This chapter introduces the scope and content of the course. Its purpose is to provide you with an overview of marketing and provide you with an understanding of how the course will unfold over the semester.  

Chapter Objectives

 I like to begin each chapter with a summary of the major objectives I have for the chapter.

What is Marketing?

Let’s start out by asking a question:

What comes to mind when someone asks you what marketing is all about?

Most people respond by saying marketing is either 'selling' or marketing is 'advertising.' In reality marketing is much more than either selling or advertising. As a matter of fact, both advertising and selling are part of a larger "promotion mix" which also includes sales promotion, publicity, and public relations.  The promotion mix, in turn, is one of four components of the overall "marketing mix" which consists of:

As you can see, marketing is much more than most people initially think. It includes a wide variety of activities. The latter half of the course will be dedicated to an in-depth examination of these activities. We will examine in detail what they are and how they are used by marketers in the real world.  

Defining Marketing

The AMA's Definition of Marketing

We now are ready for some formal definitions of marketing. You will see two definitions of marketing in this course. The first definition is provided by the American Marketing Association. This definition says:

Marketing is "the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that will satisfy individual and organizational objectives."

I present this definition only because the AMA is the major association which governs the marketing discipline.  I prefer, instead, an alternative definition offered by Etzel et al. that is a little different from the AMA definition.^[1]

Our Definition of Marketing

The definition of marketing that I will use in this course is:

Marketing is a total system of business activities designed to plan, price, promote and distribute want-satisfying goods, services, and ides to target markets to achieve organizational objectives.

This definition is a little bit easier to understand. And, since my major emphasis will be on marketing as a set of activities conducted by business organizations, it is more consistent with the way I will approach marketing in this course.  This definition of marketing is more business oriented -- it defines marketing as a process conducted by business organizations.

Even this definition, however, views marketing from a very broad perspective. As we will see, the 'broad' scope of this definition allows me to suggest that marketing can occur in organizations other than traditional business firms. The next series of paragraphs further dissect the meaning of this definition.

Dissecting Our Definition of Marketing

Marketing Requires the Existence of "Marketers"

Let’s begin by focusing on the last part of my definition of marketing which states that firms engage in marketing activities in order to "achieve organizational objectives." This means that, in order for marketing to occur, there must exist marketers – someone that offers goods and services to customers for their purchase. Usually, marketers are traditional business firms that sell goods and services to consumers like you and I. However, marketers can be other than traditional businesses. 

Marketers can be entire organizations or even individual people. Let’s first look at organizations as marketers. Usually the marketer will be a business, like Taco Bell,  that is involved in selling goods and services to ultimate consumers (like you and me).  However, organizations can also market to other organizations.  If the customer is an organization, it will either use these goods and services in its day-to-day operations, or will resell the products it purchases to other organizations (or to consumers). 

Organizations are usually businesses that are intent on earning a profit.  However, organizations can also consist of non-business entities, often referred to as non-profit organizations.  Examples of non-profit organizations are the American Red Cross, American Cancer Society, your local church, and many other community organizations. These organizations typically have products, services, or ideas that they "sell" or otherwise provide to the community. These products, services, and ideas often have prices attached to them -- they are not necessarily provided free. Moreover, non-profit organizations may engage in extensive promotional activities such as advertising on television, radio, and in various printed media.   The point here is that these non-business organizations engage in most of the same marketing activities as do traditional profit-oriented business firms!

The third category of 'organization' consists of government agencies. Many state, local and federal governmental agencies can be considered "marketers." These agencies provide goods, services, and ideas to a wide range of "customers," including the general voting population, which includes you and I. An excellent example is the Department of Defense. Within the DoD, the Army, Navy, Air Force, Marines, and Coast Guard all advertise in various mass media in an attempt to recruit new members. The basic product or service they offer is a 'career' in the military.   TV commercials are produced by the armed services to present the military as an attractive career and life style.  These ads often are designed to appeal directly to the potential recruit's self concept.  However,  the military also "sells" other "products" such as educational programs that allow individuals to learn trades that may be useful in the civilian community, feelings of accomplishment ("be all you can be" -- Army), and life experiences ("its not just a job, its an adventure" -- Navy).

Individuals can also be marketers. Politicians market themselves and their ideas. TV commercials promoting the images and ideas of specific politicians are commonplace.  Most of these take a comparative approach in which the candidate is compared directly against his or her competition.    You can find many 'home pages' sponsored by politicians by doing simple searches in one of the search engines (Yahoo, Google, etc). It should be obvious that these sites are marketing both the politicians and their ideas, as well as providing information as a community service.

