Marketing

Principles
Dr. Mary Wolfinbarger
Class Info

 Syllabus: Find it at my website

[Link]/~mwolfin
 About Me

 Education:
Ph.D. 1990, Marketing, University of California, Irvine
M.B.P.A. 1985, Business and Public Administration, University
of California, Irvine
B.S. 1983, English, Vanderbilt University
 About Me
 Professional Experience
Internal Marketing : Research for DuPont,
Polaroid, Taco Bell, PG&E, Intel, UCIMC
 Studying online consumer behavior (Center for
Research on Information Technology in
Organizations)
 Web strategy consulting: Primal Elements
([Link])
 Present research: Internal Marketing; Senior
Internet Usage; email usage for HH decision
making for separated spouses (Navy project);
Simpsons’ fan sites and discussion groups
 Lecture: Why Study
Marketing?
 How many of you bought something today?
 How many have seen or heard an ad today?

 How many of you consumed something today?

 How many of you engaged in word of mouth

about a product/service today?
Reason #1

Marketing is a fundamental human

activity
 it’s ubiquitous in daily life

 it happens around the world

 we can learn to make better

consumer decisions
 Reason #2
Marketing impacts the economy
 Marketing (broadly conceptualized) is

about 50% of retail sales expenses

 Healthy marketing systems support economic
advance
 Peter Drucker
(writing about lesser developed countries)

“…in an economy that is striving to break the age-

old bondage of man to misery, want and
destitution, marketing is…the catalyst for
transmutation of latent resources, of desires into
accomplishments, and the development of
responsible economic leaders and informed
economic citizens.”
 Reason #3

Marketing management is essential to

organizational success
 Build a better mousetrap?

…and the world will beat a path to your doorstep.

Or does it????

 80-90% of new products fail

 Same rate for new businesses
 Reason #4

 Marketing can contribute to societal well-

being
 Reason #5
 It’s about people (consumers) and it’s fun.

 (Well, it’s more fun than accounting and

calculus anyway…)
 Student Criticisms of
Marketing
 Marketing communications are not always honest
 “They can sometimes play on people’s emotions and
fears and can cause them to buy things they really
don’t need.”
 It can “psychologically manipulate” consumers (they sell
the “sizzle,” not the steak).
 Youth may be targeted by companies selling adult
products (e.g. alcohol)
 Marketing sells products that can be harmful
 Some ads are crude
 “[Sex] is not necessary to sell something, and if it is,
the product is not worth much!”
 Student Criticisms of
Marketing
 Telemarketers! Spam! Pop-up ads! Adware!
 “Sometimes I feel like I am being inundated with
information involving every medium of communication,
particularly advertising.”
 “Marketing is ubiquitous and unrelenting to the point
where it is almost inescapable…it exploits and creates
stupid holidays, making us feel guilty if we don’t buy
presents for our family and friends.”
 Sometimes minorities are stereotyped
 Advertising can be clichéd or corny
 “99% of commercials are so boring.”
 Fashion advertising emphasizes an unattainable body
 My criticism of marketing
 Exalts the buying and consuming experience (of
course)
 Encourages us to find meaning in things
 Preaches that buying things makes you happy
 Implicitly demeans self-control, gratitude, and
transcendent (non-material) values (e.g. buy now,
you deserve it….)
 Transforms products into objects of affection and
desire through promotions and branding
 My criticism of marketing

 Sometimes takes advantage of consumer

lack of knowledge (let the buyer beware)
 Especially true for goods and services with
“credence” qualitites
 Examples: car repair, plumbing, medical
services, pharmaceuticals
 One more criticism?:
The “Paradox of Choice”
 Sociologist Barry Schwartz shows that more
choice can make us less happy
 Choice has increased over time
 “Maximizers” may get more than “satisficers”
but may be less happy
• Choice increases the burdens of making “good
decisions” and regret over suboptimal decisions
• Availability of choice raises expectations
 What’s the solution?
 What’s good about
marketing?
 Usually seeks to be successful by focusing on
satisfying consumer desires (needs?)
 Often delivers customers what they want, when
they want it, at a price they are willing to pay
 (More on customer focus later!)
 What’s the alternative?
Conceptualizing
Marketing

What is marketing anyway?

