discusses seven challenges and opportunities associated with marketing in today’s economy. Identify these issues and discuss how they are related. What is the common thread that ties all seven issues together?

ESSAY
1. The text discusses seven challenges and opportunities associated with marketing in today’s economy. Identify these issues and discuss how they are

related. What is the common thread that ties all seven issues together?

ANS:
The seven issues are:

1. Power Shift to Customers
2. Massive Increase in Product Selection
3. Audience and Media Fragmentation
4. Changing Value Propositions
5. Shifting Demand Patterns
6. Privacy, Security, and Ethical Concerns
7. Unclear Legal Jurisdiction

The common thread that ties these issues together is the increase in information and choices made available by the Internet.

2. Discuss the different views or interpretations of marketing as a function of business, including the AMA’s 2007 change in the definition of marketing.

Why do you think the AMA changed the definition?

ANS:
Many people, especially those not employed in marketing, see marketing as a function of business. As a business function, the goal of marketing is to connect the

organization to its customers. Other individuals, particularly those working in marketing jobs, tend to see marketing as a process of managing the flow of products

from the point of conception to the point of consumption. A final way to think about marketing relates to meeting human and social needs. This broad view links

marketing with our standard of living, not only in terms of enhanced consumption and prosperity but also in terms of society’s well-being.

The AMA changed the definition of marketing to better reflect the realities of competing in today’s marketplace. The new definition stresses two critical success

factors in marketing today: value and customer relationships. Whereas the former definition of marketing had a decidedly transactional focus, the new definition

emphasizes long-term relationships that provide value for both customers and the firm.

3. Briefly explain and discuss the five types of utility. Which type(s) of utility is(are) the most important and why?

ANS:
The five types of utility are:

1. Form Utility—Products high in form utility have attributes or features that set them apart from the competition.
2. Time Utility—Products high in time utility are available when customers want them.
3. Place Utility—Products high in place utility are available where customers want them, which is typically wherever the customer happens to be at that moment or

where the product needs to be at that moment.
4. Possession Utility—Possession utility deals with the transfer of ownership or title from marketer to customer. Products higher in possession utility are more

satisfying because marketers make them easier to acquire.
5. Psychological Utility—Products high in psychological utility deliver positive experiential or psychological attributes that customers find satisfying. Conversely,

a product might offer exceptional psychological utility because it lacks negative experiential or psychological attributes.

One type of utility is not necessarily more important than the others. In reality, all five types are complementary and overlap to a great degree. One could argue that

form utility is the most important, however, because customers tend to choose products that offer certain features. For routinely purchased products (gasoline, bread),

time and place utility are likely to be more important. For unique types of products (vacations, luxury goods), psychological utility might be relatively more

important.

4- Discuss the challenges and opportunities associated with planning and developing marketing strategy in today’s economy. Why is marketing strategy both exciting and

challenging?

ANS:
One of the greatest frustrations and opportunities in marketing is change—customers change, competitors change, and even the marketing organization changes. Strategies

that are highly successful today will not work tomorrow. Customers will buy products today that they will have no interest in tomorrow. These are truisms in marketing.

Although frustrating, challenges like these also make marketing extremely interesting and rewarding. Another fact about marketing strategy is that it is inherently

people driven. Marketing strategy is about people (inside an organization) trying to find ways to deliver exceptional value by fulfilling the needs and wants of other

people (customers, shareholders, business partners, society at large), as well as the needs of the organization itself.

The combination of continual change and the people-driven nature of marketing makes developing and implementing marketing strategy a challenging task. A perfect

strategy that is executed perfectly can still fail. This happens because there are very few rules for how to do marketing in specific situations. In other words, it is

impossible to say that given “this customer need” and these “competitors” and this “level of government regulation” that Product A, Price B, Promotion C, and

Distribution D should be used. Marketing simply doesn’t work that way. The lack of rules and the ever-changing economic, sociocultural, competitive, technological, and

political/legal landscapes make marketing strategy a terribly fascinating subject.

5-. Why have ethics and social responsibility become so important in recent years? Why is it important that marketing ethics be incorporated into the firm’s

strategic plan?

ANS:
The importance of marketing ethics and social responsibility has grown in recent years, and their role in the strategic planning process has become even more important

as many firms have seen their images, reputations, and marketing efforts destroyed by problems in these areas. The failure to see ethical conduct as part of strategic

market planning can destroy the trust and customer relationships that are necessary for success. Ethics and social responsibility are also necessary in light of

stakeholder demands and changes in federal law. Furthermore, ethical and socially responsible behavior improves marketing performance and profits. Marketing ethics

does not just happen by hiring ethical people; it requires implementation of an effective ethics and compliance program.

