Contemporary marketing 3rd edit boone, kurtz, mackenzie, snow

Explain the shift from transaction-based marketing to relationship and social marketing.. The expanded concept of marketing activities permeates all organizational functions in businesse

Chapter 1 : Marketing: The Art and Science of Satisfying

CHAPTER OBJECTIVES

Define marketing, explain how it creates utility, and describe its role in the global marketplace

Contrast marketing activities during the four eras in the history of marketing

Explain the importance of avoiding marketing myopia

Describe the characteristics of not-for-profit marketing

Identify and briefly explain each of the five types of nontraditional marketing

Explain the shift from transaction-based marketing to relationship and social marketing

Identify the universal functions of marketing

Demonstrate the relationship among ethical business practices, social responsibility, sustainability, and

marketplace success

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WALMART HELPS SAVE THE WORLD WITH SUSTAINABILITY

The actions of Walmart, the world's largest retailer whose $400-billion-plus revenues surpass the GDPs of

40 countries, have drawn criticism in the past Now the low-price giant hopes to lead in a positive direction with its Sustainability Index

By leveraging Walmart's enormous buying power, the Index, which will ultimately provide millions of

shoppers with a way to measure the environmental impact of each of the thousands of items it sells, could virtually remake the practice of retailing To implement it—probably in the form of a scannable product label or packaging—the company will require its 60 000 consumerproducts suppliers to reach back into their own supply chains and total the social and environmental impact of their offerings, whether it's trampolines

or flat-screen TVs, orange juice or greeting cards For measuring up, suppliers can expect preferential

treatment on the shelves of Walmart's 8000 stores in 15 countries around the world

Customers

(pp 2-29)

Marketing: The Art and Science of Satisfying Customers: Chapter Objectives

© BETH HALL/LANDOV

“We're on the cusp of a major transition in the marketplace of what consumers demand to know and

producers have to tell,” says the CEO of an independent consumer products sustainability guide Walmart's senior vice president of sustainability adds that the Index is also about “creating a new level of competition

in ways that, historically, manufacturers have not competed… It's going to be an algorithm that creates a score, and it will reward some suppliers better than others.” That score will count four criteria: energy and greenhouse gas emissions, materials, natural resources, and social impact

In addition to the pressure of competition, however, Walmart is planning its own eventual departure from the Index project as an incentive to get suppliers, academics, government agencies, not-for-profit organizations, and even competitors to join the effort and pool sustainability data and ideas It has created the independent Sustainability Consortium, intended to carry out what Walmart has begun “This has to be more than

Walmart or it won't achieve standardization,” says the Consortium's co-director Says another observer,

“They are willing to get the ball rolling, but they want to hand it off to someone else.” Already on board, and making “green” improvements, are Frito-Lay, Monsanto, Unilever, Seventh Generation, Disney, and

General Mills The latter has reduced yogurt packaging 20 percent to save 1200 tons of plastic a year

The first step in the three-part process of creating the Index was to administer a 15-question survey to more than 1000 of the firm's top suppliers, asking about their current sustainability efforts Responses revealed big differences in how deeply invested firms are in community development and how carefully they monitor use

of natural resources Next steps now under discussion include tests and feedback on the Index's labelling system in three product categories: electronics, food, and chemical-based products such as household

cleaning fluids

“Imagine one day when every product on the shelf has behind it enough information from a

life-cycle-thinking perspective that [it] allows us to be much, much more intelligent about how we're buying,” says Walmart's business strategy director The company intends the Index also to weed out companies that

engage in “greenwashing,” making false or inflated claims of sustainability “Can you have trackable,

traceable supply chains that give you full visibility?” asks a manager at the Environmental Defense Fund, a Walmart partner “It is extraordinarily difficult at this moment But it can be done.”1

Connecting with Customers

Low prices and innovation have been at the heart of Walmart's marketing philosophy since it opened its first store in 1962 In the 1980s, Walmart added its “greeters,” opened the first one-hour photo lab, installed bar code-scanning equipment, and linked its operating units with two-way voice and data communication via satellite In 1994, Walmart opened the first of its newly designed environmentally friendly buildings and expanded into Canada A program to conserve wildlife habitats was launched in 2005, and a $4 generic prescription drug program was introduced the following year Meanwhile, Walmart stepped up efforts to design its stores to conserve energy and natural resources and reduce pollution In late 2010, the company opened a new 400 000-sq.-ft fresh and frozen food distribution centre in Balzac, Alberta, which has been described as Canada's most innovative and sustainable facility

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Marketing: The Art and Science of Satisfying Customers: Chapter Overview

“I only drink Tim Hortons coffee.”

“I buy all my electronics at Future Shop.”

“My next car will be a Nissan Leaf.”

“I go to all the Vancouver Canucks games at General Motors Place.”

THESE words are music to a marketer's ears They may echo the click of an online purchase, the ping of a

cash register, the cheers of THESE words are music to a marketer's ears They may echo the click of an

online purchase, the ping of a cash register, the cheers of fans at a stadium Customer loyalty is the

watchword of 21st-century marketing Individual consumers and business purchasers have so many goods and services from which to choose—and so many different ways to purchase them—that marketers must

continually seek out new and better ways to attract and keep customers It took a while, but Skype finally introduced a voice over Internet protocol (VoIP) application for iPhone subscribers in Canada The app- available free from Apple's Inc.'s App Store−has been downloaded more than six million times Users can now call other Skype users around the world for free, and can place calls to landlines and other cell phones

at rates much below those for wireless long-distance service.2

The technology revolution continues to change the rules of marketing during this first decade of the 21st century and will continue to do so in years beyond The combined power of telecommunications and

computer technology creates inexpensive global networks that transfer voice messages, text, graphics, and data within seconds These sophisticated technologies create new types of products and demand new

approaches to marketing existing products Newspapers are learning this lesson the hard way, as circulation continues to decline around the country, due in large part to the rising popularity of blogs and auction and job-posting sites Electronic reading devices such as the Amazon Kindle, on the other hand, have been picking up speed and enthusiastic fans.3

Communications technology also contributes to the globalization of today's marketplace, where businesses manufacture, buy, and sell across national borders You can bid at eBay on a potential bargain or eat a Big Mac or drink Coca-Cola almost anywhere in the world, and your MP3 player was probably manufactured in China or South Korea Both Honda and Toyota manufacture cars in Canada, while some Volkswagens are imported from Mexico Finished products and components routinely cross international borders, but

successful global marketing also requires knowledge to tailor products to regional tastes Restaurants in Newfoundland and Labrador, for example, often have cod tongues on their menu This delicacy is seldom found elsewhere in Canada

Rapidly changing business landscapes create new challenges for companies, whether they are giant

multinational firms or small boutiques, profit-oriented or not-for-profit Organizations must react quickly to shifts in consumer tastes, competitive offerings, and other market dynamics Fortunately, information

technologies give organizations fast new ways to interact and develop long-term relationships with their customers and suppliers Such links have become a core element of marketing today

Every company must serve customer needs—create customer satisfaction—to succeed We call customer satisfaction an art because it requires imagination and creativity, and a science because it requires technical knowledge, skill, and experience Marketing strategies are the tools that marketers use to identify and

analyze customers’ needs, then show that their company's goods and services can meet those needs

Tomorrow's market leaders will be companies that can make the most of these strategies to create satisfied customers

This Canadian edition of Contemporary Marketing focuses on the strategies that allow companies to succeed

in today's interactive marketplace This chapter sets the stage for the entire text, examining the importance of creating satisfaction through customer relationships Initial sections describe the historical development of marketing and its contributions to society Later sections introduce the universal functions of marketing and the relationship between ethical business practices and marketplace success Throughout the chapter—and the entire book—we discuss customer loyalty and the lifetime value of a customer

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What Is Marketing?

1 Define marketing, explain how it creates utility, and describe its role in the global marketplace

Production and marketing of goods and services—whether it's a new crop of organically grown vegetables or digital cable service— are the essence of economic life in any society Like most business disciplines,

marketing had its origins in economics Later, marketing borrowed concepts from areas such as psychology and sociology to explain how people made purchase decisions Mathematics, anthropology, and other

disciplines also contributed to the evolution of marketing These will be discussed in later chapters

Economists contributed the concept of utility —the want-satisfying power of a good or service Table 1.1

describes the four basic kinds of utility: form, time, place, and ownership

Form utility is created when the firm converts raw materials and component inputs into finished goods and

services Because of its appearance, gold can serve as a beautiful piece of jewellery, but because it also conducts electricity well and does not corrode, it has many applications in the manufacture of electronic devices like cell phones and global positioning satellite units By combining glass, plastic, metals, circuit boards, and other components, Nikon makes a digital camera and Samsung produces an LED television With fabric and leather, Prada manufactures its high-fashion line of handbags With a ship and the ocean, a captain and staff, and food and entertainment, Holland America Line creates a cruise Although the

marketing function focuses on influencing consumer and audience preferences, the organization's production function creates form utility

Marketing creates time, place, and ownership utilities Time and place utility occur when consumers find

goods and services available when and where they want to purchase them Vending machines and

convenience stores focus on providing place utility for people buying newspapers, snacks, and soft drinks The owners of Golf Without Limits created time and place utility when they opened their indoor golf centres

in Waterloo and London, Ontario Customers can play a round of simulated golf at any of 30 worldclass courses, regardless of season, weather, or time of day.4

Marketoid

The game of golf accounts for approximately $11.3 billion of Canada's GDP and supports 341 794 jobs

The transfer of title to goods or services at the time of purchase creates ownership utility Purchasing a new

smartphone, signing up for a Holland America cruise, or visiting Golf Without Limits creates ownership utility All organizations must create utility to survive Designing and marketing want-satisfying goods, services, and ideas are the foundation for the creation of utility But where does the process start? In the toy industry, manufacturers try to come up with items that children will want to play with—creating utility But that's not as simple as it sounds At the Toy Fair held each February in New York, Canadian and U.S

retailers pore over the products displayed at booths of manufacturers and suppliers, looking for the next Webkinz toys or Lego building blocks— trends that turn into classics and generate millions of dollars in revenues over the years Marketers also look for ways to revive flagging brands The classic yo-yo might be making a high-tech comeback, as an aerospace engineer, working in his spare time, has begun releasing a line of precision-engineered models with price tags that can run to $100 or more The limited-edition yo-yos have been selling out in a matter of days—and they have competitors.5

But how does an organization create a customer? Most take a three-step approach: identifying needs in the marketplace, finding out which needs the organization can profitably serve, and

table1.1 Four Types of Utility

ORGANIZATIONAL

FUNCTION

TYPE DESCRIPTION EXAMPLES RESPONSIBLE

Form Conversion of raw materials and Dinner at Swiss Chalet; iPod; shirt from Mark's Production*

components into finished goods and Work Wearhouse services

Time Availability of goods and services Dental appointment; digital photographs; Marketing when

consumers want them LensCrafters eyeglass guarantee; Canada Post

*Marketing provides inputs related to consumer preferences, but the actual creation of form utility is the responsibility of the production function

Table 1.1 Four Types of Utility

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Holland America uses the components of ship, ocean, captain, staff, food, and entertainment to create its finished service—a cruise COURTESY OF HOLLAND AMERICAN LINE INC

developing goods and services to convert potential buyers into customers Marketing specialists are

responsible for most of the activities necessary to create the customers the organization wants These

activities include the following:

identifying customer needs

designing products that meet those needs

communicating information about those goods and services to prospective buyers making the items available at times and places that meet customers’ needs pricing the merchandise and services to

reflect costs, competition, and customers’ ability to buy providing the necessary service and follow-up

to ensure customer satisfaction after the purchase6

A DEFINITION OF MARKETING

The word marketing encompasses such a broad scope of activities and ideas that settling on one definition is

often difficult Ask three people to define marketing, and three different definitions are likely to follow We are exposed to so much advertising and personal selling that most people link marketing only to those

activities But marketing begins long before a product hits the shelf It involves analyzing customer needs, obtaining the information necessary to design and produce goods or services that match buyer expectations, satisfying customer preferences, and creating and maintaining relationships with customers and suppliers Marketing activities apply to profit-oriented businesses such as Canadian Tire and Amazon.ca as well as not-for-profit organizations such as Mothers Against Drunk Driving and the Canadian Red Cross Even towns, cities, and provinces of Canada engage in marketing activities Today's definition takes all these factors into

account 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.7

The expanded concept of marketing activities permeates all organizational functions in businesses and for-profit organizations It assumes that organizations conduct their marketing efforts ethically