Types of Marketing “Offerings”
Goods

 are tangible
 Types of Marketing “Offerings”
Services
 an experience provided by the application of
human or mechanical skill

 Examples – haircut, dry cleaning,

consulting, movies…
 How services differ
 Can’t inventory
 Intangible

 Quality control difficult

 Often a real time performance

 Consumer participation
A third marketing “offering”

Ideas -- the most intangible of all

 at worst, “spin”

 at best, worthy social causes are

promoted
 Is marketing persuasion? (MOTL)
 Marketing as Selling Ideas

“Social marketing has been with us for a long

time. The Greeks and Romans launched
campaigns to free slaves. During the
Industrial Revolution, campaigns were
mounted to abolish debtor prisons and child
labor and grant voting rights to women. In the
past century social reform campaigns in
 Selling ideas/Social Marketing

America have spoken for abolition,

temperance and prohibition, and women’s
suffrage movements.”
--James Mintz, Marketing News
 Common Social Marketing
Concerns
 Health
 Environment

 Education

 Safety
 The Marketing of Ideas/
Causes
“Charitable causes and social services
campaigns for funds and donations are
everywhere: on TV and radio, in
newspapers and magazines, in point of
purchase material, in public service
announcements between the coming
attractions and the main feature at the local
movie theater…”
 Cause-related marketing
 Supporting causes as part of
marketing program
 Matching: e.g. Coors and clean water
 Pro bono work

 Advertising and media do free work

 Example: Partnership for a Drug-free
America
Goods, Services,
Ideas and...
 You can market yourself!
 Marketing Yourself!
“Starting today you are a brand. You’re every
bit as much a brand as Nike, Coke, Pepsi,
or the Body Shop…start thinking like your
favorite brand manager and ask yourself…
What is it that my product or service does
that makes it different?…Start by identifying
the qualities or characteristics that make
you distinctive from your competitors or your
colleagues…What would your colleagues…
say is your greatest and clearest strength?
Your most noteworthy personal trait?”
-- Tom Peters “The Brand Called You,’ In Fast Company, Sept. 1997
 Profit vs. Not-for Profit
 Have “customers” AND donors
 Customers may not want product

 Donors may want to be involved in

decisions
 No bottom line
Profit vs. Not-for Profit

 Lack of marketing sophistication

 Marketing as Exchange

 The goal of marketing is to facilitate exchanges

 Alternatives to Exchange

 Origination
 Force

 Transfer
 Requirements for exchange

 Two or more parties

 Parties have unsatisfied wants/needs

 Parties have something of value to exchange

 Each party has something other party wants

 Means of Communication & delivery

(marketing!)
Requirements for Market
Exchange
 A “marketplace”
 A medium of exchange

 Specialization of labor

 Marketing management/coordination
Concepts of
Marketing
 The Marketing Concept
 Achieve success by focussing on consumer
needs
 Adapt the business to deliver what consumers
want
 Be profitable

The most important principle of marketing?

 “I would say the most important principle of
marketing is to know your audience.”
(audience=customer)
 Keys to Implementing the
Marketing Concept

 Research

 Departmental Integration

 Commitment to “consumer sovereignty”

 On Research

“More companies are increasing their research

activities to pay closer attention to what
consumers want. To them, the mission of
marketing isn’t just persuasion, but learning
how to satisfy consumer wants. Among other
things, the customer demand for quality and
reliability…has taught companies that it’s
easier to sell products that meet the true need
of consumers.” Wall Street Journal
 The Marketing Mix

4 traditional P’s:
 Product
 Price
 Promotion
 Place (Distribution)

2 more:
 Preparedness
 Personnel
 Definition of Marketing
(until last year)
“Marketing is the process of planning and
executing the conception, pricing, promotion,
and distribution of ideas, goods, and services
to create exchanges that satisfy individual and
organizational goals.”
American Marketing Association Definition of
Marketing, [Link]
 New AMA Definition
(late 2004)
“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.”
 Key new ideas: “value,” “customer relationships,” (the
“new era orientation”), “stakeholders” (note: your text
explains the “value chain”)
 What’s gone? “Create exchanges,” the listing of the 4
P’s, “satisfying individual and organizational goals”
 Creating value rather than satisfaction; benefiting
stakeholders rather than indivs and organs.
 The Marketing Concept?
“Selling is not marketing. Selling concerns itself
with the tricks and techniques of getting
people to exchange their cash for your
product…[selling] does not, as marketing
invariably does, view the entire business
process as consisting of a tightly integrated
effort to discover, create, arouse and satisfy
customer needs.”
– Theodore Levitt, “Marketing Myopia” 1960
Other Marketing Philosophies

