chapter 3 economic benefits of marketing. learning objectives students will be able to 1. define the...
TRANSCRIPT
Chapter 3
Economic Benefits of Marketing
Learning Objectives
Students will be able to 1.Define the 4 types of
economic utility2.Explain how marketers use
utility to increase customer satisfaction
The Value of Marketing
Marketing bridges the gap between you and the maker or seller of an item. Products are more useful
because you can purchase them when you want.
Marketing makes buying easy for consumers.
Marketing helps to create new and improved products.
Marketing helps lower prices.
Marketing MattersCustomers rarely analyze why they decide to
buy products or services. They unconsciously make buying decisions based on the satisfaction they expect to receive from them.
Businesses therefore try to increase consumers’ satisfaction by making improvements to products and services.
Satisfaction means Utility
People select products and services based on which products and services will give them the most satisfaction for their money.
Watch and Cell Phone!
Marketing Matters
Economists have developed a concept called economic utility and identified
various types of utility to explain why consumers get more or less satisfaction from different products.
For businesses economic utility is important to help them develop better products.
Economic Utility Products that provide great
satisfaction have a high economic utility.
Products that provide little satisfaction have a low economic utility.
Businesses use economic utility to increase the chances that consumers will buy their products or services.
Economic UtilitiesThe 4 primary ways businesses can increase the economic utility of a product or service are:
1. Changes in Form2. Changes in Time3. Changes in Place4. Changes in Possession
Form Utility Changing raw materials or
putting parts together to make them more useful. Making or producing things.
Tree in original state (beauty, prevents soil erosion, produces oxygen)
Tree cut down – usefulness increases. (Lumber to make pencils, paper, furniture, and buildings.) The raw material (wood) becomes part of
finished items that have more value to us than the raw material itself.
Assembling parts into a product. Parts by themselves are useless,
together they add form utility.
Time Utility
Making the product or service available when the customer wants it. Whatever time of the year or time of day. A bank, doctor or dentist
office that stays open in the evening.
IHOP serves breakfast all day.
Place Utility Making a product or service
available where the consumer wants them. Check-cashing outlets and
businesses that provide mailing, photocopying, and printing services are successful if they are located where consumers and businesses that need those services reside. A convenient location for products and services is an important utility for people with busy lives.
Place Utility
How do you know where customers want a product or service?Study consumer shopping habits.Most convenient location for consumers to shop.
Walgreens on every corner!
Possession Utility
Affordability of the product or service. Businesses can’t afford
to cut the price. Credit – allows people
to purchase things for which they do not have enough cash at the time. Pay gradually with
monthly payments.
Possession UtilityExamples:
1. Automobile dealerships lease new cars and trucks.
Leasing = rent
2. Tuxedo rental (Prom)
3. DVD rental
4. Vacation House rental
Finding creative ways to finance, rent, or lease products has become an important business activity today.
Marketing Matters Challenge
Identify a product in this classroom and think about a change that you could make to that product that you believe would increase the satisfaction it provides to its users.
Marketing Functions and Economic Utilities4 E
con
om
ic Utilities
Financing
Risk Management
Selling
Promotion
PricingMarketing
Information
Management
Produ
ct &
Servic
e
Man
agem
ent
Market Planning
Distribution
9 Functions of Marketing
Which Marketing Function would be primarily responsible for the Economic Utility?
Financing
Risk Management
Selling
Promotion
PricingMarketing
Information
Management
Produ
ct &
Servic
e
Man
agem
ent
Market Planning
Distribution
9 Functions of Marketing and Economic Utilities
Place
Possession
Time
Form
What else does Marketing do?
Besides adding value to products, marketing activities also help increase demand for products.
When demand is high, manufacturers can make products in large quantities, which reduces the unit cost of each product.
Lower Prices
High demand – lower pricesFixed costs (building
rent) remain the same whether the company produces 10 units or 10,000
Larger quantity – less fixed costs per unit – lower price for product
Quantity Fixed Cost Produced Per Unit 10,000 $2.00
200,000 .10
Marketing Increases Competition
As a product becomes popular, more competitors enter the marketplace. In order to be competitive, marketers find ways to lower their prices. VCR
Original cost $600.00. Now $30.00.
Cell Phone Original Cost $3,000. Now $149.00
Marketing also generates New and Improved Products As competition increases,
new and improved products enter the marketplace. Businesses want to better
satisfy customers’ wants and needs.Larger variety of goods
and services for consumers.
Personal Computer – Smaller, more powerful and less expensive.
New and Improved Products Detergents demonstrate
the change in consumer preference and competition in that market. Powder – Liquid
Measuring top.Easy to use containers.
Tablets
Marketing Adds ValueHow else can your product be used?Multiple uses means increased value which leads to increased customer satisfaction.
Baking SodaA derivative of trona, a naturally occurring mineral mined in Wyoming.
1846 sold in 1 lb. bags as a baking ingredient
Marketing Adds Value 1970 and today used as a multipurpose household cleaner, an antacid, a deodorizer for the refrigerator/freezer, and a baking ingredient.
Baking soda can be found in:Laundry detergentToothpasteShampooScope MouthwashOdor Eaters Foot powderDeodorant
No clinical proof that baking soda actually makes anything cleaner!
Baking Soda – A matter of ethics
Since there is no clinical proof that baking soda makes anything cleaner, is it ethical for the companies to suggest that it does?
Marketers should not make claims that cannot be substantiated. This particular claim however, reflects how people feel when they use the product, not scientific fact.
What other products do you know can be used for multiple uses?
Marketing adds cost to the product.
Marketing costs represent approximately 50% of the selling price of an item.
1. Is marketing worth the additional cost?
Place
Time
Possession
Information
Selling
Promotion
PricingPurchasing
Marketing-Information Management
Product/
Service Planning
Distribution
Assignment: Work in a group to create a marketing wheel for a product of your choosing. This could be a new product, or a change to an existing product.
Financing
Risk Management
Selling
Promotion
PricingMarketing
Information
Management
Produ
ct &
Servic
e
Man
agem
ent
Market Planning
DistributionPlace
Possession
Time
Form
Place
Time
Possession
Information
Selling
Promotion
PricingPurchasing
Marketing-Information Management
Product/
Service Planning
Distribution
Product: Back Pack
Financing
Risk Management
Selling
Promotion
PricingMarketing
Information
Management
Produ
ct &
Servic
e
Man
agem
ent
Market Planning
Distribution
Target large college campuses then diffuse into high schools.
Every
backp
ack co
mes w
ith a
free bin
der.
$35.00 middle of competition
Survey students and find out what they want in a backpack.
Truc
ks
On cam
pus,
parents buying
school supplies.
Direct m
arket.
Small business
loan. Nee
d m
ore
pock
ets,
leat
her b
otto
m a
nd
othe
r co
mpa
rtmen
ts.
Stu
den
ts i
n
sch
oo
l in
nee
d o
f a
bet
ter,
eas
ier
to u
se b
ackp
ack
Place
Time
Possession
Information
Selling
Promotion
PricingPurchasing
Marketing-Information Management
Product/
Service Planning
Distribution
Product: Back Pack
Financing
Risk Management
Selling
Promotion
PricingMarketing
Information
Management
Produ
ct &
Servic
e
Man
agem
ent
Market Planning
DistributionPlace
Possession
Time
Form
Form
Place
Possession
Time
Product: Back Pack
POSTER