Marketing Management

Sixteenth Edition

Chapter 1
Defining Marketing for
the New Realities

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Learning Objectives
1.1 Define the scope of marketing.
1.2 Describe the new marketing realities.
1.3 Explain the role of marketing in the organization.
1.4 Illustrate how to organize and manage a modern
marketing department.
1.5 Explain how to build a customer-centric organization.

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The Scope of Marketing
• Marketing is about identifying and meeting human and
social needs
• AMA’s formal definition: Marketing is the activity, set of
institutions, and processes for creating,
communicating, delivering, and exchanging offerings
that have value for customers, clients, partners, and
society at large

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Marketing Management
• The art and science of choosing target markets and
getting, keeping, and growing customers through
creating, delivering, and communicating superior
customer value

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What is Marketed? (1 of 2)
• Goods
• Services
• Events
• Experiences
• Persons

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What is Marketed? (2 of 2)
• Places
• Properties
• Organizations
• Information
• Ideas

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Who Markets?
• A marketer is someone who seeks a response—
attention, a purchase, a vote, a donation—from another
party

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Five Basic Markets
• Resource markets
• Manufacturer markets
• Consumer markets
• Intermediary goods markets
• Government markets

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Figure 1.1 Structure of Goods, Services, and
Money Flows in a Modern Exchange Economy

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The Market Exchange
• Marketers view industry as a group of sellers and use the
term market to describe customer groups

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Figure 1.2 A Simple Marketing System

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The New Marketing Realities
• The market forces that shape the relationships among
the different market entities
• The market outcomes that stem from the interplay of
these forces
• The emergence of holistic marketing as an essential
approach to succeeding in the rapidly evolving market

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Figure 1.3 The New Marketing Realities

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Major Market Forces
• Technology
• Globalization
• Physical environment
• Social responsibility

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A Dramatically Changed Marketplace (1 of 5)
• New consumer capabilities
– Can use online resources as a powerful information
and purchasing aid
– Can search, communicate, and purchase on the
move
– Can tap into social media to share opinions and
express loyalty

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A Dramatically Changed Marketplace (2 of 5)
• New consumer capabilities
– Can actively interact with companies
– Can reject marketing they find inappropriate or
annoying
– Can extract more value from what they already own

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A Dramatically Changed Marketplace (3 of 5)
• New company capabilities
– Can use the internet as a powerful information and
sales channel, including for individually differentiated
goods
– Can collect fuller and richer information about
markets, customers, prospects, and competitors
– Can reach customers quickly and efficiently via social
media and mobile marketing, sending targeted ads,
coupons, and information

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A Dramatically Changed Marketplace (4 of 5)
• New company capabilities
– Can improve purchasing, recruiting, training, and
internal and external communications
– Can improve cost efficiency

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A Dramatically Changed Marketplace (5 of 5)
• New competitive environment
– Deregulation
– Privatization
– Retail transformation
– Disintermediation
– Private labels
– Mega-brands

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What is Holistic Marketing?
• An integrated approach to managing strategy and tactics
– Relationship marketing
– Integrated marketing
– Internal marketing
– Performance marketing

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Figure 1.4 The Concept of Holistic
Marketing

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Relationship Marketing (1 of 3)
• Relationship marketing aims to build mutually satisfying
long-term relationships with key constituents in order to
earn and retain their business

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Relationship Marketing (2 of 3)
• Customers
• Employees
• Marketing partners
• Financial
community

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Relationship Marketing (3 of 3)
• The ultimate outcome of relationship marketing is a
unique company asset called a marketing network,
which consists of the company and its supporting
stakeholders with whom it has built mutually profitable
business relationships

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Integrated Marketing
• Devise marketing activities and programs that create,
communicate, and deliver value such that “the whole is
greater than the sum of its parts.”

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Internal Marketing
• The task of hiring, training, and motivating able
employees who want to serve customers well

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Performance Marketing
• Financial
accountability
• Environmental
impact
• Social impact

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Defining the Role of Marketing in the
Organization
• Production concept
• Product concept
• Selling concept
• Marketing concept
• Market-value concept

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Table 1.1 Product-Oriented v s Market- ersu

Value-Oriented Definitions of a Business

Company Product Definition Market-Value Definition

Union Pacific Railroad We run a railroad. We move people and goods.

Xerox We make copying equipment. We help improve office

productivity.
Hess Corporation We sell gasoline. We supply energy.

Paramount Pictures We make movies. We market entertainment.

Encyclopedia Britannica We sell encyclopedias online. We distribute information.

Carrier We make air conditioners and We provide climate control in

furnaces. the home.

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Organizing the Marketing Department
• Functional organization
• Geographic organization
• Product or brand organization
• Market organization
• Matrix organization

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Figure 1.5 Functional Organization

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Figure 1.6 The Product Manager’s
Interactions

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Managing the Marketing Department
• The role of the CEO and the CMO
• Relationships with other departments

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The Role of the CEO
• Convince senior management of the importance of being
customer focused
• Hire strong marketing talent
• Facilitate the creation of strong in-house marketing
training programs
• Appoint a chief marketing officer

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The Role of the CMO
• Act as the visionary for the future of the company
• Build adaptive marketing capabilities
• Win the war for marketing talent
• Tighten the alignment with sales
• Take accountability for returns on marketing spending
• Infuse a customer perspective in business decisions
affecting any customer touch point

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Relationships with Other Departments
• Marketers must work closely with:
– customer insights and data analytics teams
– different communication agencies
– channel partners

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Building a Customer-Oriented
Organization
• Create long-term customer value
– Requires managers at every level to be personally
engaged in understanding, meeting, and serving
customers
• Customers expect companies to listen and respond to
them

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Figure 1.7 Traditional Organization versus Modern
Customer-Oriented Company Organization

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Becoming a Market-Driven Company
• Develop a company-wide passion for customers
• Organize around customer segments instead of products
• Understand customers through qualitative and
quantitative research

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Table 1.2 Characteristics of Customer-
Centric Organizations

Low Customer-Centricity High Customer-Centricity

Product driven Market driven
Mass market focused Customer focused
Process oriented Outcome oriented
Reacting to competitors Making competitors irrelevant
Price driven Value driven
Hierarchical organization Teamwork

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Discussion Questions (1 of 2)
• For many Starbucks’ customers, buying a favorite drink
now involves a few clicks on the Starbucks app and a
pick-up at the counter.
– How is technology changing the way Starbucks
interacts with its customers?
– What benefits does this offer?
– What challenges does it present?

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Discussion Questions (2 of 2)
• Amazon’s success at anticipating customer needs and
fulfilling them is evidenced by its record-breaking profits.
– How does Amazon create value for its customers?
– What are the tradeoffs between the convenience
Amazon offers and the sustainability issues its
business model creates?

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