Marketing in The Modern Organization

Marketing in
the Modern
Organization
LEARNING OBJECTIVES
After reading this chapter, you should be able to:
1 identify the fundamental principles of marketing
2 define the marketing concept and identify its key components and limitations
3 compare a production orientation and a marketing orientation
4 differentiate between the characteristics of market-driven and internally driven
businesses
5 compare the roles of efficiency and effectiveness in achieving corporate success
6 describe how to create customer value and satisfaction
7 describe how an effective marketing mix is designed
8 discuss the criticisms of the 4-Ps approach to marketing management
9 explain the relationship between marketing characteristics, market orientation
and business performance
10 identify relevant business and research examples, which illustrate the principles
of marketing in a modern organization
Copyright © Houghton
Mifflin Company. All 1 | 2
1. Marketing play a central role for business success and focuses managers’
attention on attracting and keeping customers.
2. The purpose of marketing is not to chase any customer at any price.
3. It is much more expensive to attract new customers than to retain existing ones.
* the costs of attracting a new customer have been found to be up to six times
higher than the costs of retaining old ones
. * Companies which apply the principles of marketing recognize the importance of
building relationships with customers by providing satisfaction and attracting
new customers by creating added value.
4. Finally, most markets—e.g., consumer, industrial and not-for-profit—are
characterized by strong competition.
Defining Marketing
Marketing
The process of creating, distributing,
promoting, and pricing goods, services,
and ideas to facilitate satisfying exchange
relationships with customers in a dynamic
environment
Customers
The purchasers of organizations’ products;
the focal point of all marketing activities
Components of Strategic Marketing
•FIGURE 1.1
Marketing Focuses on Customers
Target Market
A specific group of customers on whom an
organization focuses its marketing efforts
Large or small customer groups
Single or multiple product markets
Single or multiple products
Local to global markets
Marketing Builds Satisfying Exchange
Relationships
Exchange
The provision or transfer of goods, services, or ideas in return for
something of value.
Exchange is the act or process of receiving something from someone
by giving something in return.
•FIGURE 1.2
Marketing Builds Satisfying Exchange
Relationships (cont’d)
Exchange Conditions
Two or more participants have something of value
that the other party desires.
Exchange provides mutual benefit/satisfaction.
Each party has confidence in the exchange value of
the other party’s offering.
Each party must meet the expectations of the
exchange to become trusted by the other parties.
Marketing Occurs in a Dynamic
Environment
Marketing Concept
A philosophy that an organization should try
to satisfy customers’ needs through a
coordinated set of activities that also
allows the organization to achieve its goals
Customer satisfaction
Analysis of customers’ current and long-term
needs
Analysis of competitors’ capabilities
Integration of firm’s resources
Evolution of the Marketing Concept
•Product •Late 19th century: efficient production of goods
Orientation allowed firms to meet strong customer demand.
•Mid-1920s–early 1950s: weakened demand

•Sales required that products would have to be “sold.”
Orientation (personal selling, advertising, and distribution
was the focus)
•Early 1950s–2000s: adopting a customer focus

•Marketing
means a commitment to researching and
Orientation responding to customer needs.
•FIGURE
1.3
Mifflin Company. All1 | 10
Implementing the Marketing Concept
Becoming marketing oriented requires

Establishing an information system to discover
customers’ needs and using the information to
create satisfying products.
Coordinating all marketing activities by restructuring
the organization.
Obtaining the support of all managerial
and staff levels in the organization.
The Marketing Concept
Marketing concept
Marketing
The achievement Concept goals
of corporate
Themeeting
through achievementandof exceeding
corporate
goals through meeting and
customer needs and expectations
exceeding customer needs
better than
better the
than thecompetition
competition
Customer Integrated effort GoalGoal

achievement
achievement
Customer orientation Integrated effort
orientation
Corporate activities are AllAll
staff
staffaccept
accept thethe The belief
The beliefthatthat
corporate
focused uponactivities
Corporate providing responsibility
responsibility for
for creating goals can be achieved
corporate goals can
through customer
customer satisfaction customer satisfaction
are focused upon creating customer be achieved
satisfaction
providing customer satisfaction through customer
satisfaction satisfaction
Evolution of the Marketing Concept
Integrated Marketing Long run profits

customer Orientation through customer
focus satisfaction
Push! Push! Sales Short term