In response to customer demands, along with the threat of increased regulation, more and more firms have incorporated ethics and social responsibility into the

strategic marketing planning process. Any organization’s reputation can be damaged by poor performance or ethical misconduct. However, it is much easier to recover

from poor marketing performance than from ethical misconduct. Obviously, stakeholders who are most directly affected by negative events will have a corresponding shift

in their perceptions of a firm’s reputation. On the other hand, even those indirectly connected to negative events can shift their reputation attributions. In many

cases, those indirectly connected to the negative events may be more influenced by the news media or general public opinion than those who are directly connected to an

organization. Some scandals may lead to boycotts and aggressive campaigns to dampen sales and earnings.

6- Draw, label, and explain the pyramid of social responsibility. What are the requirements for a firm if it truly wants to be ethical and socially

responsible?

ANS:
The pyramid of social responsibility consists of four dimensions or responsibilities: economic, legal, ethical, and philanthropic. From an economic perspective, all

firms must be responsible to their shareholders, who have a keen interest in stakeholder relationships that influence reputation of the firm and, of course, earning a

return on their investment. The economic responsibility of making a profit also serves employees and the community at large due to its impact on employment and income

levels in the area that the firm calls home.

Marketers also have expectations, at a minimum, to obey laws and regulations. This is a challenge because the legal and regulatory environment is hard to navigate and

interpretations of the law change frequently. Economic and legal concerns are the most basic levels of social responsibility for good reason: Without them, the firm

may not survive long enough to engage in ethical or philanthropic activities.

At the next level of the pyramid, marketing ethics refers to principles and standards that define acceptable marketing conduct as determined by the public, government

regulators, private-interest groups, competitors, and the firm itself. The most basic of these principles have been codified as laws and regulations to induce

marketers to conform to society’s expectations of conduct. However, it is important to understand that marketing ethics goes beyond legal issues: Ethical marketing

decisions foster trust, which helps build long-term marketing relationships.

In terms of philanthropy, firms that choose to take these extra steps concern themselves with increasing their overall positive impact on society, their local

communities, and the environment, with the bottom line of increased goodwill toward the firm, as well as increased profits. Many firms try hard to align their

philanthropy with marketing and brand image. During major crises, like Hurricane Katrina or the more recent financial meltdown, firms are given an opportunity to make

their philanthropic programs more responsive and visible to the public. Socially responsible behavior is not only good for customers, employees, and the community, but

it also makes good business sense. For this reason, philanthropic activities make very good marketing tools. Thinking of corporate philanthropy as a marketing tool may

seem cynical, but it points out the reality that philanthropy can be very good for a firm.

7- Describe the role that a code of conduct plays in ensuring ethical compliance within a firm. How should a code of conduct be developed, what should it contain,

and what are the keys to ensuring that the code is successfully implemented?

ANS:
Most firms begin the process of establishing organizational ethics programs by developing codes of conduct (also called codes of ethics), which are formal statements

that describe what an organization expects of its employees. According to a KPMG Integrity Survey, 82 percent of employees reported that their firm has a formal code

of conduct such as codes of ethics, policy statements on ethics, or guidelines on proper business conduct. These codes may address a variety of situations from

internal operations to sales presentations and financial disclosure practices.

A code of ethical conduct has to reflect the board of directors’ and senior management’s desire for organizational compliance with the values, rules, and policies that

support an ethical climate. Development of a code of conduct should involve the board of directors, president, and senior managers who will be implementing the code.

Legal staff should be called upon to ensure that the code has correctly assessed key areas of risk and that standards contained in the code buffer potential legal

problems. A code of conduct that does not address specific high-risk activities within the scope of daily operations is inadequate for maintaining standards that can

prevent misconduct.

Research has found that corporate codes of ethics often have five to seven core values or principles in addition to more-detailed descriptions and examples of

appropriate conduct. Six core values are considered to be highly desirable in any code of ethical conduct: (1) trustworthiness, (2) respect, (3) responsibility, (4)

fairness, (5) caring, and (6) citizenship. These values will not be effective without distribution, training, and the support of top management in making them a part

of the corporate culture and the ethical climate. Employees need specific examples of how these values can be implemented.

