1 Part 1 Designing Customer-Oriented Marketing Strategies

CHAPTER 1

MARKETING: THE ART AND SCIENCE OF SATISFYING CUSTOMERS

CHAPTER OVERVIEW

This new edition of Contemporary Marketing focuses on the latest strategies that allow companies to
succeed in today’s interactive marketplace. Customer loyalty defines 21st century marketing. Individual
consumers as well as business purchasers now choose from a mind-boggling array of goods and
services—and they have many more ways to purchase them than ever before.

With such stiff competition, today’s marketers continually look for new and better ways to understand the
needs of a population, then attract and keep customers. Starbucks, highlighted in this chapter, is a good
example of a firm that focuses on offering a variety of choices, creating an individualized final product,
and making the customer happy.

Chapter 1 sets the stage for the entire text, examining the importance of creating satisfaction through
customer relationships. Its initial sections describe the historical development of marketing and its
contributions to society. Technology has drastically changed the rules in business and marketing,
creating massive networks and global telecommunications. The later sections of the chapter introduce
this technology revolution and its many repercussions in the marketplace. Then the chapter focuses on
the universal functions of marketing and the relationship between ethical business practices and
marketplace success.

Throughout the chapter—and the entire book—is the discussion and exploration of customer loyalty and
the lifetime value of a customer.

Changes in the 13th Edition

The chapter has been updated and revised, and new features have been added:

 The Opening Vignette and Evolution of a Brand profiles a business you may have heard of—
Starbucks—and how it continues to delight its dedicated customers. With more than 9,000 stores
—and an ultimate goal of 30,000—the Seattle-based coffee wizard offers countless blends,
flavorings, and fancy concoctions. What’s its secret? Chairman Howard Schultz and CEO Jim
Donald believe it’s the continual focus on the people, not the profits. Donald reports a four-day
leadership conference with the theme of “human connection.” We didn’t once talk about sales
and profits,” he says. As the firm grows and launches new stores worldwide, it continues to focus
on connecting with customers. “I want to grow big and stay small at the same time,” says Donald.
The full story is in “Starbucks: Connecting with Customers.”

 Solving an Ethical Controversy reviews the tragic situation that turned into a hot political debate
in “FEMA and Katrina: The Hurricane After the Hurricane.” The story is now all too familiar.
Katrina hit, and thousands were instantly stranded, displaced, or homeless in New Orleans and
along the Gulf Coast. The TV cameras rolled and America watched as it became increasingly
clear that FEMA and local government officials weren’t doing what obviously needed to be done.
Should private corporations have stepped in and done more to assist?

 Marketing Success features the Internet innovation that changed the way we think of information
and the way we expect to find it. “What’s a Google?” asks a question that was once perplexing but

1
2 Part 1 Designing Customer-Oriented Marketing Strategies
can now be answered by just about anyone with a computer screen. When Sergey Brin and Larry
Page redefined the concept of an Internet search engine roughly a decade ago, they named it
after the mathematical term “googol” which refers to the number 1 followed by 100 zeros. Its
strong points are clean design, ease, speed, and a vast database. Most important, it clearly
separates search results from ads. And it continues to add features—spell checker, foreign
language translator, calculator, and a revolutionary geographical search—as part of its long-term
commitment to making the world a better place.

 Etiquette Tips for Marketing Professionals provides advice on those tricky moments in
business introductions and meetings when people aren’t quite sure how to address one another. It
gives tips on listening, being professional, understanding rank, using a title, and refraining from
assuming a first-name basis until asked, in “Forms of Address: Which One Do You Use, and
When?”

 Chapter Case 1.1 highlights the latest shift in golf club manufacturing as well-known companies
such as Calloway, TaylorMade, Ping and Nike Golf have challenged the way things have always
been done by redesigning traditional clubs. Woods were always made for long fairway shots,
irons for short distances or greater accuracy. But they’re putting out new hybrid clubs designed to
capture the best features of both woods and irons. The center of gravity shifted to the back and
bottom give the ball height, the flat face gives it spin. And there have been celebrity endorsements
and marketing campaigns. But is this what golfers really want? Find out, in “Golfers Are Joining
the Hybrid Club.”

 Collaborative Learning Exercises are provided in several areas involving marketing and
customer satisfaction—Definition of Marketing, Not-for-Profit Marketing, Person Marketing, Place
Marketing, Creativity.

 Video Case 1.2 Synopsis includes a detailed overview of the video featuring the legendary
motorcycle maker, Harley-Davidson.

LECTURE OUTLINE

Opening Vignette and Evolution of a Brand – Starbucks: Connecting with Customers. What examples are
given that demonstrate the commitment Starbucks has to its customers? What specific things has
Starbucks done to make customers feel comfortable and pampered? How has it developed its brand and
fostered brand loyalty?
Chapter Objective 1: Define marketing, explain how it creates utility, and describe its role in the
global marketplace.
Key Terms: utility, form utility, time utility, place utility, ownership utility, marketing, nearshoring
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1. What is marketing?
a. Producing and marketing goods and services are the essence
of economic life in any society, creating a benefit called utility
b. Utility is the want-satisfying power of a good or service
Table 1.1 Four Types of 2. The four basic kinds of utility:
Utility. Ask students for a. Form utility—created when raw materials and inputs are
examples of each type converted into finished goods
of utility. b. Time utility—created when goods or services are available
when consumers want them
c. Place utility—created when goods or services are available
where consumers want them
Chapter 1 Marketing: The Art and Science of Satisfying Customers 3
d. Ownership utility—created when title to goods or services is
transferred
3. All organizations must create utility to survive
4. Marketing specialists are responsible for most of the activities
necessary to create the customers the organization wants, including:
a. Identifying customer needs
b. Designing goods and services that meet those needs
c. Communicating information about those goods and services
d. Making the goods or services available at times and places
that meet customers’ needs
e. Pricing merchandise and services
f. Providing the necessary service and follow-up to ensure
customer satisfaction
5. A definition of marketing
a. The word marketing encompasses a broad scope of activities
b. Today’s definition of marketing: An organizational function and
a set of processes for creating, communicating, and delivering
value to customers, and for managing customer relationships
in ways that benefit the organization and its stakeholders
6. Today’s global marketplace
a. Factors that have forced countries to extend their economic
views
i. International agreements designed to increase trade
ii. Rise of electronic commerce
iii. Interdependence of the world’s economies
b. Expanding operations beyond the U.S. gives companies
access to billions of new consumers
c. Service firms also play a major role in today’s global
marketplace
d. The U.S. is also an attractive market for foreign companies