Sell! Sell! Orientation gains in profit
by promotion via sales increases
Production
Production &
Orientation Profits through
assembly line
production controls
refinement
Production Orientation
Production
capabilities
Manufacture
product
Aggressive
sales effort
Customers
Marketing Orientation
Customer
needs
Potential
market
opportunities
Marketing
products and
services
Customers
Toyota
Toyota’s Optimal
Drive technology
provides customer
benefits of
enhanced
performance, lower
emissions and
better fuel
economy.
Understanding Market-Driven Businesses
Value
A customer’s subjective assessment of benefits relative to the costs in determining the
worth of a product
Customer value = customer benefits (perceived benefits ) – customer costs
Customer benefits: Anything desired by the customer that is received in an exchange
Perceived benefits its can be derived from the product (for example, the taste of the
hamburger), the associated service (for example, how quickly customers are served
and the cleanliness of the outlet) and the image of the company (for example, whether
the image of the company/product is favorable).
Customer costs
Anything a customer gives up in an exchange for benefits
Monetary price of the benefit
Search costs (time and effort) to locate the product
Risks associated with the exchange.
* is the total cost associated with buying a product
Creating Customer Value
Positive Customer Negative

value
Perceived Perceived
benefits sacrifice
Monetary costs
Product benefits
Time costs
Service benefits
Energy costs
Relational benefits
Psychological costs
Image benefits
Creating Customer Value
Marketing Orientated Businesses
Efficiency versus Effectiveness
Marketing Management
The process of planning, organizing, implementing, and controlling
marketing activities to facilitate exchanges effectively and
efficiently
Effectiveness: The degree to which an exchange
helps an organization achieve its
objectives.
Effectiveness means doing the right things.
This implies operating in attractive markets and making products that customers want to buy.
Efficiency
The process of minimizing the
resources an organization must
spend to achieve a specific level
of desired exchanges.
Efficiency is concerned with inputs and outputs.
Efficiency and Effectiveness
Ineffective Effective
Goes out of business quickly
•Survives
•it is a high-cost producer of
Inefficient products that customers do
•They are operating in attractive
not want to buy (General Motors ) markets and are marketing products
that customers want to buy.
Does well
Efficient Dies Slowly
Thrives
Examples
• Kodak is an example of an efficient and ineffective company that has slowly died. It was an
efficient producer of photographic film but has become ineffective as consumers have
moved to digital photography. (an efficient and ineffective company )
• Mercedes : its emphasis on over-engineering pushing up costs and lowering efficiency,

while still making cars that people wanted to buy (inefficient and effective company ).
*Toyota is an example of an efficient and effective manufacturing company. Its investment in

modern production practices ensures efficiency, while effectiveness is displayed by
research and development investment into new products that consumers want to buy.
Limitations of the Marketing Concept
The marketing concept as an ideology.

Marketers’ attention should focus not only on
propagation of the ideology but also on its
integration with the demands of other core
business functions in order to achieve a
compromise between the satisfaction of
consumers and the achievement of other
company requirements.
• Marketing and society.

• A second limitation of the marketing concept concerns its focus on individual
market transactions. Since many individuals focus on personal benefits rather
than the societal impact of their purchases, the adoption of the marketing
concept will result in the production of goods and services that do not
adequately correspond to societal welfare. Providing customer satisfaction is
simply a means to achieve a company’s profit objective and does not guarantee
protection of the consumer’s welfare.
**********Companies are responding to the challenge of societal concerns in various

ways. Marketing Ethics and Corporate Social Responsibility
• Marketing as a constraint on innovation.

The concept implies that new product
development should be based on
sound interfacing between perceived
customer needs and technological
research.
• Marketing as a source of dullness.

A fourth criticism of marketing is that its
focus on analyzing customers and
developing offerings that reflect their
needs leads to dull marketing
campaigns
Creating Customer Satisfaction And Loyalty
Customer satisfaction depends upon its perceived performance compared to the

buyer’s expectations.
Customer satisfaction occurs when perceived performance matches or exceeds
expectations.
Customer satisfaction is linked to customer loyalty and profitability. It can cost up
to five times more to attract a new customer than to serve an existing one.
Loyalty is a response which a customer shows over time. Typically, they will
repeatedly return to the same supplier if they are satisfied with the products and
services they receive.
Customer loyalty can be built on convenience, quality of service and social
interaction
Creating Customer Satisfaction
Customer Satisfaction Delight
‘Delighters’
‘More is better’
Neutral
‘Must be’
Dissatisfaction
Absent Fulfilled
Presence of the characteristic
The Marketing Mix
• Product
• Price
• Promotion
• Place
Marketing Deals with Products, Distribution,
Promotion, and Price
The Marketing Mix
Four marketing activities—product,
distribution, promotion, and pricing—that a
firm can control to meet the needs of
customers within its target market
•Product
•Distribution •Target
•Promotion Market
•Pricing
Marketing Mix Variables
•Goods, services, or ideas that satisfy customer needs
•Product •Product decisions also involve choices regarding brand names,

