RAYA UNIVERSITY DEPARTMENT OF MANAGEMENT

CHAPTER ONE

1.1. Marketing and Its Core Concepts

A market is a location where buyers and sellers meet to exchange goods and services at prices
determined by the forces of supply and demand.
What is Marketing?
Marketing must be understood not in the old sense of making a sale - 'selling' - but in the new
sense Marketing is meeting customers’ needs and wants profitably. Marketing is the economic
process by which goods and services are exchanged between the producer and the consumer and
their values determined in terms of money prices. All of us engage in marketing in one or
another way. When we are searching job we are marketing ourselves, when we are trying to
convince customers to buy our products and services, we are marketing.
The management process through which goods and services move from concept to the customer
is includes the coordination of four marketing elements called the four P’s of marketing:
i) Identification, selection and development of a product,
ii) Determination of its price,
iii) Selection of a distribution channel to reach the customers place and,
iv) Development and implementation of a promotional strategy
According to Philip Kotler, Marketing is a social 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.
American marketing association also define , marketing is the process of planning & executing
the conception, pricing, promotion & distribution of ideas, goods & services to create exchange
that satisfy individual & organizational goals.
According to 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. Ideally, marketing should result in a customer who is ready to buy. All that
should be needed is to make the product or service available.

Many people think that marketing and selling mean the same thing. Others think that marketing
is the same as selling and advertising, still others have a notion that marketing has got something
to do with making products available in the stores, arranging displays and maintaining
inventories of products for future sales. Actually marketing includes all these activities and many
more. Marketing is a key function of management. It brings success to business organization. A
business organization performs two key functions producing goods and services and making
them available to potential customers for use. An organization business success largely depends
on how efficiently the products and services are delivered to customers and how differently do
the customers perceive the difference in delivery in comparison to the competitors. This is true of
all firms.

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The Chartered Institute of Marketing defines Marketing as: “Marketing is the management
process for identifying, anticipating & satisfying customer requirements profitably.”

“The all-embracing function that likes the business with customer needs and wants in order to
get the right product to the right place at the right time”.

“The achievement of corporate goals through meeting and exceeding customer needs better than
the competition.

“The management process that identifies anticipates and supplies customer requirement
efficiently and profitably.

“Marketing may be defined as a set of human activities directed at facilitating and consummating
exchanges”.

To help put things into context, you may find it helpful to often refer to the following diagram
which summarizes the key elements of marketing and their relationships:

Understanding market Designing customer-

Construct a marketing
place and customer driven marketing
program that delivers
needs and wants strategy
superior value

Capture value from Build profitable

customers to create profits relationship and
and customer quality create customer
delight

Figure 1: Simple model of marketing process

1.2 Core Concepts of Marketing

a) Needs – The most basic concept underlying marketing is that of human needs. Need is “A
state of felt deprivation”, “Basic human requirements”. Needs are natural all human beings has
the same type of need irrespective of culture, economic and other conditions. All have need for
food, for clothing, for shelter. Humans have many complex needs. These include basic
physiological needs for food, clothing, warmth and safety; social needs for belonging and
affection; and individual needs for knowledge and self-expression. These needs are not invented
by marketers; they are a basic part of the human make-up. When a need is not satisfied, a person
will do one of two things: look for an object that will satisfy it; or try to reduce the need.

b) Wants- Wants are needs shaped by culture & individual personality. Ethiopians need Injera
for hunger reliving and Kenyans’ want poraje.

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c) Demands – People have narrow, basic needs (e.g. for food or shelter), but almost unlimited
wants. However, they also have limited resources. Thus they want to choose products that
provide the most satisfaction for their money. When wants backed by an ability to pay - that is,
buying power - wants become demands. This is the most important for marketers. Marketers
should study the needs and wants of customers and customers need to have money to buy.

d) Marketing offer – “Combinations of products, services, information or experiences offered to

a market to satisfy a need or want”

e) Value – “A set of benefits promised to consumers to satisfy their needs.” Value can be seen as
primarily a combination of quality, service & price, called between the benefit the customer
gains from owning and using a product and the costs of obtaining the product.

f) Customer Value Reflects Benefits and Costs - Customer value concerns the difference
between the benefits a customer seek from a firm’s market offering and the costs of obtaining
those benefits. The customer’s view of costs and benefits is not just limited to economic (or even
rational) considerations – and a low price may NOT result in superior value.

Cost- benefit = value

g) Marketers and Utility - Marketers are persons who try to initiate response from other person
whether to sell or buy products and services from other party. Organizations add various utility
on products or services. Utility is the satisfaction customers are getting from using the product
and there are four types of utility.