Assessment check questions

1. Define “marketing” and explain how it creates utility. Marketing is an

organizational function and a set of processes for creating, communicating, and
delivering value to customers and for managing customer relationships in ways
that benefit the organization and its stakeholders. It creates time, place and
ownership utilities.

2. What three factors have forced marketers to embrace a global marketplace?

International agreements are being negotiated in attempts to expand trade
among nations. The growth of technology is bringing previously isolated
countries into the marketplace. The interdependence of the world’s economies
is now a reality.

Chapter Objective 2: Contrast marketing activities during the four eras in the history of marketing.
Key Terms: exchange process, production orientation, sales orientation, buyer’s market, seller’s market,
consumer orientation, marketing concept, relationship marketing
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Figure 1.1 Four Eras of 1. Four eras in the history of marketing
Marketing History. a. The essence of marketing is the exchange process, in which two or
4 Part 1 Designing Customer-Oriented Marketing Strategies
What are the primary
characteristics of each
era? Think of a common
product, possibly one
with a long history. How
2.
might it have been
marketed during each
era?
3.
4.
5.
6.
more parties give something of value to each other to satisfy
perceived needs
b. The four eras in the history of marketing: the production, sales,
marketing, and relationship eras
The production era
a. Characterized by a production orientation—a business philosophy
stressing efficiency in producing a quality product
b. Attitude toward marketing is “a good product will sell itself”
c. Characteristic of a shortage economy and intense consumer demand
d. Inventing an outstanding product is not enough—it must meet a
perceived marketplace need
The sales era
a. Characterized by a sales orientation—a business philosophy
assuming that consumers will resist purchasing nonessential goods
and services
b. Attitude toward marketing is that creative advertising and personal
selling are required to overcome consumer resistance and convince
them to buy
c. Chief marketing officer in many firms held the title of sales manager
during this era
The marketing era
a. Began to emerge during the Depression Era of the 1930s when both
personal incomes and consumer demand for goods and services
declined
b. Was interrupted when rationing and shortages of goods occurred
during World War II
c. Has been emerging since the end of WWII
d. Emergence of the marketing concept
i. Production orientation changed to consumer orientation as
society changed from a seller’s market (one with a shortage
of goods and services) to a buyer’s market (one with an
abundance of goods and services)
ii. Consumer orientation is a business philosophy incorporating
the marketing concept of first determining unmet consumer
needs and then designing a system for satisfying them
iii. The marketing concept is a company-wide consumer
orientation with the objective of long-run success
iv. All facets of the organization must be involved with assessing
and then satisfying consumer wants and needs
v. A strong marketing orientation improves market success and
overall performance
The relationship era
a. Represents a major shift from the traditional concept of marketing as
a simple exchange between buyer and seller
b. Relationship marketing involves developing long-term, value-added
relationships over time with customers and suppliers
c. Strategic alliances and partnerships with vendors and retailers play a
major role in relationship marketing
Converting needs to wants
a. Every consumer must acquire goods and services on a continuing
basis to fill certain needs
b. Everyone must satisfy the fundamental needs for food, clothing,
Chapter 1 Marketing: The Art and Science of Satisfying Customers 5
shelter, and transportation
c. Effective marketing converts needs to wants by focusing on the
benefits resulting from the acquisition of specific goods and services
d. Converting those needs to the desire for certain types of
communication requires skill and a willingness to listen to what
consumers really want

Assessment check questions

1. What is the major distinction between the production era and the sales era?
During the production era, business people believed that quality products would sell
themselves. But during the sales era, emphasis was placed on selling —persuading
people to buy.

2. What is the marketing concept? The marketing concept is a company-wide

consumer orientation with the objective of achieving long-term success.

3. Describe the relationship era of marketing. The relationship era focuses on

building long-term, value-added relationships over time with customers and suppliers.

Chapter Objective 3: Explain the importance of avoiding marketing myopia.

Key Terms: Marketing myopia
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Table 1.2 Avoiding 1. Avoiding marketing myopia
Marketing Myopia. a. Marketing myopia is the failure of managers to recognize the scope
Choose a local of their business
business, and devise a
b. Future growth is endangered when management is product-oriented
company motto that
rather than customer-oriented
would avoid myopia.
How could it avoid c. Marketing myopia is often characteristic of organizations that are too
narrow thinking and narrowly defined
expand or revise its 2. A broader focus on goods/service benefits rather than on the products
product line or themselves aids in avoiding marketing myopia
services?
Assessment check questions

1. What is marketing myopia? Marketing myopia is management’s failure to

recognize the scope of a company’s business.

2. Give an example of how a firm can avoid marketing myopia. A firm can find
innovative ways to reach new markets with existing goods and services.

Chapter Objective 4: Describe the characteristics of not-for-profit marketing.