Finally, you can consider yourself as a marketer.  You market yourself on many occasions. On your last job interview you probably were marketing yourself quite heavily, trying to show the prospective employer what it is you have to offer. Your objective was to  'market' the match between your skills and the company's needs!

Marketing Requires the Existence of "Markets"

Marketing cannot occur unless there exists a market for the products or services that are to be sold. Very simply, markets are individuals or organizations that need and want the goods / services that are being offered by marketing organizations. However, just as the term marketer can be very broad in meaning, so can the term 'market.'  

Consumers As Markets

Usually, markets consist of consumers like you and me. We buy goods and services for daily lifestyle maintenance. And, of course, many businesses are geared toward selling such goods and services. 

Businesses As Markets

Markets also consist of businesses that purchase products that are required for engaging in their daily operations. For example, a firm may buy a computer system to automate its inventory management, buy equipment to support its manufacturing processes, or buy supplies (office, janitorial, etc.) that are consumed in day-to-day operations.

Business also buy products that are made into other products. For example, raw materials, fabricating parts, and fabricating materials may be combined during the manufacturing process to make a new product.  This product may then be sold to consumers or to other businesses.

Wholesalers and retailers are part of the organizational market when they buy finished goods that they resell to the next level of the distribution channel.

Governmental Organizations & Non-Profit Organizations as Markets

Just as governmental agencies and non-profit organizations can be marketers, these organizations also constitute markets for many goods and services.  As a matter of fact, the world's largest consumer of goods and services is the federal government. More specifically, the Department of Defense spends billions upon billions of dollars to purchase equipment and services for our national defense. The government publication "Commerce Business Daily" lists procurement requests larger than $25,000 made by various federal governmental agencies. We will talk about doing business with government agencies in a later topic.

Other Publics as Markets

Finally many "publics" are considered to be markets. A good example is the 'voting public.' This market is targeted by the politician wishing to exchange his or her ideas for votes. Another example is the local community in which a business operates. Businesses often treat citizens of these communities as "customers" to whom they direct advertising messages that are geared to creating good-will and enhancing corporate image.    For example,  ExxonMobil often directs promotions to different publics (including local communities) to help sway public opinion about its operations and to enhance its corporate image. Some firms even consider their own employees and other stakeholders as "markets," toward whom they direct many forms of communications and "services."

A More Formal Definition of a "Market"

Much of what we do as marketers is aimed at identifying and characterizing potential markets. In other words, we continually look for groups of people with unfilled needs that have the buying power to purchase products and services that we think can fill these needs.

Marketing Is a Process

Our definition of marketing stresses that marketing is a process. It consists of a series of activities that are performed by businesses that result in exchanges of values between marketers and markets.  

Overview of the Marketing Mix

A substantial portion of the course is dedicated to discussing and understanding these tools.  Let's spend some time in this topic with an overview of each of these elements. However, before delving into this overview, we need to talk more about the exchange process.

The Exchange Process

As depicted in Exhibit 4, marketing involves an exchange -- an exchange of values between marketers on one end and markets on the other.  The marketer offers goods and services desired by the market.   In return, the market gives back something of value to the marketer, generally money (e.g. dollars). Both ends receive something of value in the exchange process. The marketer makes money and the market receives goods, services, or ideas that satisfy needs.

Just as goods, services, and money flow between marketers and markets, so too does information.   The marketer communicates with the market via a wide range of promotional media to inform markets of the product's availability and its benefits.  Marketers also employ promotional messages to build images for products.  The objective is to develop a personality or 'position' for the product in the consumer's mind.  I have dedicated an entire chapter to how marketers determine the desired positions for their products and how they subsequently create these positions.

Similarly, the market communicates with the marketer. The market tells marketers whether or not they did a good job -- one way or another! Of course, the sales generated for the product is one way markets communicate with marketers.  Greater sales tend to suggest that the marketer is on track, low or declining sales suggests there might be a potential problem. This is definitely a form of communication!

The market also communicates with the marketer via complaining behaviors. Dissatisfied customers file complaints with sellers in many ways. An interesting venue for filing complaints these days is via the Internet. A growing number of consumers communicate their concerns to marketers via e-mail or dedicated customer service web pages that are set up by organizations. One of the more interesting uses of the Internet for voicing complaints consists of web pages built by dissatisfied customers. Customers that are experiencing a hard time getting their complaints reconciled by  marketers are using web pages as a way of broadcasting their dissatisfaction with the offending company to other consumers. 

