Chapter 4Chapter 4Marketing Begins Marketing Begins with Customerswith Customers

Study GuideStudy Guide

What are the four What are the four basics of marketing?basics of marketing?

• Understanding the marketing concept• Planning a marketing strategy• Responding to competition• Integrating marketing into the

business

What are the seven What are the seven marketing functions?marketing functions?

• Product/Service Management• Distribution• Selling• Marketing-Information Management• Financing• Pricing• Promotion

Effective marketing is an Effective marketing is an investment because . . .investment because . . .

It is responsible for matching a company’s offerings with market needs

Why is having a Why is having a superior product or superior product or

service not sufficient service not sufficient to assure success in to assure success in

business?business?Businesses must respond to customer needs and desires, or they will take their business elsewhere

What is the marketing What is the marketing concept?concept?

Using the needs of customers as the primary focus during the planning, production, distribution, and promotion of a product or service

If a new business If a new business regards marketing as an regards marketing as an investment rather than investment rather than

as an expense, what is a as an expense, what is a common mistake that it common mistake that it is more likely to avoid?is more likely to avoid?

It is likely to avoid the mistake of cutting marketing expenditures when it faces a cash squeeze, because it realizes that marketing will increase future profits

What is wrong with What is wrong with treating marketing treating marketing

mainly as a problem-mainly as a problem-solving tool?solving tool?

Treating marketing mainly as a problem-solving tool may deprive a business of the many opportunities that marketers can identify and create when marketing is used to uncover new markets and seek out ways to improve customer satisfaction

When a business uses When a business uses the marketing concept, the marketing concept, what is the first step in what is the first step in its planning process?its planning process?

The first step in the planning process with the marketing concept is to conduct research to identify potential customers and their needs

Chapter 410

Putting Marketing Up Putting Marketing Up FrontFront

Planning that identifies how a company expects to achieve its goals is known as a strategy.

A good marketing mix A good marketing mix is based on what?is based on what?

Customer needs and wants

Chapter 412

Understanding the Understanding the CustomerCustomer

• Identifying customer needs• Satisfying customer needs

Businesses tend to Businesses tend to deal with customer deal with customer needs in one of two needs in one of two ways. What are the ways. What are the

two ways?two ways?• Customers are all alike and can be

influenced to buy what a business offers.

• Customers are quite different and they select products and services to meet their unique needs.

What is a market What is a market segment?segment?

A group of similar customers within a larger market – categorized according to similar characteristics

Chapter 415

Two Views of Two Views of ConsumersConsumers

• Customers are all alike and can be influenced to buy what a business offers.

• Customers are quite different and they select products and services to meet their unique needs.

Chapter 416

Planning the OfferingPlanning the Offering

• The marketing mix• Creating the right mix

oDeveloping productsoMaking distribution decisionsoPricing products and servicesoPlanning promotion

What is a market What is a market opportunity analysis?opportunity analysis?

• It prioritizes market segments to locate the best potential

What are the elements What are the elements of the marketing mix?of the marketing mix?

• Product Development• Distribution• Pricing Products and Services• Promotion

Parts of the product Parts of the product development decision development decision

that can improve that can improve customer satisfaction customer satisfaction are ____________ such are ____________ such

as as ____________________________________________________________________.______________________.unique design, construction, size,

color, or

operation, accessories

Special Features

What is the most What is the most difficult marketing difficult marketing

decision to understand decision to understand and plan? Why?and plan? Why?

Pricing products and services. Marketers must try to balance the costs of the product with the customer’s feelings about the value of the product/service

In pricing products and In pricing products and services, what must services, what must

marketers try to marketers try to balance?balance?

The costs of the product with the customer’s feelings about the value of the product

How do consumers How do consumers measure or define measure or define

value of a product or value of a product or service?service?

• Better quality• More/better service• Lower Prices 

What are the most What are the most common forms of common forms of

promotion?promotion?• Advertising• Personal selling• Sales• Promotion• Visual display• Publicity

Under what conditions Under what conditions would promotion not would promotion not

be helpful to a be helpful to a company?company?

If the company has a poor product, excessively high prices, or ineffective distribution

How might aggressive How might aggressive promotion be useless if promotion be useless if

distribution is distribution is ineffective?ineffective?

No matter how effective a promotional campaign, sales will not increase if the product cannot get to the consumer

Name three reasons it Name three reasons it is difficult to meet is difficult to meet customer needscustomer needs

• They may not be sure of their needs or have conflicting needs

• They have limited resources with which to satisfy their needs

• People have very different needs

WhatWhat do consumers with do consumers with different needs require?different needs require?

Specialized products and services

Name several ways Name several ways businesses can alter businesses can alter

the prices they chargethe prices they charge• Prices can be altered with discounts• Markdowns• Allowances• Trade-ins• Coupons• Extensions of credit

Why is it important for Why is it important for businesses to businesses to

understand the understand the consumer decision-consumer decision-

making process?making process?So they can provide the consumer with the right information at the right time to facilitate a satisfying exchange

What benefit do What benefit do consumersconsumers get from a get from a

large number of large number of competitors in a competitors in a

particular industry?particular industry?• More choices• Cheaper prices• Convenience

List the three types of List the three types of competition?competition?