Key Terms: not-for-profit organizations, bottom line
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1. Extending the traditional boundaries of marketing
a. Today’s organizations—both profit-oriented and not-for-profit—see
the universal need for marketing and its importance to their success
b. Like businesses, not-for-profits may communicate with messages that
appear in advertisements related to their goals
6 Part 1 Designing Customer-Oriented Marketing Strategies
2. Marketing in not-for-profit organizations
a. Nearly 10 percent of the U.S. workforce works or volunteers in one of
more than 1.6 million not-for-profit organizations in the country
b. Not-for-profit organizations operate in both the public and private
sectors
i. Government units pursue service objectives that are not
keyed to profitability targets
ii. The private sector has very diverse not-for-profit
organizations, from private schools to museums to charitable
organizations
c. Adopting a marketing concept helps to meet service objectives
3. Characteristics of not-for-profit marketing
a. The bottom line (the overall profitability and financial performance of
the organization) is not the major objective of not-for-profit
organizations
b. However, not-for-profit organizations still need to generate sufficient
revenues, often from donors, to accomplish their objectives, and
marketing can help
c. Like profit-seeking firms, not-for-profit organizations may market
tangible goods and services
d. A customer or service user of a not-for-profit organization often has
less control over the organization’s destiny than customers of a profit-
seeking firm
e. Resource contributors to not-for-profit organizations may try to
interfere with the marketing program to promote a message that the
donor feels is relevant

Assessment check questions

1. What is the most obvious distinction between a not-for-profit organization and a

commercial organization? The biggest distinction is the bottom line—whether an
organization is judged by its profitability.

2. Why do for-profit and not-for-profit organizations sometimes form alliances? For-

profits and not-for-profits may form alliances to promote each other’s causes and
services. For-profits may do so as part of their social responsibility programs.

Chapter Objective 5: Identify and briefly explain each of the five types of non-traditional marketing.
Key Terms: person marketing, place marketing, cause marketing, event marketing, organization marketing
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Table 1.3 Categories of 1. Nontraditional marketing
Nontraditional a. As marketing has evolved into an organization-wide activity, its
Marketing. Give one application has broadened beyond traditional boundaries
concrete example of a
b. Five major types of nontraditional marketing are person, place, cause,
well-known product or
event, and organization marketing
service that is marketed
through each method. 2. Person marketing
a. Person marketing refers to efforts designed to cultivate the attention,
interest, and preferences of a target market toward a celebrity or
Note: Show an ad by a
authority figure
local candidate as an
example of person b. Examples
marketing. i. Sports figures (Lance Armstrong)
ii. Fictional characters (Snoopy)
Chapter 1 Marketing: The Art and Science of Satisfying Customers
Etiquette Tips for
Marketing Professionals 3.
—Forms of Address:
Which One Do You
Use, and When?
Choose one tip and
discuss its importance
in business situations. 4.
Then practice these
skills by introducing
one another in class.
Note: Ask students for
examples of sports 5.
arenas with corporate
names.
Note: Find, or ask
students to find, an
example of
organization marketing
for your college or 6.
university (the Web site
is one possibility).
Note: Ask if students
feel organization
marketing is
appropriate and
whether or not there
should be any limits to
it. Assessment check questions
7
iii. Political candidates (Congressional office seekers)
Place marketing
a. Place marketing attempts to attract customers to particular areas
b. Many states, cities, and countries have convention and visitor
bureaus that publicize their attractions to vacation and business
travelers
Cause marketing
a. Cause marketing refers to the identification and marketing of a social
issue, cause or idea to selected target markets
b. Examples include campaigns promoting family planning, advocating
literacy, or cautioning against underage drinking
c. Many profit-seeking firms link their products to social causes
d. There is strong support among both customers and company
employees for cause-related marketing
Event marketing
a. Event marketing refers to the marketing of sporting, cultural, and
charitable activities to selected target markets
b. It includes sponsorships of events by firms seeking to increase public
awareness and bolster their images
i. One example is sports sponsorships
ii. Many professional sports arenas carry corporate names
Organization marketing
a. Organization marketing refers to attempts to influence others to
accept the goals of, receive the services of, or contribute in some way
to an organization
b. It includes mutual-benefit organizations (churches), service and
cultural organizations (universities, museums), and government
agencies (the U.S. Postal Service)
c. Organizations raise funds and sell licensed merchandise

1. Identify the five major categories of nontraditional marketing. The five categories
of nontraditional marketing are person, place, cause, event, and organization
marketing.

2. Give an example of a way in which two or more of these categories might overlap.
Overlap can occur in many ways. An organization might use a person to promote its
cause or event. Two organizations might use one marketing effort to promote an
event and a place – for example, NBC Sports and the National Thoroughbred Racing
Association combining to promote the Kentucky Derby at Churchill Downs.

Chapter Objective 6: Outline the importance of creativity, critical thinking, and the technology revolution
in marketing.
Key Terms: Creativity, critical thinking, technology, interactive technology, interactive marketing, Internet
protocol television (IPTV), broadband technology, wireless technology, mobile marketing
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1. Creativity and critical thinking
a. The challenges presented in today’s marketing environment require
critical-thinking skills and creativity from marketing professionals
b. Creativity is a human activity that produces original ideas or
8 Part 1 Designing Customer-Oriented Marketing Strategies
knowledge
c. Critical thinking refers to the process of determining the authenticity,
accuracy, and worth of information, knowledge, claims, and
arguments
Marketing Success—
What’s a Google? 2. The technology revolution in marketing
Discuss Google’s latest a. Technology is the business application of knowledge based on
innovations in scientific discoveries, inventions, and innovations
searching, accessing, b. Technological advances are revolutionizing marketing
and organizing 3. Interactive and Internet marketing
information.
a. Interactive technology combines computers and telecommunications
resources to create software that users can direct themselves
Note: Cite the increase b. Interactive marketing refers to buyer-seller communications in which
in online sales of goods the customer controls the amount and type of information received
and services as an
example of how i. It allows marketers and customers to customize their
technological advances communications
are revolutionizing ii. It allows larger exchanges, in which customers can
marketing. communicate with one another using email or electronic
bulletin boards
iii. Internet protocol television (IPTV) allows a two-way digital
broadcast signal to be sent through a telephone or cable
network via a broadband connection
4. Broadband
a. Broadband technology is an always-on Internet connection that runs
much faster than dial-up connections
b. More than 50 percent of online U.S. households use a broadband
Internet connection
5. Wireless
a. Wireless technology offers Internet connections for about 41 percent
of U.S. Internet users
b. Wireless Internet connections—through laptop computers, PDAs, or
smart cell phones—have set the stage for mobile marketing, or
marketing messages sent via wireless technology

Assessment check questions

1. Define “creativity” and “critical thinking.” Creativity produces original ideas or

knowledge. Critical thinking is the process of determining the authenticity, accuracy,
and worth of information, knowledge, claims, and arguments.

