CHAPTER 1 An Overview of Marketing



CHAPTER 1: An Overview of Marketing

REVIEW/DISCUSSION QUESTIONS

1. What is the CMA? What does it do? How do its services benefit marketers? http://

2. Give an example of a company that might be successfully following a production orientation. Why might a firm in this industry be successful following a production orientation?

3. Referring to a Peter Drucker’s quote—“the aim of marketing is to know and understand the customer so well, that the product or service fits him and sells itself”—discuss the value in investing in employees as demonstrated by the example in the text of Lululemon.

4. Can a multinational corporation practice different marketing orientation in different countries? Why would an MNC do it? What are the pros and cons of such a strategy?

APPLICATION QUESTIONS

1. Your company president has decided to restructure the firm and become more market-oriented. She is going to announce the changes at an upcoming meeting. She has asked you to prepare a short speech outlining the general reasons for the new company orientation.

2. The chairman of the board of Ford Motor Company, remarked, “If we aren’t customer-driven, our cars won’t be either.” Explain how this statement reflects the marketing concept.

3. A friend of yours agrees with the adage, “People don’t know what they want—they only want what they know.” Write your friend a letter expressing the extent to which you think marketers shape consumer wants.

4. Your local supermarket uses the slogan is “It’s your store.” However, when you asked one of the stock people to help you find a bag of chips he told you it was not his job and that you should look a little harder. On your way out, you noticed a sign with an address for complaints. Draft a letter explaining why the supermarket’s slogan will never be credible unless their employees carry it out.

5. How does MADD (Mothers Against Drunk Driving) should market itself? What kind of information does its website at MADD.ca provide about drinking and driving? Review the website and write a short report on what MADD is or isn’t doing right.

6. Write a letter to a friend or family member explaining why you think that a course in marketing will help you in your career in some field other than marketing.

APPLICATION EXERCISE

Understanding the differences among the various marketing management philosophies is the starting point for understanding the fundamentals of marketing. From reading the chapter, you may be convinced that the market orientation is the most appealing philosophy and the one best suited to creating a competitive advantage. Not all companies, however, use the market orientation, and even companies that follow it may not execute well in all areas.

Activities

1. Visit your local grocery store and go through the cereal, snack-food, and dental hygiene aisles. Go up and down each aisle slowly, noticing how many different products are available and how they are organized on the shelves.

2. Count the varieties of product in each product category. For example, how many different kinds of cereal are on the shelves? How many different sizes? Do the same for snack food and toothpaste.

3. Now try to find a type of product in the grocery store that does not exhibit such variety. There may not be many. Why do you think there are enough kinds of cereals to fill an entire aisle (and then some), but only a few different types of, say, peanut butter? Can this difference be explained in terms of marketing management philosophy (peanut butter manufacturers do not follow the marketing concept) or by something else entirely?

4. Have you ever wanted to see a particular kind of cereal or snack food on the shelf? Think of product varietals (like grapefruit-flavoured toothpaste or peanut butter-covered popcorn) that you have never seen on shelves but would be interested in trying if someone would make them. Write a letter or send an e-mail to an appropriate company, suggesting that it add your concept to its current product line.

ETHICS EXERCISE

In today’s business environment, ethics are extremely important. In recent years, there have been numerous scandals and trials that stem from a lack of ethical judgment. For this reason, we are including an ethical exercise in every chapter. A brief scenario will present you with a situation in which the right thing to do may or may not be crystal clear, and you will need to decide the ethical way out of the dilemma. To help you with these decisions, we will always refer you back to the CMA’s Code of Ethics, found online at the-. This will give you a resource for the exercise and will also help reinforce the ethical standards that marketers should uphold.

Rani Pharmaceuticals is the maker of several popular drugs used to treat high blood pressure and arthritis. Over time, the company has developed a positive relationship with many of the patients who use its medications through a quarterly newsletter that offers all the latest information on new medical research findings and general health and fitness articles. The company has just been acquired by a group of investors who also own Soothing Waters Hot Tubs and Spas. The marketing director for Soothing Waters would like to use Rani’s mailing list for a direct-mail promotion.

