Midterm 1: BEV
Marginal Revolution
(started by Walras, Javons, and others) led to the development of abstract, formal theories as a result of the usage of mathematical tools like calculus economic value became determined subjectively Marginalists believed in understanding economic value based on utility (how useful is a product or service?)
Functions of Marketing
- Buying - Selling - Transporting - Storing - Grading - Financing - Marketing Research - Risk Taking
Factors that impact Willingness to Pay
- income - weather - gender - service levels - competing products - legality - environmental or social impact - geography - age - brand loyalty - advertising - expectations - packaging - necessity
Requirements for a firm to successfully use a concentration or multisegment approach to market segmentation
1. Consumers' needs for the product must be heterogenous 2. The segments must be identifiable and divisible 3. The total market must be divided in a way that allows estimated sales potential, cost, and profit to be compared 4. At least one segment must have enough profit potential to justify developing and maintaining a special marketing strategy 5. The firm must be able to reach the chosen market segment with a particular market strategy
Adam Smith's Invisible Hand
A hidden hand of the market operating in a competitive market through the pursuit of self-interest allocated resources in society's best interest. Societal economics succeeds as a result of people's self interests (in a honest and reliable way)
Selling (Functions of Marketing)
A persuasive activity that is accomplished through promotion (advertising, personal selling, sales promotion, publicity, and packaging) The exchange process is expedited through selling
Feudalism
A political system in which nobles are granted the use of lands that legally belong to their king, in exchange for their loyalty, military service, and protection of the people who live on the land A network of mutual obligation and dependencies → good for social stability Con: - production was ineffective due to fragmented landholding and lack of competition and incentives for innovation - local trade dominated and long-distance - trade was risky land was tied to family structures
Democratic Political System
A political system in which the supreme power lies in a body of citizens who can elect people to represent them transparency & rule of law -> business investments clarity regarding legal rules -> economic efficiency some investments to influence the political process more entrepreneurship; more innovation; more dynamic economies
Socialism
A system in which society, usually in the form of the government, owns and controls the means of production. advocates for collective ownership + management of production, distribution (serves as a solution to the cons of capitalism) Key principles - Collective ownership of the means of production (collective property rights): all assets in the economy is owned by the community and government is the central planner - Workers' rights: workers are protected by fair wages, safe working conditions, unions - Social Welfare: safety net for citizens - Role of Government: government has a greater role Cons: less incentive to work hard and innovate, centralized bureaucracy leading to slow change, risks to political freedom, allocation of goods via command mechanism rather than price mechanism leads to inefficient allocation of goods and services
Mercantilism
An economic policy under which nations sought to increase their wealth and power by obtaining large amounts of gold and silver and by selling more goods than they bought (maximize exports, minimize imports) Led to the creation of monopolistic trading companies like East India Company. Restrictions on where finished goods could be purchased led to burdensome high prices for those goods. Established by Dutch bankers to finance trade in Asian (Dutch East Indies) Investments in a company, not a single expedition con: restrictive trade policies -> limited free trade (tariffs and quotas on foreign goods), stifling innovation and efficiency (no pressure of international competition), market limitation (businesses constrained to the domestic market and miss out on profitable international opportunities), trade wars as nations respond to mercantilist policies with their own tariffs and restrictions
Capitalism
An economic system based on private ownership of capital - encourages more economic growth due to the principle of "free choice" and "free markets" - invisible hand and pursuing their self-interest - Division of labor and specialization - works well when consumers and producers negotiate based on mutual advantage Important features of capitalism: - Freedom - Right to private ownership and control of property - Market-driven environment → private ownership and control of property are preserved Con: severe income inequality, exploitation of labor, economic instability
Planning and Designing Operations Systems
Before a company can produce any product, it must first decide what it will produce and for what group of customers... it must then determine what processes it will use to make these products as well as the facilities it needs to produce them. 1. A company must determine what consumers want and then design a product to satisfy that want - Most companies work to reduce development time and costs... they may join together with other companies and pool their resources to reduce the time it takes to develop a new product 2. Within the company the engineering or research and development department is charged with turning a product idea into workable design that can be produced economically. - In smaller companies, a single individual (perhaps the owner) may be solely responsible for this crucial activity 3. Before beginning production, the firm must determine the appropriate method of transforming resources into the desired product
Mixed Economic Systems
Blend features of capitalism and socialism for more balanced and equitable economy Key Principles: - Allocates resources through supply and demand leading to efficient use of resources - Profit motive in capitalism drives innovation - Socialist elements ensure safety net for citizens (healthcare, education, unemployment benefits, pensions) - Government regulation address market failures (monopolies, environmental degradation, financial crises) Potential cons: - government intervention in markets might lead to inefficient allocation of resources - crowding out - dependency on government support
Authoritarian political systems vs Democracies
Democratic counties have a stable political environment that encourages long-term business investments (due to their free and fair elections)
What are the basis for segmenting markets?
