The Importance of Marketing Use Prior Knowledge When did you last shop at a mall? Did you witness any promotion effort? Did you compare prices? What role did this play in your decision to buy?
OBJECTIVES
THE MAIN IDEA
• Analyze the benefits of marketing • Apply the concept of utility
Marketing supports competition and offers benefits to consumers.
KEY TERMS
GRAPHIC ORGANIZER Draw the figure below. As you read this section, write in the benefits of marketing and list five utilities on the extended lines.
• utility
ACADEMIC VOCABULARY You will find these words in your reading and on your tests. Make sure you know their meanings. • impact • benefit Go to the OLC through glencoe.com fo r pri ntabl e graphic organizers, Academ ic Vocabulary definit ions, and more.
ACADEMIC STANDARDS English Language Arts NCTE 1 Read texts to acqu ire new information. Mathematics NCTM Number and Operations Compute fluently and make reasonable estimates.
Economic Benefits of Marketing own experiences and observations about how marketing benefits you personally.
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Through the study of marketing you will realize how important marketing is and how much it affects your life and the lives of other consumers. Its impact is more dramatic when you consider how it affects our economy and standard of living. Marketing plays an important role in an economy because it provides the means for competition to take place. In a competitive marketplace, businesses try to create new or improved
UNIT 1 - THE WORLD OF MARKETING
Lower Prices Marketing activities increase demand, and this helps to lower prices. When demand is high, manufacturers can produce products in larger quantities. This reduces the unit cost of each product. This is because the fixed costs (such as the rent on a building) remain the same whether the company produces 10 units or 10,000 units. When a company produces a larger quantity of a product, it spends less per unit on fixed costs. The company can charge a lower price per unit, sell more units, and make more money. Here is an example using a fixed cost of $20,000. Quantity Produced 10,000 ($20,000
• NEW PRODUCTS One of the major economic benefits of marketing is the proliferation of new and improved products.
List three new and improved products you have seen marketed lately.
products at lower prices than their competitors. Those efforts force them to be efficient and responsive to consumers. In addition, businesses look for ways to add value to a consumer's shopping experience. Let's look at the economic benefits of marketing to the economy and to consumers.
New and Improved Products Marketing generates competition, which in turn fosters new and improved products. Businesses always look for ways to satisfy customers' wants and needs and to keep customers interested. This creates a larger variety of goods and services. For example, personal computers have gotten smaller, lighter, more powerful, and less expensive. As more people use computers, this market continues to grow. ~-~~ Summa~i~e What is the benefit of __....:....,_ compet1t1on?
200,000 ($20,000
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Fixed Cost Per Unit $2.00 10,000)
.10 200,000)
In addition, when products become popular, more competitors enter the marketplace. To remain competitive, marketers find ways to lower their prices. Look at the DVD market for some examples of this phenomenon. DVD players were introduced in 199 7. Since then, there has been an explosion in the sales and rentals of DVDs and DVD players. Combination DVD/CD/MP3 players were very costly products when they were introduced, but now they can be purchased for about $100.
Added Value and Utility The functions of marketing add value to a product. This added value in economic terms is called utility. Utilities are the attributes of a product or service that make it capable of satisfying consumers' wants and needs. There are five economic utilities involved with all products: form, place, time, possession, and information. Although form utility is not directly related to marketing, much of what goes into creating new products, such as marketing research and product design, makes it an integral part of the marketing process. Chapter 1 -
Marketing Is All Around Us
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Form Utility
Supermarket Personal Shopper Albertsons introduced its Shop 'n' Scan technology by testing it-first in a handful of stores in Chicago, then expanding the test to more than 100 stores in the Dallas area. The tests started in October 2002. By October 2004 the company was planning to roll out the system in other cities. The system enables customers to use handheld scanners to scan and bag their purchases as they shop at several Jewei-Osco stores.
Focus on the Shopper The technology has some other customerfriendly features. A portable computer keeps a running total of the prices of the items in the cart. Customers can also use an express pay station to ring up their purchases.
