MARKETING MANAGEMENT Chapter 1Marketing in the 21st century Courtesy: Marketing Management by Philip Kotler 10th Edition Chapter 1 Marketing in the 21st century Scope of Marketing Marketing people are involved in 10 types of entities: •Goods like eggs, steel, cars (Maruti!!!! Wow) •Services like airlines, hotels, barbers •Experiences like Walt Disney world’s magic kingdom, at planet Hollywood •Events like Olympics, trade shows, sports events •Persons like celebrity marketing by making major film star as brand ambassador etc. Places like cities, states, nations to attract tourists, factories, company headquarters, and new residents, like we use TAJ or say Nainital •Properties like real state owners market properties or agent markets securities •Organizations thru’ Corporate identity ads like by using tag line ‘Lets make things better’, or like Richard Branson (virgin) or Phil knight of Nike are some identity •Information like thru encyclopedias, CDs and visit the internet for information. This is information marketing •Ideas like the buyer of a drill are really buying a hole.
Church should market itself as a place of worship or a community center. Eight different states of demand: •Negative demand: if a major part of market dislikes the product and may even pay a price to avoid it – vaccinations, gall bladder operations etc. Marketing task is to analyse why the market dislikes the product and whether a marketing program can change beliefs and attitudes. •No Demand: Target consumers may be unaware of or uninterested in the product. Ex. College students may not be interested in foreign language courses.
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Marketing should look for ways to benefit others with their product and of course thus sell their product •Latent demand: Market feels strong needs for some products like harmless cigarettes. Marketer needs to measure size of this market and develop such goods •Declining demand: Market for product declines. Then marketer need to know the causes and rectify •Irregular demand: Demand of many products and services are seasonal. Marketer needs to devise ways called synchro-marketing like flexible pricing, promotions and other incentives •Full demand: sometimes full demand is there.
Marketing task is to maintain current level of demand in face of changing consumer preferences and increasing competition. •Overfull demand: sometimes demand is higher than what organization can handle. Then marketing task, called de-marketing is required. like thru raising prices and reducing promotion and service. Selective marketing is reducing demand from some parts, say not so profitable, of the market •Unwholesome demand: Unwholesome products will attract organized efforts to discourage consumption. Like unselling campaigns against cigarettes, alcohol, handguns. Marketing can use fear messages like raising prices, reduced availability.
Marketing managers face a host of decisions, from major ones such as what product to make, what features, how many salespersons to hire etc. These questions vary according to marketplaces. Consider following four markets •Consumer market: mass consumer goods and services such as soft drinks, toothpaste, air travel etc. •Business Markets: Companies selling business goods and services face weel trained and well informed professional buyers. They buy goods for their utility or to to make or resell a product to others. •Global markets: goods and services for global marketplace .
They have to decide which country to enter , how to enter, has to have a fit the cultural practices etc. •Nonprofit and Governmental Markets: goods to nonprofit organizations like churches, universities, governmental agencies need to be priced carefully. They have to follow long government procedures to get this market. Marketing Concepts and Tools: Defining Marketing: Social Definition: Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. (One marketer said that marketing’s role s to deliver a high standard of living) Managerial Definition: Often described as the art of selling. Marketing is not just selling. Selling is only the tip of the iceberg! Peter Drucker: The aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. American Management Association: Marketing (management) is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services to create exchanges that satisfy individual and organisational goals.
Kotler: We see marketing management as the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value. Core Marketing Concepts: Target Markets and Segmentation: Marketers can rarely satisfy everyone in the market. So they start with ‘Market segmentation’. Identify and profile different groups of buyers. Target segments that present the greatest opportunity – those needs the firm can meet in a superior fashion. For each chosen target market, the firm develops a market offering, which is positioned as offering some central benefit.
Marketers view the sellers as constituting the industry and the buyers as constituting the market. Markets: Need markets (the diet seeking market) Product markets (the shoe market) Demographic markets (the youth market) Geographic market (the French market) Other markets like voter markets, donor markets and labour markets. Marketplace v/s marketspace – physical v/s digital Services Gooda and services Services,money Money Resources Taxes, goods Taxes Marketers and prospects: Marketer is someone seeking response in the form of attention, purchase, vote and donation.