 Form Utility – is the utility organizations add by changing the format of the input into new
output. E.g. when bakers change the wheat flower to Bread, it is adding form utility.
 Time Utility- is the utility the organizations are providing by making the product available at
the required time. E.g. Merchants make available rain coats during summer season.
 Place utility -the utility the organizations are providing by making the product available at
the required place. E.g., when products are available near to the villages of customers, it is
providing place utility.
 Possession utility- is the satisfaction customer is getting by undertaking various activities on
the product.

h) Satisfaction and Quality -

 Customer satisfaction- Is the extent to which a product's perceived performance matches
buyers’ expectations. If the product's performance falls shore, of expectations, the buyer is
dissatisfied. If performance matches or exceeds expectations the buyer is satisfied, or
delighted.
 Quality-Customer satisfaction is closely linked to quality. Quality has a direct impact on
product performance, and hence on customer satisfaction.

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In the narrowest sense, quality can be defined as 'freedom from defects'. But most customer-
centered companies go beyond this narrow definition of quality. Instead, they define quality in
terms of customer satisfaction
i) Exchange, Transactions and Relationships
 Exchange- Marketing occurs when people decide to satisfy needs and wants through
exchange. Exchange is the act of obtaining a desired object from someone by offering
something in return. Exchange is only one of many ways people can obtain a desired object.
 Transactions- Whereas exchange is the core concept of marketing, a transaction is
marketing's unit of measurement. A transaction consists of a trading of values between two
parties.
 Relationships- Transaction marketing is part of the larger idea of relationship marketing.
Smart marketers work at building long-term relationships with valued customers,
distributors, dealers and suppliers. They build strong economic and social tics by promising
and consistently delivering high-quality products, good service and fair prices. Increasingly,
marketing is shifting from trying to maximize the profit on each individual transaction to
maximizing mutually beneficial relationships with consumers and other parties.
1.3 Marketing Philosophies
i. Production Concept: The production concept holds that consumers will favor products that are
available and highly affordable. Therefore, management should focus on improving production
and distribution efficiency. This concept is one of the oldest orientations that guide sellers. The
production concept is still a useful philosophy in two types of situations. The first occurs when
the demand for a product exceeds the supply. Here, management should look for ways to
increase production. The second situation occurs when the product’s cost is too high and
improved productivity is needed to bring it down.
ii. The Product Concept: Another important concept guiding sellers, the product concept, holds
that consumers will favor products that offer the most quality, performance and innovative
features, and that an organization should thus devote energy to making continuous product
improvements. Some manufacturers believe that if they can build a better mousetrap, the world
will beat a path to their door." But they are often rudely shocked. Buyers may well be looking for
a better solution to a mouse problem, but not necessarily for a better mousetrap. The product
concept also can lead to 'marketing myopia'.

iii. The Selling Concept: Many companies follow the selling concept, which holds that
consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling
and promotion effort. The concept is typically practiced with unsought goods – those that
buyers do not normally think of buying, such as insurance or blood donations. These industries
must be good at tracking down prospects and selling them on product benefits.

iv. The Marketing Concept: The marketing concept holds that achieving organizational goals
depends on knowing the needs and wants of target markets and delivering the desired
satisfactions better than competitors do. Under the marketing concept, customer focus and
value are the paths to sales and profits.
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The selling concept takes an inside-out perspective. It starts with the factory, focuses on the
company’s existing products, and calls for heavy selling and promotion to obtain profitable sales.
It focuses primarily on customer conquest getting short-term sales with little concern about who
buys or why.

In contrast, the marketing concept takes an outside-in perspective. The marketing concept starts
with a well-defined market, focuses on customer needs, and integrates all the marketing activities
that affect customers. In turn, it yields profits by creating lasting relationships with the right
customers based on customer value and satisfaction.

Fig: Marketing concept compared with the selling concept

Starting Focus Means Ends

point

Factory Existing Selling and Profits through

Products Promoting sales volume

The selling concept

Market Customer Integrated Profits through

Needs marketing sales volume &
Satisfaction

The marketing concept

Customers deeply to learn about their desires, gather new product and service ideas, and test
proposed product improvements. Such customer-driven marketing usually works well when a
clear need exists and when customers know what they want.

V. The Societal Marketing Concept: The Societal marketing concept questions whether the
pure marketing concept overlooks possible conflicts between consumer short-run wants and
consumer long-run welfare. Is a firm that satisfies the immediate needs and wants of target
markets always doing what’s best for consumers in the long run? The societal marketing concept
holds that marketing strategy should deliver value to customers in a way that maintains or
improves both the consumer’s and the society’s well-being.
1.4 Marketing and Demand Management
Since marketing management involves influencing the level, timing and composition of demand
for the company’s product, sometimes it is also known as demand management. Demand
management serves what customers look for no matter when.