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and that these efforts serve the best interests of both society and the organization The concept also identifies the marketing variables—product, price, promotion, and distribution—that combine to provide customer satisfaction In addition, it assumes that the organization begins by identifying and analyzing who its

potential customers are and what they need At all points, the concept emphasizes creating and maintaining long-term relationships with customers and suppliers

Marketoid

Canadian Tire was founded in 1922 and now employs 57 000 people in its more than 1200 retail stores and gas bars across Canada

TODAY'S GLOBAL MARKETPLACE

Several factors have forced marketers—and entire nations—to extend their economic views to events outside their own national borders First, international agreements are being negotiated in attempts to expand trade among nations Second, the growth of electronic commerce and related computer technologies is bringing previously isolated countries into the marketplace for buyers and sellers around the globe Third, the

interdependence of the world's economies is a reality because no nation produces all the raw materials and finished goods its citizens need or consumes all its output without exporting some to other countries

Evidence of this interdependence is illustrated by the introduction of the euro as a common currency to facilitate trade among the nations of the European Union and the creation of trade agreements such as the North American Free Trade Agreement (NAFTA) and the World Trade Organization (WTO) As a result of NAFTA, Canada enjoys access to a market totalling more than 450 million people

Rising oil prices affect the price that Canadian consumers pay for just about everything—not just gasoline at the pump Dow Chemical raised the prices of its products up to 20 percent to adjust to its rising cost for energy Dow supplies companies in industries such as agriculture and health care, all of which will be

affected by the price hike Airlines, too, are trying to respond to a near-doubling of the cost of jet fuel Many have started charging customers for redeeming their reward miles, and Air Canada now charges $20 (per direction) for a second checked bag on domestic flights, $30 on flights to the United States, and $50 on flights to

Europe.8

To remain competitive, companies must continually search for the most efficient manufacturing sites and most lucrative markets for their products Canadian marketers now find tremendous opportunities serving customers not only in traditional industrialized nations but also in Latin America and emerging economies in central Europe, the Middle East, Asia, and Africa, where rising standards of living create increased customer demand for the latest products Expanding operations beyond the Canadian market gives domestic

companies access to more than 6.5 billion international customers China is now the second-largest market in the world—only the United States is larger But, with regard to new automobile sales, China is the world's largest market In 1993, there were only 37 000 private cars in China but, today, Chinese consumers buy more than 12 million new cars each year.9 So, automakers worldwide are extending their operations to

China In addition, China is beginning to compete in the global market, exporting cars that it manufactures to more than 170 countries.10 Chinese-manufactured cars will, most likely, eventually be available in Canada Interestingly, however, signs are mounting that China's increasing prosperity may be reducing its

attractiveness as a low-cost labour source Rising costs already are driving some foreign manufacturers out

of the country Mexico has taken the lead as the lowest-cost country for outsourced production, with India and Vietnam second and third, respectively; China stands in sixth place.11

Service firms also play a major role in today's global marketplace Telecommunications firms like South Africa's MTN, Luxembourg's Millicom International, and Egypt's Orascom Telecom Holding have carved

out new global markets for their products by following the lead of Finnish firm Nokia, among the first tech firms to create durable and affordable cell phones specifically designed for emerging markets The opportunities for such telecom innovators will continue to grow as long as electricity-reliant personal

high-computers remain out of reach for millions in the developing world “Like a lot of people who made their first call on a mobile [phone], they will have their first experience with the Internet on a mobile,” says one industry analyst.12

Assessment Check 1

1.1 Define marketing and explain how it creates utility

1.2 What three factors have forced marketers to embrace a global marketplace?

Canada is also an attractive market for foreign competitors because of its size, proximity to the United States, and the high standard of living that Canadian consumers enjoy The United States has made more investment in Canada than in any other country Companies such as Avon, Walmart, Home Depot, Lowe's, 3M, General Electric, and Dell are actively targeting Canadian consumers Among them, they perform such activities as production, assembly, distribution, service, and selling in Canada In fact, several of them use their Canadian operations as major global suppliers for some of their

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product lines, frequently exporting their goods and services to the United States as well as to other

countries Approximately 75 product lines, frequently exporting their goods and services to the United States

as well as to other countries Approximately 75 percent of all Canadian exports go to the United States, while about 50 percent of Canadian imports come from there Nearly $1.4 billion in trade crosses the

Canada–U.S border every day.13

Although many global marketing strategies are almost identical to those used in domestic markets, more and more companies are tailoring their marketing efforts to the needs and preferences of consumers in foreign markets It is often difficult to standardize a brand name on a global basis The Japanese, for example, like the names of flowers or girls for their automobiles, names such as Bluebird, Bluebonnet, Violet, and Gloria Canadians, on the other hand, prefer rugged outdoorsy names such as Challenger, Mustang, and Cherokee Four Eras in the History of Marketing

2 Contrast marketing activities during the four eras in the history of marketing

The essence of marketing is the exchange process , in which two or more parties give something of value to

each other to satisfy perceived needs Often people exchange money for tangible goods, such as video

games, clothes, or groceries In other situations, they exchange money for intangible services, such as a haircut or an education Many exchanges involve a combination of goods and services, such as dinner in a restaurant where dinner represents the good and the wait staff represents the service People also make exchanges when they donate money or time to a charitable cause, such as Habitat for Humanity

Although marketing has always been a part of business, its importance has varied greatly Figure 1.1

identifies four eras in the history of marketing: (1) the production era, (2) the sales era, (3) the marketing era, and (4) the relationship era

THE PRODUCTION ERA

Before 1925, most firms—even those operating in highly developed economies in Western Europe and North America—focused narrowly on production Manufacturers stressed production of quality products and then looked for people to purchase them The prevailing attitude of this era held that a high-quality product

would sell itself This production orientation dominated business philosophy for decades; business success

often was defined solely in terms of production successes

Figure 1.1 Four Eras of Marketing History From Boone/Kurtz Contemporary Marketing, 13E © 2008

South-Western, A Part Of Cengage Learning, Inc Reproduced By Permission

Www.Cengage.Com/Permissions

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The production era reached its peak during the early part of the 20th century Henry Ford's mass-production line exemplifies this orientation Ford's slogan, “They [customers] can have any colour they want, as long as it's black,” reflected the prevalent attitude toward marketing Production shortages and intense consumer demand ruled the day It is easy to understand how production activities took precedence

However, building a new product is no guarantee of success, and marketing history is cluttered with the bones of miserable product failures despite major innovations—more than 80 percent of new products fail Inventing an outstanding new product is not enough because it must also fill a perceived marketplace need Otherwise, even the best-engineered, highest-quality product will fail Even Henry Ford's horseless carriage took a while to catch on People were afraid of motor vehicles; they spat out exhaust, stirred up dust on dirt roads, got stuck in mud, and tied up horse traffic Besides, at the speed of seven miles per hour, they caused all kinds of accidents and disruption It took savvy marketing by some early salespeople—and eventually a widespread perceived need—to change people's minds about the product Today, most of us could not imagine life without a car and have refined that need to preferences for certain types of vehicles, including SUVs, convertibles, trucks, and hybrids

THE SALES ERA

As production techniques in North America and Europe became more sophisticated, output grew during the period from the 1920s into the early 1950s As a result, manufacturers began to increase their emphasis on effective sales forces to find customers for their output In this era, firms attempted to match their output to

the potential number of customers who would want it Companies with a sales orientation assume that

customers will resist purchasing nonessential goods and services and that the task of personal selling and advertising is to persuade them to buy

Although marketing departments began to emerge from the shadows of production and engineering during the sales era, they tended to remain in subordinate positions Many chief marketing executives held the title

of sales manager But selling is only one component of marketing As marketing scholar Theodore Levitt once pointed out, “Marketing is as different from selling as chemistry is from alchemy, astronomy from astrology, chess from checkers.”

THE MARKETING ERA AND THE EMERGENCE OF THE MARKETING CONCEPT

Personal incomes and consumer demand for goods and services dropped rapidly during the Great Depression

of the 1930s, thrusting marketing into a more important role Organizational survival dictated that managers pay close attention to the markets for their goods and services This trend ended with the outbreak of World War II, when rationing and shortages of consumer goods became commonplace The war years, however, created only a pause in an emerging trend in business: a shift in the focus from products and sales to

satisfying customer needs

The marketing concept, a crucial change in management philosophy, can be linked to the shift from a seller's

market —one in which there were more buyers for fewer goods and services—to a buyer's market —one in

which there were more goods and services than people willing to buy them When World War II ended, factories stopped manufacturing war supplies and started turning out consumer products again, an activity that had, for all practical purposes, stopped during the war

The advent of a strong buyer's market created the need for consumer orientation by businesses Companies

had to market goods and services, not just produce and sell them This realization has been identified as the emergence of the marketing concept Marketing would no longer be regarded as a supplemental activity performed after completion of the production process Instead, the marketer would play a leading role in

product planning Marketing and selling would no longer be synonymous terms

Today's fully developed marketing concept is a company-wide consumer orientation with the objective of

achieving long-run success All facets—and all levels, from top to bottom—of the organization must

contribute first to assessing and then to satisfying customer wants and needs Whether marketing manager, accountant, or product designer, every employee plays a role in reaching potential customers Even during tough economic times, when companies tend to emphasize cutting costs and boosting revenues, the

marketing concept focuses on the objective of achieving long-run success instead of short-term profits Because the firm's survival and growth are built into

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the marketing concept, company-wide consumer orientation should lead to greater long-run profits

Apple exemplifies the marketing concept, creating consistently stylish and cutting-edge products The iPad is a recent innovation H F (HERB)

MACKENZIE

Apple exemplifies the marketing concept in every aspect of its business Its products are consistently stylish and cutting edge but without overwhelming users with every possible feature “A defining quality of Apple has been design restraint,” says one industry consultant That hallmark restraint is a characteristic of Apple's founder, Steve Jobs, and is reflected in the work of Apple's designers, managers, and engineers, whose contributions to the company's new products Jobs credits for the company's ability to constantly surprise the marketplace Apple's 2010 release, the iPad, was called a product that “may change the world.” Says one business professor, “Real innovation in technology involves a leap ahead, anticipating needs that no one really knew they had and then delivering capabilities that redefine product categories That's what Steve Jobs has done.”14 A strong market orientation—the extent to which a company adopts the marketing concept—generally improves market success and overall performance It also has a positive effect on new-product development and the introduction of innovative products Companies that implement market-driven

strategies are better able to understand their customers’ experiences, buying habits, and needs Like Apple, these companies can, therefore, design products with advantages and levels of quality compatible with customer requirements

THE RELATIONSHIP ERA

The fourth era in the history of marketing emerged during the final decade of the 20th century and continues

to grow in importance Organizations now build on the marketing era's customer orientation by focusing on establishing and maintaining relationships with both customers and

CAREER READINESS: Network to Success

YOU may think only extroverts and social butterflies can build the personal networks that lead to business and career success Not so! Networking is a skill anyone can learn Here are some tips to get you started:

Think of building your personal connections as making an investment in your future It requires time and effort to become fruitful

Work on your network a little at a time Start by attending one or two promising events a month or joining a professional networking service like LinkedIn or one or two professional groups you can find there, and stick with them

Be sure your online profile won't embarrass you with party photos or objectionable language

If you join a group or network that doesn't look immediately promising but you really enjoy it, keep going

Talk to new people everywhere, including social events like weddings and everyday places like

checkout lines in stores Don't hesitate to invite people to join you for coffee or a quick meal after work Some of the most interesting contacts might just be shy

Carry information about yourself or your company to give out, such as an up-to-date brochure or business card

Remember, it's not all about you Talk about relevant activities you've done, but be ready to ask questions that help others talk about themselves and their company or organization

Look for a few people who know a lot of other people, rather than many people in specific positions or types

of businesses Keep a record of people you want to stay in touch with, and don't wait for an occasion to get together Follow-up and

Keep a record of people you want to stay in touch with, and don't wait for an occasion to get together

Follow-up and reciprocating are the keys to being remembered

Evaluate your results periodically Which networking strategies are working best for you, and which can you improve?

