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The purpose of this lecture is to review the fundamentals of Marketing. It is assumed that the student has completed, at minimum, an undergraduate introductory course in Marketing, or a graduate leveling course of the same. Students are urged to reference a Principles of Marketing textbook whenever they feel the need to "refresh" their memories of these principles, in this lecture or in the lectures to come. Whenever possible, links to companies have been provided in the lectures to help illustrate topics further. Students are encouraged to visit these links to gain a better understanding of these firms.
Please visit the link at the bottom of Student Pages to fill out your Biographical Sketch. It will create a page that can be viewed under 'Student Pages' on the navigational frame. Of all the various activities engaged in by businesses, Marketing is perhaps the most visible and far-reaching. Marketing is virtually inescapable in the free world. Consumers are confronted with thousands of Marketing messages every day, from TV and radio advertisements, to newpapers, magazines, billboards, direct mail, and more. For this reason, Marketing is often the whipping boy of business and social critics, who bewail the discipline for foisting all manner of ills upon an otherwise innocent human population: materialism, pollution, economic inequities, resource depletion, and even the hole in the ozone layer over Antarctica. Well, we have to blame someone, right? They may as well blame us. Yet, in spite of criticism across the spectrum, Marketing remains one of the most vital of business activities. It is the very life blood of a firm's revenues, for without it, few if any customers would be aware of the company's products or services. It can be argued, furthermore, that Marketing is the very essence of a free society, in which competing ideas, products, philosophies, etc., all seek their place in the marketplace. Marketing is pervasive and is performed by everyone, from the nation's top retailers and manufacturers, all the way down to your next door neighbor who is holding a garage sale. Politicians use it to seek public office. Individuals use it in the form of a resume. Charities use it to raise funds for their cause. Churches use it to proselytize and recruit members. What is Marketing? Marketing is the collection of activities associated with the production, distribution, sale, and consumption of goods and services, between producers, sellers, and consumers. Furthermore, it includes the following:
Before progressing with our discussion of Marketing, it is imperative that one thing be set straight at the onset: The customer is at the center of all Marketing activities. No matter how good your products or services are, how cleverly you advertise them, how competitively you price them, or how widespread you distribute them, if the customer does not drive all of your decision making, it will be for naught. Products must be designed with the customer in mind. If they do not meet the needs and wants of customers, there is little point in continuing. Thus, it is important that marketers have an intimate understanding of their customers. To this end, we will examine the issue of studying consumers later in this term, because, while studying consumers is important for the marketer, critics often see it as an ethical issue, and an invasion of privacy. Thus, marketers who try to take the high road by knowing their customers, are often criticized for doing so.
There are numerous variables that the Marketer has control over in both the short- and long-term operations of the business. The most prominent of these variables are known collectively as the Marketing Program Variables, or, more commonly, the 4Ps. The other two variables to be discussed are of nearly equal importance, but sometimes get short shrift in marketing analyses. The Marketing Program Variables
What the marketer sells is its product, which can range from totally tangible items (pure products) to totally intangible items (pure services), and can also include blended product/service offerings, like food served in a restaurant. It is the marketer's domain to decide the characteristics of the product or service, and its essential features, benefits, quality, etc.
Services like Federal Express serve a vital need in modern society by being able to deliver documents and parcels in under 24 hours. .It is incumbent upon marketers to communicate their product and its benefits to their potential customes. Rare indeed is the business that succeeds without benefit of communication. Marketers have four methods of comunication available to them. They are: , which refers to paid-for communucation, and includes print and broadcast media, outdoor media, direct response, and, more recently, the Internet. , which are short-term incentives to buy, and include coupons, samples, sweepstakes, contests, premiums, and short-term sales. Sales promotions must also use advertising in order for the promotion to be effective. , which is free coverage given by news media, and includes the use of press releases and press conferences, and other such media events like grand openings, celebrity appearances, etc. , which refers to one-on-one selling that demands a response from the customer. Because there are so many people (over 265 million in the US alone), and so many products, marketers usually have to rely more on the above three methods. .In an essentially free economy like that of the US, marketers have the ability to set their prices as they see fit. While there are exceptions to this rule (e.g., cable TV rates, utility rates, and insurance rates), marketers are subject to the realities of economic theory as it pertains to market structure, elasticity of demand, etc., and accounting, which includes the costs of producing and selling the product. Setting prices may appear to the untrained eye to be merely a random game of fine-tuning prices on the shelf (or to the cynic, abusing the consumer), but in reality it is a highly complex issue that demands a marketer's constant attention.