2. Why are both of these attributes important for marketers? Both creativity and
critical thinking are important for marketers because they generate new ideas and
then use discipline to analyze the best course of action.

3. Why is interactive marketing an important tool for marketers? Interactive marketing

technologies create direct communication with customers, allow larger exchanges,
and put the customer in control.

Chapter Objective 7: Explain the shift from transaction-based marketing to relationship marketing.
Key Terms: transaction-based marketing, lifetime value of a customer, relationship marketing, buzz
marketing, strategic alliances
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Note: Remind students 1. From transaction-based marketing to relationship marketing
Chapter 1 Marketing: The Art and Science of Satisfying Customers 9
of the relative cost of a. Traditional view of marketing is a simple exchange process
acquiring new (transaction-based marketing)
customers versus the b. New view of marketing stresses the importance of establishing and
cost of maintaining maintaining long-term relationships with customers
existing ones.
c. The lifetime value of a customer consists of the revenues and
intangible benefits that a customer brings to an organization over an
Figure 1.2 Converting average lifetime
New Customers to d. Relationship marketing gives a company the opportunity to move
Advocates. Think about customers from new to regular purchasers and from loyal supporters
the steps needed to of the firm to advocates
successfully convert a
e. Buzz marketing uses customers to create a “buzz” about a company’s
new customer into a
products
regular one, a loyal
one, and finally a wildly f. Effective relationship marketing relies heavily on information
enthusiastic one. Are technologies such as computer databases
you an advocate for a 2. Developing partnerships and strategic alliances
product or service? a. Relationship marketing extends to business-to-business relationships
Trace the steps you with a firm’s suppliers and distributors as well as other types of
went through to corporate partnerships
become totally sold on
b. Strategic alliances are partnerships that create competitive
the brand. Did you skip
advantages
any of the steps given
in the illustration? i. Firms often form strategic alliances when developing new
products
ii. Not-for-profits often make use of strategic alliances in order to
Note: Ask students to
promote their causes
think of several recent
examples of strategic
alliances and Assessment check questions
partnerships.
1. How does relationship marketing give companies a competitive edge?
Relationship marketing can move customers up a loyalty ladder, generating repeat
sales and long-term relationships.

2. What is a strategic alliance? A strategic alliance is a partnership formed between

two organizations to create a competitive advantage.

Chapter Objective 8: Identify the universal functions of marketing.

Key Terms: exchange functions, physical distribution functions, facilitating functions
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1.
2.
3.
Figure 1.3 Eight
Universal Marketing
Functions. Review the
eight marketing
functions, and give a
concrete example of
each one in operation.
Costs and functions of marketing
The costs of marketing (what the firm needs to spend to market a product)
a. Firms must spend money to create time, place, and ownership utilities
b. Most estimates of marketing costs, in relation to overall product costs,
range from 40 to 60 percent
The functions of marketing (what the consumer receives in return for the cost
of marketing a product)
a. Two exchange functions
i. Exchange functions include buying and selling
ii. Buying: marketers must determine how and why consumers
buy certain products
iii. Selling: involves advertising, personal selling, and sales
promotion
b. Two physical distribution functions
10 Part 1 Designing Customer-Oriented Marketing Strategies
i. Physical distribution functions include transporting and storing
ii. Transporting: moving goods from the seller to the buyer
iii. Storing: warehousing goods until they are needed for sale
c. Four facilitating functions
i. Facilitating functions include standardizing and grading,
financing, risk taking, and securing marketing information
ii. These final four areas are considered facilitating functions
because they help marketers perform the exchange and
physical distribution functions
iii. Standardizing and grading: quality and quantity control
standards and grades reduce the need for buyers to inspect
each item
iv. Financing: this is a marketing function because buyers often
need access to funds in order to finance inventories prior to
sale
v. Risk taking: manufacturers create goods and services based
on their belief that consumers need them; wholesalers and
retailers acquire inventory based on similar expectations
vi. Securing marketing information: marketers gather
information to meet the need for decision-oriented input
about consumers

Assessment check questions

1. Which two marketing functions represent exchange functions? Buying and selling
are exchange functions.

2. Which two functions represent physical distribution functions? Transporting and

storing are physical distribution functions.

3. Which four functions are facilitating functions? The facilitating functions are
standardization and grading, financing, risk taking, and securing market information.

Chapter Objective 9: Demonstrate the relationship between ethical business practices, social
responsibility, and marketplace success.
Key Terms: ethics, social responsibility
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Ask students to list 1. Ethics and social responsibility: doing well by doing good
examples of companies a. Ethics are moral standards of behavior expected by a society
who have not lived up
b. Most companies do their best to abide by an ethical code of conduct,
to an ethical code of
but occasionally organizations and leaders fall short
conduct.
2. Despite these lapses, most businesspeople follow ethical practices
Solving an Ethical a. Many companies offer ethics training to employees
Controversy—FEMA b. Corporate mission statements often include pledges to protect the
and Katrina: The environment, contribute to communities, and improve workers’ lives
Hurricane After the c. Social responsibility involves marketing philosophies, policies,
Hurricane. Should procedures, and actions whose primary objective is to enhance
private companies be society
asked to assist
governments during
emergencies? Where Assessment check questions
do ethics and social
responsibility begin?
Chapter 1 Marketing: The Art and Science of Satisfying Customers 11
And end? 1. Define “ethics.” Ethics are moral standards of behavior expected by a society.