Sources: Kristen Porter, “How to Grow Your Professional Networking,” eHow, http://www.ehow.com , February 4, 2010; Rob May, “How to Network: For Introverts,” Business Pundit,

http://www.businesspundit.com , April 16, 2009; “How to Network Effectively,” eHow,

http://www.ehow.com , April 16, 2009; C J Hayden, “Network Your Way to a New Job or Career,”

About.com , http://humanresources.about.com , April 16, 2009

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MARKETING AND THE SME: QR Codes: A New Dimension in Customer Connection

TONIGHT you are hosting a dinner party for an important business associate who has just arrived from France You are quite nervous as you know he has high expectations and is not easily impressed The dinner menu you have prepared includes lobster bisque, filet mignon, asparagus, and mushrooms, and it will be followed by crème brûlée for dessert The only decision left is the wine choice You drive to your local wine store, hoping that someone there can give you advice

As you wind through the wine racks, an unfamiliar black and white square on the side of a bottle catches your eye It is a QR, or “quick response,” code The sales clerk shows you how to scan the code with your smartphone, and you are immediately brought to the wine maker's website where you view information specifically about the wine you are considering The beauty of this is that the wine may have been put on the store shelf months before, but the website you view may have been updated only hours before you view it Château des Charmes was one of the first Canadian wineries to take advantage of QR codes on its products and in its advertisements With this technology, the winery can easily communicate important and up-to-date information to interested people

QR codes are becoming popular on many products: on food items enabling you to check the nutritional value

or ingredients, on medicine bottles so you can see dosage instructions and side effects, and even in

advertisements and on billboards You might, for example, see an ad or a billboard promoting a new

perfume By scanning the QR code, you can get additional information, possibly even a coupon for a special

promotional trial offer, which you can then download to your smartphone Through your phone, you might then check the location of the nearest retailer where you can use your coupon

QR codes are the most popular two-dimensional codes in Japan, and they are quickly gaining popularity among the 4 billion or so mobile phone users around the world QR codes are creating convergence between the many information media and are encouraging interactive consumer behaviour They offer potential for many small businesses to improve the efficiency—and effectiveness—of their communications programs Sources: “QR Code Primer,” Château des Charmes website,

suppliers Relationship marketing involves long-term, value-added relationships developed over time with

customers and suppliers Strategic alliances and partnerships among manufacturers, retailers, and suppliers often benefit everyone The Boeing 787 Dreamliner, which has been under development and construction since 2004, is the result of an international team of companies working on the technology, design, and

construction of the planes Boeing and 43 global suppliers are working together to complete the planes With orders for 876 planes, Boeing is proving that its long-term relationships are worth the effort.15 The concept

of relationship marketing, which is the current state of customer-driven marketing, is discussed in detail later

in this chapter and informs much of the content of this book On a personal level, see the “Career Readiness” feature for suggestions on creating your own personal network, a key to success in marketing and in business generally

CONVERTING NEEDS TO WANTS

Every consumer must acquire goods and services on a continuing basis to fill certain needs Everyone must satisfy the fundamental needs for food, clothing, shelter, and transportation by purchasing things or, in some instances, temporarily using rented property and hired or leased transportation By focusing on the benefits resulting from these products, effective marketing converts needs to wants A need for a pair of pants may be converted to a desire for jeans—and further, a desire for jeans from Abercrombie and Fitch or Mark's Work Wearhouse The need for food may be converted to a desire for a taco from Taco Bell or groceries from Sobeys or Real Canadian Superstore But if the need for transportation isn't converted to a desire for a Honda Odyssey or a Ford Mustang, extra vehicles may sit unsold on a dealer's lot

Assessment Check 2

Assessment Check 2

2.1 What is the major distinction between the production era and the sales era?

2.2 What is the marketing concept?

2.3 Describe the relationship era of marketing

Consumers need to communicate But converting that need to the desire for certain types of communication requires skill It also requires listening to what consumers want Consumers’ demand for more cell

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phone and wireless services seems nearly unlimited, particularly with the surge in social networking sites—providing tremendous opportunities for companies New products appear continually to feed that demand, such as increasingly popular broadband wireless services now offered by all cell phone carriers in a market currently dominated by Bell Canada, Rogers, and Telus Though many consumers who use Internet-friendly phones and other devices tend to be business travellers, the wireless broadband industry is intent on

improving its appeal to the social networking mass market, perhaps with flexible service plans, new features, and lower fees One industry analysis group predicts that very soon “for most consumers, the smartphone will be the norm and not the exception.”16

Avoiding Marketing Myopia

3 Explain the importance of avoiding marketing myopia

The emergence of the marketing concept has not been devoid of setbacks One troublesome problem led

marketing scholar Theodore Levitt to coin the term marketing myopia According to Levitt, marketing

myopia is management's failure to recognize the scope of its business Product-oriented rather than

customer-oriented management endangers future growth Levitt cites many service industries—such as dry cleaning and electric utilities—as examples of marketing myopia But many firms have found innovative ways to reach new markets and develop long-term relationships

Apple, for instance, has been working for a while on developing solar-powered devices, and in response to customer demand for longer battery life for its devices, the firm has restarted work on ways to use solar power for battery recharging Such innovations also hold out the promise of greener and more sustainable manufacturing processes that might eliminate the use of some toxic or nonrecyclable parts in its products that have drawn criticism of Apple from such groups as Greenpeace.17 Table 1.2 illustrates how firms in a number of industries have overcome myopic thinking by developing broader marketing-oriented business ideas that focus on consumer need satisfaction

Assessment Check 3

3.1 What is marketing myopia?

3.2 Give an example of how a firm can avoid marketing myopia

Extending the Traditional Boundaries of Marketing

Today's organizations—both profit-oriented and not-for-profit—recognize universal needs for marketing and its importance to their success During a television commercial break, viewers might be exposed to an

advertisement for a Kia Spectra, an appeal to help feed children in foreign countries, a message by a political candidate, and a commercial for Tim Hortons—all in the space of about two minutes Two of these ads are paid for by firms attempting to achieve profitability and other objectives The appeal for funds to feed

children and the political ad are examples of communications by not-for-profit organizations and

individuals

Table 1.2 Avoiding Marketing Myopia

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Table 1.2 Avoiding Marketing Myopia

Table 1.2 Avoiding Marketing Myopia

COMPANY MYOPIC DESCRIPTION COMPANY MOTTO—AVOIDING MYOPIA

Nokia A cell phone manufacturer Connecting People

Visa A credit card company Life Takes Visa

Purolator A courier company Where Business Is Going

Corporate Express Canada An office supplies company Productivity in Your Hands

Michelin A tire manufacturer A Better Way Forward

Xerox A photocopier manufacturer The Document Company

La-Z-Boy A furniture manufacturer Comfort It's What We Do.

Marketing helps raise money to support social causes The War Amps is a not-for-profit organization that offers

comprehensive services to child amputees and their families Its CHAMP Program is unique in the world

COURTESY OF THE WAR AMPS

MARKETING IN NOT-FOR-PROFIT ORGANIZATIONS

There are approximately 161 000 not-for-profit and charity organizations in Canada, representing nearly $80 billion–or 7.8 percent–of GDP, making this sector larger than the manufacturing sector It employs more than 2 million Canadians and is the second largest not-for-profit and voluntary sector in the world.18 That makes not-for-profit organizations big business

Not-for-profit organizations operate in both public and private sectors Federal, provincial, and municipal government units and agencies pursue service objectives that are not keyed to profitability targets The Canada Border Services Agency is a federal government agency that provides border security services and helps facilitate the flow of people and goods across the Canadian border; individual provincial government departments regulate labour safety, environmental conservation and natural resources, and alcohol control; municipal school boards are responsible for overseeing educational and curriculum standards for their

district The private sector contains an even greater array of not-for-profit organizations, including zoos, hospitals, universities and colleges, ethnic and religious associations, and charities, such as the Make-a-Wish Foundation of Canada Regardless of their size or location, all these organizations need funds to operate Adopting the marketing concept can make a great difference in their ability to meet their service objectives their service objectives

Some not-for-profits form partnerships with business firms that promote the organization's cause or message The Hospital for Sick Children (SickKids) has been supported by Walmart since it came to Canada in 1994

In 2010, 75 Walmart Canada associates gathered at SickKids to celebrate $10 million in donations, raised through employee-led initiatives, the sale of Miracle Balloons, and a corporate donation-matching

program.19 Generally, the alliances formed between not-for-profit organizations and commercial firms

benefit both The reality of operating with multimillion-dollar budgets requires not-for-profit organizations

to maintain a focused business approach Consider some current examples:

Food Banks Canada (FBC) represents community food banks across Canada Approximately 870 000 different people access food banks monthly in Canada, nearly 40 percent of them children FBC moves about 10 million pounds of food industry donations annually to its members, almost exclusively with

donated transportation Some of the many participating companies are Nestle Canada, Danone Canada, Loblaw, Kellogg Canada, ConAgra Foods Canada, and H J Heinz Co of Canada.20

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Barely a week after the March 11, 2011, earthquake and tsunami hit Japan, the Canadian Red Cross sent $5 million, donated by Canadians, to help support relief efforts Since then, millions of more dollars have been donated by individuals, companies, and charitable organizations across Canada Many companies donated goods and services as well as money

Telus, for example, donated $100 000, but also provided free long-distance and wireless services to Japan.21

M & M Meat Shops encourages its franchisees across Canada to support community-based charities and programs Since

1989, at the corporate level, it has raised more than $16 million in support of the Crohn's and Colitis

Foundation of Canada.22

The diversity of not-for-profit organizations suggests the presence of numerous organizational objectives other than profitability In addition to their organizational goals, not-for-profit organizations differ from profit-seeking firms in several other ways

CHARACTERISTICS OF NOT-FOR-PROFIT MARKETING

4 Describe the characteristics of not-for-profit marketing

The most obvious distinction between not-for-profit organizations and for-profit—commercial—firms is the

financial bottom line , business jargon that refers to the overall profitability of an organization For-profit

organizations measure profitability, and their goal is to generate revenues above and beyond their costs to make money for all stakeholders involved, including employees, shareholders, and the organization itself Not-for-profit organizations hope to generate as much revenue as possible to support their causes, whether it

is feeding children, preserving wilderness, or helping single mothers find work Historically, not-for-profits have had less exact goals and marketing objectives than for-profit firms, but in recent years, many of these groups have recognized that, to succeed, they must develop more cost-effective ways to provide services, and they must compete with other organizations for donors’ dollars Marketing can help them accomplish these tasks Some groups are finding, for instance, that online social network sites, such as Facebook and MySpace, can bring them increased attention But they are also using specialized networks devoted to social causes like YourCause.com and easy payment systems like Piryx to generate funds.23

of National Breast Cancer Awareness month in October every year “Promotional items have been extremely important to the breast cancer awareness push,” says the corporate relationship manager of the Susan G Komen fund, a breast cancer fundraising group “Not only are they essential for fundraising to find a cure, they are also key to spreading life-saving messages to audiences we might never reach without them With the help of promotional items, it has finally become okay to talk about breast cancer.”24 But profit-seeking businesses tend to focus their marketing on just one public—their

customers Not-for-profit organizations, however, must often market to multiple publics, which complicates decision making about the correct markets to target Many deal with at least two major publics—their clients

and their sponsors—and often many other publics as well A college or university targets prospective

students as recipients of its marketing program, but it also markets to current students, parents of students, major donors, alumni, faculty, staff, local businesses, and local government agencies

A service user of a not-for-profit organization may have less control over the organization's destiny than would be true for customers of a profit-seeking firm Not-for-profit organizations also often possess some degree of monopoly power in a given geographic area An individual contributor might object to United Way's inclusion of a particular local agency, but that agency will still receive a portion of that donor's

5 Identify and briefly explain each of the five types of nontraditional marketing

As marketing evolved into an organization-wide activity, its application has broadened far beyond its

traditional boundaries of forprofit organizations engaged in the creation and distribution of tangible goods and intangible services In many cases, broader appeals focus on causes, events, individuals,

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Table 1.3 Categories of Nontraditional Marketing

organizations, and places Table 1.3 lists and describes five major categories of nontraditional marketing: person marketing, place marketing, cause marketing, event marketing, and organization marketing These

Table 1.3 Categories of Nontraditional Marketing

marketing

Marketing efforts designed to attract visitors to a particular area; improve consumer images of

a city, province, or country; and/or attract new business

Saskatchewan: Land

of Living Skies Nova Scotia: Canada's Ocean Playground Manitoba: Friendly Manitoba

marketing

Marketing efforts of mutual-benefit organizations, service organizations, and government

organizations that seek to influence others to accept their goals, receive their services, or

contribute to them in some way.