The response is sought from prospect. Needs, Wants and Demand: Needs describe basic human requirements. Example need for food, air, water, education, entertainment etc. Needs become wants when they are directed to specific objects that might satisfy the need. Need for food —> Want for a Hamburger Demands are wants for specific products backed by willingness and ability to pay. Marketers do not create needs. Needs pre-exist marketers. Marketers along with other social influencers influence wants. Product or offering: A product is any offering that can satisfy a need or want.
Major typed of basic offerings: Goods, services, experiences, events, persons, places, properties, organizations, information and ideas. A brand is an offering from a known source. Value and satisfaction: Value is what customer gets and what he gives. Customer gets benefits and assumes costs. Benefits include functional and emotional benefits. Costs include monetary costs, time costs, energy costs and psychic cost. Benefits (functional and emotional benefits) Value = ———– = ———————————————
Costs (include monetary costs, time costs, energy costs and psychic cost) Value of customer offering can be increased by: Raise benefits Reduce costs Raise benefits AND reduce costs Raise benefits by MORE THAN the raise in costs Lower benefits by LESS THAN the decrease in costs Exchange and transactions: Exchange is one of the four ways in which a person can obtain a product. Exchange is core concept of marketing. Exchange involves obtaining a desired product from someone by offering something in return. For exchange potential to exist five conditions must be satisfied: 1.
At least two parties 2. Each party has something that might be of some value to the other party. 3. Each party is capable of communication and delivery 4. Each party is free to accept or reject offer 5. Each party believes that it is appropriate or desirable to deal with the other party. Exchange is value-creating process as it leaves both the parties NORMALLY better off. Exchange is a process rather than an event. A transaction is a trade of values between two or more parties. Monetary transaction: Paying money in exchange of goods Barter transaction: Goods or services for other goods or services.
Dimensions of a transaction: At least two things of value Agreed upon conditions A time of agreement Place of agreement Transaction differs from transfer. In a transfer A gives goods to B but does not receive anything tangible in return. Example: Gifts, charities, subsidies etc. Relationships and networks: Transaction marketing is a part of larger idea called relationship marketing. Relationship marketing has the aim of building long term mutually satisfying relations with key parties – customers, suppliers, and distributors – in order to earn and maintain their long term preference and business.
Relationship marketing builds string economic, social and technical ties among the parties. A marketing network consist of companies and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies, university scientists and others). Marketing Channels: To reach a target market marketer uses three different kinds of marketing channels. Communication channel: The marketer uses communication channels to deliver and receive messages from target buyers. These consist of dialogue channels (e mail, toll free numbers).
Distribution channels: To display and deliver the physical product or service to the buyer or user. They include warehouses, transportation vehicles and various trade channels such as distributors, wholesalers, retailers etc. Selling channels: They include not only the distributors and retailers but also the banks and insurance companies that facilitate transactions. Supply chain: Supply chain represents a value delivery system. When a company moves upstream or downstream, the aim is to capture a higher percentage of supply chain value. Competition:
Competition includes all the actual and potential rival offerings and substitutes that a buyer might consider. Four levels of competition: Brand competition: Similar products or services to the same customers at similar prices. Industry competition: All companies making the same product or the class of product. Form competition: All companies manufacturing the products that supply the same service. Generic competition: All companies that compete for the same consumer dollars. Example: Company – Volkswagen Brand competition: Honda, Toyota and other medium price automobiles Industry competition: All automobile manufacturers
Form competition: Automobiles + Motorcycles + Bicycles + Trucks Generic competition: Consumer durables + Foreign Vacations + New Homes Marketing Environment Competition represents only one force in the environment in which the marketer operates. The marketing environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are company, suppliers, distributors, dealers, and the target customers.
Included in the supplier group are material suppliers and service suppliers such as marketing agencies, advertising agencies, banking and insurance companies, transportation and telecommunication companies. Included with distributors and dealers are agents, brokers, manufacturer representatives, and others who facilitate finding and selling to consumers. The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment, and social-cultural environment.
