Bachelor of Business Administration Year 1

A/Y 2019/2020
Principles of Marketing
TOPIC 1: INTRODUCTION TO MARKETING
Definition of Marketing:
Marketing is a management process of identifying, anticipating and satisfying
customer needs at a benefit through creation of customer value.

CORE MARKETING CONCEPTS

1. Customer needs, wants, and demands

a) Need: Is a state of felt deprivation. Basic forces that drive customers to take
action e.g. physiological (food, clothing,), safety, social, self-esteem and self-
actualization needs. An unsatisfied need is the gap between a person’s actual
and desired states on some physical dimension.

b) Want: The form a human need takes as shaped by culture and personality.
For example, the need for transport leads to one to want a car or bicycle or
train or plane etc. It is a reflection of a person’s desire for a specific product to
satisfy a particular need.

c) Demand: Is a want for a specific product/service supported by the willingness

and ability to pay for it. It is a want that is backed by buying/purchasing power.

2. Market offering/ Product: Market offerings are some combination of products,

services, information, or experiences offered to a market to satisfy a need or want.
Consumer needs and wants are fulfilled through market offering.

3. Customer value and satisfaction

a) Customer value: The difference between the values the customer gains from
owning and using of a product and the costs of obtaining the product.
Customers usually want to buy from firms that offer them the highest
perceived value.

b) Customer satisfaction: The extent to which a product’s perceived

performance matches a buyer’s expectations. Satisfied customers buy again
and tell others about their good experience.

4. Exchanges/transaction and relationships

a) Exchange: The provision or transfer of goods, services and ideas in return of
something of value. It is the act of obtaining a desired object from someone by
offering something in return.

b) Relationship marketing: Is the process of creating, maintaining and

enhancing strong long term customer relations. Customer relationship
management (CRM) is the overall process of building and maintaining
 profitable relationships by delivering superior customer value and satisfaction
with the main aim of acquiring and retaining and growing customers.

5. Markets: The set of all actual and potential buyers of a product or service.

Evolution of marketing: Marketing Concepts/ Orientations/ Philosophies

Marketing management wants to design strategies that will build profitable
relationships with the target consumers. But what philosophy/ orientation should
guide these marketing strategies? There are five alternative concepts under which
organisations design and carry out their marketing strategies:

1. Production concept: It holds that consumes will favor products that are available
and highly affordable and that management should therefore focus on improving
production and distribution efficiency.
Useful in two situations
 When demand for a product exceeds the supply, management should look for
ways to improve production.
 When the production cost is too high such that improved productivity is
needed to minimize costs which lead to reduced price.

2. Product concept: The idea that consumers will favor products that offer the most
quality, performance and range of innovative features and that the organization
should therefore focus on research and development for continuous product
improvements.

3. Selling concept: The idea that consumers will not buy enough of the
organization’s products unless the organization undertakes a large scale selling and
promotion effort.

Starting point Focus Means Ends

Factory Existing products selling and promoting Profits through sales

volume
I.e. inside- outside concept

4. Marketing concept: This marketing management philosophy holds that

achieving organizational goals depends on determining the needs and wants of
target markets and delivering the desired satisfactions more effectively and efficiently
than competitors do.

Starting point Focus Means Ends

Market Customer needs Integrated marketing Profits through customer

satisfaction
I.e. Outside – inside concept

5. Societal marketing concept: The idea that the organization should determine the
need, wants, and interests of target markets and deliver the desired satisfactions
more effectively and efficiently than competitors do in a way that maintains or
improves the consumer’s and society’s well-being.
TOPIC 2: MARKETING ENVIRONMENT
Introduction
Marketing operates in a complex and changing environment. Other actors in this
environment; suppliers, intermediaries, customers, competitors, publics, and others
may work with or against the company. Major environmental forces; demographic,
economic, natural, technological, political, and cultural shape marketing
opportunities, pose threats, and affect the company’s ability to build customer
relationships. To develop effective marketing strategies, a company must first
understand the environment.

A company’s marketing environment consists of the actors and forces outside

marketing that affect marketing management’s ability to develop and maintain
successful relationships with its target customers. The marketing environment is
made up of a micro environment and a macro environment,

The micro environment consists of the actors close to the company that affect its
ability to serve its customers (the company/internal environment, suppliers,
marketing channel firms, customer markets, competitors, and publics).

