Marketing Essentials Economic Utilities Chapter 1 n Marketing

Marketing Essentials Economic Utilities Chapter 1 n Marketing Is All Around Us 1

SECTION 1. 2 Economic Utilities What You'll Learn =The benefits of marketing =The meaning of economic utility =The five economic utilities and how to distinguish the four that are related to marketing Chapter 1 n Marketing Is All Around Us

The Marketing Concept • Businesses must satisfy customers’ needs and wants in order to make a profit. Chapter 1 n Marketing Is All Around Us 3

SECTION 1. 2 Economic Utilities Why It's Important By understanding the benefits of marketing, you will see how the functions of marketing add value to products. You will also see how marketing activities lead to lower prices and new and improved products. Chapter 1 n Marketing Is All Around Us 4

SECTION 1. 2 Economic Utilities Key Terms = utility = form utility = place utility = time utility = possession utility = information utility Chapter 1 n Marketing Is All Around Us 5

SECTION 1. 2 Economic Utilities Economic Benefits of Marketing Ø Bridges the gap between you and the maker or seller of an item. Ø Makes buying easy for customers. Ø Creates new and improved products at lower prices. Chapter 1 n Marketing Is All Around Us 6

SECTION 1. 2 Economic Utilities Economic Benefits of Marketing • Economic utility • the amount of satisfaction a person receives from the consumption of a particular product or service • Economic utilities • reflect the value that producers and marketers add to raw materials when they make them into products and offer them for sale to the public. Chapter 1 n Marketing Is All Around Us 7

SECTION 1. 2 Economic Utilities =Form utility (production) =Place utility (marketing) =Time utility (marketing) =Possession utility (marketing) =Information utility (marketing) Attributes of a product or service that make it capable of satisfying consumers’ wants and needs. Chapter 1 n Marketing Is All Around Us 8

SECTION 1. 2 Economic Utilities Form Utility Changing raw materials or putting parts together to make them more useful. = Example: The parts of a lounge chair— the wood frame, the fabric, the glue and nails, and the reclining mechanism—are less useful by themselves. Putting them together adds form utility. Chapter 1 n Marketing Is All Around Us 9

Form Utility Changing raw materials into goods– making and producing things. • Sand into glass • Wood into paper • Silk into fabric Chapter 1 n Marketing Is All Around Us 10

When Henry Ford first created the Model T, he was the only one mass producing cars. He didn’t have to think about “The Marketing Concept. ” But, as more and more producers started making cars, they had to think about what customers need and want in order to stay in business. Click on the Model T Ford to see Henry Ford’s thoughts about car color in the early 1900’s. Chapter 1 n Marketing Is All Around Us

Imagine if, in today’s world, you could only buy black. Many customers would not be very happy! Chapter 1 n Marketing Is All Around Us

Today’s buyer wants a choice! Chapter 1 n Marketing Is All Around Us

The Marketing Concept • If automobile manufactures do not give their consumers a choice (what they want), they will not stay in business. • That concept is true for all businesses. • Companies sell what Customers want. Chapter 1 n Marketing Is All Around Us

SECTION 1. 2 Economic Utilities Place Utility Having a product where customers can buy it. = Example: Selling directly to the customer through catalogs. = It Includes: Location –at a retailer (actual store) – or, Internet Transporting the product to the location. Chapter 1 n Marketing Is All Around Us 15

SECTION 1. 2 Economic Utilities Place Utility If you are selling products in a huge warehouse style store, like Home Depot of Costco, the utility of "place utility" can be as simple as having the product in boxes on pallets ready to be picked up and the customer can simply walk directly to the cashier to make payment. Chapter 1 n Marketing Is All Around Us 16

SECTION 1. 2 Economic Utilities Place Utility • When so many products are sold online, or in a marketing situation which may be partly online, and partly in a store, it is more and more important to make sure the "place utility" is as competitive as possible because sometimes the final decision about whether to buy, or not buy, is made by the customer based on how they can physically get their hands on the product as soon as possible. • For example, it is no good having a detailed You. Tube video of how your low priced air-conditioner works, if the customer has to drive many miles to find a store with one actually in stock Chapter 1 n Marketing Is All Around Us 17