Codes of conduct will not resolve every ethical issue encountered in daily operations, but they help employees and managers deal with ethical dilemmas by prescribing

or limiting specific activities. Many firms have a code of ethics, but sometimes they do not communicate their code effectively. A code placed on a website or in a

training manual is useless if the company doesn’t reinforce it on a daily basis. By communicating both the expectations of proper behavior to employees, as well as

punishments they face if they violate the rules, codes of conduct curtail opportunities for unethical behavior and thereby improve ethical decision making. Codes of

conduct do not have to be so detailed that they take into account every situation, but they should provide guidelines and principles capable of helping employees

achieve organizational ethical objectives and address risks in an accepted manner.

8- What is the relationship among marketing ethics, strategic planning, and organizational performance? How is being market oriented different than having

a stakeholder orientation?

ANS:
One of the most powerful arguments for including ethics and social responsibility in the strategic planning process is the evidence of a link between social

responsibility, stakeholders, and marketing performance. An ethical climate calls for organizational members to incorporate the interests of all stakeholders,

including customers, in their decisions and actions. Hence, employees working in an ethical climate will make an extra effort to better understand the demands and

concerns of customers. One study found that ethical climate is associated with employee commitment to quality and intrafirm trust. Employee commitment to the firm,

customer loyalty, and profitability have also been linked to increased social responsibility. These findings emphasize the role of an ethical climate in building a

strong competitive position.

An ethical climate is also conducive to a strong market orientation. Market orientation refers to the development of an organizational culture that effectively and

efficiently promotes the necessary behaviors for the creation of superior value for buyers and, thus, continuous superior performance of the firm. Market orientation

places the customer’s interests first, but it does not exclude the interests of other stakeholders. Being market oriented means fostering a sense of cooperation and

open information exchange that gives the firm a clearer view of the customer’s needs and desires.

The degree to which a firm understands and addresses stakeholder demands can be referred to as a stakeholder orientation. This orientation contains three sets of

activities: (1) the organization-wide generation of data about stakeholder groups and assessment of the firm’s effects on these groups, (2) the distribution of this

information throughout the firm, and (3) the organization’s responsiveness as a whole to this intelligence.

A stakeholder orientation can be viewed as a continuum in that firms are likely to adopt the concept to varying degrees. To gauge a given firm’s stakeholder

orientation, it is necessary to evaluate the extent to which the firm adopts behaviors that typify both the generation and dissemination of stakeholder intelligence

and responsiveness to it. A given organization may generate and disseminate more intelligence about certain stakeholder communities than about others and, as a result,

may respond to that intelligence differently.

9- “Analysis alone is not a solution” is an important piece of advice to keep in mind during a situation analysis. What does this phrase mean? If analysis alone

is not a solution, what other considerations are relevant during a situation analysis?

ANS:
Although it is true that a comprehensive situation analysis can lead to better planning and decision making, analysis itself is not enough. Put another way, situation

analysis is a necessary but insufficient prerequisite for effective strategic planning. The analysis must be combined with intuition and judgment to make the results

of the analysis useful for planning purposes. Situation analysis should not replace the manager in the decision-making process. Its purpose is to empower the manager

with information for more effective decision making.

A thorough situation analysis empowers the marketing manager because it encourages both analysis and synthesis of information. From this perspective, situation

analysis involves taking things apart: whether it’s a customer segment (in order to study the heavy users), a product (in order to understand the relationship between

its features and customers’ needs), or competitors (in order to weigh their strengths and weaknesses against your own). The purpose of taking things apart is to

understand why people, products, or organizations perform the way they do. After this dissection is complete, the manager can then synthesize the information to gain a

big-picture view of the complex decisions to be made.

10- Identify and explain each element of the 5W model for customer analysis. What role does this analysis play in an overall situation analysis?

ANS:
During the analysis of the customer environment, information should be collected that identifies (1) the firm’s current and potential customers, (2) the prevailing

needs of current and potential customers, (3) the basic features of the firm’s and competitors’ products perceived by customers as meeting their needs, and (4)

anticipated changes in customers’ needs.

Who Are Our Current and Potential Customers? – Answering the “who” question requires an examination of the relevant characteristics that define target markets. This

includes demographic characteristics (gender, age, income, etc.), geographic characteristics (where customers live, density of the target market, etc.), and

psychographic characteristics (attitudes, opinions, interests, etc.).

What Do Customers Do with Our Products? – The “what” question entails an assessment of how customers consume and dispose of the firm’s products. Here the marketing

manager might be interested in identifying the rate of product consumption (sometimes called the usage rate), differences between heavy and light users of products,

whether customers use complementary products during consumption, and what customers do with the firm’s products after consumption.