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There are 8 different types of demand

1. Negative Demand: it is a situation where the buyer does not like the product and may even
pay a price to avoid it.
 Marketing Task: converting the negative demand to positive demand
 Marketing Situation/solution: conversational marketing
 Marketing Strategies: positive promotion, continuous advertising, reduction in price
and redesigning the product
2. No Demand (Non- Existent Demand): in this case, consumers neither like nor dislike the
product. They are indifferent towards the company’s offer. Consumers may be unaware of or
uninterested in the product.
 Marketing Task: Creating demand (connect the benefits of the product with the
customers’ natural need and wants)
 Marketing Situation/solution: Creative marketing
 Marketing Strategies: Effective communication and incentives for buying
3. Latent Demand: This is when consumers are not satisfied with existing products and are
looking for new products.
 Marketing Task: Develop demand (develop effective goods and services that would
satisfy the demand)
 Marketing Situation/solution: Developmental marketing
 Marketing Strategies: Conduct intensive and extensive research to develop new
products, determine the size of the potential market and create and maintain long-term
relationship with customers.
4. Falling (Declining) Demand: It is a condition where demand is declining due to weak
marketing program, high competition, high price, etc…
 Marketing Task: Reverse demand
 Marketing Situation/solution: Creative re-marketing
 Marketing Strategies: Lowering the price, offering additional incentives and building
favorable product image.
5. Irregular Demand: Is a demand that varies on a seasonal, daily or hourly basis. For example,
the demand for umbrella and rain jackets will be high during the rainy season and the number of
customers in restaurants increases at lunch time.
 Marketing Task: Synchronize demand (varying the level of output and time allotted
to render the service)
 Marketing Situation/solution: Synchro- marketing
 Marketing Strategies: Set high price and decrease advertisement during peak period
and set lower price and frequently advertise during slack period.
6. Full Demand: it is a state where demand and supply are equal. The company is pleased with
its volume of business. Customers are adequately buying all products put in to market place.
 Marketing Task: Maintain demand
 Marketing Situation/solution: Maintenance marketing
 Marketing Strategies: Continuously monitor the marketing environment and make
some necessary adjustments so that the trend will continue.

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7. Over-full Demand: demand is greater than the supply capacity of the company.
 Marketing Task: Reduce demand
 Marketing Situation/solution: De-marketing
 Marketing Strategies: Increase price, decrease incentives and decrease advertising
8. Unwholesome Demand: it is a state where some part of the society like the product and
others are against it. Products that have undesirable social consequences such as cigarette, hard
drugs, x-rated movies and hand guns are normally considered as harmful.
 Marketing Task: Destroy Demand
 Marketing Situation/solution: Counter Marketing (Social Marketing)
 Marketing Strategies: Set high price, earning, and cautionary labels such as “tobacco
damages health” and communicate the negative impact of the product.
1.5 Importance of Marketing
Marketing have the following importance:
a) Marketing Helps in Transfer, Exchange and Movement of Goods:
Marketing is very helpful in transfer, exchange and movement of goods. Goods and services are
made available to customers through various intermediaries’ viz., wholesalers and retailers etc.
Marketing is helpful to both producers and consumers.
b) Marketing Is Helpful In Raising And Maintaining the Standard of Living of The
Community:
By making available the uninterrupted supply of goods and services to consumers at a reasonable
price, marketing has played an important role in raising and maintaining living standards of the
community. Community comprises of three classes of people i.e., rich, middle and poor.
Everything which is used by these different classes of people is supplied by marketing.
c) Marketing Creates Employment:
Marketing is complex mechanism involving many people in one form or the other. The major
marketing functions are buying, selling, financing, transport, warehousing, risk bearing and
standardization, etc. In each such function different activities are performed by a large number of
individuals and bodies.
Thus, marketing gives employment to many people. It is estimated that about 40% of total
population is directly or indirectly dependent upon marketing. In the modern era of large scale
production and industrialization, role of marketing has widened.
d) Marketing as a Source of Income and Revenue:
The performance of marketing function is all important, because it is the only way through which
the concern could generate revenue or income and bring in profits. Busk irk has pointed out that,
“Any activity connected with obtaining income is a marketing action. It is all too easy for the
accountant, engineer, etc., to operate under the broad assumption that the Company will realize
many dollars in total sales volume.
e) Marketing Acts as a Basis for Making Decisions:
In modern times marketing has become a very complex and tedious task. Marketing has emerged
as new specialized activity along with production.

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As a result, producers are depending largely on the mechanism of marketing, to decide what to
produce and sell. With the help of marketing techniques a producer can regulate his production
accordingly.
f) Marketing Acts as a Source of New Ideas:
The concept of marketing is a dynamic concept. It has changed altogether with the passage of
time. Such changes have far reaching effects on production and distribution. With the rapid
change in tastes and preference of people, marketing has to come up with the same.
Marketing as an instrument of measurement, gives scope for understanding this new demand
pattern and thereby produce and make available the goods accordingly.
g) Marketing Is Helpful In Development Of An Economy:
Adam Smith has remarked that “nothing happens in our country until somebody sells
something”. Marketing is the kingpin/principal that sets the economy revolving. The marketing
organization, more scientifically organized, makes the economy strong and stable, the lesser the
stress on the marketing function, the weaker will be the economy.