Demographics: age, sex, race, ethnicity, income, education, occupation, family size, religion, social class these often closely relate to customers' product needs and purchasing behavior Geographic: Climate, terrain, natural resources, population density, subcultural value these influences consumer needs and product usage Psychographic: personality characteristics, motives, life-styles Behavioristic: some characteristics of the consumer's behavior toward the product, pattern of buying something (e.g. buying something only during Christmas)
Buying (Functions of Marketing)
Everyone who shops for products (consumers, stores, businesses, governments) decides whether and what to buy A marketer must understand buyers' needs and desires to determine what products to make available
What are the support activities in Porter's Value Chain?
Firm Infrastructure, Human Resource Management, Technology Development, Procurement These activities provide support for each of the primary activities
Inbound Logistics (Porter's Value Chain)
Inbound Logistics include receiving, storing, and distributing inputs. Effective inbound logistics help reduce cost and improve quality of inputs → contributing to buyer WTP Includes: material handling, warehousing, inventory control, and returns to suppliers.
What are the primary activities in porter's value chain?
Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, Service
How can firms create value?
Increase Average Willingness to pay: - investments improve functional utility of a good or service - investment in subjective product feature (does not affect product usefulness but its appeal to buyers (e.g. new logo) - developing new variety of product that satisfy previously unaddressed customer needs - making more available to consumers so they can obtain it easier or feel comfortable using it Decrease Average cost: - engage in innovation-oriented investments that drive down average costs
Insourcing vs Outsourcing
Insourcing: - using company's own resources to handle tasks that might otherwise have been outsourced - full control over processes, quality, and operations but involves higher cost but also relies on company's expertise and resources Common uses -> strategic activities, intellectual property -> customer-facing services Outsourcing: - practice of contracting third-party companies or external service providers to perform certain business functions or processes that could be done in-house - less direct control over processes and quality, reduces labor and operational costs, and provides access to external expertise and technology Common uses -> IT services, customer support, manufacturing
Labor Required (Manufacturing vs Service)
Manufacturer is likely to be more capital-intensive because of the machinery and technology used in the mass production of highly similar goods e.g. it would take a considerable investment for Ford to make an electric car that has batteries with a longer life Service providers are generally more labor-intensive (require more labor) because of the high level of customer contact, perishability of the output (must be consumed immediately), and high degree of variation of inputs and outputs (customization) e.g. Adecco provides temporary support personnel
Nature and Consumption of Output (Manufacturing vs Service)
Manufacturer → firm makes tangible products (can occur in an isolated environment, away from the customer) Service provider → produces more intangible products (more limited than manufacturers in selecting work methods, assigning jobs, scheduling work, and exercising control over operations) - e.g. USPS delivery of priority mail The very nature of the service provider's product requires a higher degree of customer contact. The actual performance of the service typically occurs at the point of consumption
Uniformity of Output (Manufacturing vs Service)
Manufacturers and service providers differ in the uniformity of their output, the final product. In manufacturing, the high degree of automation available allows manufacturers to generate uniform outputs, and thus, the operations are more effective and efficient Due to the human element inherent in providing services, each service tends to be performed differently.
