Nature of Marketing

Learning Targets

• Discuss the importance of marketing and its role in the economy

• Describe the factors that are part of the nature of marketing

Supply and Demand• Producers and consumers need

information to help them make decisions

• Independent decision making = basis of free enterprise system

• Marketing activities help to match production and consumption

What is Marketing?

• Set of activities that gets products from producers to consumers

• Definition: an organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships

• Key tool in matching Supply and Demand

Marketing as Primary Business

RETAILERS • Businesses that sell directly

to final consumers• Ex: Target, Walgreens

WHOLESALERS• Buy products from businesses

and sell them to other businesses

• Ex: lumberyardBusinesses that support:• Advertising Agencies – provide promotional services• Finance Companies– offer loans and other financial services• Transportation Companies– handle and move products

Marketing Activities

• Buying• Selling• Transporting• Storing• Financing• Researching• Risk Taking• Grading and Valuing

Marketing Activities Continued…

• Buying: – finding suppliers that can provide the right products,

quality & quantity at fair price• Selling:– Providing personalized & persuasive info to

customers to match needs & wants• Transporting:– Moving products from where they were

manufactured to where consumers can buy them• Storing: – Warehousing, shelves, storage room

Marketing Activities Continued…

• Financing:– Obtaining credit when buying, extending credit

when selling• Researching:– Studying buyer interests/needs, testing products,

gathering facts needed to make good marketing decisions

• Risk Taking:– assuming risk (ex. fires, theft, damages etc.)

• Grading & Valuing:– Grouping goods according to size, quality,

characteristics and pricing appropriately

Cost of Marketing• Sometimes higher than cost of making

product• Often 50% markup to account for marketing

activities• Necessary to attract and retain customers

Role of Marketing• Early 1900s Product - Oriented – Little choice, inefficient manufacturing– Focus: was ‘how’ and ‘what’ to produce?

• 20th Century Sales – Oriented– More efficient manufacturing, lots of similar products– Focus: advertising and selling, widespread distribution

• Today Customer – Oriented– Needs of customer drives design, production, and

distribution of product called the “Marketing Concept”– Profit is important, but long-term success depends on

satisfying customers so they continue to buy

ELEMENTS OF MARKETINGCHAPTER 20.2

Learning Targets

• Describe the role of market determination• Define the basic marketing concepts and the

four elements of the marketing mix: product, price, place, and promotion

Market Determination• Type of buyers a business wishes to attract– Gender– Age– Ethnic background– Education– Income – Occupation – Family status– Location

• Market research : study of a company’s current and prospective customers

Market Determination

• Where to serve?– Local, state, national, international?

• TARGET MARKET– Groups of customers with very similar needs– Easier for firms to produce a product that satisfies

everyone in the group– Ex. Imagine developing a bicycle to satisfy everyone’s

needs – What might be Target Markets?• Road, mountain, BMX, commuter, 3 vs. 20 speed, cruiser,

recumbent, etc

The Marketing Mix

• Marketing managers must focus decisions around 4 Elements of Marketing1. Product2. Price 3. Place4. Promotion

Possible Decisions

1. Will you make the product in one size and color or in several?

2. Will you price the product high, medium, low?

3. Will you sell in stores or online?4. Will you use newspapers, radio, television, or

internet advertising?

PRODUCT

• All attributes (tangible and intangible) customers receive in exchange for purchase price

• Strategy includes:– Number of items to produce– Physical features– Quality– Number of models and features– Packaging features– Brand name– Guarantees and services– Image to be communicated to customers about the above

PRICE • Must be high enough to cover

production and marketing costs• Higher quality can charge higher

price• Sold for cash or credit?• Consider competitor pricing• Will you offer coupons, discounts,

promotional bonuses to attract customers?

• What price to charge companies that buy and resell product?

PROMOTION• Providing information to

consumers that will assist them in making a decision to purchase

•How and When? -Magazines? Direct Mail? Product Demos? Trade Shows?

•What type of Info? •How much to spend on ads, displays, and other promotions?•What promotions are competitors using?

Major Methods: Advertising & Personal Selling

Online Net Bookmark

• http://www.amazon.com• Amazon.com pioneered a new form of marketing by

developing an online store that goes beyond selling to a whole marketing system. Evaluate the Amazon.com site. Determine how Amazon.com develops relationships with its customers. Compare and contrast how Amazon.com performs the eight marketing activities discussed versus traditional stores. How likely are you to use an online store such as Amazon.com?