United Way: Without you, there would be

categories can overlap—promotion for an organization may also encompass a cause; a promotional

campaign may focus on both an event and a place

PERSON MARKETING

Person marketing involves efforts designed to cultivate the attention, interest, and preferences of a target

market toward a celebrity or authority figure Celebrities can be real people or fictional characters Political candidates engage in person marketing as they promote their candidacy for office However, results of exit polls following the 2011 federal election suggest that the party leader— not the local candidate—sways the majority of voters This may help explain why, in one Quebec riding, a candidate who barely spoke French, spent little time in her riding, and vacationed in Las Vegas during the campaign, won.25 Authors such as

Suze Orman of The Road to Wealth use person marketing to promote their books Rachael Ray uses person marketing to promote her Every Day with Rachael Ray magazine, where she appears on every cover

An extension of person marketing involves celebrity endorsements, in which well-known athletes,

entertainers, and experts or authority figures promote products for companies or social causes for profit organizations Proactiv Solution spends up to $15 million annually on celebrity endorsements to promote its acne treatment Promotions have included stars such as Katy Perry,

not-for-Avril Lavigne, Sean “Diddy” Combs, and Justin Bieber—reportedly paid $3 million for a two-year deal.26

Actor William Shatner was seen in ads for Priceline.com , while his former Star Trek co-star Leonard Nimoy

promoted the pain reliever Aleve Athletes are the big winners in the celebrity endorsement arena—NBA star LeBron James has multimillion-dollar endorsement deals with Nike, Upper Deck, and the Coca-Cola Company New York Giants quarterback Eli Manning has endorsement deals with Citizen Watch, Reebok, and Nabisco's Oreo brand, and with his brother, Indianapolis Colts’ quarterback Peyton, faces off against Donald Trump in ads for Oreo cookies.27

PLACE MARKETING

Another category of nontraditional marketing is place marketing , which attempts to attract customers to

particular areas Cities, provinces, regions, and countries publicize their tourist attractions to lure vacation travellers They also promote themselves as good locations for businesses Place marketing has

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become more important in the world economy—not only for tourism but also to recruit business and

workers Casino operator MGM is betting the house on its latest venture, the $8.5-billion CityCenter

complex in Las Vegas, which is complete with four 61-storey hotel towers, high-end stores, and dozens of bars and restaurants—and, of course, a casino Like other hospitality businesses in the city, MGM is hoping

to reverse Las Vegas's recently flagging status as a tourist draw, offering pricing deals to push the number of visitors up to nearly 40 million a year.28

Although tourism is not the only aspect of place marketing, tourism has a major economic impact Canada was the most popular destination for U.S travellers in 2010; Americans charged $3.5 billion to their credit cards during trips to Canada.29 However, the Canadian Tourism Commission is warning of increasing

international competition and notes that Canada has dropped to fifteenth place from sixth place in the last decade Austria, Germany, Hong Kong, Turkey, Malaysia, and Ukraine have surpassed Canada as sites for international tourist arrivals.30

China is expected to become the world's largest market for tourism, with an estimated 100 million outbound travellers annually by 2020 Canada currently receives about 200 000 travellers each year from China and expects double-digit growth in future years Interest in Canada has increased greatly since Canada received approved destination status from China As a result, in 2011, Canada launched its first major consumer-focused advertising campaign in China, with the tagline “Say Hello to Canada,” aiming to attract Chinese tourists to Niagara Falls, Ottawa, Whistler, Banff, and other popular sites.31

CAUSE MARKETING

A third category of nontraditional marketing, cause marketing , refers to the identification and marketing of

a social issue, cause, or idea to selected target markets Cause marketing covers a wide range of issues, including literacy, physical fitness, awareness of childhood obesity, environmental protection, elimination of birth defects, child-abuse prevention, and preventing drunk driving

As mentioned earlier, an increasingly common marketing practice is for profit-seeking firms to link their products to social causes Staples Canada, through its annual School Supply Drive, reached its 2010 goal of raising $1 million, which was distributed through local community-based charities to children in need Since the inception of its Recycle for Education program, Staples has contributed $2.7 million to schools across Canada In addition, in 2011, Staples implemented the Recycle for Education Contest and awarded a $50

000 computer lab makeover to first-place winner Dover Bay Secondary School in Nanaimo, B.C.32

awarded a $50 000 computer lab makeover to first-place winner Dover Bay Secondary School in Nanaimo, B.C.32

Surveys show strong support for cause-related marketing by both consumers and company employees In one recent survey, 92 percent of consumers had a more positive image of companies that support important social causes, and four of five respondents said that they would change brands to support a cause if the price and quality of the two brands remained equal

EVENT MARKETING

Event marketing refers to the marketing of sporting, cultural, and charitable activities to selected target

markets It also includes the sponsorship of such events by firms seeking to increase public awareness and bolster their images by linking themselves and their products to the events Sports sponsorships have gained effectiveness in increasing brand recognition, enhancing image, boosting purchase volume, and increasing popularity with sports fans in demographic segments corresponding to the sponsors’ business

goals

Some people might say that the premier sporting event is baseball's World Series Others claim it's the Olympics or the World Cup Still others might argue that it's the Super Bowl, which many consumers claim they watch only to see the debut of commercials Those commercials are expensive and can run as much as

$3 million (U.S.) for 30 seconds of airtime, or $100 000 a second But they reach an estimated 90 million viewers Companies now also feed their commercials to websites and make them available for downloading

to personal computers and video iPods Experienced marketers caution that firms planning such a big

expenditure should make it part of a larger marketing plan, not just a single shot at fame

Marketoid

Twenty-three percent of Canadians aged 25 to 34 were born outside of Canada; they account for 40 percent

of master's degrees and 49 percent of Ph.Ds

For those who prefer the international pageantry of the Olympics, marketers have plenty of plans The promotion of upcoming Olympics—both summer and winter—begins years in advance Before the end of each Olympics, hosts of the next games unveil their logo and the marketing

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takes off from there Corporate sponsors such as Adidas and Nike try to target the next Olympic gold-medal winners, draping them in clothing and gear with company logos The 2010 Vancouver Winter Olympics afforded opportunities for hundreds of firms to provide wine and beer for hospitality events, frames and tents, jewellery, team uniforms, energy generation and temperature control systems, beds for the athletes’ village, natural gas, cold and flu remedies, organic groceries, hand sanitizers, and computer and accounting services.33

ORGANIZATION MARKETING

Organization marketing attempts to influence others to accept the goals of, receive the services of, or

contribute in some way to an organization Organization marketing includes mutual-benefit organizations

(conservation groups, labour unions, and political parties), service and cultural organizations (colleges and universities, hospitals, and museums), and government organizations Many organizations use organizational marketing to help raise funds In 2011, Davorka Cvitkovic was appointed CEO of the fundraising arm of Manitoba's $310-million Canadian Museum for Human Rights, scheduled for completion in 2012 The organization had already raised about $125 million of its $150 million capital campaign goal, but it wanted

to change focus to raise money outside of Manitoba Cvitkovic has held senior fundraising positions with Simon Fraser University and the Canadian Arthritis Society.34

Assessment Check 5

5.1 Identify the five major categories of nontraditional marketing

5.2 Give an example of a way in which two or more of these categories might overlap

GO GREEN: Tired of Blue, White, and Pink Jobs? Think Green

TRADITIONALLY, the colour green was described as dark, light, or bright Today, we are more likely to describe green as army, asparagus, emerald, forest, hunter, jade, jungle, lime, moss, olive, pine, or sea green Traditionally, “green” jobs were largely sciencebased positions: contaminant and waste management,

environmental engineering, water conservation and quality management, soil testing, forest conservation, agronomy, etc Today, green jobs are more likely to be cross-functional or cross-disciplinary, and many require only a marginal understanding of science That's great news for many people, including want-to-be marketers Green job opportunities are hot

Todd Latham, publisher of two Toronto-based environmental magazines, sees opportunities for people who are simply passionate about the environment This could include—among others—lawyers, accountants, builders, economists, journalists, and marketers This may help explain why enrolments are declining in the majority of university-level degree programs that are focused on environmental careers, but green jobs are growing much faster than jobs in the overall economy In Canada, more than a half-million people are

employed in environmental jobs—more than 3 percent of working-age Canadians

There are increasing opportunities for green entrepreneurs, people who want to start green businesses As green products become more popular, there will be opportunities for green manufacturers, and they will employ green salespeople and green marketers There will be opportunities for new green service firms, such

as Carbonzero, a Toronto-based firm that uses recognized international carbon accounting standards to measure greenhouse gas emissions for clients and then helps them reduce or neutralize their impact on the environment

Many green jobs will continue to require technical or scientific backgrounds, and entry standards for some jobs are very high— either a master's degree or a Ph.D However, a major task for many organizations within the environmental industry will be their ability to “sell” green science and gain popular acceptance There will be key positions for those who can work with teams of people from various stakeholder groups—company technical people and senior-level management, government agencies, public interest groups—and communicate effectively with them Many people in the industry—such as Michael Gerbis, president of Ottawa-based Delphi Group, an environmental consulting firm that has worked with many of Canada's Fortune 100 companies—see education and technical expertise as necessary but not sufficient qualities for new employees Enthusiasm and communications skills are what differentiates the best green job applicants from the rest

Sources: Derek Sankey, “Staffing the Green Machine,” Ottawa Citizen, March 17, 2007, p D10; Diana McLaren, “Green Jobs Take Root and Proliferate,” The Globe and Mail, February 14, 2008,

http://www.theglobeandmail.com , February 14, 2008; Delphi Group website, http://www.delphi.ca , April

14, 2008; Carbonzero website, http://www.carbonzero.ca , April 14, 2008

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From Transaction-Based Marketing to Relationship Marketing

6 Explain the shift from transaction-based marketing to relationship and social marketing

As marketing progresses through the 21st century, a significant change is taking place in the way companies

interact with customers The traditional view of marketing as a simple exchange process, or

transaction-based marketing , is being replaced by a different, longer-term approach that emphasizes building

relationships one customer at a time Traditional marketing strategies focused on attracting customers and closing deals Today's marketers realize that, although it's important to attract new customers, it's even more important to establish and maintain a relationship with them so they become loyal repeat customers These efforts must expand to include suppliers and employees as well Over the long term, this relationship may be translated to the lifetime value of a customer—the revenues and intangible benefits that a customer brings to

an organization over an average lifetime, minus the investment the firm has made to attract and keep the customer

Figure 1.2 Converting New Customers to Advocates From Boone/Kurtz

Contemporary Marketing, 13E © 2008 South-Western, A Part Of Cengage Learning, Inc Reproduced By Permission Www.Cengage.Com/Permissions

Marketers realize that consumers are getting more and more sophisticated They quickly recognize

marketing messages and may turn away from them if the messages don't contain information that consumers want and need So marketers need to develop new techniques to establish and build trusting relationships between companies and their customers As defined earlier in this chapter, relationship marketing refers to the development, growth, and maintenance of long-term, cost-effective exchange relationships with

individual customers, suppliers, employees, and other partners for mutual benefit It broadens the scope of external marketing relationships to include suppliers, customers, and referral sources In relationship

marketing, the term customer takes on a new meaning Employees serve customers within an organization as

well as outside it; individual employees and their departments are customers of and suppliers to one another They must apply the same high standards of customer satisfaction to intradepartmental relationships as they

do to external customer relationships Relationship marketing recognizes the critical importance of internal

marketing to the success of external marketing plans Programs that improve customer service inside a company also raise productivity and staff morale, resulting in better customer relationships outside the firm Relationship marketing gives a company new opportunities to gain a competitive edge by moving customers

up a loyalty ladder— from new customers to regular purchasers, then to loyal supporters of the firm and its goods and services, and finally to advocates who not only buy its products but recommend them to others, as shown in Figure 1.2

Relationship building begins early in marketing It starts with determining what customers need and want, then developing highquality products to meet those needs It continues with excellent customer service during and after purchase It also includes programs that encourage repeat purchases and foster customer loyalty Marketers may try to rebuild damaged relationships or rejuvenate unprofitable customers with these practices as well Sometimes modifying a product or tailoring customer service to meet the needs of these customers can go a long way toward rebuilding a relationship