Exchanges Create Utility for Customers

A product is any "bundle of attributes that is capable of satisfying customer wants and needs" (Exhibit 5). The thing to remember about this definition is that a product can be something other than our usual interpretation of product as a physical product i.e. something you touch or hold.  A product can also can be a service, an idea, a place, a person, or even a 'cause.' It can be just about anything valued by consumers that can be employed in the exchange process.  Common to all "products" is that they possess a set of characteristics (called attributes) that satisfy a specific configuration of customers' wants and needs. To better understand what this means, let's examine some examples of 'products.' 

Products Can Be "Consumer Products"

Exhibit 6 illustrates a some typical consumer products.  A box of Tide illustrates  a consumer convenience good. The Tide brand is one of many in Procter & Gamble's product mix. Convenience goods are typically products purchased in grocery stores and convenience stores (7-Eleven, E-Z Check). They are often staple goods that contribute to our day-to-day lifestyle maintenance. Our wants and needs for these products are very basic.

In contrast, the other product is a motorcycle -- a very prestigious motorcycle -- a Harley-Davidson. Such products are often referred to a shopping or specialty goods, depending on the strength of the customer's brand preference or loyalty. The wants and needs filled by products like Harleys are substantially different than for convenience goods. The Harley, of course, fills  consumers' basic transportation need, but it also satisfies some very high level ego-related needs.  As a result, consumers will make decisions much differently for the box of Tide than they will for products like the Harley-Davidson. We will examine some of these differences in later topics.

Products Can Be Industrial Products

Many businesses purchase goods and services that will be used to operate the organization. Illustrated in Exhibit  7 is a John Deere tractor, such as may be purchased by a small farmer.  Also depicted in the exhibit is a piece of industrial wood-working equipment  (a wood lathe).  In this case, the lathe is used to manufacture small hand-crafted gift items intended for sale at gift shops located in Rocky Mountains states.   

Parts and materials that are combined to make other products are also examples of industrial products.  The jet engine depicted at right is an example if a 'part' in that it will be combined with many other parts to make the final product -- the jet aircraft.

Products purchased by organizational buyers -- whether the buyer is a local farmer, a small businessman, or an executive in a major corporation -- are purchased much differently than are consumer goods. Organizational buyers generally exercise greater care in the decision process because of the higher costs and risks associated with industrial products.  Mistakes in buying can cost millions of dollars and potentially bankrupt a company!  We will discuss organizational buying in later chapters, and compare how organizational buying differs from, and is similar to, consumer buying.

Products Can Be Services

Products can be services. Exhibit 8 illustrates some typical household services:

Two of my favorites are Gold's Gym and my local lawn care service. I can think of better ways to spend my time than mowing my lawn once a week (like going to the Gym!). 

Services are also purchased by businesses and other types of organizations. Of course, businesses purchase many of the same services as do consumers. But they also tend to buy some services that are targeted specifically to businesses. A good example is provided by professional consulting services, such as those provided by  Booz, Allan, & Hamilton and McKinsey & Company.  Both firms are major players in the consulting arena. Try the hyperlinks for these companies. Browse their web pages and see what kind of services they provide.

Products Can Be "Places"

Products can  be places. Some of you probably have taken vacations to exotic places around the World. One of my favorite places to go is Hawaii.  (If I could afford it, I'd probably make a beach house in Maui my permanent residence.)  Travel Agencies market places. They are in business to sell travel packages to business and consumer markets that make it easy, enjoyable, and affordable to visit some of these places. In fact, many attractive destination resorts, like Hawaii, have established state government and/or private organizations to encourage tourism. These organizations are working in conjunction with many travel agencies to provide consumers with attractive travel and vacation packages.

Products Can Be People, Ideas, or Causes

Finally, products can be people, ideas, or causes. When at your last job interview, you were both the product and the marketer! You were marketing yourself to your prospective employer, trying to convince the recruiter that you were just what the firm was look for -- that you were the ideal candidate to satisfy the firm's needs! In return for your valuable services, you anticipated that they would offer an attractive salary and benefit package, as well as provide you with substantial career opportunities.

We have already talked about politicians marketing their ideas. The internet is opening up a major new communications medium that politicians can use to obtain continuous exposure with various 'publics.' Take a look at the "webslinger"  page that indexes the home pages for Texas politicians. Pick some of the better known public figures (Senator Hutchinson?) from the index and examine their web pages. How good of a job do they do marketing themselves and their ideas on these pages?  Based on what you already know about marketing, what could they do better?

