PPT_Student_Slides_Chapter_01

Chapter 1
An Overview of Strategic
Marketing
Pride/Ferrell, Marketing 2020, 20th Edition. © 2020 Cengage. All Rights Reserved. May not be scanned,
copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
LO 1-1 Define marketing.
LO 1-2 Explain the different variables of the marketing mix.
LO 1-3 Describe how marketing creates value.
LO 1-4 Briefly explore the marketing environment.
LO 1-5 Summarize the marketing concept.
LO 1-6 Identify the importance of building customer relationships.
LO 1-7 Explain why marketing is important to our global economy.
Pride/Ferrell, Marketing 2020, 20th Edition. © 2020 Cengage. All Rights Reserved. May not be scanned, copied or
duplicated, or posted to a publicly accessible website, in whole or in part.
Defining Marketing
• Marketing – The process of creating, distributing, promoting, and pricing goods, services,
and ideas to facilitate satisfying exchange relationships with customers and to develop and
maintain favorable relationships with stakeholders in a dynamic environment
• The essence of marketing is to develop satisfying exchanges from which both customers
and marketers benefit
• Customers – The purchasers of organizations’ products
• Are the focal point of all marketing activities
• Target market – A specific group of customers on whom an organization focuses its
marketing efforts
Figure 1.1 – Components of Strategic Marketing
Marketing Deals with Products, Distribution,
Promotion, and Price (slide 1 of 2)
• Marketing is more than simply advertising or selling a product
• It involves:
• Developing and managing a product that will satisfy customer needs
• Promoting to help customers learn about the product and determine if the product will
satisfy their needs
• Making the product available in the right place
• Pricing the product at an acceptable level for buyers
• Communicating information to help customers determine if the product will satisfy
their needs
Marketing Deals with Products, Distribution,
Promotion, and Price (slide 2 of 2)
• Marketing mix – Four marketing activities—product, pricing, distribution, and promotion—that a firm
can control to meet the needs of customers within its target market
• A firm can control these activities to meet the needs of customers within its target market
• There is a limit to how much these variables can be controlled
• Marketers must:
• Strive to develop a marketing mix that matches the needs of customers in the target market
• Constantly monitor the competition and adapt their products, distribution decisions, promotion, and
pricing to foster long-term success
• Collect in-depth, up-to-date information about customer needs, such as:
• The age, income, ethnicity, gender, and educational level of people in the target market
• Their preference for product features
• Their attitudes toward competitors’ products
• The frequency with which they use the product
The Product Variable
• Product – A good, a service, or an idea

• Good – A physical entity that you can touch
• Service – The application of human and mechanical efforts to people or objects to
provide intangible benefits to customers
• Idea – A concept, a philosophy, an image, or an issue
• The product variable involves creating or modifying brand names and packaging
• May also include decisions regarding warranty and repair services
• Product variable decisions and activities are important because they directly relate to
customers’ needs and wants
The Distribution Variable
• To satisfy customers, products must be available at the right time and in appropriate locations
• A marketing manager makes products available in the quantities desired to as many target-
market customers as possible while minimizing these three costs:
• Inventory
• Transportation
• Storage
• A marketing manager also may:
• Select and motivate intermediaries (wholesalers and retailers)
• Establish and maintain inventory control procedures
• Develop and manage transportation and storage systems
• The advent of the internet and electronic commerce has dramatically influenced the distribution
variable
• Companies now can make their products available throughout the world without maintaining
facilities in each country
The Promotion Variable
• The promotion variable relates to activities used to inform and persuade to create a desired
response
• Promotion can:
• Increase public awareness of the organization and of new or existing products
• Inform customers about product features
• Urge people to take a particular stance on a political or social issue
• Help to sustain interest in established products
The Price Variable
• The price variable relates to decisions and actions associated with pricing objectives and
policies and actual product prices
• Price is a critical component of the marketing mix because customers are concerned
about the value obtained in an exchange
• Price is often used as a competitive tool
• Intense price competition sometimes leads to price wars
Marketing Creates Value
• Value – A customer’s subjective assessment of benefits relative to costs in determining the

