CHAPTER 1 - Understanding The Critical
Role of Marketing in Organizations and
Society
The Globalized Economy
 geographical and cultural distances
shrunk significantly
• Jet airplanes
• Fax machines
• Global computer
• Telephone linkups
• Television satellite
broadcasting
 global markets are expanding
domestically purchased goods and
services as “hybrids” (in design,
materials, manufacturers etc.)
• U.S. company Chrisler
The Income Gap
 Is notably measured using the
distribution of income and the
distribution of wealth
 Is the extent to which income is
distributed unevenly in the
population
• Top 20% of the income earners
are rich
• Poor are at the bottom 20%
 There are important types of
economic inequality between
groups of people
• Between third world countries in
South America, Africa and
Eastern Europe
- POOR nations pressure the rich
nations to open their markets to
their cheaper goods but the RICH
nations maintain tariffs and quotas
to protect their local industries and
employments
Solutions to address the income gap
1. Countertrade
• the poor pay for the needed
goods by exchanging other
goods and services
ex: General Electric builds a
lamp factory in Hungary and gets
paid with light bulbs
2. “more for less”
• offering a product or service of
less quality for a lower price
The Environmental Imperative
• Starting in the 1970s,
environmental laws were passed
that required companies to install
pollution control equipment of all
kinds.
• All of this raised costs for American
manufacturers who felt they were
being put at a disadvantage against
global competitors who operated
under weaker or non-existent
environmental regulations.
• Clearly, companies will be
increasingly held accountable for
their effluents, packaging material,
waste handling, and other
environmental fallouts from their
 manufacturing and marketing
activities.
The Core Concepts of Marketing
• Marketing is a social and managerial
process by which individuals and
groups obtain what they want
through creating, offering and
exchanging products of value with
others.
• The definition of marketing rests on
the following core concepts:
◦ A human need is a state of felt
deprivation of some basic
satisfaction
*food, shelter, clothing, belonging, esteem
and a few other things for survival
◦ Wants are desires for specific
satisfiers of these deeper needs
*people need food and wants hamburger;
needs clothing and wants Pierre Cardin suit
◦ Demands are wants for specific
products that are backed by an
ability and willingness to buy them
*many people want Mercedes; only a few
are willing and able to buy one
o Product is anything that can be
offered to satisfy a need or want.
*The importance of product lies not so much
in owning them as in obtaining the services
they render
o Value, cost and satisfaction
The first guiding concept is value,
where he will estimate the capacity
of each product to satisfy his own
set of needs. It is the satisfaction of
the customer when he owns the
product and can use it at lowest
possible cost.
Exchange, transactions and relationships
• Self-production (no market and no
marketing)
• Coercion
• Begging
• Exchange – the act of obtaining a
desired product from someone by
offering something in return
Five conditions of exchange
1. there are at least 2 parties
2. each party has something that might 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
offer
5. Each party believes it is appropriate or
desirable to deal with the other party
Transaction – is the basic unit of exchange.
It consists of trade values between two
parties.
Dimensions of transactions
1. At least 2 things of value
2. Agreed-upon conditions
3. A time of agreement
4. A place of agreement
Transactions vs. Transfer
Transfer - involves movement of an asset or
monetary funds and/or ownership rights
from one account to another.
Transaction - is the act of conducting or
carrying out (business, negotiations, plans).
Sufficient match or overlap in the want
lists = a basis for transaction
Negotiation = the process of trying to
arrive at mutually agreeable terms
= leads to either mutually
acceptable terms or a decision not
to transact
Markets
◦ Economists use the term market to
refer to a collection of buyers and
sellers who transact over a
particular product.
◦ The size of a market depends upon:
 the number of persons who exhibit
the need
 have resources that interest others
 willing to offer these resources in
exchange for what they want
Modern economies operate on the
principle of division of labor where each
person specializes in the
◦ Production of something
◦ Receives payment and
◦ Buys needed things with this money
Thus modern economies abound in
markets.
Marketing and marketers
Marketing
◦ means working with markets to
actualize potential exchanges for the
purpose of satisfying human needs
and wants.
◦ means human activity taking place in
relation to markets.
If one is more actively seeking an
exchange than the other party, we call
the first party a marketer and the and brand managers, market, and
second party a prospect. industry managers, and the
marketing vice president.
The marketer can be a seller or a buyer.
Company Orientations Toward the
Marketplace
Main elements in a modern marketing
◦ Clearly, marketing activities should
system:
be carried out under a well-thought-
out philosophy of efficient, effective,
and responsible marketing.
◦ Marketing concept is the strategy
that firms implement to satisfy
customers’ needs, increase sales,
maximize profit and beat the
competition.
◦ Marketing is a department of
management that tries to design
strategies that will build profitable
Marketing Management relationships with target consumers.