2. What is “social responsibility”? Social responsibility involves marketing

philosophies, policies, procedures, and actions whose primary objective is the
enhancement of society.

ANSWERS AND TEACHING NOTES TO CHAPTER EXERCISES

Chapter 1 Assurance of Learning Review

1. Identify the four types of utility, and give an example of each.

Form utility—raw materials and inputs are converted into finished goods (example: manufacturer
combining glass, plastic, metals, and circuits to create a digital camera). Time utility—goods or services
are available when consumers want them (example: pizza place adding delivery cars on Super Bowl
Sunday). Place utility—goods or services are available where consumers want them (example: vending
machines making snacks available in office lunch rooms). Ownership utility—title to goods or services is
transferred (example: music fan buying a concert ticket online).

2. What condition in the marketplace gave rise to the need for a consumer orientation by businesses
after World War II?

The rationing and shortage of consumer goods during the war led to a shift from focusing on selling
products that were already produced to understanding the wants and needs of consumers.

3. Define “relationship marketing” and describe how it fits into the marketing concept.

Relationship marketing involves developing long-term, value-added connections to customers and

suppliers over time. It includes strategic alliances and partnerships among manufacturers, retailers, and
suppliers. It has impacted the marketing concept by stressing ways to understand and satisfy customers
rather than just trying to sell them certain goods.

4. Why do not-for-profit organizations need to engage in marketing efforts?

More than 1.6 million not-for-profit organizations in the U.S. operate in both public and private sectors.
Profit is not the priority, but with all that competition, an organization often adopts marketing concepts to
help get out its message, cover costs and payroll, attract donors, and even sell tangible goods and
services—all in order to do its work and accomplish its objectives.

5. Give an example of how Big Apple Bagels could use one or more of the nontraditional marketing
techniques to promote the opening of a new franchise.

It could use person marketing by hiring a celebrity or local personality to endorse its product. It could use
place marketing by stressing the New York City location and its “Big Apple” reputation with images of the
city buildings and streets. It could use cause marketing by promoting a social issue in the store or
contributing a percentage of sales to a charity. It could use event marketing by sponsoring an appropriate
festival or sport, such as a marathon, and supplying bagels at the event. It could use organization
marketing by aligning itself with another firm, such as a bookseller, a music store chain, or even a not-for-
profit, to promote each other’s goods and services while creating a mutually beneficial relationship.

6. What might be some of the benefits of mobile marketing for firms that use it to reach out to
consumers?
12 Part 1 Designing Customer-Oriented Marketing Strategies

Mobile marketing offers the technology to send marketing messages via wireless Internet connections—
through laptops, computers, PDAs, and now smart cell phones. Firms might benefit from a number of
related factors—increasing speed and efficiency, lowering costs, delivering messages instantly,
projecting a high-tech image with the latest cutting-edge ideas, and reaching younger or more technically
savvy audiences.

7. Describe the significance of the shift from transaction-based marketing to relationship marketing.
When does relationship building begin?

Transaction-based marketing operated under the traditional view of marketing as a simple exchange
process, focusing on producing an item, attracting a customer, and closing the deal. Over time the focus
shifted toward consumers as they found more shopping options, became more sophisticated about
making purchase decisions, and were increasingly bombarded with endless advertising and marketing
messages. The shift is significant because marketers realized they needed to understand their desires
and needs, inform them about the products that will meet those needs, and eventually establish and
maintain long-term relationships. And they found it’s much less expensive to keep existing customers
than it is to find new ones. Relationship building begins when a firm focuses on establishing and
maintaining connections with customers so they become loyal, repeat customers and often tell others
about their positive experience.

8. Identify the two exchange functions of marketing and explain why they are important to the overall
marketing program.

The two exchange functions of marketing are buying and selling. Buying is important because marketers
must determine how and why consumers buy certain goods and services, understand consumer
behavior, be able to predict consumer preferences, and provide products to retailers and intermediaries
that consumers want. Selling is important to marketers because it involves advertising, personal selling,
and sales promotion in an attempt to match a firm’s goods and services to consumer needs. Overall
marketing helps the buying side by determining what products customers want or need, and the selling
side by organizing advertising, personal selling, and sales promotion activities.

9. How does the physical distribution function create utility?

The physical distribution function involves transporting (physically moving goods from the seller to the
buyer) and storing (warehousing goods until needed for sale). Manufacturers, wholesalers, and retailers
create utility through this function by providing goods when and where customers want or need them.

10. How do ethics and social responsibility help a firm achieve marketplace success?

Ethics are moral standards of behavior expected by society. Social responsibility refers to the
philosophies, policies, procedures, and actions of a firm—including philanthropy and charitable giving—
that act to enhance society. Companies that abide by an ethical code of conduct and demonstrate social
responsibility become successful by focusing on the public good—not only “doing the right thing” for their
own workforce, the environment, and society at large, but also building an image of well-being and trust
that consumers recognize. This leads to improved customer relations, increased employee loyalty, and
often improved financial performance.
Chapter 1 Marketing: The Art and Science of Satisfying Customers 13
Projects and Teamwork Exercises

1. Each firm’s goods and/or services can create different types of utility in various ways. Though
marketing technically creates three of the four utilities, form utility is also included below as one that is
created by these businesses. Some ideas:

a. Olive Garden, Red Robin, Chili’s, or another restaurant chain—they create form utility by taking
raw materials (produce, meat, bread) and converting them into menu items, time utility by setting
operating hours when customers want meals, place utility by opening restaurants in high-traffic
areas with easy access, and ownership utility by transferring goods into the buyer’s hands at the
time of purchase.