Questions

1. What should Rani Pharmaceuticals do?

2. Does the CMA Code of Ethics address using customer information by multiple divisions of the same company in its Code of Ethics? Go to the- and review the code. Then write a brief paragraph on how the CMA Code of Ethics relates to Rani Pharmaceutical’s dilemma

COMPANY CLIP VIDEO ASSIGNMENT: Method – Live Clean

This video segment describes how Method, the innovative branding concept in household cleaning, was conceived by roommates Eric Ryan and Adam Lowry during the drive to a ski lodge. Eric had been thinking of ways to introduce design to the home care industry (i.e., cleaning products) and began talking about his vision to Adam. A chemical engineer from Stanford University with a degree in environmental science, Adam was the perfect sounding board. He soon realized that he could use his expertise to create naturally-derived, biodegradable formulas for the beautiful products Eric had in mind.

Questions

1. Eric refers to the partnership between him and Adam as one that works because it is a combination of “art and science”. Marketing has often been referred to as just that – an art and a science. Using Methods rise to fame as your example, describe what marketing is, referencing the concept of the art and science. (Learning Objective 1)

2. Does Method have a societal marketing orientation, or is it just a market-oriented company that integrates a number of environmental practices into its operation? (Learning Objective 2)

3. A key element that differentiates a sales orientation from a marketing orientation is the “organization’s focus”, in particular the focus on customer value and customer satisfaction. Describe what is meant by both customer value and customer satisfaction using Method as the example. (Learning Objective 3)

CASE ASSIGNMENT: Harmonix

HARMONIX: EMBRACE YOUR INNER ROCK STAR

A few years ago you had probably never heard of Harmonix, and you may still not know who they are, but you have likely heard of one of their most successful products, Guitar Hero. In 2005 Harmonix, the videogame design studio, released Guitar Hero, which subsequently became the fastest videogame in history to top $1 billion in North American sales. The game concept focuses on a plastic guitar-shaped controller. Players press coloured buttons along the guitar neck to match a series of dots that scroll down the TV in time with music from famous rock tunes. Players score points based on their accuracy. Just two years later, Harmonix released Rock Band, adding drums, vocals, and bass guitar options to the game. Rock Band has sold over 3.5 million units with a $169 price tag (most videogames retail at $50 to $60). Between the launch of Guitar Hero and Rock Band, Harmonix’s founders sold the company to Viacom for $175 million. The terms of the sale allowed Harmonix to retain operational autonomy while providing them greater budgets for product development and licensing music for their games. Harmonix’s success, however, did not come overnight.

The company was founded by Alex Rigopulos and Eran Egozy in 1995, and focused on some demo software they had created in grad school and a company vision of providing a way for people without much musical training or talent to experience the joy of playing and creating music. The founders believed that if people had the opportunity to create their own music, they would jump at the chance. Their software, which they eventually dubbed The Axe, provided basic music composition tutorials and allowed participants to use a joystick to improvise solos along to popular music tracks. They attempted to market their creation through an interface with Japanese karaoke machines, a demo package deal with Intel, and even an exhibition at Disney’s Epcot. And while the software always proved technically impressive, people generally expressed little initial interest in trying it out, or else it just didn’t seem like they were having much fun.

In 2000, Rigopulos and Egozy hit on a concept that would engage consumers, and Harmonix became a videogame company. The Axe software provided an improvisation program with no set goal, whereas most videogames are designed with a purpose and offer competition, which helps engage, direct, and motivate players. At the time, the market for music-based games had not fully developed, but especially in Japan, rhythm-based games, in which players tapped different combinations of buttons in time with a beat or a tune, were becoming increasingly more popular. Harmonix created two games, Frequency and Amplitude, in which players hit buttons along with a beat, unlocking tracks for different layers of instruments in a song. Neither of the games proved especially successful, however, as both were very complex and the expense of generating initial interest proved too high for their publisher, Sony, to continue funding them.