These environments contain forces that can have a major impact on the actors in the task environment. Market actors must pay close attention to the trends and the developments in these environments and then make timely adjustments to their marketing strategies. Marketing Mix Marketers use numerous tools to elicit desired responses from their target markets. These tools constitute a marketing mix. Marketing mix is the set of marketing tool that the firm uses to pursue its marketing objectives in the target market.
McCarthy classified these tools into four broad groups that he called the four P’s of marketing: Product, Price, Place and Promotion. The particular marketing variables under each P are shown in figure 1. 5. Marketing mix decisions must be made for influencing the trade channels as well as the final consumers. Fig 1. 6 shows the company preparing the offering mix of the products, services and prices and utilizing a promotion mix of sales promotion, advertising, sales force, public relations, direct mail, telemarketing, and internet to reach the trade channels and the target customers.
Typically, the firm can change its price, sales force size, and advertising expenditures in the short run. It can develop new products and modify its distribution channels only in the long run. Thus the firm typically makes fewer period-to-period marketing-mix changes in the short run than the number of marketing-mix decision variables might suggest. Note that the four Ps represent the sellers view of the marketing tools available for influencing the buyer. From a buyer’s point of view, each marketing tool is designed to deliver a customer benefit.
Robert Lauterborn suggested that the seller’s four P’s correspond to the customer’s four Cs. Four PsFour Cs ProductCustomer Solution PriceCustomer Cost PlaceConvenience PromotionCommunication Winning companies will be those who can meet customer needs economically and conveniently and with effective communication. Company orientation towards the market place We have defined marketing management as the conscious effort to achieve desired exchange with target markets. But what philosophy should guide a company’s marketing efforts?
What relative weights should be given to the interests of the organization, the customers and the society? Very often these interest conflict. Clearly, marketing activities should be carried under a well-thought out philosophy of efficient, effective, and socially responsible marketing. However, there are five competing concepts under which organizations conduct marketing activities: the production concept, selling concept, marketing concept, customer concept and societal marketing concept. The Production Concept: The production concept is the oldest concept in business.
The production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented business concentrate on achieving high production efficiency, low costs and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than its features. It is also used when a company wants to expand the market. Some service organizations also operate on the production concept.
Many medical and dental practices are organized on assembly-line principles, as are some government agencies (such as unemployment offices and license bureaus). Although this management orientation ca handle many cases per hour, it is open to charges of impersonal and poor quality service. The Product Concept: Other businesses are guided by the product concept. The product concept holds that consumers will favor those products that offer the most quality, performance, or innovative features. Managers in these organizations focus on making superior products and improving them over time.
They assume that buyers admire well-made products and can appraise quality and performance. However, these managers are sometimes caught up in a love affair with their product and do not realize what the market needs. Management might commit the “better-mousetrap” fallacy, believing that a better mousetrap will lead people to beat a path to its door. Such was the case when WebTV was launched during Christmas 1996 to disappointing results. The Selling Concept: The selling concept is another common business orientation.
The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organizations products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept one assumes that consumers typically show buying inertia or resistance and must be coaxed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is practiced in the non-profit area by fund-raisers, college admission offices, and political parties. A political party vigorously sells its candidates to voters.
The candidates’ flaws are concealed from the public because the aim is to make a sale and not worry about post purchase satisfaction. After the election, the new official wants and a lot of selling to get the public to accept policies the politician or party wants. THE MARKETING CONCEPT The marketing concept is a business philosophy that challenges the three business orientations we just discussed. The marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating customer values to its chosen target markets.
The marketing concept rests on four pillars: target market, customer needs, integrated marketing and profitability. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses on customer needs, coordinates all the activities that will affect customers, and produces profits by satisfying customers. Target market
Companies do best when they select their target markets carefully and prepare tailored marketing programs. Customer needs A company can define its target market but fail to correctly understand the customers’ needs. Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious. Or they cannot articulate these needs. Or they use words that require some interpretation. We can distinguish among five types of needs: 1. Stated needs 2. Real needs 3. Unstated needs 4. Delight needs 5. Secret needs