b. Snapfish or other online digital photo service—it creates form utility by taking raw materials
(digital images) and converting them into finished forms (CDs, prints, etc), time utility by allowing
24-hour access through the Web, place utility by allowing transactions to occur from any location
via the Internet, and ownership utility by providing a service at the time of purchase.

c. Busch Gardens—it creates form utility by taking raw materials (gardens, kiosks, walkways,
snack bars, etc.) and converting them into a finished form (entertainment park), time utility by
having hours convenient to visitors, place utility by allowing transactions to occur from any
location via the Internet, and ownership utility by providing a service at the time of purchase.

d. eBay—it creates form utility by taking raw materials (items for sale, buyers and sellers) and
converting them into a finished form (auction Web site), time utility by allowing 24-hour access
through the Web, place utility by allowing transactions to occur from any location via the Internet,
and ownership utility by providing a service at the time of purchase.

e. Supervalu supermarkets— it creates form utility by taking raw materials (produce, canned
goods, other food products, shelving, lighting, shopping carts, cash registers, etc.) and converting
them into a finished form (grocery store), time utility by maintaining hours convenient to local
shoppers, place utility by locating stores in high-traffic locations with easy access and ample
parking, and ownership utility by transferring goods to the shopper at the time of purchase.

2. Students may use the suggestions given (Pizza Hut, Cuts Fitness, Curves, Sold It, Burton
Snowboards, or American Eagle Outfitters) or they may find a different U.S.-based company whose
products could do well in overseas markets. Their plans will probably vary in length and detail, but should
contain some basic elements and address some broad concerns. The plan should demonstrate that the
business can create at least several of the utilities in a foreign market, would be accepted by the culture,
would fill a need or want on the part of its citizens, and would meet trade restrictions.

3. Students should be able to form a brief summary of the firm’s current status and create some
strategies for avoiding marketing myopia and expanding the scope of business over the next ten years.
Stress that to avoid marketing myopia, firms need to broadly define organizational goals oriented toward
consumer needs in the present and future, rather than just focusing on their current products. Students
should have some creative suggestions for these firms:

a. DHL delivery service—scope: air express transportation of goods between countries, door-to-
door delivery to virtually any address

b. Carnival Cruise Line—scope: cruise getaways on “Fun Ships” that reach more than 60
locations, including onboard experiences and shore excursions
14 Part 1 Designing Customer-Oriented Marketing Strategies
c. Olympus—scope: digital cameras and printers, online digital photo service, film and traditional
cameras, music players and audio equipment, medical and diagnostic tools, surgical optics,
educational services

d. E*Trade—scope: investment and trading services, tools and research, banking, mortgages and
home equity, retirement programs, educational services

e. Apple Computer—scope: Mac computers and laptops, iPod and iTunes music and video
players, online publishing services

4. Encourage students to think creatively and imagine all types of relationships with these organizations.
Remind them that not all partners seem an obvious match at first, but some of the most interesting and
successful alliances have been between seemingly polar entities. Below are a few possible partners for
strategic alliance ideas to match each of the not-for-profit organizations provided:

a. U.S. Postal Service—trucking firms or airlines to assist with long-distance shipments, graphics
companies to sponsor stamp designs, office supply stores to promote sales of envelopes and
shipping materials, greeting card companies

b. Make-a-Wish Foundation—entertainment parks and recreation facilities, sports teams and

sports stadiums, sports franchises such as the NFL and networks such as ESPN, or just about
any firm that would like to align itself with this well-known cause with donations of time, money, or
personnel, or fund-raising efforts

c. Habitat for Humanity—suppliers of raw materials and building goods, construction firms,
hardware and home improvement chains, home goods and furnishings retailers, appliance
manufacturers

d. American Cancer Society—pharmaceutical firms, medical and surgical supply manufacturers,

and again, just about any firm that would like to align itself with this well-known cause with
donations of time, money, or personnel, or fund-raising efforts

e. American Kennel Club—pet food manufacturers, pet supply chains, veterinarian hospitals and
practices

5. Students should be able to create several types of marketing plans for each business given. Some
suggestions on how person, place, cause, event, or organization marketing might promote these
products:

a. MasterCard—person marketing featuring a musician or actor, place marketing featuring many

global locations where the card is used, cause marketing featuring a donation to a charitable
group for every transaction

b. L’Oréal Paris—place marketing featuring Paris street scenes, person marketing featuring a
French actress or celebrity, event marketing featuring a festival or concert in France

c. Trek bicycles—person marketing featuring a sports figure or well-known cyclist, place

marketing featuring an area of rugged terrain appropriate for Trek mountain bikes or a stretch of
pathway suitable for its road bikes, cause marketing in partnership with an environmentally
focused not-for-profit such as the Sierra Club or Audubon Society

d. T-Mobile—place marketing featuring various places where a strong signal is now available,
person marketing featuring an offbeat performer or entertainer, organization marketing featuring a
partnership with a business that thrives on cell phone service
Chapter 1 Marketing: The Art and Science of Satisfying Customers 15

e. Subway—person marketing featuring regular customers across the U.S., event marketing in a
sponsorship of a youth sporting event such as Little League World Series, place marketing
showing various locations (rural, urban, suburban) where a sandwich is unwrapped and eaten

Critical-Thinking Exercises

1. How does an organization create a customer?

Organizations create customers by applying the marketing concept and adhering to a customer
orientation. They anticipate needs and provide innovative products and services to satisfy those needs.
This means that organizations need to research the marketplace and demonstrate a companywide
commitment to satisfying customer needs. The demonstration of high ethical standards can also attract
new customers.

2. How can marketers use interactive marketing to convert needs to wants and ultimately build long-term
relationships with customers?

Back and forth communication is the key to building a relationship with customers. Keep customers
informed and seek feedback from them. Interactive marketing allows customers immediate access to
information and also allows a company to create customized communications. Technology (Internet –
broadband and wireless) is making this easier than ever.