USING INTERACTIVE AND SOCIAL MARKETING TO BUILD RELATIONSHIPS

Today's technology allows people to transmit memos, reports, and drawings quickly and inexpensively over phone lines, cables, or wireless devices People can subscribe to personalized news services that deliver article summaries on specified topics directly to their computers or cell phones They can communicate via email, voice mail, text messages, fax, videoconferencing, and computer networks; pay bills using online banking services; and use online resources to get information about things such as theatre events or a local Ford dealer's special sale As an increasing number of Internet users use wireless devices such as

smartphones or notebook computers to access the Web and check their email; the stage is set for mobile

marketing —marketing messages transmitted via wireless technology

Interactive media technologies combine computers and telecommunications resources to create software that users can control Putting power into the hands of customers allows better communication, which can build

relationships Interactive marketing refers to buyer–seller communications in which the customer controls

the amount and type of information received from a marketer This technique provides immediate access to key product information when the consumer wants it, and it is increasingly taking place on social media sites such as Facebook,

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Twitter, and blogs Social marketing is the use of online social media as a communications channel for

marketing messages Social media is now the top online activity, and it's estimated that if Facebook were a country, it would be the fourth most populous in the world.35 In one recent year, 50 million users posted 8 billion tweets on Twitter.36 Following the death of Osama bin Laden, messaging hit 5106 tweets per second

at times during the surge that lasted more than four hours Tweets during Britain's royal wedding peaked at

3966 tweets per second, but reached 6939 tweets per second when New Year's 2011 arrived in Japan, and a record

7196 game-related messages per second during the 2011 Women's World Cup soccer final between the United States and Japan.37 More than half the Fortune 100 companies have joined Twitter, and almost a third use Facebook and blogs One Nielsen executive called social media “a catalyst for fresh thinking on how companies can improve customer service.”38

Interactive marketing allows marketers and consumers to customize their communication Customers may come to companies for information, creating opportunities for one-to-one marketing They also can tell the company what they like or dislike about a product, and they can just as easily click the exit button and move

on to another area As interactive promotions grow in number and popularity, the challenge is to attract and hold consumer attention “We can be more intimate with our marketplace customers and peers,” says the

president of the International Social Media Association “Consumers are developing the expectation that companies are going to be more available and respond more quickly, that people are listening.”39

One small business making good use of social media is Lou Dawg's Southern Sandwiches in Toronto owner Daryl D'Souza tried a print campaign, food drops to radio stations, begging for reviews, and handing out sample smoked chicken wings, but sales flatlined soon after his business opened He recently started twittering on his iPhone, announcing new menu items and providing secret words that followers could use in the restaurant for free food Sales jumped 22 percent in only a few months.40 Kodak uses social media to accomplish what it calls “the 4 E's”: engage, educate, excite, and evangelize Says a company executive,

Co-“You have to create communication that engages the customer Everyone talks about traditional ROIs [return

on investment], but I talk about the new one, ‘Return on Ignoring.’ If you are ignoring this stuff, I can

guarantee you are losing a fantastic business opportunity.”41

Social media also allow larger exchanges in which consumers communicate with one another using email or social networking sites These electronic conversations can establish innovative relationships between users and the business, providing customized information based on users’ interests and levels of understanding

By converting indifferent customers into loyal ones, companies generate repeat sales The cost of

maintaining existing customers is far below the cost of finding new ones, and these loyal customers are profitable Some of the best repeat customers are those who are also willing to spread the word—create a

buzz—about a product Buzz marketing can be very effective in attracting new customers by bridging

MARKETING IN A DIGITAL WORLD: Canada Goos Up Google Maps

HAVE you ever wanted to egg somebody's house–or even your school? Well, Kraft Canada and Google Maps have partnered to allow you to do that, virtually You can smother homes, buildings, parks, and

monuments with egg goo But don't use real eggs; they are expensive and can get you in trouble Go online and smother your chosen target with virtual goo from Cadbury Creme Eggs

In a marketing campaign for their Easter Creme Eggs, Kraft Canada created a website where visitors could catapult an egg to hit a target of their choice Visitors first select a destination on Google Maps as a target, pull back the catapult, launch an egg through the sky, and watch as it plummets to earth, smothering their chosen target in egg goo Visitors are then encouraged to share their experience with others through email, Facebook, and Twitter

The online campaign received about 140 000 visits between its launch in late February and the following Halloween, a clear marketing success The application was also shared 3000 times on Facebook, tweeted about 300 times, and was mentioned on approximately 100 blogs Mackenzie Davison, director of

marketing, shares why he believes the online campaign has been a success: “It's very consistent with the brand itself Creme Eggs are all about fun and the gooey filling….”

So next time you want to egg something, visit www.returnofthegoo.ca

Sources: Matt Semansky, “Cadbury Goos Up Google Maps,” Marketing, March 24, 2011; Kraft Canada

website, http://www.returnofthegoo.ca/en/#/launch , July 11, 2011

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QR codes, such as the one shown in this advertisement, are becoming increasingly popular as Canadian companies seek to market in a digitally connected world COURTESY OF CHâTEAU DES CHARMES

the gap between a company and its products Companies as diverse as Microsoft and KFC have tapped customers to create a buzz about their products Firms that make the most efficient use of buzz marketing warn that it is not a “one-way” approach to building customer relationships Buzz can be purely visual, too

“Visual buzz,” according to one marketing strategist, is “not only about telling, but more and more about showing You see a Nike poster in a friend's dorm room; perhaps you don't even talk about it, but you

noticed it.” A prime example, the strategist says, is Lance Armstrong's Live Strong bracelet

Effective relationship marketing often relies heavily on information technologies such as computer databases that record customers’ tastes, price preferences, and lifestyles This technology helps companies become one-to-one marketers who gather customerspecific information and provide individually customized goods and services The firms target their marketing programs to appropriate groups rather than relying on mass-marketing campaigns Companies that study customer preferences and react accordingly gain distinct

competitive advantages

DEVELOPING PARTNERSHIPS AND STRATEGIC ALLIANCES

Relationship marketing does not apply just to individual consumers and employees It also affects a wide range of other markets, including business-to-business relationships with the firm's suppliers and distributors

as well as other types of corporate partnerships In the past, companies have often viewed their suppliers as adversaries against whom they must fiercely negotiate prices, playing one off against the other But this attitude has changed radically, as both marketers and their suppliers discover the benefits of collaborative relationships

The formation of strategic alliances is also on the rise A recent PriceWaterhouseCoopers survey of 1200

executives in 69 countries reported that half of them expected to enter into a joint venture or strategic

alliance within a year.42 Alliances take many forms, including product-development partnerships that involve shared costs for research and development and marketing, and vertical alliances in which one company provides a product or component to another firm, which then distributes or sells it under its own brand Many alliances are formed simply to exploit competitive advantage TransForce and DHL Express Canada announced a 10year strategic alliance to provide a fully integrated shipping and logistics service

Transforce—through its subsidiary Loomis Express—would take over DHL Express Canada's domestic business, providing efficiencies through increased scale The partnership also would allow it to provide better international services for its Canadian customers DHL Express Canada would be able to focus on its core competency—international express—and to provide better service within Canada for its global

customers The two companies launched an integrated advertising campaign entitled “The Power of 2” to

communicate how the alliance would “bring Canadian businesses the most powerful delivery service in Canada, and the world.”43

Assessment Check 6

6.1 How does relationship marketing give companies a competitive edge?

6.2 Why are interactive and social marketing important tools for marketers?

6.3 What is a strategic alliance?

Not-for-profit organizations often make use of strategic alliances to raise awareness and funds for their causes or to achieve their goals Thrifty Foods, with its Food for Families campaign, raised $200 000 for Vancouver food banks Sobeys’ Ontario's Annual Charity Golf Tournament raised $50 000 to support the Boys and Girls Club of Canada IGA stores in Quebec partnered with suppliers to raise $350 000 to support the Montreal Heart Institute Foundation Sobeys, Price Chopper, and Foodland raised $68 000 to support child nutrition programs throughout Atlantic Canada.44 These are just some examples of how the Sobeys group of companies partnered with more than 800 communities they serve across Canada

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Costs and Functions of Marketing

7 Identify the universal functions of marketing

Firms must spend money to create time, place, and ownership utilities Numerous attempts have been made

to measure marketing costs in relation to overall product costs, and most estimates have ranged between 40 and 60 percent of total costs On average, onehalf of the costs involved in a product, such as a Subway sandwich, a Toyota Prius, or a financial planning lecture, can be traced directly to marketing These costs are not associated with wheat, metal, or other raw materials Nor are they associated with baking, welding, or any of the other production functions necessary for creating form utility What functions does marketing perform, and why are they important in creating customer satisfaction?

As Figure 1.3 reveals, marketing is responsible for the performance of eight universal functions: buying, selling, transporting, storing, standardizing and grading, financing, risk taking, and securing marketing information Some functions are performed by manufacturers, others by marketing intermediaries such as retailers or wholesalers (described in Chapter 12)

Buying and selling represent exchange functions Buying is important to marketing on several levels

Marketers must determine how and why consumers buy certain goods and services To be successful, they must try to understand consumer behaviour In addition, retailers and other intermediaries must seek out products that will appeal to their customers Marketers must also anticipate consumer preferences for

purchases to be made several months later Selling is the second half of the exchange process It involves advertising, personal selling, and sales promotion in an attempt to match the firm's goods and services to consumer needs

Transporting and storing are physical distribution functions Transporting involves physically moving goods from the seller to the purchaser Storing involves warehousing goods until they are needed for sale

Manufacturers, wholesalers, and retailers all typically perform these functions

The final four marketing functions—standardizing and grading, financing, risk taking, and securing

marketing information—are often called facilitating functions because they help the marketer perform the exchange and physical distribution functions Quality and quantity control standards and grades, frequently established by government, reduce the need for purchasers to inspect each item For example, if you request

a certain size tire for your automobile, you expect to get it

Financing is another marketing function because buyers often need access to funds to finance inventories prior to sales

Manufacturers often provide financing for their wholesale and retail customers Some types of wholesalers perform similar functions for their markets Finally, retailers frequently allow their customers to buy on credit, with either store charge cards or major credit cards

The seventh function, risk taking, is part of most ventures Manufacturers create goods and services based on research and their belief that consumers need them Wholesalers and retailers acquire inventory

Figure 1.3 Eight Universal Marketing Functions

7.1 Which two marketing functions represent exchange functions?

7.2 Which two functions represent physical distribution functions?

7.3 Which four functions are facilitating functions?

The final marketing function involves securing marketing information Marketers gather information about potential customers—who they are, what they buy, where they buy, and how they buy By collecting and analyzing marketing information, marketers can understand why consumers purchase some products while passing others by This information also helps determine what consumers want and need—and how to offer goods and services to satisfy them So marketing is the direct connection between a firm and its customers, the link that helps build and maintain lasting relationships

Ethics and Social Responsibility: Doing Well by Doing Good

8 Demonstrate the relationship among ethical business practices, social responsibility, sustainability, and marketplace success

Ethics are moral standards of behaviour expected by a society Most companies do their best to abide by an

ethical code of conduct, but sometimes organizations and their leaders fall short Several years ago, energy giant Enron collapsed, taking with it the retirement savings of its employees and investors In another

scandal, executives from Tyco were convicted of using millions of company dollars for their personal

benefit And chemical manufacturer Monsanto was convicted not only of polluting a rural area's water

sources and soil for decades but also of ignoring evidence its own scientists had gathered indicating the

extent and severity of the pollution Ethics matters in the public sector, too Some see ethical concerns in the government's use of full-body scans at Canadian airports; see the “Solving an Ethical Controversy” feature for a discussion of the issues

Most businesspeople do follow ethical practices Over half of all major corporations now offer ethics

training to employees, and most corporate mission statements include pledges to protect the environment, contribute to communities, and improve workers’ lives This book encourages you to follow the highest ethical standards throughout your business and marketing career

Social responsibility includes marketing philosophies, policies, procedures, and actions whose primary

objective is to enhance society and protect the environment through sustainable products and practices As the chapter opener pointed out, Walmart, for society and protect the environment through sustainable

products and practices As the chapter opener pointed out, Walmart, for instance, has made great strides in reducing its use of energy in its stores Social responsibility often takes the form of philanthropy, making gifts of money or time to humanitarian causes Many firms, both large and small, include social

responsibility programs as part of their overall mission These programs often produce such benefits as improved customer relationships, increased employee loyalty, marketplace success, and improved financial performance

