demand is high items are going to cost more because there are less available • Producers need to find out what is in need of supply before producing it

6. 3.2 Microeconomics and Demand • Macro – economy of entire society • Micro – relationships between individuals in the economy • Factors affecting demand • Need or want is strong • Availability of supply • Availability of alternative products • Demand Curve

7. Supplying the Product • What and how many? • Possibility of profit • Amount and type of competition • Alter product? • Accessories to the product instead • Capability of developing and marketing • Lots of capital (cash) • Location • Supply Curve

8. 3.3 Types of Economic Competition • 2 important characteristics in determining the type of competition • The number of firms competing in the market • The amount of similarity between the products of competing businesses • 4 types – Pure Competition, Monopoly, Oligopolies, Monopolistic Competition

9. Pure Competition • Large number of suppliers offering very similar products • Agricultural products – no single supplier can raise the price without hurting themselves • Businesses have no control over price if they want to sell their products

10. Monopoly • Opposite of pure competition • One supplier offering a unique product • Supplier has almost total control • Consumers have to accept the price • Few legal monopolies in the US • Microsoft? • DeBeers Diamonds • Standard Oil

11. Oligopolies • A few businesses offer very similar products of services • If they work together they will be a monopoly, work against they will be pure competition • Airline industry • Usually if they want to increase prices they need to do it as a group or it won’t work

12. Monopolistic Competition • Most common type • Many firms competing with products that are somewhat different • Fewer the number of competitors and the greater the differences among the competitors’ products, the greater the control each firm will have on the market

13. 3.4 Enhancing Economic Utility • Economic Utility “Satisfaction” – the satisfaction a consumer receives from the consumption of a product • Higher utility if greater satisfaction • Marketers try to pick out the utility of a customer and prey on location, time, form, etc.

14. Form utility – changes in the tangible parts of a product or service • Time utility – available at the moment the customer wants it • Place utility – available where the customer is • Possession Utility – affordable at the time the customer can afford it