Uniformity of Inputs (Manufacturing vs Service)
Manufacturers typically have more control over the amount of variability of the resources they use than do service providers Service organizations' products tend to be more "customized" than those of their manufacturing counterparts e.g. a haircut is more likely to incorporate your specific desire as opposed to a bottle of shampoo
Measurement of Productivity (Manufacturing vs Service)
Manufacturers → measuring productivity is fairly straightforward because of the tangibility of the output and its high degree of uniformity Service provider → variations in demand (e.g. higher demand for air travel in some seasons than in others), variations in service requirements from job to job, and the intangibility of the product make productivity measurement more difficult
Marketing Research (Functions of Marketing)
Marketers can ascertain the need for new goods and services. This can help detect new trends and changes in consumer tastes
Marketing and Sales (Porter's Value Chain)
Marketing and sales inform buyers about product, induce buyers to purchase, and facilitate the purchase process. Effective marketing and sales strategies can help boost demand, drive brand loyalty, raise barriers to entry for rivals, and affect product price and willingness to pay It helps understand the internal activities of the firm. Includes: advertising, pricing, channel selection, promotions, and sales force management
How does Marketing create Value?
Marketing create values by allowing individual and organizations to obtain what they need and want. It provides provides revenue to sustain the firm Products must be conveniently available, competitively prices, and uniquely promoted
Marketing
Marketing involves planning and executing the development, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. Marketing is not manipulating consumers to get them to buy products they do not want. It is not just advertising and selling. It is a systematic approach to satisfying consumers.
Marketing strategy
Marketing strategy is a plan of action for developing, pricing, distributing, and promotion products that meet the needs of specific customers 1. Select a target market 2. Develop an appropriate marketing mix to satisfy that target market
Five Ways Manufacturing and Service Providers Differ
Nature and Consumption of Output Uniformity of Inputs Uniformity of Outputs Labor Required Measurement of Productivity note: most organizations are a combination of the two, with both tangible and intangible qualities embodied in what they produce
Operations (Porter's Value Chain)
Operations refers to transformation of inputs into final products. Effective operations help enhance product quality and reduce production costs. Includes: machining, packaging, assembly, maintenance, and testing
Outbound Logistics (Porter's Value Chain)
Outbound Logistics are activities relating to distribution of final products to customers. Effective outbound logistics ensure timely delivery and enhance customer service Includes: Order fulfillment, transportation, and distribution management
Important regulations and policies that impact business operations
Political stability is important for business confidence Strength of the legal environment, e.g. property rights and contract enforcements, can benefit businesses due to protection of intellectual property protections Risk of appropriation by government can affect businesses because fewer would want to invest in countries in autocratic or unstable regimes where private property could be confiscated
Authoritarian political systems
Political systems in which all decisions related to governing the state are made by a small group of people or by one person (for example: military rulers, dictators, monarchies, theocracies) ability to intercede in business -> uncertainty -> less business investment businesses are less sure of how political systems might interfere with their future operations existing businesses develop more ties to government, often leading to corruption, and sometimes leading to windfall profits often greater concentration of businesses (smaller number of bigger firms) In order to leverage economies of scale in political influence
Differences between Porter's Value Chain and Industry Value Chain
Porter's Value Chain focuses specifically on the firm while Industry Value Chain focuses on firm + suppliers PVC: - internal - analyzes company activities to create competitive advantage - optimizing and improving firm- specific activities - looks at activities within one firm - identify efficiencies and competitive advantages within a single business Industry Value Chain: - External (entire industry or supply chain) - understand how value is created across different firms in the industry or supply chain - mapping and analyzing the relationships between firms and stages in the production process - looks at multiple firms + industries involved in the production and delivery of a product - used to analyze industry-wide value creation, identifying collaboration and competition points in the supply chain
Marketing Mix
Product, price, place, and promotion—the controllable set of activities that a firm uses to respond to the wants of its target markets.