guarantees, packaging and the services that should accompany the
product offering.
•The ready, convenient, and timely availability of

products
•Distribution •Distribution channels consist of organizations such as
retailers or wholesalers through which goods pass on their
way to customers.
•Activities that inform customers about the organization and its
•Promotion
products
•advertising, personal selling, sales promotions, public relations, direct
marketing and online promotion.
•Decisions and actions that establish pricing objectives and
•Pricing
policies and set product prices
•Expenditure on product design (product), advertising and salespeople
(promotion), and transportation and distribution (place)
Apple: iPod
Apple has extended the iPod brand to cater for

diverse customer requirements.
An Effective Marketing Mix
Matches
customer needs
Creates a Effective
competitive marketing Well
advantage balanced
mix
Matches corporate
resources
Marketing Mix and Customer Needs
Customer Key Competitive Marketing

needs customer advantage mix
requirements
The marketing mix matches customer needs
Customers evaluate products on economic and

psychological criteria.
Economic criteria include factors such as performance,
availability, reliability, durability and productivity
gains to be made by using the product.
Psychological criteria include factors such as self-
image, a desire for a quiet life, pleasure,
convenience and risk reduction
The marketing mix creates a competitive advantage
A competitive advantage is the achievement

of superior performance through
differentiation to provide superior customer
value or by managing to achieve lowest
delivered cost.
The marketing mix should be well blended
The third characteristic of an effective

marketing mix is that the four elements—
product, price, promotion and place—should
be well blended to form a consistent theme. If
a product gives superior benefits to
customers, price, which may send cues to
customers regarding quality, should reflect
those extra benefits.
The marketing mix should match corporate resources
The choice of marketing mix strategy may

ultimately be down to the available financial
resources of the company.
Customer needs
Economic Psychological
Performance
Customer Self-imageKey Competitive Marketing
Availability
needs customer
Quiet life advantage mix
Reliability requirements
Pleasure
Durability Convenience
Productivity Risk reduction
Marketing mix
Customer Key Competitive Marketing

needs customer advantage Product mix
requirements Price
Promotion
Place
The Relationship Between Market
Orientation and Profitability
Core Reading
Core reading to
support this topic
can be found in
Chapter 1 of your
recommended
text
Chapter Quiz
1.Marketing is best defined as

a.developing a product and matching it with
its market.
b.advertising and selling products.
c. creating marketing mixes to facilitate
satisfying exchange relationships with
customers.
d.transferring goods to stores to make them
available.
e.a process of bringing buyers and sellers
together.
Chapter Quiz (cont’d)
2. A marketing manager decides what combination of

variables is needed to satisfy customers’ needs for a
general type of product. What are the essential
variables that the marketing manager combines?
a. Product variables, price variables, distribution
variables, and promotion variables
b. Marketing environment variables
c. Product variables and promotion variables
d. Product variables, price variables, and customer
variables
e. Product variables, price variables, customer
variables, and promotion variables.
Chapter Quiz (cont’d)
4.The focal point of all marketing activities is

a.profits.
b.promotion and selling.
c. the marketing concept.
d.customers.
e.competitors.
Explain how the desire to become high
efficient may conflict with being high
effective.
Explain how a production orientation
is different from marketing
orientation

Marketing in The Modern Organization

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Marketing in

•Mid-1920s–early 1950s: weakened demand

•Early 1950s–2000s: adopting a customer focus

Becoming marketing oriented requires

Customer Integrated effort GoalGoal

Integrated Marketing Long run profits

Push! Push! Sales Short term

Positive Customer Negative

• Mercedes : its emphasis on over-engineering pushing up costs and lowering efficiency,

*Toyota is an example of an efficient and effective manufacturing company. Its investment in

The marketing concept as an ideology.

• Marketing and society.

**********Companies are responding to the challenge of societal concerns in various

• Marketing as a constraint on innovation.

• Marketing as a source of dullness.

Customer satisfaction depends upon its perceived performance compared to the

•Goods, services, or ideas that satisfy customer needs

•Product •Product decisions also involve choices regarding brand names,

•The ready, convenient, and timely availability of

•Activities that inform customers about the organization and its

•Decisions and actions that establish pricing objectives and

Apple has extended the iPod brand to cater for

Customer Key Competitive Marketing

Customers evaluate products on economic and

A competitive advantage is the achievement

The third characteristic of an effective

The choice of marketing mix strategy may

Customer Key Competitive Marketing

1.Marketing is best defined as

2. A marketing manager decides what combination of

4.The focal point of all marketing activities is

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