 Production Concept
 Product Concept

 Selling Concept

 Societal or Social Marketing Concept

Production
Concept
 Mass production
 Lower prices

 Example: Ford’s Model T

 Production
Concept
 Assumption : consumers will buy it if it’s cheap
 Makes sense when little differentiation is
demanded
 Makes sense for price sensitive segments
 The Production
Concept
 Why did Henry Ford’s production concept finally
fail?
 Product Concept
 Customers want bells and whistles and will pay
 “The Engineering Fallacy”
 May result in unwanted products -- e.g. clear whiskey
 May make sense for some segments -- e.g. hobbyists
 Some segments and markets are novelty-driven
 Product Concept

 May overlook segments wanting simpler

products
 Selling Concept

 Company relies on sales talent

 May result in high pressure sales tactics

 Makes more sense when new product’s

benefits are hard to understood
 Selling Concept

 Can be fall-back position of marketers

without enough product development
 More likely when salespeople feel they
have one opportunity
 Societal (Social) Marketing
Concept

 Deliver consumers desired satisfactions

effectively and efficiently AND serve
societal well-being
Societal (social) Marketing
Concept
Four considerations
 consumer needs and wants
 consumer best interests
 profit
 society’s best interest

(Whew!)
Societal (social) Marketing
Concept
Any problems with this?
 Consumers can want what isn’t good
for them
 Are businesses qualified to determine
what is good for society?
 Doing social good works can make it
more difficult to be profitable
Internal and
External
Environment
 Internal
Environment
 Increasing emphasis on internal departmental
integration AND teamwork
 Marketing conflicts
Selected Conflicts
Selected Conflicts
R&D Marketing
 Basic Research  Applied Research

 Functional  Sales Features

Features
Selected Conflicts

Engineering Marketing
 Few Models  Many Models

 Long Lead Design  Short Lead Time

Time
Selected Conflicts

Finance Marketing
 Strict spending  Intuitive spending
rationales rationales
 Strict budgets  Flexible budgets
Selected Conflicts

Accounting Marketing
 Standard  Special Terms &
Transactions Discounts
Selected Conflicts

Credit Marketing
 Low Credit Risks  Medium Risks

 Tough Credit  Easy Terms

Terms
How to Resolve Conflicts

 Market Orientation
 What is Market Oriented?

 Market information shared across the

company
 Interfunctional decisions

 Result: well-coordinated decisions executed

with commitment
 What is Market Oriented?

“Serial communication, when one function

passes an idea or request to another routinely
without interaction -- like tossing a brick with a
message tied to it over a wall -- can’t build the
commitment needed in a customer-driven
company…”
 What is Market Oriented?

“…joint opportunity analysis, in which functional

and divisional people share ideas and discuss
alternative solutions and approaches,
leverages the different strengths of each
party.”
--Benson Shapiro, Harvard Business Review
 What is Market-Oriented?

“Marketing…is the whole business seen from

the point of view of its final result, that is,
from the customer’s point of view.”
--Peter Drucker
 Empirical Study,
Marketing Science Institute
 Compared R&D, cost-cutting and market
orientation ( “customer focus”)
 Included new biz ventures in Japan and U. S.
 Market oriented co’s were more profitable
 R&D oriented co’s add features customers may not
want
 Cost-cutting strategy often easy to copy
 External
Environment
 Channel: Set of firms that cooperate
to make the product available
 Markets
consumer markets
business markets
government markets
international markets
secondary markets
 The External Environment

 Competitors
 Publics
Financial Publics
Media Publics
Citizen Action Publics
The General Public
 The External Environment
Citizen Action Publics
“Most boycott groups…don’t expect or even hope to gut a company’s
sales with their protests. Nor do companies fear it. Still, even a
small decline can have an effect…a boycott that affects sales by 5%
is considered cause for concern by companies.
“Further, those likely to boycott are often the most valuable
demographic group…two income families, holding college degrees
and hailing from the big-spending thirty-something crowd.” Wall
Street Journal
 The External Environment