The company
In designing marketing plans marketing management takes other company groups
into account these groups form the internal environment.
Top management; sets mission, objectives, broad strategies and policies.
Finance; sourcing and using of funds.
R & D; designing safe and attractive products.
Manufacturing; producing the desired quality and quantity of products.
Accounting; measures revenues and costs.
Together all these departments have an impact on the marketing department’s plans
and actions.

Suppliers
Suppliers provide the resources (input) needed by the company to produce its goods
and services. Managers should watch supply availability and monitor price trends of
their key inputs. Marketers these days treat suppliers as partners in the value
delivery chain.

Marketing Intermediaries
These are firms that help the company to promote, sell and distribute its goods to
final buyers. They include:
Resellers; these include wholesalers and retailers, who buy and resell
merchandise.
Physical distribution firms; they help the company to stock and move goods from
their points of origin to their destinations (warehouse and transportation firms).
Marketing services agencies; they are the marketing research firms, advertising
agencies, media firms and marketing consultancy firms that help the company
target and promote its products to the right markets.
 Financial intermediaries; include banks, credit companies, insurance companies
and other businesses that help finance their transactions or insure against the
risks associated with buying and selling of goods.
The company must partner effectively with marketing intermediaries in order to
optimize the performance of the entire system.

Customers
There are five types of customer markets;
Consumer markets consist of individuals and households that buy goods and
services for personal consumption.
Business markets buy goods and services for further processing or for use in
their production process.
Reseller markets buy goods and services to resell at a profit.
Government markets are made up government agencies that buy goods and
services to others who need them.
International markets consist of buyers in other countries.

Competitors
Competitor’s activities greatly influence the marketing activities of the firm. Firms
must constantly provide greater customer value and satisfaction than their
competitors. They need to monitor their competitors’ marketing activities. They also
must gain strategic advantage by positioning their offerings strongly against
competitors’ offerings in the minds of consumers.

Publics
A public is any group that has an actual or potential interest in or impact on an
organisation’s ability to achieve its objectives. These include; financial publics,
media publics, government publics, local publics, citizen action publics and the
internal public.

Macro-environment
The macro environment consists of the larger societal forces that affect the
microenvironment. The company and all of the other actors operate in a larger macro
environment of forces that shape opportunities and pose threats. Some of these
forces are unforeseeable and uncontrollable. Others can be predicted and handled
through skillful management. Companies that understand and adapt well to their
environments can thrive. Those that don’t will face difficult times.

Political environment
It consists of laws, government agencies and pressure groups that influence and
limit various organisations and individuals in a given society. The political arena has
huge influence upon the regulation of businesses. Governments develop public
policy to guide commerce. They come up with sets of laws and regulations that limit
business for good of society as a whole. Management must consider issues such as:
stability of the political environment
Laws covering issues such as fair competition, fair trade practices,
environmental protection, product safety, product standards.
The government’s position on marketing ethics.

Economic environment
The economic environment consists of factors that affect consumer purchasing
power and spending patterns. Customers’ income, purchasing power and their
willingness to buy (which is different across world markets) greatly influence
marketing activity. Marketers need to look at factors such as interest rates, the level
of inflation, employment level per capita, and long term prospects for the economy’s
GDP and per capita income.

Socio-cultural environment
It is made up of institutions and other forces that affect a society’s basic values,
perceptions, preferences and behaviour. Social and cultural influences on business
vary from country to country. It is important for marketers to consider factors like,
demographics, religion, attitudes, language, culture.

Technological environment
Technology has a tremendous impact on our lifestyles, consumption patterns and
economic well-being. Consumers’ technological knowledge influences their desires
for goods and services. New generation mobile telephones, internet, computers etc
are examples of new technology. This environment changes rapidly. New
technologies create new markets and opportunities; however every new technology
replaces an older technology. Companies that do not keep up with technological
change soon will find their products out dated.

Demographic environment
Demography is the study of human populations in terms of size, density, location,
age, gender race, occupation and other statistics. The demographic environment is
of major interest to marketers because it involves people who make up markets.
Thus, marketers keep a close eye on demographic trends and developments in their
markets. They analyze changing age and family structures, geographic population
shifts, educational characteristics and population diversity.