Sustainable products , which can be produced, used, and disposed of with minimal impact on the

environment, are another goal of socially responsible firms Many such firms have added annual

sustainability reports and a top-level executive position to develop and promote their sustainability efforts One such executive is DuPont's chief sustainability officer, Linda Fisher, who says about the challenges DuPont faces in furthering its environmentally friendly efforts, “What our customers and their customers are looking for are products that are greener, more energy-efficient, but they'd like to keep the same price point

So they're demanding more… Those are real cost issues and market issues… It really is trying to balance the needs of industry and the economy with the needs of the environment The two objectives tug at each other.” But, says Fisher, given such basic factors as world population growth, “the fact is, we're going to have to become much more productive, and we need to do that in a sustainable way.”45

What is the role of marketing in sustainability efforts? According to Fisher, “The folks we hire in marketing have a real interest in marketing around sustainability Our public affairs and communications people are very involved… No matter where you want to work, you can find an opportunity around sustainability.”46 Other sustainability and social responsibility officers agree that sustainability must permeate the firm's corporate strategy from the top down, so all areas in the firm can align their

Marketoid

Ninety-one percent of Canada's 2010 Best Employers report that the environment is one of their top drivers

of social corporate responsibility

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SOLVING AN ETHICAL CONTROVERSY: Airport Scanners Show All Your Bumps and Curves

FULL-body scanners, fairly common in European and U.S airports and train stations, have now come into wide use at security checkpoints in many Canadian airports At a cost of about $250 000 each, the machines blur facial images and project chalk-like outlines of the body to reveal plastic or chemical explosives and weapons hidden in clothing or on the body that would elude a metal detector

There are 41 full-body scanners in use in Canadian airports, mostly for secondary screening when a

passenger sets off a metal detector No one argues that airline travel should not be as safe as airlines and governments can possibly make it How to do so, however, is a question that brings security and privacy needs into apparent conflict for some

Can governments encourage public support of full-body scans without endangering privacy rights?

PRO

Scanning requires only that passengers stand in the screening room, fully clothed, for about five seconds, and the machines can neither store images nor print them

Because of the way tasks are assigned at screening locations, no security officer is able to both view the image and interact with the passenger

CON

Full-body scans are revealing, invasive, and undignified

In addition to privacy concerns, scanning is a reactive move terrorists will quickly find their way around, and one that wastes millions of dollars better spent on preventive measures like better intelligence Where do you stand: pro or con?

Source: Transport Canada, “Full Body Scanners at Major Canadian Airports,”

products.”48 Some firms that have recently won praise for their efforts to eliminate dangerous or polluting ingredients in their products include Nokia and Sony Ericsson Nokia, for instance, offers a recycling

program with “takeback service” in 85 countries “As we take our environmental responsibilities very

seriously, it is of course rewarding to see our environmental efforts acknowledged in various rankings,” said Nokia's head of sustainability The environmental advocacy group Greenpeace recently gave high marks to Apple, which it has criticized in the past “Apple beat all the other brands in removing polyvinyl chloride (PVC) and brominated flame retardants (BFRs) from all its products almost two years ahead of HP and the rest of the PC sector,” the organization's report said “Apple has demonstrated that there are no technical barriers to substituting PVC and BFRs with safer alternatives in smartphones, iPods, PCs, and TVs.”49

Assessment Check 8

8.1 Define ethics

8.2 What is social responsibility?

8.3 What are sustainable products?

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Strategic Implications

Unprecedented opportunities have emerged from electronic commerce and computer technologies in

business today These advances and innovations have allowed organizations to reach new markets, reduce selling and marketing costs, and enhance their relationships with customers and suppliers Thanks to the Internet and social media tools, business has grown into a global market

Both profit-seeking and not-for-profit organizations must broaden the scope of their activities to prevent myopic results in their enterprises If they fail to do so, they lose out on promising opportunities

Marketers must constantly look for ways to create loyal customers and build long-term relationships with those customers, often on a one-to-one basis They must be able to anticipate customer needs and satisfy them with innovative goods and services They must be able to do this faster and better than the competition And they must conduct their business according to the highest ethical and sustainability standards

Marketing: The Art and Science of Satisfying Customers: Review of Chapter Objectives

Define marketing, explain how it creates utility, and describe its role in the global marketplace

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 Utility is the want-satisfying power of a good or service Four basic kinds of utility exist: form, time, place, and ownership Marketing creates time, place, and ownership utilities Three factors have forced marketers to embrace a global marketplace: expanded international trade agreements; new technologies that have brought previously isolated nations to the marketplace; and greater interdependence of the world's economies

Contrast marketing activities during the four eras in the history of marketing

During the production era, businesspeople believed that quality products would sell themselves The sales era emphasized convincing people to buy The marketing concept emerged during the marketing era, in which there was a company-wide focus on consumer orientation with the objective of achieving long-term success The relationship era focuses on establishing and maintaining relationships between customers and suppliers Relationship marketing involves long-term, value-added relationships

Explain the importance of avoiding marketing myopia

Marketing myopia is management's failure to recognize a company's scope of business It focuses marketers too narrowly on Marketing myopia is management's failure to recognize a company's scope of business It focuses marketers too narrowly on products and thus misses potential opportunities to satisfy customers To avoid it, companies must broadly define their goals so they focus on fulfilling consumer needs

Describe the characteristics of not-for-profit marketing

Not-for-profit organizations operate in both public and private sectors The biggest distinction between for-profits and commercial firms is the bottom line—whether the firm is judged by its profitability levels Not-for-profit organizations may market to multiple publics A customer or service user of a not-for-profit organization may have less control over the organization's destiny than do customers of a profit-seeking firm In addition, resource contributors to not-for-profits may try to exert influence over the organization's activities Not-for-profits and for-profits may form alliances that effectively promote each other's causes and services

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Identify and briefly explain each of the five types of nontraditional marketing

Person marketing focuses on efforts to cultivate the attention, interest, and preferences of a target market toward a celebrity or noted figure Place marketing attempts to attract visitors, potential residents, and

businesses to a particular destination Cause marketing identifies and markets a social issue, cause, or idea Event marketing promotes sporting, cultural, charitable, or political activities

Organization marketing attempts to influence others to accept the organization's goals or services and

contribute to it in some way

Explain the shift from transaction-based marketing to relationship and social marketing

Relationship marketing represents a dramatic change in the way companies interact with customers The focus on relationships gives a firm new opportunities to gain a competitive edge by moving customers up a loyalty ladder from new customers to regular purchasers and then to loyal supporters and advocates Over the long term, this relationship may be translated to the lifetime value of a customer Interactive technologies and social marketing (via Facebook, Twitter, and the like) allow marketers direct communication with customers, permit more meaningful exchanges, and put the customer in control Organizations may form

partnerships—called strategic alliances—to create a competitive advantage These alliances may involve

product development, raising awareness, and other activities

Identify the universal functions of marketing

Marketing is responsible for eight universal functions, divided into three categories: (1) exchange functions (buying and selling); (2) physical distribution (transporting and storing); and (3) facilitating functions (standardization and grading, financing, risk taking, and securing market information)

Demonstrate the relationship among ethical business practices, social responsibility, sustainability, and marketplace success

Ethics are moral standards of behaviour expected by a society Companies that promote ethical behaviour and social responsibility usually produce increased employee loyalty and a better public image This image often pays off in customer growth, since many buyers want to associate themselves with—and be customers of—such firms Social responsibility involves marketing philosophies, policies, procedures, and actions whose primary objective is the enhancement of society and the protection of the environment through sustainable products and practices These actions also generally promote a firm's public image

Marketing: The Art and Science of Satisfying Customers: Assessment Check Answers

1.1 Define marketing and explain how it creates utility

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 It creates time, place, and ownership

utilities

1.2 What three factors have forced marketers to embrace a global marketplace?

International agreements are being negotiated in attempts to expand trade among nations The growth of technology is bringing previously isolated countries into the marketplace The interdependence of the world's economies is now a reality

What is the major distinction between the production era and the sales era?

During the production era, businesspeople believed that quality products would sell themselves But during the sales era, emphasis was placed on selling—persuading people to buy

What is the marketing concept?

What is the marketing concept?

The marketing concept is a company-wide consumer orientation with the objective of achieving long-term success

Describe the relationship era of marketing

The relationship era focuses on building long-term, value-added relationships over time with customers and suppliers

What is marketing myopia?

Marketing myopia is management's failure to recognize the scope of a company's business

Give an example of how a firm can avoid marketing myopia

A firm can find innovative ways to reach new markets with existing goods and services

4.1 What is the most obvious distinction between a not-for-profit organization and a commercial

4.2 Why do for-profit and not-for-profit organizations sometimes form alliances?

For-profits and not-for-profits may form alliances to promote each other's causes and services For-profits may do so as part of their social responsibility programs

5.1 Identify the five major categories of nontraditional marketing

The five categories of nontraditional marketing are person, place, cause, event, and organization marketing 5.2 Give an example of a way in which two or more of these categories might overlap

Overlap can occur in many ways An organization might use a person to promote its cause or event Two organizations might use one marketing effort to promote an event and a place—for example, NBC Sports and the National Thoroughbred Racing Association combining to promote the Kentucky Derby at Churchill Downs

6.1 How does relationship marketing give companies a competitive edge?

Relationship marketing can move customers up a loyalty ladder, generating repeat sales and long-term relationships

6.2 Why are interactive and social marketing important tools for marketers?

Interactive marketing technologies create direct communication with customers, allow larger exchanges, and put the customer in control Social marketing media (Facebook, Twitter, for example) let companies show customers they are listening and will respond quickly

6.3 What is a strategic alliance?

A strategic alliance is a partnership formed between two organizations to create a competitive advantage 7.1 Which two marketing functions represent exchange functions?

Buying and selling are exchange functions

7.2 Which two functions represent physical distribution functions?

Transporting and storing are physical distribution functions

7.3 Which four functions are facilitating functions?

The facilitating functions are standardization and grading, financing, risk taking, and securing market

information

8.1 Define ethics

Ethics are moral standards of behaviour expected by a society

8.2 What is social responsibility?

8.2 What is social responsibility?

Social responsibility involves marketing philosophies, policies, procedures, and actions whose primary objective is the enhancement of society

8.3 What are sustainable products?

Sustainable products are those that can be produced, used, and disposed of with minimal impact on the environment

Marketing: The Art and Science of Satisfying Customers: Marketing Terms You Need to Know

These terms are printed in red in the text They are defined in the margins of the chapter and in the Glossary that begins on p G-1

utility 5

marketing 6 exchange process 8 production orientation 8 sales orientation 9 seller's market 9 buyer's market 9 consumer orientation 9 marketing concept 9 relationship marketing 11 marketing myopia 12 bottom line 14 person marketing 15 place marketing 15 cause marketing 16 event marketing 16

organization marketing 17 transaction-based marketing 18 mobile marketing 18 interactive marketing

18 social marketing 19 buzz marketing 19 strategic alliances 20 exchange functions 21 ethics 22 social responsibility 22 sustainable products 22

Marketing: The Art and Science of Satisfying Customers: Project and Team Work Exercises

1 Consider each of the following firms and describe how the firm's goods and/or services can create different types of utility If necessary, go online to the company's website to learn more about it You can do this alone or in a team

a Visa, MasterCard, or American Express; Swiss Chalet, Wendy's, Red Lobster, or another restaurant chain b Flickr or another online digital photo service

Calgary Stampede

Amazon.ca

Sobeys, Real Canadian Superstore, Overwaitea, or another grocery store chain

With a classmate, choose a Canadian-based company whose products you think will do well in certain markets overseas Thecompany can be anything from a music group to a clothing retailer—anything that interests you Suggestions include Domino's Pizza, Arcade Fire, Molly Maid, or Lululemon

Athletica Then write a plan for how you would target and communicate with overseas

markets

Choose a company that interests you from the following list, or select one of your own Research the

company online, throughbusiness magazines, or through other sources to learn what seems to be the scope of its business Write a brief description

Delta Hotels and Resorts

Research in Motion (RIM)

Canadian Tire

4 With a classmate, choose one of the following not-for-profit organizations Then come up with a for-profit firm with which you think your organization could form a strategic alliance Create a presentation—an ad, a poster, or the like—illustrating and promoting the partnership

Canadian Cancer Society

Make-A-Wish Foundation of Canada

Habitat for Humanity Canada

Save the Children Canada

Humane Society of Canada

5 Research one of the following electronics companies, or another of your choosing, and study its efforts to improve the sustainability of its products, particularly their safe disposal What does the company do well in this area? What could it do better? a Toshiba

Nintendo

Microsoft

Fujitsu

Samsung

Marketing: The Art and Science of Satisfying Customers: Critical-Thinking Exercises

How does an organization create a customer?