worth of a product
• Customer benefits include anything a buyer receives in an exchange
• Customer costs include anything a buyer must give up to obtain the benefits the product
provides, including cost, time, effort, and risk
• Value is a subjective assessment of benefits relative to costs
• A product that demonstrates value usually has a feature or an enhancement that provides
benefits
• Lowest price
• Convenience
• Availability
Marketing Builds Relationships with
Customers and Other Stakeholders (slide 1 of 2)
• Exchanges – The provision or transfer of goods, services, or ideas in return for something of
value
• For an exchange to take place, four conditions must exist:
• Two or more individuals, groups, or organizations must participate, and each must possess
something of value that the other party desires
• The exchange should provide a benefit or satisfaction to both parties involved in the
transaction
• Each party must have confidence in the promise of the “something of value” held by the other
• To build trust, the parties to the exchange must meet expectations
• Marketing activities should attempt to create and maintain satisfying exchange relationships
• To maintain an exchange relationship:
• Buyers must be satisfied with the good, service, or idea obtained
• Sellers must be satisfied with the financial reward or something else of value received
Marketing Builds Relationships with
Customers and Other Stakeholders (slide 2 of 2)
• Stakeholders – Constituents who have a “stake,” or claim, in some aspect of a company’s
products, operations, markets, industry, and outcomes
• Stakeholders include:
• Customers
• Employees
• Investors and shareholders
• Suppliers
• Governments
• Communities
• Competitors
Figure 1.2 – Exchange between Buyer and Seller
Marketing Occurs in a
Dynamic Environment (slide 1 of 2)
• Marketing environment – The competitive, economic, political, legal and regulatory,
technological, and sociocultural forces that surround the customer and affect the marketing
mix
• The effects of these forces on buyers and sellers can be dramatic and difficult to predict
• Their impact on value can be extensive as market changes can easily influence how
stakeholders perceive certain products
• These forces affect a marketer’s ability to facilitate value-driven exchanges in three general
ways:
• Influence customers by affecting their lifestyles, standards of living, and preferences and
needs for products
• Can determine whether and how a marketing manager can perform certain marketing
activities
• May shape a marketing manager’s decisions and actions by influencing buyers’ reactions
to the firm’s marketing mix
Marketing Occurs in a
Dynamic Environment (slide 2 of 2)
• Because these forces are closely interrelated, changes in one way cause changes in others
• Changes in the marketing environment produce uncertainty for marketers and at times hurt
marketing efforts, but they also create opportunities
• Compared to marketing-mix variables, an organization has far less control over the forces of
the environment
Understanding the
Marketing Concept
• Marketing concept – A managerial philosophy that an organization should try to satisfy
customers’ needs through a coordinated set of activities that also allows the organization to
achieve its goals
• The marketing concept is not a second definition of marketing but rather a management
philosophy guiding an organization’s overall activities
• A firm that adopts the marketing concept must satisfy not only its customers’ objectives
but also its own objectives
• The evolution of marketing has gone through three periods, including:
• Production orientation
• Sales orientation
• Market orientation
The Production Orientation
• During the second half of the 19th century, the Industrial Revolution improved speed and
efficiency
• As a result of new technology and new ways of using labor, products poured into the
marketplace, where demand for manufactured goods was strong
• Firms were developing the ability to produce more products, and competition was becoming
more intense
The Sales Orientation
• During the first half of the 20th century, competition increased and focus shifted to selling
products to many buyers
• Businesses viewed sales as the major means of increasing profits
• Businesspeople believed that the most important marketing activities were personal selling,
advertising, and distribution
• Some people incorrectly equate marketing with a sales orientation
• Some firms still use a sales orientation
The Market Orientation
• Emerged in the mid-20th century

