1 What marketing is not Chapter 1 What is Marketing a Misconception 1 marketing is common sense i Some common sense misconceptions about marketing Lower price is always better 1 2 Better service leads to higher profits 3 More choice is better ii Reality 1 Sometimes higher price is better a Luxury items are meant to be a luxury Rolex i i b Price has something to do with the quality level You get what you pay for 2 People will pay for a certain level of service a If you wanted Walmart to have better service you would expect prices to increase 3 Limited choices are better for both company and customer a Sometimes if there are too many options you will just stop looking i We have a capacity of looking at stuff so if we have too many choices our capacity of overdrawn b More is better but only up to a point c Sears had too many options because it was easier to just go to specialized stores for what you needed Toy store instead of toy department tools electronics etc i b Misconception 2 marketing is equivalent to sales or advertising i Reality 1 Marketing is a much broader concept that also includes product design pricing choosing where when and how to sell products to customers and a variety of other decisions 2 The breadth of marketing decisions is referred to as the 4 Ps of marketing which are product price place and promotion decisions a When introducing a new iPhone Apple has to decide which features it should have product how much it should sell for price where to sell it place and how to persuade people to buy it promotion c Misconception 3 marketing makes people buy things they don t need i Differences 1 Need a lack of means of subsistence 2 Want desire for something that fulfills a need 3 Demand want plus buying power and willingness ii Reality 1 Marketing can influence wants 2 Customer has control and only buys things they need iii We live mostly at the want and the demand level but not really needs d Misconception 4 marketing is an art and you either have the gift or you don t i Key facts 1 Creativity does not guarantee marketing success 2 The list of clever ad campaigns and brands that created buzz but then failed is quite long a Pets com i ii Pets com ads Pets com performance marketing but are quite successful a UPS b Proctor and Gamble P G 3 There are the companies that plod along with no exciting 4 Creativity can enhance good marketing but is not sufficient for success e Misconception 5 marketing does not involve numbers i Reality 1 Marketing is full of numbers a Will we make or lose money b How much should we charge to make a profit c How many customers do we need to cover our expenses 2 Marketers need basic math skills 3 Anyone who is not comfortable calculating basic marketing functions e g profit markup margins breakeven should not seek a career in marketing 4 Most common marketing math involves only addition subtraction multiplication and division 2 Marketing defined a Definition of market according to American Marketing Association i Marketing is the activity set of institutions and processes for creating communication delivering and exchanging offerings that have value for customers clients partners and society at large 1 Do not need to memorize this 3 Philosophy of marketing a Philosophy b Our definition i Key components of the AMA definition basic ideas underlying marketing practice ii iii i ii iii iv i 1 Marketing involves at least two parties 2 They each have something of value to the other 3 They are willing and able to make an exchange So our definition of marketing 1 Marketing managing exchanges with customers Key terms 1 Market the parties as a company or nonprofit organization and its customers and the place these parties come together 2 Marketing plan a written statement for managing exchanges with customers that includes goals activities needed to achieve goals a timeline and budget for included activities and measures to evaluate the activities 3 Target market the primary group of customers you would prefer to exchange with Best marketers manage exchanges to maximize benefits for both parties However there is inherent conflict in an exchange 1 Company wants maximum price with least benefits 2 Customer wants maximum benefits with least price Basic goal maximize how much the customer is willing to pay while making sure the customer thinks they got more than what they paid for How much would you pay for a cup of coffee 1 However much you think it is worth Perceived value the perceived benefits relative to the perceived costs associated with an exchange 1 Different customers have different perceptions 2 Goal is to find a group where a company can maximize perceived value relative to competition 3 Marketers have to understand customer perceptions and how to influence them 4 Marketing research measures marketing activity outcomes 5 How much should someone spend on an engagement ring b Perceived value ii Marketing managers in managing exchanges maximize how much customers are willing to pay while making sure customers think they got more than they paid for c Value propositions Value propositions combinations of benefits that will appeal to some specific groups but not others 1 Airbnb offers customers a variety of lodging arrangements where customers can live like a local because you stay in someone s home d The role of marketing research i i Good marketers are naive scientists which has several implications for marketing practice 1 While there is an art and sometimes luck to successful marketing it should be methodical 2 To test an idea to see it is is effective the idea should have a specific goal against which to measure the outcomes and goals other than sales and performance are often appropriate 3 You have to measure marketing outcomes to see if your marketing works 4 Marketing doesn t always work and good marketing means taking calculated risks which means your ideas should have some basis in practice or theory to increase your odds of success 4 How marketing has changed over time a Examples of marketing i ii Ancient Egyptians bartered for goods and services as early as 2000 BC Early Romans used to paint pictures of wine glasses and grapes above the door denote wine stores iii iv v vi vii viii In the Middle Ages monks brewed beer for nourishment but also to sell and even used beer as a form of payment to pay taxes By 1900 Sears Roebuck and Co produced a mail catalog with over 500 items including just about anything from appliances to speciality food