Wellbeing and role of autonomy in wellbeing
Sen argues that well-being is about having freedom to choose from various life paths -> contradicting with purely economic views of well-being (which reduces it to income or utility maximization) Individuals' well-being should be judged by their ability to pursue the life they value, not just by material possessions Autonomy is an individual's ability to make independent choices and have control over their life which is important to living a fulfilling and meaningful life (wellbeing) Bottom line: well-being depends on capabilities & freedoms to make choices & shape one's life, resources & goods consumed matters but what matters more is what individuals can do with those resources & goods
Service (Porter's Value Chain)
Service are activities that maintain and, potentially, enhance a product's value after purchase. Effective service can increase customer satisfaction and repeat business, while also affecting firm average costs. Includes: installation, training, repair, and supply of replacement parts
How is Sen's perspective important for thinking about role of business in developing and industrialized countries?
Shifts focus of role of businesses from traditional profit-driven motives to broader societal impacts Businesses can contribute to human well-being by expanding capabilities, promoting social justice and enhancing freedoms Sen's framework encourages businesses to think beyond profits and assess their impact on social justice, equality, and sustainable development
Grading (Functions of Marketing)
Standardizing products by dividing them into subgroups and displaying and labeling them so that consumers clearly understand their nature and quality e.g. products like meat, steel, and fruit are graded according to a set of standard that often are established by the state or federal government
Fit among activities in PVC
Strategy (all the activities) have to fit together and work together e.g. in Walmart how their strategy is low prices which leads to keeping prices low without sacrificing quality <- this dominates their activities which all have to fit together to reach this model
Firm Infrastructure / core activity / management (Porter's Value Chain)
Support Activity Firm Infrastructure is the broad set of activities that support the entire value chain. Effective firm infrastructure can enable the efficient functioning of all of the firm's activities. Includes: general management, finance, accounting, law, quality management, and strategy
Human Resource Management (Porter's Value Chain)
Support Activity Human Resource Management is associating (and Includes) with recruiting, hiring, training, developing, and compensating employees. Effective human resource management enables a firm's workforce to effectively support its other activities
Procurement (Porter's Value Chain)
Support Activity Procurement are activities relating to acquiring firm resources. Effective procurement can reduce costs and support the quality of firm inputs. Includes: the acquisition of raw materials, components, and supplies
Technology Development (Porter's Value Chain)
Support Activity Technology Development are activities that improve a firm's product and processes. Advances in technology development can lead to innovating products and more effective processes Includes: research and development, process automation, and product design
Target Market
Target market is a more specific group of consumers on whose needs and wants a company focuses its marketing efforts
Value Capture
The appropriation of the value created by a product, service, or process. Think of the value chain as a long number line, the amount of value a specific step captures (whether it be a supplier, the firm, the retailer, or end consumer) is the price - the cost Interestingly, value can be captured by both the buyer's WTP and cost to the firm
Cost to the firm
The avg amt that the firm spends to make product or service available for sale (what they pay suppliers) total cost = cost of all firm expenditures in a particular unit of time / total amount of units sold in that time period
Risk Taking (Functions of Marketing)
The chance of loss associating with marketing decision Most marketing decisions result in either success or failure.