1.6 Scope of Marketing:

It is seen as the task of creating, promoting & delivering goods & services to consumers &
businesses. Marketers are skilled in stimulating demand for company’s products; they are
responsible for demand management. Marketing managers seek to influence the level, timing &
composition of demand to meet the organization’s objectives. Marketing people are involved in
marketing nine types of entities (products):

 Goods: Constitute the bulk of most countries’ production and marketing effort.
 Services: are acts or performances offered by one party to another.
 Events: include trade shows, artistic performances, global sporting events such as the
Olympics and world cup.
 Experiences: visits, vacations, camping
 Persons: artists, musicians, athletes and other celebrities
 Places: cities, states, regions and whole nations compete actively to attract tourists, factories,
company headquarters etc…
 Properties: are intangible rights of ownership of real property (real estate) or financial
property (stocks and bonds).
 Organizations: actively work to build a strong, favorable and unique image in the minds of
target publics.
 Ideas: include business proposals. Products and services are platforms for delivering some
ideas.

1.7 The Goals of Marketing System

Marketing is not a one-time activity; it is a continuous process and affects different parties with
different interests such as, customers, suppliers, and the public etc. Most of the time the interest
of these different parties are conflict each other.

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The marketing system generally has four goals.

1. Maximizing consumption- marketing stimulates maximum demand. Maximum consumption
inter maximize production, employment and wealth.
2. Maximizing Satisfaction - Owning one product gives sense when it maximized satisfaction
to customers. Marketing systems maximize satisfaction by creating and providing quality
products & variety products etc.
3. Maximizing choices - marketing system provides varieties. As a result the consumer will
find products that fit to their exact test.
4. Maximizing life quality - the participation of marketing system in environmental protection
maximize the quality of life of consumer. As a result of this the life style consumers leads to
quality of life achieved.
1.8 Trends in Marketing Thinking and Practice
What are Market Trends?
A market trend is what people see as long or short terms trends principal in the stock market.
Many uses some form of analysis to read or predict what they think are possible trends
Here are the main marketing trends:
 From make-and-sell marketing to sense-and-respond marketing: a company will perform
better if one view the marketing challenge as that of developing a superior understanding of
customer needs rather than as simply pushing out your products better.
 From focusing on customer attraction to focusing on customer retention: Companies need
to pay more attention to serving and satisfying their present customers before they venture in
an endless race to find new customers. Companies must move from transaction marketing to
relationship marketing.
 From pursuing market share to pursuing customer share: The best way to grow market
share is to grow customer share, namely to find more products and services that can be sold
to the same customers.
 From marketing monologue to customer dialogue: one can create stronger relationships
with customers by listening to and conversing with them than by only sending out one-way
messages.
 From mass marketing to customized marketing: The mass market is splintering into mini-
markets and a company now has the capability of marketing to one customer at a time.
 From owning assets to owning brands: Many companies are beginning to prefer owning
brands to owning factories. By owning fewer physical assets and outsourcing production,
these companies believe they can make a greater return.
 From operating in the marketplace to operating in cyberspace (such as Internet): Smart
companies are developing a presence online as well as off-line. They are using the Internet
for buying, selling, recruiting, training, exchanging, and communicating.
 From single-channel marketing to multichannel marketing: Companies no longer rely on
one channel to reach and serve all their customers. Their customers have different preferred
channels for accessing the company’s products and services.

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 From product-centric marketing to customer-centric marketing: The sign of marketing

maturity is when a company stops focusing on its products and starts focusing on its
customers.
These trends will affect different industries and companies at different rates and times. A
company must decide where it stands with respect to each marketing trend.
What are the latest trends in the marketing world?
The first is the impact of the Internet on the marketing function. Compared to all other media, the
Internet combines all aspects of marketing pre-selling, selling and post-selling. Now we are
anticipating six key drivers of the future trends. And we are building our future strategy around
these six new realities.
1. The future is not just increasingly digital but it is integrating with analog (Digital Leakage)

2. The futures is less about marketing and more about facilitating self-marketing

3. Advertising will be less about messages and more about content creation and distribution,
and increasingly about utilities and services.

4. The future of TV will be even more powerful, but, will be very different and come from the
slime (IP TV) and be multi-glass.

5. The future will be about more access and less ownership

6. Marketing a huge growth category
The future of marketing will be bright. Now all of us marketers have to be bright enough in
learning, re-inventing and collaborating to remain relevant and truly unleash this potential!

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