3. Why is utility such an important feature of marketing?

Effective marketing works to turn needs into wants. Form, time, place and possession utility are ways
that a good or service can satisfy the wants of consumers. Marketers need to consider these various
forms utility in order to identify those wants that they can most effectively serve.

4. What benefits—monetary and nonmonetary—do social responsibility programs bring to a business?

Improved customer relationships, enhanced employee loyalty, and a positive image in the marketplace
are all nonmonetary benefits that lay the groundwork for monetary reward.

5. Why is determining the lifetime value of a customer an important analysis for a company to make?

It is easier and less costly to satisfy and keep existing customers than it is to acquire new ones.
Customer lifetime value helps to illustrate this point and helps companies resist the temptation to revert
to transaction-based marketing practices.

6. Why is it important for a firm to establish high ethical standards for its business practices? What role
do you think marketers play in implementing these high standards?

Ethics are the moral standards of behavior expected by a society. Customers are part of society and will
have such expectations of the companies they do business with. Breeches in ethical behavior cost
money in the long run. Marketers are focused on customers and customer relationships and so it is their
responsibility safeguard those customers.
16 Part 1 Designing Customer-Oriented Marketing Strategies
Ethics Exercises

While being interviewed for a job as a marketer for a large company, you can see papers on the
interviewer’s desk that contain ads by a competitor. You have an interview with the competitor the
following week.

1. Would you take a quick look at the ads—and any accompanying marketing notes—while the
interviewer is out of the office? Why or why not?

2. In your next interview, would you tell the competitor that you saw the ads? Why or why not?

3. When the interviewer returns, would you mention the ads and offer your own commentary on them?
Why or why not?

Student responses to the ethical situation presented may vary and with most of the ethics exercises in
Contemporary Marketing there aren’t necessarily right or wrong answers. Some students will argue that
the interviewer’s papers are private work product and it is unethical for you to look at the papers, and
certainly unethical of you to share the material with a competitor. Others may disagree. Many students
may question the ethical and professional judgment of the interviewer who brought such potentially
sensitive material to a meeting with a job candidate.

Internet Exercises

1. Exploring the AMA’s Web site

a. According to a recent survey of hiring managers, what is the best way for a job seeker to follow
up after he or she submits a résumé?

b. What is the primary means of communication used by managers today?

c. What are three dos and don’ts when attending a business luncheon?

This is a great Web site with a wealth of information for those considering a marketing career. Be
sure to review the Web site prior to assigning this exercise. The content is very fluid and the very
specific questions asked here may not be readily addressed.

2. Job outlook for marketing professionals

a. What are the three significant points about the outlook for those considering a career in
marketing?

Student findings may vary some. Expect stiff competition. A degree is important, and so are
creativity, communication skills, and computer skills. High earnings are often accompanied by
extensive travel and long hours.

b. Of the total employed as managers in the various marketing-related occupations, how many
are employed as sales managers? Which industry (or industries) employs the largest number of
sales managers?

About half of the marketing-related management positions are held by sales managers. Most of
those sales managers work in wholesale and retail trade, and finance and insurance industries.

c. What is the outlook for growth in the various marketing related occupations over the next few
years?
Chapter 1 Marketing: The Art and Science of Satisfying Customers 17
These careers are expected to grow by 18 to 26 percent through 2014.

Case 1.1 “Golfers Are Joining the Hybrid Club”— Questions for Critical Thinking

1. Describe the role of relationship marketing in the making of the hybrid clubs successful in the
marketplace.

Golfers are prone to developing a loyalty to their favorite clubs. When golf club manufacturers help a
golfer perform his/her best, they are on their way to creating a lifetime customer. At the same time, golf
club companies are working closely with promotion partners, such as the LPGA or Golf for Women
magazine, to strengthen these relationships and try to create new ones.

2. What type of strategic alliances could golf equipment manufactures use to promote their hybrids?

Possible strategic alliance partners include retailers (sporting goods stores, golf specialty stores), golf
magazines, golf courses and resorts, PGA and LPGA, and non-profit organizations (like the Children’s
AIDS Foundation or the National Minority Golf Foundation).

COLLABORATIVE LEARNING EXERCISES

Definition of Marketing

Purpose:
To introduce marketing in a way that your students will understand on a more personal level

Background:
The formal definition of marketing is rather abstract, which makes it somewhat difficult for many
students to grasp. This quick, discussion-based exercise helps students understand the impact of
marketing on a more concrete yet personal level, which should lead to a better understanding of
the formal definition.

Relationship to Text:
What Is Marketing?

Estimated Class Time:

Less than 10 minutes

Preparation/Materials:
None needed

Exercise:
Ask your class how many of them ate anything during the last meal time (breakfast, lunch, or
dinner), depending on the time of your class. Then, call on individual students to share what they
ate. Be sure to ask specific questions regarding the marketing mix. For example, why did you
choose that cereal? Who bought the bacon and eggs? From what store? Why did you go to
Dunkin’ Donuts? Where did you first hear of that pancake house? With your guidance, they will
quickly see the impact of product, price, place, and promotion on their day-to-day lives, which will
help them internalize the broader meaning of marketing.

Questions for Reflection:

 Beyond the elements of the marketing mix, what factors influence consumer decision-making?
18 Part 1 Designing Customer-Oriented Marketing Strategies
 Do you think the marketing field is ethical? Socially responsible? Why or why not?
 Can not-for-profit organizations benefit from marketing? How?

Not-For-Profit Marketing

Purpose:
To highlight a key challenge of not-for-profit marketing

Background:
While nearly 10 percent of the U.S. workforce either works or volunteers at not-for-profit
organizations, many students do not recognize that marketing plays a critically important role at
these institutions. This quick, discussion-based exercise is designed to highlight not just the
importance of marketing, but also a key difference in marketing within not-for-profits: the frequent
need to focus on multiple “publics.”