 The Macro Environment

Demographics
Cultural Forces
Economic Forces-disposable income, foreign
economies
Technological Forces
The Regulatory/Legal Environment
Government: Federal Trade
Commission
Non-Government: BBB, NARB,
Business and Trade Associations
 Trends in the
Macroenvironment
Demographics
Info from [Link]
 Trends in the
Macroenvironment
 Estimated U. S. Population: About
295,000,000
 One birth every 8 seconds

 One death every 12 seconds

 Demographics

Estimated World Population

Over 6 billion! (6.4 billion)
 4.2 births/second

 1.7 deaths/second
Changing face of U. S.
(2000 Census)
White 77.1%
Black/African American 12.9
American Indian or Alaska Native 1.5
Asian 4.2
Native Hawaiian/other Pacific Islander .3
Some other race* 6.6
*Adds to more than 100% because 2.4% of people reported 2 or more races
Hispanic (of any race**) 12.5%
**(69% of Hispanics are classified as “white”)
 Seniors

 15% of population is currently 65+

 Estimate for 2050: One in four!
Demographics

Median Income (2000)

U. S. $42, 148
California 46,802
Maryland 51,695
West Va 29,052
Colorado 48,506
Texas 39,842
Alabama 33,105
 Demographics

*75% of jobs in services

*Marrieds just over 50% of households
*Nearly 1/4 of households are of single people
 Education (25+)

*H. S. degree or higher 80.4%

*B. S. or higher 24.4
*Grad school 15.5
 Technology
 B2C Commerce: ~$125 billion (including travel)
 Current retail percentage: 3.5% -5% (and growing)
 Eventual consumer %? 10%? 15% 25%?
 About 2/3s of Americans have Internet connections at
home
 About 30% of Americans don’t use the Internet (yet)
 Broadband connections growing (50% of Internet HH)
Marketing Ethics

American Marketing Association

Code of Ethics
 AMA Code of Ethics
 Page 67
 It is signed by everyone who joins the
American Marketing Association
 AMA Code of Ethics
Marketers’ professional conduct must be guided by
 The basic rule of professional ethics; not knowingly to do harm
 The adherence to all applicable laws and regulations
 The accurate representation of their education training and
experience; and
 The active support, practice and promotion of this Code of
Ethics.
 AMA Code of Ethics
Honesty and Fairness. Marketers shall uphold and
advance the integrity, honor, and dignity of the marketing
profession by
 Being honest in serving consumers, clients, employees,

suppliers, distributors and the public

 Not knowingly participating in conflict of interest without

prior notice to all parties involved; and

 Establishing equitable fee schedules...
 AMA Code of Ethics
Rights and Duties of Parties. Participants in the
marketing exchange process should be able to
expect that:
 Products and services offered are safe and fit for
their intended uses;
 Communications about offered products and
services are not deceptive;
 All parties intend to discharge their obligations,
financial and otherwise in good faith…..
 AMA Code of Ethics
In the area of product development management:

Disclosure of all substantial risks associated with

product or service usage….
 AMA Code of Ethics

In the area of promotions:

Avoidance of false and misleading advertising

Rejection of high pressure manipulations, or misleading
sales tactics
Avoidance of sales promotions that use deception or
manipulation
 AMA Code of Ethics
In the area of distribution:

…Not using coercion in the marketing channel

Not using undue influence over the resellers’ choice to
handle a product
 AMA Code of Ethics
In the area of pricing:

Not engaging in price fixing

Not practicing predatory pricing
Disclosing the full price associated with any purchase
 AMA Code of Ethics
In the area of marketing research:

Prohibiting selling or fund raising under the guise of doing

marketing research
Maintaining research integrity by avoiding
misrepresentation and omission of pertinent research
data
Treating outside clients and suppliers fairly
 AMA Code of Ethics
Organizational Relationships
 ….Apply confidentiality and anonymity in professional
relationships with regard to privileged information
 Meet obligations and responsibilities in contracts and
mutual agreements in a timely manner
 Avoid taking the work of others, in whole, or in part, and
represent this work as their own or directly benefit from it
without compensation or consent of the originator or
owner
 AMA Code of Ethics

Organizational Relationships (continued)

 Avoid manipulation to take advantage of situations to

maximize personal welfare in a way that unfairly

deprives or damages the organization or others

Any AMA members found to be in violation of this Code

of Ethics may have his or her Association
membership suspended or revoked.