SECTION 1. 2 Economic Utilities Time Utility Having a product available at a time convenient for customers. = Example: Retailers offer large supplies of backpacks in the late summer, near the beginning of the school year. • Planning and ordering • Time of day and week Chapter 1 n Marketing Is All Around Us • Time of year: holidays and seasons 18

SECTION 1. 2 Economic Utilities Time Utility Challenge: The "social-cultural environment" of customers in the current marketing climate is one in which people often are quite impatient to take possession of the product once they have made the final decision to buy. It is important, in a competitive environment, to use every opportunity to streamline your supply chain and distribution channels to allow a customer to physically obtain the chosen product as quickly as possible. Chapter 1 n Marketing Is All Around Us 19

SECTION 1. 2 Economic Utilities Time Utility In the case of food service items, you can't have the burger ready and have the customers wait many minutes for the fries, they just won't come to your drive-through next time. This is one of the reasons why (say some fast food experts) that Mc. Donald's fries are skinnier and smaller and are designed to cook faster so Mc. Donald's can serve customers faster because the Mc. Donald's focus is on the "Fast" in fastfood. Chapter 1 n Marketing Is All Around Us 20

SECTION 1. 2 Economic Utilities Possession Utility Exchange of a product for some monetary value. = Example: Taking credit cards and checks rather than just cash enables customers to buy • Cash products. • Personal checks • Credit cards • Installments (layaway) Chapter 1 n Marketing Is All Around Us 21

SECTION 1. 2 Economic Utilities Possession Utility • The utility of Place and Possession are very much inter-related and depend on each other. When someone buys something from a vendor, essentially, it is a "transfer of ownership". • Part of being successful in the competitive world of "selling stuff" is to make it easy for the customer to pay, and take possession. • Having a variety of easy payment methods, is part of facilitating possession as is the physical location of the product and how it is delivered to the customer. Chapter 1 n Marketing Is All Around Us 22

SECTION 1. 2 Economic Utilities Information Utility Providing information so the customer is comfortable buying. = Example: Salespeople explain features of products. = Example: Packaging explains qualities and uses. = Example: Advertising informs consumers about products. • Ads • Packaging • Signs • Displays • Owner’s Manuals Chapter 1 n Marketing Is All Around Us 23

SECTION 1. 2 Economic Utilities Lower Prices When demand is high, manufacturers can make products in larger quantities, which reduces the unit cost of each product. = Example: When fixed costs are $20, 000: Quantity Produced Fixed Cost Per Unit 10, 000 $2. 00 200, 000 10¢ Chapter 1 n Marketing Is All Around Us 24

SECTION 1. 2 Economic Utilities New and Improved Products As businesses continue to look for opportunities to better satisfy customers' wants and needs, the result is a larger variety of goods and services. = Example: Personal computers have become smaller, more powerful, and less expensive through competition between makers. Chapter 1 n Marketing Is All Around Us 25

Which types of utility are related to marketing? Form utility is a function of production, NOT marketing Chapter 1 n Marketing Is All Around Us 26

These utilities ARE directly related to marketing: • Place • Time • Possession • Information Chapter 1 n Marketing Is All Around Us 27

1. 2 ASSESSMENT Reviewing Key Terms and Concepts 1. What is meant by the economic concept of utility? 2. Which economic utility is not classified as a marketing utility? Why? 3. Besides added value, what are two other benefits of marketing? Chapter 1 n Marketing Is All Around Us 28

1. 2 ASSESSMENT Thinking Critically How would you explain the following statement? Marketing is more than just promotion. Chapter 1 n Marketing Is All Around Us 29

Marketing Essentials End of Section 1. 2 Chapter 1 n Marketing Is All Around Us 30

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