Finally there are many organizations that market 'causes.' Tune in the TV at any time of the day and you will be exposed to one or more commercials that advocate social causes and / or solicit donations for charitable organizations. The United Way is among the major organizations that promote charitable giving behavior.

Distribution or "Place"

Let’s move on to the next component of the marketing mix -- distribution. Distribution, or "place," involves getting the product into the hands of customers when they want it and where they want it. Essentially, distribution involves moving the product from the producer, through a series of middlemen, and into the hands of the customer (generally the ultimate consumer).   All the functions performed by manufactures, wholesalers, and retailers that are related to moving the product and its title through the 'channel of distribution' are considered to be channel-related functions.  We will dedicate several topics to a discussion of the channel of distribution, channel functions, and the organizations involved in performing these functions.

What is A Channel of Distribution?

The following definition builds on the conceptual understanding of a channel of distribution developed in the last paragraph:

A "channel of distribution" is the totality of people and entire organizations that are involved in moving the product from point of production to point of ultimate consumption.

The channel of distribution certainly consists of wholesalers and retailers. However, the manufacturer (at one end) and the consumer (at the other end) are also considered to be part of the channel.

A Typical Channel for Consumer Goods

Exhibit 10 illustrates a typical channel of distribution for a consumer product -- beer. At the top is the manufacturer -- Miller Brewing.  At the bottom is the final consumer -- you and me. In between are the wholesalers and retailers through which the product moves from point-of-production to point-of-consumption.

Miller Brewing as the "manufacturer" sells the product to numerous wholesalers located in different geographic locations around the world. Several wholesalers serve the Dallas-Ft. Worth area in Texas. In turn, these wholesaler are responsible for distributing the beer to local retail stores, such as 7-11, Safeway Stores, Kroger's, and Winn Dixie.  Restaurants, bars, and private clubs also purchase from Miller's distributors. 

The linkages between the manufacturer, its various wholesalers, retailers, and ultimate consumers is the typical distribution channel encountered for consumer goods. It is the most traditional distribution channel for consumer products. We will look at variations on this channel structure later on in the course.  Peruse the Miller Lite web page to get a feel for how the company operates. The web is sponsored by Miller Brewing Company.  Additional brands owned by Miller include Red Dog, Fosters, Hamms, and Henry Weinhard's.  Miller Brewing is owned by Philip Morris.

Channels for Consumer Products and Industrial Products

Consumer products generally have longer channels than do industrial products. Exhibit 11 presents the channel of distribution that we just talked about for Miller Beer -- a consumer product. The manufacturer (Miller) sells to wholesalers, who in turn sell the product to retailers.  Finally, retailers sell to the ultimate consumer. Again, this is the traditional channel for most consumer products. 

Exhibit 12 highlights a typical industrial channel. Channels for industrial products tend to be shorter in that they tend to have fewer middlemen involved. An industrial channel is illustrated by the distribution of coin boxes for use in vending machines.   The coin boxes produced by firms such as Coinco are considered to be component parts.   Coinco may sell its boxes to an industrial distributor who, in turn, may resell the boxes to manufacturers of vending machines (Such as Vendo). Alternatively, Coinco may sell directly to larger manufacturers that buy in large quantities.  This latter channel, called a  'direct channel,' is very common for industrial products.  Vendco will buy a large number of additional parts and materials directly from other manufacturers or from other industrial distributors that, in conjunction with the coin boxes, will be used in making vending machines.

What is Price?

The third component of the marketing mix is price:

"Price is a measure or expression of value concerning how much a good or service is worth to the buyer."

Usually prices are expressed in monetary terms. However this is not always the case. The price of a product or service can be expressed in terms of other products and/or services.  For example, I may offer you my old lawn mower in exchange for your snow blower -- the price of my lawnmower is your snow-blower.  In this case, I valued my lawn mower at 'one snow blower.'  If you accept, then you have valued your snow-blower at 'one used lawnmower.'

The Major Pricing Questions

When we look at price in more detail later in the course, we will focus on answering the three major questions posed in Exhibit 13. The first question is what should be the "base price" charged for the product? You can think of base price simply as "list price." In other words, the price of one unit of the product at its point of resale to the consumer or to a business buyer.