Relationship to Text:
Characteristics of Not-for-Profit Marketing

Estimated Class Time:

About 10 minutes

Preparation/Materials:
Marker and white board

Exercise:
NOTE: This exercise is only relevant for non-profit public or private colleges and universities
(which compose the vast majority of the higher education market).

Ask your students to brainstorm the various “publics” that your school targets. Most classes
quickly identify students and faculty, but it often takes them a moment to recognize how broad the
list can actually be. (The less obvious possibilities include employers, taxpayers, book publishers,
the local community, etc.) Write their responses on the board, and then ask them to consider the
list. How does their school prioritize those publics? Why? How do they see the results of these
decisions? Do they agree or disagree with the school’s approach? The student comments are
typically interesting and thoughtful. In fact, you may want to ask someone from your school’s
marketing group to join the discussion, add real-world insights, and benefit from the students’
perspectives.

Questions for Reflection:

 Why do non-for-profit organizations often need to serve multiple publics?
 Does this characteristic make them more or less effective? Why?

Person Marketing

Purpose:
To demonstrate the prevalence and power of person marketing in pop culture

Background:
From athletes to entertainers to politicians, person marketing surrounds us all on a continual
basis. This exercise is designed to help students understand the various tools and techniques of
person marketing and to examine how it can affect the image of a person in the public eye.
Chapter 1 Marketing: The Art and Science of Satisfying Customers 19
Relationship to Text:
Person Marketing

Estimated Class Time:

About 15 minutes

Preparation/Materials:
None needed

Exercise:
Brainstorm with your class a list of high-profile people who need an image makeover (essentially
celebrities who are in trouble). Encourage them to consider athletes, actors, musicians,
entertainers, and politicians who have legal problems, substance abuse issues, or just a tendency
to do or say the wrong thing. Briefly explain why each person needs help. Possibilities include
Bobby Brown, Britney Spears, Kobe Bryant, Martha Stewart, Janet Jackson, Courtney Love, etc.
When you have a list of 10 to15 people, discuss with your class the various tools and techniques
of people marketing. Possibilities could include everything from straightforward methods such as
direct advertising or supporting a high profile charity, to more subtle methods such as creating a
distraction (e.g., getting married for the ninth time). Then divide your students into small groups
and charge each group with rehabilitating the image of the person of their choice. (This exercise
works well even if multiple groups choose the same person.) Five to ten minutes should be
enough time. Reconvene as a class, and ask each group to present its plan, beginning with the
objective and following with the strategy. The plans are almost always both instructive and
amusing.

Questions for Reflection:

 What are the unique challenges to person marketing?
 Who has done an especially strong job with person marketing? Why?

Place Marketing

Purpose:
To stimulate student thinking about the potential impact of place marketing

Background:
Over the past ten years, place marketing has blossomed, as a growing number of cities and
states have actively marketed themselves to both businesses and tourists. Among the high
profile examples is Las Vegas, which recently introduced a $25 million marketing campaign
promoting their racy new slogan: “What Happens Here, Stays Here.” This exercise is designed
to help students explore the multiple possibilities of place marketing.

Relationship to Text:
Place Marketing

Estimated Class Time:

About 15 to 20 minutes

Preparation/Materials:
None needed

Exercise:
Divide your class into small groups and challenge them to develop a plan to lure businesses and
tourists to their city. Questions to consider (and you might want to write these on the board):
20 Part 1 Designing Customer-Oriented Marketing Strategies

 What would their slogan be?

 What qualities and attractions would they promote, and why?
 What challenges would they need to overcome?
 What companies or organizations might they choose as partners and why?

Encourage your students to push the envelope in creative thinking and innovative ideas. Then
reconvene as a class for brief presentations of the slogans and the plans. To bolster the
competitive spirit, you may want to ask the class to vote on the best package.

Questions for Reflection:

 Is place marketing a good way to spend taxpayer dollars? Why or why not?
 What are some private destinations (e.g. Disney World) that have done especially well at
place marketing? What tools have they used?

Creativity

Purpose:
To emphasize the importance of creativity in marketing

Background:
In today’s hyper-competitive marketplace, businesses must differentiate their products and
services from the wide range of alternatives. While dynamic innovation is rare (and life-changing),
many successful products depend on providing a new twist on an existing item. Examples include
Jet Blue’s cable-TV-for-every-seat, Apple’s translucent, multi-colored computer monitors, and
Colgate’s pump toothpaste dispenser. This activity is designed to exercise the creativity that is
crucial for business innovation.

Relationship to Text:
Competitive Differentiation
Critical Thinking

Estimated Class Time:

About 10 minutes

Preparation/Materials:
None needed

Exercise:
Rebus puzzles present common words and phrases in novel orientation to each other. The goal
is to determine the meaning. Write each puzzle on the board, and challenge your students to
determine the meaning. NOTE: Often one student “gets it” instantly—if so, you may want to ask
that person to hold off for a moment to give others a chance. The puzzles (and the answers) are
below. To go one step further, ask students to create their own rebus puzzles.

ARREST
YOU’RE
(You’re under arrest)

abcdefghjmo
pqstuvwxyz
(Missing links)
Chapter 1 Marketing: The Art and Science of Satisfying Customers 21
HISTORY
HISTORY
(History repeats itself)

TimeTime
(Time after time or double time)

Chimadena
(Made in China)

YYYGuy
(Wise guy)

RIGHT RIGHT
(Equal rights)

scope
(Microscope)

MEREPEAT
(Repeat after me)

XQQQMe
(Excuse me!)

BAN ANA
(Banana split)

BPULSEIANSEUSRSE
(Mixing business with pleasure)

Questions for Reflection:

 How can companies nurture creativity? How can they stifle it?
 How important is creativity to a successful career?
 What are some ways that you could exercise your own creativity?