◦ Marketing management takes place But what philosophy is the best for
when at least one party to a company in setting marketing strategies?
potential exchange gives thought to
objectives and means of achieving
desired responses from other There are five alternative concepts under
parties. which organizations design and carry out
their marketing strategies:
◦ It is the process of planning and
executing the conception, pricing,
promotion, and distribution of
goods, services, and ideas to create
exchanges with target groups that
satisfy customer and organizational
objectives.
◦ Marketing work in the customer
market is formally carried out by
sales managers, salespeople,
advertising, and promotion
managers, marketing researchers, The Production Concept
customer-service managers, product
 ◦ It holds that consumers will favor
those products that are widely
available and low in cost. Managers
of production-oriented
organizations concentrate on
achieving high production efficiency
and wide distribution coverage.
◦ The assumption is that consumers
are primarily interested in product
availability and low price
◦ Managers following this philosophy
will concentrate on:
- Achieving high production
efficiency
- Low costs
- Mass distribution
The Product Concept
◦ The product concept holds that the
consumers will favor those that offer
the most quality, performance, or
innovative features.
◦ Managers in these product-oriented
organizations focus their energy on
making superior products and
improving them over time.
◦ These managers assume that buyers
admire well-made products and can
appraise product quality and
performance.
◦ Product-oriented companies often
design their products with little to
no customer input.
◦ The product concept leads to the
“marketing myopia”, a focus on the
product rather than on the
customer’s need.
The Selling Concept
◦ Here the management focuses on
creating sales transactions rather
than on building long-term,
profitable customer relationships.
◦ The selling concept holds that
consumers, if left alone, will
ordinarily not buy enough of the
organization’s products. The
organization therefore will
undertake an aggressive selling and
production effort.
◦ The concept assumes that
consumers will typically show
buying inertia or resistance and
have to be coaxed into buying
◦ The selling concept is practiced most
aggressively with “unsought goods”
such as insurance, encyclopedias,
and funeral plots.
The Marketing Concept
◦ Here marketing management takes
a “customer first” approach.
◦ The marketing concept holds that
the key to achieving organizational
goals consists in determining the
needs and wants of the target and
delivering the desired satisfactions
more effectively and efficiently than
competitors.
 ◦ Under the marketing concept,
customer focus and value are the
routes to achieve sales and profits.
The important concepts in this philosophy
are:
◦ Target market
◦ Customer Needs
◦ Coordinated Marketing
◦ Profitability
◦ Target market – A very carefully
thought and well defined target
market is chosen.
◦ Customer needs have to be fully
identified. It is never a simple
process. Customers have the
following five types of needs:
 Stated needs: Which are stated.
must be coordinated among
themselves.
2. Marketing must be well coordinated
with the other company
departments.
o Profitability – the purpose of this
marketing concept is to help
organizations achieve their goals.
 Private firms – major goal in profit
 nonprofit and public organizations –
surviving and attracting enough
funds to perform their work.
Bill Marriott still believes that the
customer is the key to profitability. He
and some other company residents
consider the typical organizational chart
to be obsolete.

 Real needs: Which are meant by

stating.
 Unstated needs: Which are
expected.
 Delight needs: Which are a bit more
than expectation.
 Secret needs: The purpose deep
down behind the stated need.
◦ Coordinated marketing – It means Master marketing companies know
that all the departments of the better, they invert the chart as shown in
company work together to the this figure:
customer’s interest.
Coordinated marketing means 2 things:
1. The various marketing functions –
salesforce, advertising, product
management, marketing research

The Selling and Marketing Concept
Contrasted
• The selling concept takes an inside-
out perspective. It starts with the
factory, focuses on company’s
existing products and calls for heavy
selling and promoting to produce
profitable sales.
• The marketing concept takes an
outside-in perspective. It starts with
a well-defined market, focuses on
customer needs, coordinates all the
activities that will affect customers
and products through customer
satisfaction.
In the course of converting to a market-
oriented company, a company will face
three hurdles:
1. organized resistance
2. slow learning
3. fast forgetting
Organized resistance
- Some company departments, often
manufacturing, finance, and R&D,
do not like to see marketing built up
because it threatens their power in
the organization.
Slow learning
– in spite of some resistance, many
companies manage to introduce some
marketing into their organization.
 The company president
establishes a marketing
department
 Outside marketing talent is hired
 Key managers attend marketing
seminars
 The marketing budget is
substantially increased
 Marketing planning and control
systems are introduced.
Even with these steps, the learning as to
what marketing really is comes slowly.
Fast forgetting – even after installing
marketing, management must fight a strong
tendency to forget basic marketing
principles. Management tends to forget
marketing principles in the wake of
marketing success.
- A number of them failed
because they forgot the
marketing maxim: Know
your target market and how
to satisfy them.
The Societal Marketing Concept
 ◦ The societal marketing concept - Marketing in increasingly attracting
holds that the organization’s task is the interest of nonprofit
to determine the needs, wants, and organizations such as colleges,
interests of target markets and to hospitals, and performing arts
deliver desired satisfactions more groups.
effectively and efficiently than
- Various government and private
competitors in a way that preserves
nonprofit agencies are also
or enhances the consumer’s and the
launching social marketing
society’s well-being.
campaigns
◦ It calls upon marketers to balance
◦ In the international sector
three considerations in setting their
marketing policies namely, company - Multinational companies are
profits, consumer want satisfaction investing heavily to improve their
and public interest. global marketing skills.
◦ The Societal Marketing Concept puts - Multinationals have introduced and
human welfare on top before profits spread modern marketing practices
and satisfying the wants. throughout the world.
◦ They began to recognize the long-
run importance of satisfying
consumer wants.
The Rapid Adoption of Marketing
Management
Marketing management today is a subject
of growing interest in all types of
organizations within and outside the
business sector in all kinds of countries.
◦ In the business sector
- Marketing entered the
consciousness of different
companies at different times.
- Marketing spread rapidly in
consumer packaged-goods
companies, consumer durables
companies and industrial-equipment
companies
o In the nonprofit sector