Where Do Customers Purchase Our Products? – The “where” question is associated mainly with distribution and customer convenience. Until recently, most firms looked

solely at traditional channels of distribution such as brokers, wholesalers, and retailers. Thus, the marketing manager would have concerns about the intensity of the

distribution effort and the types of retailers that the firm’s customers patronized. Today, however, many other forms of distribution are available. The fastest

growing form of distribution today is nonstore retailing—which includes vending machines; direct marketing through catalogs, home sales, or infomercials; and

electronic merchandising through the Internet, interactive television, and video kiosks.

When Do Customers Purchase Our Products? – The “when” question refers to any situational influences that may cause customer purchasing activity to vary over time. This

includes broad issues such as the seasonality of the firm’s products and the variability in purchasing activity caused by promotional events or budgetary constraints.

Why (and How) Do Customers Select Our Products? – The “why” question involves identifying the basic need-satisfying benefits provided by the firm’s products. The

potential benefits provided by the features of competing products should also be analyzed. The “how” part of this question refers to the means of payment that

customers use when making a purchase.

Why Do Potential Customers Not Purchase Our Products? – An important part of customer analysis is the realization that many potential customers choose not to purchase

the firm’s products. There are many potential reasons why customers might not purchase a firm’s products.

This analysis is vital because the information can be used to identify and select specific target markets for the revised marketing strategy. The firm should target

those customer segments where it can create and maintain a sustainable advantage over its competition.

11- Identify and discuss at least five reasons why potential customers do not purchase a firm’s goods or services. For each reason, discuss ways that the

firm can overcome the resistance of noncustomers.

ANS:
There are many potential reasons why customers might not purchase a firm’s products. The reasons given in the text are:

 Noncustomers have a basic need that the firm’s product does not fulfill.
 Noncustomers perceive that they have better or lower-priced alternatives such as
competing substitute products.
 Competing products actually have better features or benefits than the firm’s
product.
 The firm’s product does not match noncustomers’ budgets or lifestyles.
 Noncustomers have high switching costs.
 Noncustomers do not know that the firm’s product exists.
 Noncustomers have misconceptions about the firm’s product (weak or poor
image).
 Poor distribution makes the firm’s product difficult to find.

Student responses will vary greatly as to the reasons for nonpurchase, as well as how the firm might overcome the resistance of noncustomers.

12-Identify and discuss the challenges involved in collecting environmental data and information. How can a marketing manager or analyst overcome these problems?

ANS:
Despite the best intentions, problems usually arise in collecting data and information. One of the most common problems is an incomplete or inaccurate assessment of

the situation that the gathering of data should address. After expending a great degree of effort in collecting data, the manager may be unsure of the usefulness or

relevance of what has been collected. In some cases, the manager might even suffer from severe information overload. To prevent these problems from occurring, the

marketing problem must be accurately and specifically defined before the collection of any data. Top managers who do not adequately explain their needs and

expectations to marketing researchers often cause the problem.

Another common difficulty is the expense of collecting environmental data. Although there are always costs associated with data collection (even if the data are free),

the process need not be prohibitively expensive. The key is to find alternative data collection methods or sources. For example, an excellent way for some businesses

to collect data is to engage the cooperation of a local college or university. Many professors seek out marketing projects for their students as a part of course

requirements. Likewise, to help overcome data collection costs, many researchers have turned to the Internet as a means of collecting both quantitative and qualitative

data on customer opinions and behaviors.

A third issue is the time it takes to collect data and information. Although this is certainly true with respect to primary data collection, the collection of

secondary data can be quite easy and fast. Online data sources are quite accessible. Even if the manager has no idea where to begin the search, the powerful search

engines and indexes available on the Internet make it easy to find data. Online data sources have become so good at data retrieval that the real problem involves the

time needed to sort through all of the available information to find something that is truly relevant.

Finally, it can be challenging to find a way to organize the vast amount of data and information collected during the situation analysis. Clearly defining the

marketing problem and blending different data sources are among the first steps toward finding all of the pieces to the puzzle. A critical next step is to convert the

data and information into a form that will facilitate strategy development. Although there are a variety of tools that can be used to analyze and organize

environmental data and information, one of the most effective of these tools is SWOT analysis. As we will see in the next chapter, SWOT analysis – which involves

classifying data and information into strengths, weaknesses, opportunities and threats—can be used to organize data and information and used as a catalyst for strategy

formulation.

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