Financing (Functions of Marketing)
The marketer arranges credit to expedite the purchase Especially true for large items like automobiles, refrigerators, and new homes
Multi-party Value Chain / Party Value Chain / "extended Value Chain"
There is competition within (and across) every step (multiple party) Picture the value chain -> but there are multiple upstream suppliers, multiple suppliers, multiple firms, multiple wholesalers, multiple retailers and then to the final end consumers
Total-Market Approach (Market Segmentation)
Total-market Approach: (mass marketing) appeal to everyone and assume that all buyers have similar needs and wants - e.g. sellers of salt, sugar, and many agricultural products
Difference between economic value and Sen's perspective on value
Traditional economic approaches -> material wealth, market prices, and utility maximization Sen's perspective -> human capabilities, freedom to live a life one values -> value should be assessed by opportunities and choices individual have, rather than just their income or utility they derive from consumption Sen is basically saying that economic value is beyond market prices -> it is also factors that impact WTP like if something is organic, warm, the values of the company, whether it's trendy <- These nonmarket values!!!
Value captured by Supplier =
Value captured by Supplier = Cost to firm - cost to supply
Value captured by the buyer =
Value captured by the buyer = WTP - Price Also known as consumer surplus or consumer delight
Value captured by the firm (profit) =
Value captured by the firm (profit) = Price - Cost
Simplified value creation: (based on two-parties) value creation is defined by
Willingness to pay (WTP) of the buyer Cost to the firm Value created = WTP - cost summary: value created reflects the investment of firm in transforming its supplies into a product (or service) buyers would want
Value Stick (Value Creation & Capture Framework)
[willingness to pay [price [cost [willingness to supply
Communism
a form of socialism that abolishes private ownership Eliminates the capitalist system and abolishes private enterprise, creating a classless, stateless society -> in it's ideal form there is no money, market, or competition and everything is planned and distributed by the community or the state Communist government maintain centralized power Cons: eliminates free market leading to inefficiencies and lack of competition, there's no incentive for innovation or entrepreneurship, misallocation of resources and lack of price signals, lack of consumer choice due to standardized goods and services, economic stagnation due to no profit motive and disincentivizing of hard work.,
Promotion (Marketing Mix)
a persuasive form of communication that attempts to expedite a marketing exchange by influence individuals, groups, and organizations to accept goods, services and ideas - Includes: advertising, personal selling, publicity, and sales promotion - goal is to communicate directly or indirectly with individuals, groups, and organizations to facilitate exchanges
Price (Marketing Mix)
a value placed on an object exchanged between a buyer and a seller. Though usually established by the seller, can be negotiated between the buyer and the seller - Key element of marketing mix because it relates directly to the generation of revenue and profits
Porter's Value Chain (PVC) <Firm Value Chain Framework>
an approach to help understand ways in which firms create and capture value. It makes a distinction between a firm's primary activities and support activities. These activities must fit together to create value The framework's primary use is to provide a convenient way of summarizing a firm's various activities. (how does the role of general & specific business functions in value creation) note: Porter Value Chain helps look at internal choices made by a firm and analyzes how those relate to economic actors outside of a firm's boundaries. While firms must address each of the activities in the PVC, they do not need to do all the activities themselves. It's possible to outsource nearly every one of the primary and support activities.
