Marketing can be further understood by defining the core concepts applied by marketing managers.
A marketer can rarely satisfy everyone in a market. Not everyone likes the same soft drink, automobile, college, and movie. Therefore, marketers start with market segmentation. They identify and profile distinct groups of buyers who might prefer or require varying products and marketing mixes. Market segments can be identified by examining demographic, psychographic, and behavioral differences among buyers. The firm then decides which segments present the greatest opportunity—those whose needs the firm can meet in a superior fashion.
For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefit(s). For example, Volvo develops its cars for the target market of buyers for whom automobile safety is a major concern. Volvo, therefore, positions its car as the safest a customer can buy.
Traditionally, a "market" was a physical place where buyers and sellers gathered to exchange goods. Now marketers view the sellers as the industry and the buyers as the market (see Figure 1-1). The sellers send goods and services and communications (ads, direct mail, e-mail messages) to the market; in return they receive money and information (attitudes, sales data). The inner loop in the diagram in Figure 1-1 shows
Industry (a coiiection of seiiers)
Market (a coiiection of buyers)
Figure i-i A Simple Marketing System an exchange of money for goods and services; the outer loop shows an exchange of information.
A global industry is one in which the strategic positions of competitors in major geographic or national markets are fundamentally affected by their overall global positions. Global firms—both large and small—plan, operate, and coordinate their activities and exchanges on a worldwide basis.
Today we can distinguish between a marketplace and a marketspace. The marketplace is physical, as when one goes shopping in a store; marketspace is digital, as when one goes shopping on the Internet. E-commerce—business transactions conducted on-line—has many advantages for both consumers and businesses, including convenience, savings, selection, personalization, and information. For example, on-line shopping is so convenient that 30 percent of the orders generated by the Web site of REI, a recreational equipment retailer, is logged from 10 p.m. to 7 a.m., sparing REI the expense of keeping its stores open late or hiring customer service representatives. However, the e-commerce marketspace is also bringing pressure from consumers for lower prices and is threatening intermediaries such as travel agents, stockbrokers, insurance agents, and traditional retailers. To succeed in the on-line marketspace, marketers will need to reorganize and redefine themselves.
The metamarket, a concept proposed by Mohan Sawhney, describes a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries. The automobile metamarket consists of automobile manufacturers, new and used car dealers, financing companies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet. Car buyers can get involved in many parts of this metamarket. This has created an opportunity for meta-mediaries to assist buyers to move seamlessly through these groups. One example is Edmund's (www.edmunds.com), a Web site where buyers can find prices for different cars and click to other sites to search for dealers, financing, and accessories. Metamediaries can serve various metamarkets, such as the home ownership market, the parenting and baby care market, and the wedding market.9
Another core concept is the distinction between marketers and prospects. A marketer is someone who is seeking a response (attention, a purchase, a vote, a donation) from another party, called the prospect. If two parties are seeking to sell something to each other, both are marketers.
Needs, Wants, and Demands
The successful marketer will try to understand the target market's needs, wants, and demands. Needs describe basic human requirements such as food, air, water, clothing, and shelter. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but wants a hamburger, French fries, and a soft drink. A person in Mauritius needs food but wants a mango, rice, lentils, and beans. Clearly, wants are shaped by one's society.
Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are able and willing to buy one. Companies must measure not only how many people want their product, but also how many would actually be willing and able to buy it.
However, marketers do not create needs: Needs preexist marketers. Marketers, along with other societal influences, influence wants. Marketers might promote the idea that a Mercedes would satisfy a person's need for social status. They do not, however, create the need for social status.
People satisfy their needs and wants with products. A product is any offering that can satisfy a need or want, such as one of the 10 basic offerings of goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
A brand is an offering from a known source. A brand name such as McDonald's carries many associations in the minds of people: hamburgers, fun, children, fast food, golden arches. These associations make up the brand image. All companies strive to build a strong, favorable brand image.
In terms of marketing, the product or offering will be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings on the basis of which is perceived to deliver the most value. We define value as a ratio between what the customer gets and what he gives. The customer gets benefits and assumes costs, as shown in this equation:
Value — Benefits__Functional benefits + emotional benefits_
Costs Monetary costs + time costs + energy costs + psychic costs
Based on this equation, the marketer can increase the value of the customer offering by (1) raising benefits, (2) reducing costs, (3) raising benefits and reducing costs, (4) raising benefits by more than the raise in costs, or (5) lowering benefits by less than the reduction in costs. A customer choosing between two value offerings, Vj and V?, will examine the ratio Vj/ V?. She will favor Vj if the ratio is larger than one; she will favor V? if the ratio is smaller than one; and she will be indifferent if the ratio equals one.
Exchange, the core of marketing, involves obtaining a desired product from someone by offering something in return. For exchange potential to exist, five conditions must be satisfied:
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Whether exchange actually takes place depends upon whether the two parties can agree on terms that will leave them both better off (or at least not worse off) than before. Exchange is a value-creating process because it normally leaves both parties better off.
Note that exchange is a process rather than an event. Two parties are engaged in exchange if they are negotiating—trying to arrive at mutually agreeable terms. When an agreement is reached, we say that a transaction takes place. A transaction involves at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement. Usually a legal system exists to support and enforce compliance among transactors. However, transactions do not require money as one of the traded values. A barter transaction, for example, involves trading goods or services for other goods or services.
Note also that a transaction differs from a transfer. In a transfer, A gives a gift, a subsidy, or a charitable contribution to B but receives nothing tangible in return. Transfer behavior can also be understood through the concept of exchange. Typically, the transferer expects something in exchange for his or her gift—for example, gratitude or seeing changed behavior in the recipient. Professional fund-raisers provide benefits to donors, such as thank-you notes. Contemporary marketers have broadened the concept of marketing to include the study of transfer behavior as well as transaction behavior.
Marketing consists of actions undertaken to elicit desired responses from a target audience. To effect successful exchanges, marketers analyze what each party expects from the transaction. Suppose Caterpillar, the world's largest manufacturer of earth-moving equipment, researches the benefits that a typical construction company wants when it buys such equipment. The items shown on the prospect's want list in Figure 1-2 are not equally important and may vary from buyer to buyer. One of Caterpillar's marketing tasks is to discover the relative importance of these different wants to the buyer.
As the marketer, Caterpillar also has a want list. If there is a sufficient match or overlap in the want lists, a basis for a transaction exists. Caterpillar's task is to formulate an offer that motivates the construction company to buy Caterpillar equipment. The construction company might, in turn, make a counteroffer. This process of negotiation leads to mutually acceptable terms or a decision not to transact.
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