• Market orientation – An organizationwide commitment to researching and responding to
customer needs
• Market orientation is linked to new product innovation by developing a strategic focus to
explore and develop new products to serve target markets
Implementing the
Marketing Concept
• Management must first establish an information system to discover customers’ real needs
and then use the information to create satisfying products
• An information system is usually expensive; management must commit money and time
for its development and maintenance
• Without an adequate information system, however, an organization cannot be market
oriented
• To satisfy customers’ objectives as well as its own, a company also must coordinate all of its
activities
• Implementing the marketing concept demands the support not only of top management but
also of managers and staff at all levels of the organization
Customer Relationship Management
• Customer relationship management – Using information about customers to create

marketing strategies that develop and sustain desirable customer relationships
• Achieving the full profit potential of each customer relationship should be the fundamental
goal of every marketing strategy
• Profits can be obtained through relationships in the following ways:
• By acquiring new customers
• By enhancing the profitability of existing customers
• By extending the duration of customer relationships
• Implementing the marketing concept means optimizing the exchange relationship
Relationship Marketing
• Relationship marketing – Establishing long-term, mutually satisfying buyer-seller

relationships
• Focuses on value enhancement through the creation of more satisfying exchanges
• Continually deepens the buyer’s trust in the company
• Increases the firm’s understanding of the customer’s needs
• To build long-term customer relationships, marketers are increasingly turning to marketing
research and information technology
• Through the use of e-marketing, companies can personalize customer relationships
on a nearly one-on-one basis
Customer Lifetime Value
• Customer lifetime value (CLV) – A key measurement that forecasts a customer’s

lifetime economic contribution based on continued relationship marketing efforts
• Requires identifying patterns of buying behavior and using that information to focus on the
most promising and profitable customers
• Represents an intangible asset to a marketer that can be augmented by addressing the
customer’s varying needs and preferences at different stages in his or her relationship with
the firm
• May include an individual’s strong word-of-mouth communication about the company’s
products
• The emphasis changes from share of market to share of customer
• The most basic application of this idea is 80 percent of business profits come from 20 percent
of customers
• Can be calculated by taking the sum of the customer’s present value contributions to profit
margins over a specific time frame
• Helps marketers determine how best to allocate resources to marketing strategies to sustain
a customer over a lifetime
The Importance of Marketing
in Our Global Economy (slide 1 of 3)
• Marketing costs consume a sizable portion of buyers’ dollars
• About one-half of a buyer’s dollars goes toward marketing costs
• Marketing is used in nonprofit organizations
• Government agencies at the federal, state, and local levels engage in marketing activities to
fulfill their mission and goals
• In the private sector, nonprofit organizations employ marketing activities to create, distribute,
promote, and price programs that benefit particular segments of society
• Marketing is important to business and the economy
• Marketing activities help to produce the profits that are essential to the survival of individual
businesses
• Marketing helps to create a successful economy and contributes to the well-being of society
• Marketing fuels our global economy
• Advances in technology, along with falling political barriers and the universal desire for a
higher standard of living, have made marketing across national borders commonplace while
stimulating economic growth
• Marketing knowledge enhances customer awareness
• Studying marketing allows us to understand the importance of marketing to customers,
organizations, and our economy
• Marketing connects people through technology
• Technology helps marketers to understand and satisfy more customers than ever before
• The Internet allows companies to disseminate information about their products and
interact with target markets
• Socially responsible marketing: Promoting the welfare of customers and stakeholders
• Green marketing – A strategic process involving stakeholder assessment to create
meaningful long-term relationships with customers while maintaining, supporting, and
enhancing the natural environment
• Market orientation combined with social responsibility improves overall business
performance
• Marketing offers many exciting career prospects
• From 25 to 33 percent of all civilian workers in the United States perform marketing activities
• The marketing field offers a variety of interesting and challenging career opportunities throughout
the world, such as:
• Personal selling
• Advertising
• Packaging
• Transportation
• Storage
• Marketing research
• Product development
• Social media management
• Wholesaling
• Retailing

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Chapter 1

• Product – A good, a service, or an idea

• Value – A customer’s subjective assessment of benefits relative to costs in determining the

• Emerged in the mid-20th century

• Customer relationship management – Using information about customers to create

• Relationship marketing – Establishing long-term, mutually satisfying buyer-seller

• Customer lifetime value (CLV) – A key measurement that forecasts a customer’s

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