How can marketers use interactive and social marketing to convert needs to wants and ultimately build term relationships with customers?

long-Why is utility such an important feature of marketing?

What benefits—monetary and nonmonetary—do social responsibility programs bring to a business?

Why is determining the lifetime value of a customer an important analysis for a company to make?

Why is it important for a firm to establish high ethical standards for sustainability? What role do you think marketers play in implementing these standards?

Marketing: The Art and Science of Satisfying Customers: Ethics Exercise

You are having lunch with a friend who works for an advertising agency that competes with yours Suddenly

he remembers an errand he has to run before returning to work, and he rushes off with a hasty goodbye after giving you some money to cover his lunch As you gather your things to leave a few minutes later, you realize your friend left his notebook computer on the table, open to a report about a client Your company is very interested in doing some work for this client in the future

Would you take a quick look at the report before you return it to your friend? Why or why not?

Would you share any information in the report with anyone in your office? Why or why not?

When you return the notebook to your friend, would you mention the contents and offer your own

commentary on them?

Why or why not?

Marketing: The Art and Science of Satisfying Customers: Internet Exercises

1 Exploring the CMA's website The Canadian Marketing Association's website contains lots of useful and interesting information for students and others One section is devoted to careers Visit the CMA's website (www.the-cma.org ) Answer the following questions:

Describe the Canadian Marketing Association What is its purpose?

Click on “Find a Job” to visit marketing-jobs.ca Find three marketing jobs you think you would like What

makes these jobs attractive to you?

Click on “Student Membership.” (See Membership Information on right side of page.) What are the benefits

of having a studentmembership?

Event marketing The Westminster Kennel Club runs one of the largest and most famous dog shows in the world Review its website (www.westminsterkennelclub.org ) and prepare a brief report relating what you learned to the material on event marketing in the chapter Make sure to describe sponsor tie-ins and other joint marketing efforts

Sustainability Johnson and Johnson engages in a major effort to incorporate sustainability into its ranging business activities Visit the website listed here (www.jnj.com/connect/caring/environment-

wide-protection ) and read about the firm's recent activities How does Johnson and Johnson promote

sustainability? What are some specific examples?

Note: Internet web addresses change frequently If you don't find the exact sites listed, you may need to access the organization's or company's home page and search from there or use a search engine such as Google

P 27

Marketing: The Art and Science of Satisfying Customers: Case 1.1: Reinventing IBM

IBM's successful management of globalization and technological change amounts to a reinvention of the company known as “Big Blue.” A firm whose original name was International Business Machines and that relied nearly exclusively on computer manufacturing is now turning to software and services to provide it with a competitive edge in today's marketplace To increase its margins, IBM first reduced its costs, in part

by hiring lower-cost labour in India to run its data centres and to help its customers maintain their IBM software products Big Blue also addressed flattening profits in its service businesses by automating as many tasks as possible Its senior vice-president for global business services says, “The goal is to replace a lot of labour but to do it with software, not … with lower-cost labour.”

The firm is also looking for profits in the higher-margin software sphere “Software had to play a bigger role,” says CEO Samuel Palmisano “Then we could offset the transition in services.” To achieve its goals, IBM bought more than 50 smaller software and service companies that specialized in security, data

management, and e-commerce IBM Canada employs the largest team of software developers outside the United States Offices in Victoria, Vancouver, Edmonton, London, Markham, Ottawa, and Montreal are collectively known as the IBM Canada Lab, where software solutions are developed for customers around the world “Software is now the largest provider of IBM profit, and our most stable source of growth,” says the company's chief financial officer

Higher-end services are proving profitable for IBM in new fields like energy management and conservation, fraud detection, traffic management using variable-pricing models, personalized medicine based on genetics,

and Internet-based supercomputing known as cloud computing, which many believe is the next step in

information technology Blue Cloud, as IBM's supercomputing initiative is known, relies on open-source programming but will ultimately help sell more IBM software, hardware, and services that assist corporate clients to become more efficient, reduce power usage, and save costs IBM Canada's manufacturing plant in Bromont, Quebec, is the company's largest semiconductor packaging and test facility Besides IBM

products, this plant also performs custom assembly and testing for many original equipment manufacturers (OEMs) In total, IBM Canada exports nearly $2 billion annually in hardware, software, and services,

making it one of Canada's largest exporters

IBM is also tackling social media, testing in-house versions of networking and blogging tools like Facebook and Twitter It currently uses them to connect and strengthen links among its 400 000 far-flung employees and work teams, but it also hopes they will attract bright new hires And farther down the line, IBM hopes products like its new Atlas Connections, which digests email and chat content to help users build networks

of contacts, will become industry-leading innovations that also become profitable The company maintains that Atlas Connections is already “the fastest-growing software product in IBM history.”

And Big Blue still hopes to challenge Microsoft in the office software arena It's joined forces with Google and Sun Microsystems to offer free alternatives to Microsoft's popular Word, Excel, and PowerPoint

programs

Questions for Critical Thinking

How do IBM's plans for its goods and services meet the definition of marketing? How do you think they help create utility?

IBM has linked partnerships with Google and Sun Microsystems What other partnerships do you think might be useful to its future plans? Why?

Sources: Company website, “IBM: Helping Canada and the World Work Better,”

http://www.ibm.com/ibm/ca/en/ , May 13, 2011;

“IBM Social Computing Guidelines,” http://www.ibm.com , April 16, 2009; Stephen Baker, “Big Blue Embraces Social Media,”

Business Week, http://www.businessweek.com , May 22, 2008; Steve Lohr, “IBM to Push ‘Cloud

Computing,’ Using Data from Afar,”

The New York Times, http://www.nytimes.com , November 15, 2007; Steve Lohr, “IBM to Offer Office

Software Free in Challenge to The New York Times, http://www.nytimes.com , November 15, 2007; Steve Lohr, “IBM to Offer Office Software Free in Challenge to Microsoft's Line,” The New York Times,

http://www.nytimes.com , September 18, 2007; Steve Lohr, “IBM Showing That Giants Can Be Nimble,”

The New York Times, http://www.nytimes.com , July 18, 2007

Marketing: The Art and Science of Satisfying Customers: Case 1.2: Hewlett-Packard Reduces, Reuses, Recycles

Hewlett-Packard (HP), the world's largest information technology (IT) company, was founded in 1939 and ranks among the top 10 of the Fortune 500 HP operates in more than 170 countries and earned revenues of more than $126 billion in 2010 Its products range from small, hand-held devices to giant supercomputers and fall into three main business groups: Personal Systems, which includes PCs, workstations, and mobile computing devices; Enterprise Business, including storage devices, servers, and business software; and Imaging and Printing, encompassing inkjet and laser printers, commercial printing services, and printing supplies

P 28

For its leadership role in reporting and reducing its greenhouse-gas emissions, HP was recently named the

“Greenest Big Company in America” by Newsweek magazine In 2010, Mediacorp placed HP Canada on its

list of Canada's Greenest Employers; this was the second consecutive year HP Canada made the list HP has long been focused on contributing to each country and community in which it operates by reducing waste, raising standards among its global suppliers, and easing access to information technology around the world Seeing itself as a “global steward,” the firm recycles HP ink cartridges for free and accepts any brand of computer hardware and rechargeable batteries for recycling in the United States and Canada In partnership with the National Cristina Foundation in the United States, HP also accepts used computer equipment for donation, as well as equipment for trade-in and resale, to reduce electronic waste

“Recycling technology equipment is a win–win situation for everybody,” HP believes “It is good for the planet and good for business.” In one recent year, the firm recycled more than 67 000 tonnes of hardware and print cartridges around the world, and it hopes soon to have recycled more than 800 000 tonnes of electronic products and supplies The company estimates that in 2010, it has used more than 4.7 million kilograms of recycled plastic in the manufacture of its consumer printers HP Canada has engaged retailers and provincial governments across the country to implement end-of-life electronics programs to divert waste electronics from landfill sites As a result, more than 100 000 tonnes of waste electronics have been diverted from Canadian landfill sites

HP's scientists estimate that businesses’ use of technology consumes more than 350 million tonnes of coal each year, emitting more than twice that amount in the form of carbon dioxide waste “We cannot continue

to consume energy at our current rates,” the company's website says As part of its Design for the

Environment strategy, HP's corporate phones and laptops use less energy thanks to displays that use ambient light, and soon the firm hopes to reduce the energy consumption and greenhouse-gas emissions of all its operations and products to 40 percent below their 2005 levels It has already met its 2010 goal to reduce them to 25 percent below 2005 levels, and it is moving forward with plans to invest in renewable energy sources and to make it even easier to recycle every one of its products The company opened a new data centre in Wynyard, U.K., in 2010 that is expected to reduce energy consumption by 40 percent, cut

greenhouse gas emissions, and save upwards of $15 million annually Leading-edge energy savings devices are also incorporated in its Canadian head office in Mississauga, Ontario A building automation system monitors conditions inside the building and adjusts the heating and cooling systems to best conserve energy

In most offices, sensorcontrolled lights turn off automatically when there is no motion detected after about

20 minutes Outside, a “smart” lawn irrigation system detects weather conditions and will not operate if rain

administrators can even manage a whole network of computers with Power Assistant, customizing the

machines to go into energy-saving hibernate mode sooner, for instance Future laptops and desktops from

HP will boast the same innovative feature “The way we see it,” says HP, “environmental responsibility and business success go hand in hand

Questions for Critical Thinking

What kind(s) of marketing utility do you think Hewlett-Packard's sustainability efforts provide for its

customers? Are there any downsides to these programs?

HP has entered a partnership with the National Cristina Foundation in the United States to accept used computer equipment for donation What other partners, or types of partners, might help the company achieve its sustainability goals in the future?

Sources: Company websites, “Changing the Equation” and “HP Environmental Citizenship Milestones,” http://www.hp.com/canada/corporate/hp_info/environment/index.html , May 13, 2011; “Canadian

Companion to the Global Citizenship Report,”

http://www.hp.com/canada/corporate/hp_info/environment/news/awards.html , May 13, 2011;

http://www.hp.com , February 23, 2010; “HP and the Environment,” DestinationGreenIt,

http://www.destinationgreenit.com , November 16, 2009; Agam Shah, “HP Green Laptops to Cut Power Usage,” TechWorld, http://news.techworld.com , October 13, November 16, 2009; Agam Shah, “HP Green Laptops to Cut Power Usage,” TechWorld, http://news.techworld.com , October 13, 2009; “Hewlett-Packard Sets New GHG Emission Reduction Target,” EcoSeed, http://www.ecoseed.org , September 22, 2009;

Daniel McGinn, “The Greenest Big Companies in America,” Newsweek, http://www.newsweek.com ,

Jamie Sturgeon, “Skype Offers Free Cellphone Service App,” Postmedia News, September 9, 2009

Vince Knightley, “Electronic Reading Devices Reviews—3 Different Ebook Readers to Compare Before You Buy,” Artipot,http://artipot.com, January 2, 2010

Golf Without Limits website, www.golfwithoutlimits.com, accessed July 28, 2011

Mark Anderson, “A New Spin on an Old Toy,” IEEE Spectrum, http://spectrum.ieee.org, November 2009 Joseph P Guiltinan and Gordon W Paul, Marketing Management, 6th ed (New York: McGraw-Hill), 1996,

Karl Gerth, As China Goes, So Goes the World (New York: Hill and Wang, 2010), pp 24, 27

Statistics Canada, “International Merchandise Trade: Annual Review 2010,” Catalogue 65-208-X

Steve Lohr, “Steve Jobs and the Economics of Elitism,” New York Times, www.nytimes.com, January 29,

2010

Gregory Polek, “UAL Finalizes Boeing 787 Order,” AINonline, www.ainonline.com, February 25, 2010; Boeing website, “Boeing787 Dreamliner Will Provide New Solutions for Airlines, Passengers,”

www.boeing.com, accessed March 3, 2010

“Wirefly's Top 10 Best Selling Phones of ’09 and Wireless Trends ’10,” Wirefly, www.wirefly.com, January