The second pricing question addresses possible adjustments to this base price. For example, do we need to offer a discount schedule specifying quantity discounts, cash discounts, seasonal discounts, etc.? What adjustments need to be made to allow for shipping and handling costs? Should promotional allowances for distributors be built into the pricing schedule? These and other adjustments are examined in later topics. 

The third question is: "how should price be managed over time?" How should price be modified in response to changes in customer demand, to competitors' price changes,  or to changes in economic conditions?

By answering these question, marketing managers can build a 'pricing plan' that coordinates pricing activities with other components of the marketing mix.

The Major Pricing Activities

Promotion is the final component of the marketing mix (Exhibit 14). Promotion is not just advertising; nor is it just personal selling. The "promotion mix" consists of advertising, personal selling, sales promotion, publicity and public relations.  Think of the promotion mix as the total set of tools available for communicating with markets.  Since advertising is probably the most common form of promotion, let's briefly explore it different forms  -- very briefly.

Advertising is a paid form of mass communication using communications media such as TV, radio, newspapers, magazines, bill boards, and the internet.  We are most familiar with TV advertising.  Indeed, some of today's TV ads are far more entertaining than the  programming in which they are aired. 

Advertising also is intended to do more than merely promote products. There are numerous types of advertising -- and each type is used to achieve slightly different objectives.  One type of advertising with which you may not be familiar is called "institutional" advertising. This form of advertising is employed to promote the image of the company, rather than promote its products. The objective is to make the company look like a 'good guy' in the eyes of different 'publics.' These publics include virtually any group that is impacted by the firm's operations or, in turn, may have an impact (positive or negative) on the firm. Publics include such entities as the local community, government agencies, and activist groups such as Ralph Nader’s group.  For example, the ad in Exhibit 15 is sponsored by Gulf Oil. Gulf's message is intended to convince the target audience (general public?) of the good job it is doing to  protect wildlife in those communities in which it operates. The objective of the ad is to improve its image with these communities. Gulf Oil's web page is still under construction, but does have some interesting links that promote its "proud sponsorship" of NHL and AHL hockey.

Texaco, like Gulf, also employs institutional advertising to enhance its corporate image. Texaco's web site is heavily employed as a medium for image-building. Take a look at Texaco's safety and environmental page to see a summary of its current activities impacting environmental health and safety. What specifically are they trying to accomplish with the information provided on this web page?

Just as advertising can be used to promote a company’s image, it can also be used to encourage individuals (like you and I) to be more socially responsible in the way we behave. Exhibit 16 contains an ad produced by the U.S. Department of Transportation. The ad highlights the extreme dangers of drinking and driving. Its rather obvious objective is to discourage this type of behavior in the targeted audience. Similar ads are produced by major corporations, primarily by those firms engaged in the production and marketing of consumer products that possess the strong potential for consumer abuse. For example, Budweiser often airs ads encouraging young adults to be more responsible drivers. The billboard in Exhibit 17 is a current example of Budweiser's "responsible drivers" program.

Take a look at the DOT web page. It contains many links to important consumer safety issues including current warnings and recalls of products. Clearly, these are forms of "advertising" that are in society's best interests.

Some advertisers direct their messages to audiences that don’t actually use the product. For example, Exhibit 18 contains an ad produced by the Armed Forces that is directed at "influencers." The ad targets parents who can have a substantial influence on their sons' or daughters' decisions to join the armed forces.  To get a flavor for how the army targets different groups with its promotion, take a look at its homepage at www.army.mil. The table of contents allows you access information maintained by the Army's recruiting offices. The selection is entitled "Recruiting Online." Spend some time scanning the selections on these pages. Ask yourself what specific audiences are being targeted with the messages on these pages. Try doing the same on the web pages maintained by the Navy, Air Force, and Marines.

All Elements of the Marketing Mix Must Work Together!

All elements of the marketing mix must work together (Exhibit 19).  This means that managers cannot structure one component of the marketing mix  without considering its relationship with all others.   All elements taken together are responsible for developing the complete image or personality of the product. 

A good example is illustrated by the ad for Joy perfume contained on the right. Joy is positioned as a status symbol.  This position is clearly supported by the ad's copy -- the 'costliest perfume in the world.'  The product is distributed exclusively through Lord and Taylor, one of the most prestigious department stores around!  The point is that all elements of the marketing mix -- product, price, distribution, and promotion -- are working together to create the brand's personality.

¹Michael J. Etzel, Bruce J. Walker, and William J. Stanton (1997) Marketing. 11th Ed., Boston, MA: Irwin-McGraw-Hill

Page last modified: April 24, 2007