Product Orientation (Marketing Concept)
an inward-looking approach that focuses on making products that can be made - or have been made for a long time - and then trying to sell them - focus on developing and perfecting the product itself -> less emphasis on customer needs or market demand - prioritize innovation, quality, and features belief in "Build it, and they will come" (contrasting with market orientation)
Value Chain
demonstrates the path of exchange of goods and services from (a) from a supplier to a firm and (b) from that firm to a buyer In a value chain (which are typically drawn on a horizontal axis): Goods and services will flow from left to right supplier → firm → buyer Payment for goods and services flow from right to left buyer → firm → suppliers
Industry value Chain (value Chain)
depiction of the transformation of raw materials into finished goods and services along distinct vertical stages, each of which typically represents a distinct industry in which a number of different firms are competing
Amartya Sen
development should be assessed less by material output and more by the capabilities and opportunities that people enjoy believes that business and public policy analyses should take into account various perspectives and ethical considerations to fully understand and address issues of human welfare NOT ALL VALUE IS ECONOMIC VALUE!! -> religious values, moral values, social values, cultural values, aesthetic values
Subjective approach to value
economic value is shaped by a combination of the usefulness of a product or service to potential buyers and by preferences of those buyers (as opposed to inherent, intrinsic, or objective valuing) Based on this approach, the value of goods can vary from place to place, year to year, and even minute to minute Value of goods & services is measured based on how much potential buyers were willing to pay for it
Outputs (the transformation process)
final products or services that result from the transformation process. These outputs should meet customer needs or add value
Service organizations must build their operations around
focused on designing, managing, and improving the processes that create and deliver intangible services to customer -> deals with managing experiences, customer interactions, and the effective delivery of non-physical outputs good execution, which comes from hiring and training excellent employees, developing flexible systems, customizing services, and maintaining adjustable capacity to deal with fluctuating demand
Market Orientation (Marketing Concept)
focuses on understanding and meeting customer needs and preferences -seeks to understand what customers want and need - decision driven by customer preferences, trends, and competitors - adapt products or services based on feedback and changing market conditions requires organizations to gather information about the customer needs, share that information throughout the entire firm, and use it to help build long-term relationships with customers → linked to new product innovation by developing a strategic focus to explore and develop new products to serve target markets be responsive to ever-changing customer needs and wants
Conversion (the transformation process)
inputs are processed, transformed, or refined to create value. It can involve physical changes (e.g. manufacturing), informational changes (e.g. data processing), or changes in customer experience (e.g. service delivery)
Modular Design (Operations Process)
involves building an item in self-contained units ,or modules, that can be combined or interchanged to create different products Allows customers to mix and match components e.g. PC -> various components like CPU, RAM, hard drive, graphics card, and motherboard
Supply Chain Management (SCM)
involves maintaining a flow of products through physical distribution activities → acquiring resources, inventory, and the interlinked networks that make the products available to customers through purchasing, logistics, and operations
Standardization (Operations Process)
making identical, interchangeable components or even complete products - speeds up production and quality control and reduce production costs - provides consistency so that customers who need certain products to function uniformly all the time will get a product that meets their expectations
Distribution/Place (Marketing Mix)
making products available to customers in the quantities desired (remember supply chain management)
Customization (Operations Process)
making products to meet a particular customer's needs or wants. Products produced this way are generally unique e.g. repair services, photocopy services, custom artwork, jewelry, and furniture, as well as large-scale products such as bridges, ships, and computer software Mass customization relate to making products that meet the needs of a large number of individual customers the customer can select the model, size, color, style, or design of the product (customers get to make choices and have the options to determine the final product)
Manufacturing and production VS Operations
manufacturing and production is used interchangeably to represent the activities and processes used in making tangible product operations describe the process used in the making of both tangible and intangible products
Multisegment Approach (Market Segmentation)
multiple target markets the marketer aims its marketing efforts at two or more segments, developing a marketing strategy for each
How can firms capture value?