Marketers have the ability to price their products and services, relying on market factors, resource costs, and competition in the process. In the case of highly similar products (like gasoline), price competition is often intense, and even more so when retailers selling these products are located in proximity to one another. Note the variability in the price of gasoline in just the first 8 months of 2001. Market demand as well as supply have a large effect on the price we must pay to drive our cars and trucks. . While perhaps stretching the "P" concept a little, "placement" is more accurately is described as "distribution," which accounts for the types of intermediaries that carry the product as well as the intensity of distribution in a particular market. Other related issues in this field include power, conflict, and legal issues governing the distribution of goods and services. Other Controllable Factors
This variable, sometimes called the "5th P," is strictly a perceptual variable, meaning that it is solely in the eyes (and mind) of the beholder. It refers to how people see your company or product. For example, Coca Cola has carved out a viable position in the marketplace, with consumers seeing them as a traditional, patriotic, even "classic" beverage, whereas Pepsi is positioned more as a product oriented toward youth ("The Choice of a New Generation"). Positioning strategy is essential for all marketers; great care must be taken to select a unique position, and not try to duplicate someone else's position. Few marketers aim to sell their product(s) to all consumers. Hence, they choose a subset of the total market, called a target market. The process begins with the marketer analyzing the whole market, and determining the nature of the various market segments that comprise the total market. A market segment is a subgroup that possesses some unifying characteristic that sets them apart from other subgroups (like gender, age, race, etc.). Marketers examine market segments for their viability (size, accessibility, and potential profitability) before making their target market selections. It is possible for marketers to select multiple targets, to be served either with one product, or with separate products. External, Uncontrollable Variables Marketers face a variety of external variables (or environments) over which they have no control. All marketers face these same variables to some degree or another. A marketer's vulnerability to these variables is a function of the marketer's size, resources, and ability to respond. Still, no firm is totally immune to these external variables. The nature of these variables evolves over time. In other words, yesterday's impact might be commonplace today and of little consequence to anyone. Furthermore, there are always new manifestations of these variables that appear as time passes. For example, in years past, door-to-door retailing may have once been a threat to traditional store retailing, whereas today mail-order retailing is the current concern, and door-to-door is scarcely paid any attention. Marketers need to think of these external factors in terms of being either threats or opportunities. A threat is any situation that has the potential to impact a company in a negative way. On the other hand, an opportunity is any situation that a company may capitalize on to their own benefit. One of the marketer's biggest jobs, then, is keeping a steady lookout for both threats and opportunities, so that appropriate responses can be made in a timely fashion. This section examines five broad areas of external influence that companies face, along with numerous examples of how these factors may exert their influence. As you read them, try to think of other examples.
The Competitive
Environment
The competitive environment is in a constant state of evolution. Nothing is static in business, and competitors appear in many new shapes and forms. But worse than not recognizing the changing face of the competition is not recognizing the competition at all. A sure sign of a soon-to-die business is one that declares it has no competition. The reality is that there is a fixed amount of money that consumers have to spend, and ALL businesses are in essence competing for these finite dollars. To be short-sighted here is to hasten the demise of the business. Another common problem is the new business entity who thinks it will simply enter a market and command a sizeable, if not dominant, market share. This is seldom the case. The grim reality of business is that markets do not get larger just because new firms with new products arrive on the scene. There are only two situations under which a market may grow: there has been a structural change in the demand curve, or, the market has gotten larger on its own accord. In other words, all things constant, the new entrant must literally steal all of its business away from others. But will the other previously-established businesses let this happen? Over their dead body! Marketers must be cognizant of three forms of competition:
The photos below illustrate some of
the more modern forms of competition that have changed the way consumers
shop for goods and services. Home improvement superstores like Lowe's now dominate the scene. Once called "lumber yards," today's modern home improvement centers sell far more than just lumber. Furthermore, men and women alike shop at these stores, where power tools and wallpaper share equal billing. Wal-Mart has redefined the way America shops, and has become the gold standard against which all other retailers are measured (whether they like it or not). In the 1990s, Wal-Mart expanded their discount stores to become supercenters, with the addition of a grocery section, as well as video rentals and other services. This 198,000-square foot store is open 24 hours daily, catering to the round-the-clock needs of consumers. Wal-Mart is the store that many people love to hate, yet it continues to be the top-selling store in the country because it has found the formula that works: sell what people want at reasonable prices. Even office supplies were swept up in the retailing frenzy of the 1990s. Office superstores such as Office Max have presented a formidable threat to the old-fashioned stationer who also dabbled in file cabinets and desks. Everyone from business offices to parents needing school supplies for their kids to home-business entrepreneurs are regular customers at these stores.
Not to be outdone, the pet products industry has also seen its share of category killers. Petsmart is one of the largest of these entities, selling every imaginable kind of pet product. There's only two things missing: dogs and cats. They refuse to sell these pets, arguing that, with over 107 million cats and dogs in the US, we already have enough.
The electronics industry is filled with category killers, having begun their infatuation with the concept back in the 1980s with chains such as Fretter and Highland Appliances (both now gone), and replaced today by the likes of Circuit City and Best Buy, who often are located within a half-mile of one another and engage in heated price competition. Thanks to our fascination with electronic products, as well as our increased disposable income, sales at these stores are booming, but the old "Mom and Pop" appliance stores they challenged have nearly all bitten the dust. Toys-R-Us is one of the original category killers in the US. Known as Bargain Town in the early 1970s, Toys-R-Us has always been a kid's dream and a parent's nightmare, yet it remains as the place to shop for children's toys. The selection is awesome, making all other retailers' toy selections pale by comparison. Toys-R-Us has diversified somewhat into children's and infant's clothing to help soften the impact of smaller family sizes (see discussion below).
Barnes and Noble is doing to small bookstores what Petsmart and OfficeMax are doing to their respective competitors. Furthermore, B&N is showing that you don't necessarily have to use a discount pricing strategy to get customers to spend money. Their approach is to sell books in a library-like environment that invites people to stay as long as they like, as opposed to many other stores that encourage people to leave. The strategy is working, as they have discovered that people will surprisingly spend more money the longer they stay in the store. Those nice, stuffed chairs sure are inviting!
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