Company Goals These customer-focused developments are in keeping with the overall policies and objectives of the company: • Focusing on customers • Building efficiency • Capitalizing on technology The company has had success with Shop 'n' Scan. According to the Wall Street Journal, shoppers using the technology bought, on average , twice as many groceries as shoppers using regular carts.
Form utility involves changing raw materials or putting parts together to make them more useful. In other words, it deals with making or producing things. The manufacturing of products involves taking things of little value by themselves and putting them together to create more value. If you consider the value of a zipper, a spool of thread, and several yards of cloth, each would have some value, but not as much as when you put all three together by making a jacket. Form utility involves making products that consumers need and want. Special features or ingredients in a product add value and increase its form utility. For example, electronic controls on the steering wheel of an automobile add value to the final product. Place Utility
Place utility involves having a product where customers can buy it. Businesses study consumer shopping habits to determine the most convenient and efficient locations to sell products. Some businesses use a direct approach by selling their products through catalogs, and other businesses rely on retailers to sell their products. The Internet offers even more options to businesses that want to sell their products directly to their customers without the use of any intermediaries. Time Utility
Go to the Marketing Essentials OLC
Time utility is having a product available at a certain time of year or a convenient time of day. For example, supermarkets and other food stores offer convenient shopping hours or they are open 24-hours a day. Retailers often have extended shopping hours during the busiest shopping season of the year, from Thanksgiving till Christmas. Marketers increase the value of products by having them available when consumers want them.
through glencoe.com to find a project on technology as added value.
Possession Utility
How do you come into possession of the items you want? You generally buy them for 10
UNIT 1 - THE WORLD OF MARKETING
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a price. The exchange of a product for money is possession utility. Retailers may accept alternatives to cash, such as personal checks, debit or credit cards, in exchange for their merchandise. They may even offer installment or layaway plans (delayed possession in return for gradual payment). Every one of these options adds value to the product being purchased. In fact, without these options, some customers would not be able to buy the items they want. In business-to-business situations, companies also grant their customers credit. They may give them a certain period (for example, 30 days) to pay a bill. This adds value to the products they sell. Possession utility is involved every time legal ownership of a product changes hands. Possession utility increases as purchase options increase. The Internet also provides consumers with options to pay by providing secure sites where credit cards are accepted.
Information Utility
Information utility involves communication with the consumer. Salespeople provide information to customers by explaining the features and benefits of products. Displays communicate information, too. Packaging and labeling inform consumers about qualities and uses of a product. The label on a frozen food entree will tell you the ingredients, nutritional information, directions for preparation, and any safety precautions needed. Advertising informs consumers about products, tells where to buy products, and sometimes tells how much products cost. Many manufacturers provide owners' manuals that explain how to use their products. Businesses also have Web sites where they provide detailed information about their companies and their products for customers.
Key Terms and Concepts I. How does marketing help to lower prices?
2. In what way is marketing related to form utility? 3. Which utility is added by drive-through windows at fast-food
restaurants?
Academic Skills Math .. · · ... · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · · ·
4. In a business-to-business transaction, the
seller offers the buyer a 2 percent discount for paying a bill early. Assuming the buyer took advantage of this offer, how much would be discounted on a $10,000 invoice? Science
5. Marketing has fostered new and improved
products, such as LCD computer and TV screens, which are flatter and lighter than their predecessors. Do research to find out about LCDs (liquid crystal displays). What are they and how do they work?
G•@ii+ Number and Operations: Percents A percent is a ratio comparing a number to 100. To convert percents to decimals, move the decimal point two places to the left. 1. To solve the problem, convert the percent to a decimal number. 2 . Multiply that decimal number by the invoice amount to find the discount amount.
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For help, go to t he Math Appendix located at the back of this book.
Check your answers at the Marketing Essentials OLC through glencoe.com.
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CHAPTER 1 -
MARKETING IS ALL AROUND US
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