only choices that drive down Cost (while preserving WTP) lead to value capture why? -> not all WTP increases are accompanied by increases in price (if firm investment -> increase WTP -> no increase in avg price -> value capture by WTP will contribute to buyer (consumer surplus) rather than profitability increase Bottom line: if increase in WTP leads to greater volume of sales which drives down Average cost, this can lead to value capture
Operation managers
oversee the transformation process and the planning and designing of the operations systems, managing logistics, quality, and productivity
Storing (Functions of Marketing)
part of the physical distribution of products and includes warehousing goods Warehouses hold some products for lengthy periods to create time utility (being able to satisfy demand in a timely manner
Sales Orientation (Marketing Concept)
primary focus is on aggressively selling and promoting products rather than aligning them with customer needs or preferences. Prioritize pushing existing products to customers through sale techniques with the belief that increased sales volume will lead to profitability - emphasis on generating sales through persuasive techniques, rather than tailoring products to market demand - aggressive promotion (heavy advertising, promotions, discounts to boost sales) - short-term focus -> immediate revenue and market penetration rather than long-term customer satisfaction - product-driven -> if sales effort strong, customers will buy regardless of how well product fits their needs
Value Created
reflects investment of firm in transforming supplies into a product (or service) buyers would want On the number line, this is demonstrated from the point to the end consumer (think for a firm creating jackets, the value that high quality cotton creates... the potential of that cotton to become the high quality jacket)
Willingness to pay (WTP) of the buyer
reflects the utility of a product or service to potential buyers depends on (the two can also be conceptually separated) - productive utility of a product or service - - features of the product or service WTP varies significantly across consumers note: this is a nuanced concept and represents hypothetical maximum amount a buyer would spend for a good or service (assuming they have the resources for that purchase)
Inputs (the transformation process)
resources like raw materials, capital, equipment, labor, information, and energy
Concentration Approach (Market Segmentation)
single target market a company develops one marketing strategy for a single market segment → allows a firm to specialize (focus all its efforts on the one market segment)
What are some things to consider in the operations process?
standardization, modular design, customization, capacity
Market Research
systematic, objective process of getting information about potential customers to guide marketing decisions can include data about the age, income, ethnicity, gender, and educational level of people in the target market, their preferences for product features, their attitudes towards competitors' products, and the frequency with which they use the product important because marketing concept cannot be implemented without information about customers
Operations Management (OM)
the development and administration of the activities involved in transforming resources into goods and services
Marketing Concept
the idea than an organization should try to satisfy customers' needs through coordinated activities that also allows it to achieve their own goals consists of product orientation, sales orientation, market orientation 1. first figure out what consumers desire and then develop the good, service, or idea that fulfills their needs or wants 2. then continually alter, adapt, and develop products to keep pace with changing consumer needs and wants You must implement the marketing concept by making a product with satisfying benefits and making it available and visible!!
The transformation process
the method by which inputs are converted into outputs
Market Segmentation
the process of dividing a market into meaningful, relatively similar, and identifiable segments or groups Market Segment: collection of individuals, groups, or organizations who share one or more characteristics and thus have relatively similar product needs and desires e.g. women are a large market segment - Total Market Approach, Concentration Approach, Multisegment Approach
Niche Marketing
the process of finding small but profitable market segments and designing or finding products for them narrow market segment focus when efforts are on one small, well-defined group that has a unique, specific set of needs are usually very small compared to the total market for the product
Transporting (Functions of Marketing)
the process of moving products from the seller to the buyer Marketers focus on transportation costs and services
Utility
the satisfaction, pleasure, or benefit that a consumer derives from consuming a good or service
Labor Theory of Value
value of goods & services = amount of labor required for production - coined by Adam Smith - Karl Marx adds on to this theory and claims that the value of a product can be measured objectively by average # of hours of human labor used in production e.g. if someone takes 2x as long to produce a shirt than a hat, the shirt would be more valuable - a theoretically object (intrinsic) way of obtaining economic value
Objective (intrinsic) approach to value
valuing things based on inherent importance as a result of the physical and human components of their production (as opposed to valuing based on human perception or preferences) The advancement of technology, scale, and complexity of production evolved the idea that economic value was not objective or intrinsic. "Adding Up": the value of complex product = sum of labor costs + (measurable) profit of capitalist + rent associated with land → all of which used to make the product
Product (Marketing Mix)
whether a good, service, or idea, is a complex mix of tangible and intangible attributes that provide satisfaction and benefits - Good: is a physical entity that you can touch - Service: application of human and mechanical efforts to people or objects to provide intangible benefits to customers - Ideas: concepts, philosophies, images, and issues - Has emotion and psychological as well as physical characteristics that include everything that the buyer receives from an exchange → note: products are among a firm's most visible contacts with customers