26, 2010

Brennon Slattery, “Apple's Future Is in Solar-Powered Devices,” PC World, www.pcworld.com, January 22,

2010

Imagine Canada website, www.imaginecanada.ca/node/32, accessed July 28, 2011

SickKids Foundation news archives, “SickKids Has 10 Million Reasons to Be

Thankful,”www.sickkidsfoundation.com/news/NewsWalmart.asp, accessed July 28, 2011

Food Banks Canada website, http://foodbankscanada.ca/aboutus.htm and

http://foodbankscanada.ca/fooddonors.htm, accessedJuly 28, 2011

Canadian Red Cross, “Canadian Red Cross Sends $5 Million to Japan Donated by Generous Canadians,” news release, availablewww.redcross.ca/article.asp?id=38530&tid=001, accessed July 28, 2011; Salvation Army, “Helping Hand from Telus,” March 31, 2011, www.salvationarmy.ca/?s=Japan&x=9&y=15,

accessed July 28, 2011

M&M Meat Shops website, www.mmmeatshops.com/en/aboutmm/donations.asp, accessed July 28, 2011 Rafe Needleman, “Piryz Raises Money for Your Cause,” CNET News, http://news.cnet.com, September 22,

2009

“Cause Awareness Calls for Promo Products,” Virgo Publishing, www.corporatelogo.com, October 13,

2009 25 Jane Taber, “Why Voters Elected the NDP's ‘Vegas Girl’ Anyway,” The Globe and Mail, May 5,

2011, anyway/article2010885, accessed July 28, 2011

www.theglobeandmail.com/news/politics/ottawa-notebook/why-voterselected-the-ndps-vegas-girl-Kate Lunau, “Marketing: Pretty Valuable Faces: How Spending Millions to Reveal Celebrities’ Pimple Problems Has TurnedProactiv into an International Bestseller,” Maclean's, February 7, 2011, p 42

“Manning Brothers and ‘Double Trump’ Face-off for the Future of the Oreo Double Stuf Racing League,” Market Watch,www.marketwatch.com, January 12, 2010; Barry Janoff, “Eli Manning Already Scoring off MVP Showing,” BrandWeek, February 6, 2008, www.brandweek.com; Tim Arango, “Top 10 Endorsement Superstars,” Fortune, November 2007, http://money.cnn.com, accessed September 29, 2008; Tim Arango,

“LeBron Inc.,” Fortune, November 28, 2007, http://money.cnn.com, accessed September 29, 2008

Neal Karlinsky and Eloise Harper, “Law Vegas Gambles on $8.5 Billion CityCenter,” ABC News,

http://abcnews.com, December16, 2009

Scott Simpson, “Canadian Visitors Feeling Right at Home in U.S Destinations; On the Flip Side, Tourism Vancouver Officials AreAlso Expecting Solid Results for 2011,” Vancouver Sun, April 26, 2011, p 1 Brent Jang, “Canada Lagging in Fight for Tourist Dollars,” The Globe and Mail, November 2, 2010, p 7 Scott Deveau, “Number of Chinese Tourists Taking Flight; ‘Huge Opportunity’; China to Drive Increase in Global Air Travel,”National Post, February 15, 2011, p 5

Staples Canada website, www.staples.ca/ENG/Static/static_pages.asp?pagename=soulcommunity, accessed July 28, 2011

Thomas Alan Gray, “Official Suppliers at Vancouver 2010,” Marketing PR, www.suite101.com, September

30, 2009

Melissa Martin, “New Friends’ CEO Says $25-M Goal Attainable,” Winnipeg Free Press, April 16, 2011, p

17

John H Ostdick, “Embracing Social Media,” Success, March 2010, pp 65–69

Spencer E Ante, “The Real Value of Tweets,” Bloomberg Businessweek, January 18, 2010, p 31

“Terror Leader's Death Prompts Tweeting Frenzy Says Company,” Calgary Herald, May 3, 2011, p 2; Cathal Kelly, “TwitterConfirms You Were Right to Care,” Toronto Star, July 19, 2011, p 3

John Moore, “Four Big Ideas Influencing Marketing in 2010,” Promo, www.promomagazine.com,

December 17, 2009

John Moore, “Four Big Ideas Influencing Marketing in 2010,” Promo, www.promomagazine.com,

December 17, 2009

Ostdick, “Embracing Social Media.”

Emmanuel Samoglou, “His Customers Are All a-Twitter About His Offers: Barbecue Restaurant Boss Uses Twitter, FoursquareApp to Build Relationships and Drive His Sales,” Toronto Star, May 5, 2011, p 1 Ostdick, “Embracing Social Media.”

Steve Brearton, “Sounding Out the CEOs,” The Globe and Mail, February 26, 2011, p 9

TransForce website, “TransForce Inc and DHL Express Canada to Offer Fully Integrated Transportation Solutions to CanadianBusinesses,” available www.transforcecompany.com/pr/2011/20110429E.asp,

Chapter 2 : Strategic Planning in Contemporary Marketing

(pp 30-69)

Distinguish between strategic planning and tactical planning

Explain how marketing plans differ at various levels in an organization

Identify the steps in the marketing planning process

Describe successful planning tools and techniques, including Porter's Five Forces model, first and second mover strategies, SWOTanalysis, and the strategic window

Identify the basic elements of a marketing strategy

Describe the environmental characteristics that influence strategic decisions

Describe the methods for marketing planning, including business portfolio analysis, the BCG market

share/market growth matrix,and the strategic growth opportunity matrix

P 30 AFEXA LIFE SCIENCES: ITS DOWNS AND UPS

In 1996, CV Technologies (CVT) had a virtually unknown product: COLD-FX, a ginseng-derived remedy for the common cold and flu It was sold in only a few health food stores until the Edmonton Oilers, who were using it, agreed to take part in a research study of the product's effectiveness Unfortunately, by 2003 CVT was almost bankrupt—revenue was a mere $1.5 million, with a loss of $1.8 million—and had to cut back operations severely

Although things looked bleak, CVT hired a public relations professional As a result, publicity about the product proliferated Sales grew rapidly, and the company outsourced some manufacturing to meet demand

In 2004, Don Cherry of Hockey Night in Canada became a celebrity spokesperson, and comedian Rick

Mercer plugged the product on the Rick Mercer Report Participating retail merchants increased from 1000

to 4000, and sales grew to $6.4 million Marketing expenses were $1.3 million The company made a small profit and described 2004 as its “breakout year.”

Favourable publicity continued throughout 2005 CVT won an entrepreneur of the year award and was

chosen as one of the 50 fastest-growing companies in Canada CVT opened a Toronto sales and marketing

Strategic Planning in Contemporary Marketing: Chapter Objectives

COURTESY OF AFEXA LIFE SCIENCES INC

CHAPTER OBJECTIVES

office and entered the Quebec market, where it benefited from an association with the Montreal Canadiens Distribution grew and sales quintupled

In 2006, CVT started to focus on the U.S market, as customers prepared for the 2006 cold and flu season But U.S sales were very disappointing, and many U.S retailers returned inventory Sales increased to $41.4 million, but marketing costs were $8.3 million Profit was a mere $639 thousand In 2007, U.S sales were disappointing Many U.S retailers returned inventory Marketing expenses were $16.4 million, including

$10.5 million to support the U.S launch CVT lost $9.8 million In 2008, the company refocused on Canada, creating a national sales organization and developing stronger retailer relationships Revenue increased, partly thanks to a 6 percent price hike, but this was offset somewhat by new promotional sales programs Sales in the United States nearly doubled to $2.1 million despite decreased marketing effort there Return of inventory from the United States was repackaged for sale in Canada, but profit was still reasonable: $4.6 million

In 2009, CVT changed its name to Afexa Life Sciences Inc., expanded sales to Hong Kong and Macau, and introduced a new product: IMMUNITY-FX, a year-round daily immune booster Afexa announced a

sponsorship agreement with the Vancouver Organizing Committee for the 2010 Winter Olympics Revenue was marginally down as retailers reduced inventory in the face of economic uncertainty Profits, however, decreased to only $1.3 million, due to increased sales, administration, and R&D costs

Sales grew in 2010 to $34.4 million, $8.5 million higher than the same period in 2009 (based on only six months of sales data as the company moved its year end from September to March) Management attributed the increase to public concern about a pending flu pandemic Earnings improved to $2.8 million for the six-month period Revenue for 2011 showed a sharp decline to $39.6 million, and Afexa had a loss of nearly a million dollars Retailers were over-stocked from the previous year and there was less concern about a flu pandemic

Where does Afexa go from here? There is room for considerable growth First, while COLD-FX is the market share leader in natural cold remedies, household penetration in Canada is still low Clinical trials are underway on a special formulation of COLD-FX for pediatric use, as well as products related to cancer, diabetes, cholesterol management, and other conditions In the United States, Afexa is considering seeking approval for COLD-FX as a botanical drug, a new category defined by the U.S Food and Drug

Administration If successful, Afexa would be able to make expanded therapeutic health claims and better position itself in that market Afexa is exploring regulatory approval for COLD-FX in China and is assessing market opportunities in Japan and Europe.1

Connecting with Customers

Afexa Life Sciences connects with customers by effectively combining traditional marketing media—radio and television ads, and point-of-purchase displays—with newer promotion techniques: public relations, celebrity endorsements, and word-of-mouth promotion Its attention to quality and the strong endorsements

it gets from athletes, doctors, and pharmacists have created awareness and credibility in all markets where its products are sold

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Strategic Planning in Contemporary Marketing: Chapter Overview

“We have many products at various stages of development How should we prioritize them for

research and development? We also have potential to enter many markets around the world Where are

we likely to be most successful?” “We have fewer customers eating at our restaurant on weekends Should we revamp our menu? Lower our prices? Use special promotions? Update the dining room decor?”

“Recent marketing research shows we are not reaching our customer target—consumers in their early to mid-20s Should we

“Recent marketing research shows we are not reaching our customer target—consumers in their early to mid-20s Should we consider another advertising agency?”

MARKETERS face strategic questions every day—planning strategy is a critical part of the job The

marketplace changes continually in response to changes in consumer tastes and expectations, technological developments, competitors’ actions, economic trends, and political and legal events, as well as product innovations and pressures from suppliers and distributors Although the causes of these changes often lie outside a marketer's control, effective planning can anticipate many of the changes

When the price of gas and jet fuel soared recently, travellers opted to stay closer to home—taking

“staycations” instead of booking vacations to exotic, faraway places This represents an opportunity for places such as Cavendish Beach, Prince Edward Island, and Banff, Alberta Local water parks and

amusement parks, nearby lakes, indoor playgrounds or gyms, and restaurants can market themselves as potential alternatives Any destination that promotes itself to potential vacationers within a short drive could find itself adding up the profits

This chapter provides an important foundation for analyzing all aspects of marketing by demonstrating the importance of gathering reliable information to create an effective plan These activities provide a structure for a firm to use its unique strengths Marketing planning identifies the markets a company can best serve as well as the most appropriate mix of approaches to satisfy the customers in those markets While this chapter focuses on planning, we will examine in greater detail the task of marketing research and decision making in Chapter 7

Marketing Planning: The Basis for Strategy and Tactics

Everyone plans We plan which courses we want to take, which movie we want to see, and which outfit to wear to a party We plan where we want to live and what career we want to pursue Marketers engage in

planning as well Planning is the process of anticipating future events and conditions and of determining the

best way to achieve organizational objectives Of course, before marketing planning can even begin, an organization must define its objectives Planning is a continuous process that includes identifying objectives and then determining the actions through which a firm can attain those objectives The planning process creates a blueprint for marketers, executives, production staff, and everyone else in the organization to follow for achieving organizational objectives It also defines checkpoints so that people within the

organization can compare actual performance with expectations to indicate whether current activities are moving the organization toward its objectives

Planning is important for both large and small companies For years, Sir Richard Branson—founder of the airline Virgin Galactic— dreamed of launching a spaceship designed for commercial travel The dream required complex design and engineering plans, including the launch of prototypes and rigorous rounds of safety testing After one of the prototypes became the first privately owned, manned craft to reach space, the company's engineers went to work on a similar craft designed for commercial use, called SpaceShipTwo Meanwhile, the idea of space travel has been marketed to wealthy clients, 430 of whom have either made a deposit or paid the full $200 000 price to be among

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