Harmonix finally found some success with its 2004 release of Karaoki Revolution, in which players used a microphone or headset peripheral to score points singing along to pop songs. It allowed gamers to play the role and be a part of the music. In 2005, a new but relatively successful peripheral videogame control

Questions

1. What marketing management philosophy did Harmonix use at first and how did their philosophy change?

2. How do you think Harmonix would describe its business?

3. To whom was Harmonix’s product directed and how did it create a product that would appeal to that audience?

ALTERNATE CASE ASSIGNMENT: Netflix

READY FOR PRIMETIME

Shocked at the $40 fee he incurred for a late return of Apollo 13, Netflix founder Reed Hastings decided that in the age of the Internet, there had to be a better way to rent videos for home viewing. Thus, in 1997, he started an Internet-based DVD rental service that offered direct-to-home deliveries with no late fees. A mere decade and 4 million subscribers later, Netflix has taken on established video rental companies such as Blockbuster, Hollywood Video, and Walmart and emerged as the leader in innovation and customer service.

In addition to betting that the Internet would be the future of the video rental market, Hastings made a few other key predictions that helped him develop a company with almost $700 million in revenue in under ten years. He watched as moviegoers fled public theatres for the comfort of home theatre systems, and he observed those same consumers embracing the features, capacity, and high-quality format of the DVD. Realizing that the Internet could allow those same convenience seekers 24-hour browsing and selection access to an unprecedented volume of movie titles in a single digital catalogue, Hastings shrewdly designed a service that outperforms traditional, store-based video rentals.

Netflix allows consumers to choose from a variety of subscription plans. The most popular plan offers three DVDs for $17.99 per month. Once a subscriber builds a list of favourite movies and TV shows from a selection of over 60,000 titles, Netflix mails out the three titles at the top of the list, along with return-addressed prestamped envelopes. After viewing the DVDs, the customer simply mails them back to Netflix in the supplied packaging. When the titles are scanned in at one of the distribution warehouses, the customer is simultaneously sent the next selections on the favourites list.

With 34 strategically placed distribution centres, Netflix can deliver 92 percent of its movies within one day of being ordered. That outstanding delivery service is just the tip of the iceberg. Netflix’s website takes personalization to new levels through its high-powered recommendation software, called Cinematch. Cinematch uses over a million lines of code and over half a billion customer-supplied ratings to suggest rental choices upon request.

Amazingly, over 60 percent of the titles added to users’ favourites lists come from Cinematch recommendations, and over a million ratings are sent to Netflix every day. Just how effective is Cinematch? Netflix uses fewer than 50 customer service reps to support its entire customer base! Of those, 10 are authorized to make direct callbacks to customers with complaints to find out how the problem could have been prevented in the first place. It’s that kind of attention to customers that forced retail giant Walmart to give up and turn over its entire customer list to Netflix.

Netflix even added two key features to its service in response to customer requests. The first is the ability to generate multiple favourites lists for a single account, allowing families to build multiple wish lists that can differ as much as Steel Magnolias and Old School. The second is the addition of a community feature called “Friends.” Friends enables users to share the titles, ratings, and preferences for recently viewed shows with those they invite to be part of their network.

Always looking to the future, Hastings wants to diversify Netflix by adding high-definition DVD rentals to its current service, selling previously rented DVDs in the rapidly growing used-DVD market, and developing an on-demand video download service. Though it’s impossible to tell exactly what blockbuster service Netflix will deliver next, it’s a safe bet its customers will applaud.

Sources: (accessed November 27, 2011); (accessed November 27, 2011)

Questions

1. Describe the elements of the exchange process as they occur between Netflix and its customers.

2. Which marketing management philosophy does Netflix subscribe to?

3. How does Netflix’s approach to relationship marketing increase customer satisfaction?

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MKTG

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