• Intense• Limited• Monopolistic

Of the three types of Of the three types of competition, which is competition, which is the most difficult type the most difficult type of competition? Why of competition? Why

do you think this is so?do you think this is so?Intense competition because the product is very similar and consumers can find a replacement very easily

What is pure What is pure competition?competition?

Many businesses offering the same product

What is an oligopoly?What is an oligopoly?

Only a few companies compete in the same market, consumers see few if any differences

What is some of the typical What is some of the typical responses a business can responses a business can make to deal with intense make to deal with intense

competition?competition?• Emphasize price• Emphasize promotion – convince customers that

their products were better, relatively minor differences as being important, unique brand names and images – more personalized or detailed information, non-traditional methods or media

• Distribution can focus on making the product available at better locations and times, with more careful handling, or greater customer service

• Pricing can offer alternative methods of payments, greater ease of obtaining credit, extended time for payment, or leasing

Explain limited Explain limited competition and how competition and how businesses respond.businesses respond.

• Little or no direct competition – Monopoly

• Don’t have to worry so much about price or promotion

• Business concentrates on maintaining its advantage in the market

• Customers often become dissatisfied with their lack of choice

Explain monopolistic Explain monopolistic competition and how competition and how businesses respond.businesses respond.

• Many competitors, some differences among the choices

• It is important for the companies to have clearly-identified differences that result in customers selecting their brands

• Companies in monopolistic competition find the marketing concept to be of most value

• Focus different groups of customers and try to identify their needs

• They make changes to the marketing mix that not only make the brand different from its competitors but more attractive to potential customers

Why does monopolist Why does monopolist competition allow competition allow

businesses to benefit businesses to benefit most from the marketing most from the marketing

concept?concept?Because the businesses with monopolies do not have to pay much attention to consumer needs, and businesses facing intense competition tend to rely primarily on price. Monopolistic competition gives a business an opportunity to differentiate its products to win customers from other businesses.

What are the five stages What are the five stages of the consumer of the consumer

decision-making process?decision-making process?

Name three things that Name three things that businesses use businesses use

marketing research marketing research for.for.

• To identify customers, characteristics that make groups of customers different from others, their needs, and how they make purchase decisions

• To identify the type of competition and the strengths and weaknesses of competing companies

• To determine which are most effective and which are most profitable marketing strategies

From a consumer From a consumer perspective, which perspective, which type of competition type of competition

offers the most choice? offers the most choice? The least choice? The least choice?

Intense competition offers the most choice; limited competition offers the least

Explain what is meant Explain what is meant by a “channel of by a “channel of

distribution.”distribution.”

The businesses that work cooperatively to move products from the producer to the consumer

Another name for a Another name for a channel member is?channel member is?

Middleman

List two types of channel List two types of channel members and what members and what

part(s) of the marketing part(s) of the marketing mix the focus their efforts mix the focus their efforts

on.on.• Wholesalers emphasize distribution planning;

many help their customers with financing and provide marketing information

• Retailers are responsible for most final pricing decisions and use a variety of promotion activities to encourage consumers to purchase their products

What is a markup and What is a markup and how is it calculated?how is it calculated?

• A markup covers a business’s operating expenses, taxes, and whatever profit it builds into its price before it passes a product on to another member of the channel or the end user

• The difference between the price a business pays for a product and the price it plans to sell the product for. Expressed as a percentage of the price paid by the business

• MU = Profit / Cost

Who is responsible for Who is responsible for adding the markup to adding the markup to

a product?a product?

The middleman

A video game store A video game store charges $28 for a video charges $28 for a video game that is purchased game that is purchased

for $22. What is the for $22. What is the markup on the video markup on the video game? Round to the game? Round to the

nearest percent.nearest percent.MU = $27 - $15 = 8 8/15 = 53.3 = 53%

A gift shop purchased 25 A gift shop purchased 25 handmade scarves for handmade scarves for

$10.50 each. If the price $10.50 each. If the price is marked up 20%, what is marked up 20%, what

will the customer be will the customer be charged for each scarf?charged for each scarf?

MU = $10.50 * .2 = $2.10 $10.50 + 2.10 = $12.60

What is the gross profit What is the gross profit margin and how is it margin and how is it

calculated?calculated?

• The gross profit margin is the difference between the price it plans to sell the product for and the price a business pays for a product.

• MU = Profit / Cost

A sweatshirt shop pays a A sweatshirt shop pays a local supplier $15 for local supplier $15 for each sweatshirt and each sweatshirt and

charges customers $27. charges customers $27. What is the gross profit What is the gross profit

margin on each margin on each sweatshirt? Round to the sweatshirt? Round to the

nearest percent.nearest percent.GPM = $27 - $15 = 8 8/27 = 29.6 = 30%

List three challenges List three challenges faced by service faced by service

businesses?businesses?• The work directly with their consumers

rather than through a channel of distribution, so they are responsible for the entire marketing mix

• More difficult to control quality of the service• Distribution planning must be available

where and when the customer wants it• Difficult to promote since the customer can’t

see or examine them

Why should not-for-profit Why should not-for-profit organizationsorganizations worry worry

about marketing?about marketing?

Because satisfying their customers’ needs is necessary if they are to achieve whatever their goals are and maximize their effectiveness