Natural environment
It involves the physical environment and the natural resources that are needed as
inputs by marketers or that are affected by marketing activities. Marketers should be
aware of the several trend in the natural environment such as; growing shortage of
raw materials, increases pollution, increased government intervention.

Tools of analysis
1. Porter’s Five Forces Analysis is a tool for environmental scanning. It helps
to contrast an industry’s competitive environment by assessing its long term
attractiveness. Five forces analysis looks at five key areas namely the threat of entry,
the power of buyers, the power of suppliers, the threat of substitutes, and
competitive rivalry. The mix of these forces explains why some industries are more
profitable than others and provides further insights into which resources are required
and which strategies should be adopted to be successful.

The threat of entry

New competitors add capacity to the industry and bring with them the need to gain
market share, thereby making competition more intense.
Threats include;
 When economies of scale are present e.g. the benefits associated with bulk
purchasing and low cost production.
The high or low cost of entry e.g. how much it will cost to adopt latest
technology?
Ease of access to distribution channels e.g. Do competitors have the distribution
channels sewn up?
Cost advantages not related to the size of the company e.g. personal contacts or
knowledge that larger companies do not own or learning curve effects.
Government action e.g. will new laws be introduced that will weaken our
competitive position
The greater the threat of new entrants, the less will be an industry’s attractiveness.

The bargaining power of buyers

An industry’s customers constantly look for reduced prices, improved product quality,
and added services and thus can affect competition within an industry.
The extent to which buyers succeed in their bargaining efforts depends on:
The extent of buyer concentration, as when a few buyers that account for a large
portion of industry sales can gain concessions.
When there are a large number of undifferentiated, small suppliers.
When the cost of switching between suppliers is low.
The threat of backward integration, there by alleviating the need for the supplier
The products importance to the performance of the buyer’s product i.e. the
greater the importance, the lower their bargaining power.
The greater the power of the high-volume customers served by an industry, the less
attractive will be that industry.

The power of suppliers

The power of suppliers tends to impact the industry when
When a limited number of suppliers service several different industries
When switching costs and prices of substitutes
When suppliers can realistically threaten forward integration
When the supplier’s product is a large part of the buyer’s value added
The greater the bargaining power of the key suppliers to an industry, the less will be
the overall attractiveness.

The threat of substitutes

Substitutes are alternative product types that perform essentially the same functions
e.g. email for fax, where there is a substitution of need e.g. better toothpaste reduces
the need for dentists.

Competitive Rivalry
Rivalry occurs among firms that produce products that are close substitutes for each
other. Rivalry is greater under the following conditions
There are many small firms in an industry or no dominant firms exist
There is little product differentiation e.g. the tyre industry
The greater the competitive rivalry in an industry, the less attractive it is to current
players or would be entrants
2. SWOT analysis
When you are planning strategically with any company it is useful to complete an
analysis that takes into account not only your own business, but your competitor's
businesses and the current business environment as well. SWOT analysis is a tool
for auditing an organization and its environment. It is the first stage of planning and
helps marketers to focus on key issues. SWOT stands for strengths, weaknesses,
opportunities, and threats. Strengths and weaknesses are internal factors.
Opportunities and threats are external factors.
In SWOT, strengths and weaknesses are internal factors. For example:
Strengths could be:
 Your specialist marketing expertise.
 a new, innovative product or service
 location of your business
 quality processes and procedures
 Any other aspect of your business that adds value to your product or
service.
A weakness could be:
 lack of marketing expertise
 undifferentiated products or services (i.e. in relation to your
competitors)
 location of your business
 poor quality goods or services
 damaged reputation
In SWOT, opportunities and threats are external factors. For example:
An opportunity could be:
 A developing market such as the Internet.
 mergers, joint ventures or strategic alliances
 moving into new market segments that offer improved profits
 a new international market
 a market vacated by an ineffective competitor
A threat could be:
 a new competitor in your home market
 price wars with competitors
 a competitor has a new, innovative product or service
 competitors have superior access to channels of distribution
 taxation is introduced on your product or service