Accountancy, Business and Management

Principles of Marketing

Lesson: Marketing: Principles and Strategies

Marketing

• It is the process of continuously and profitably satisfying target customer’s needs, wants, and expectations
superior to competition. (“Principles & Practices of Marketing In The Philippine Setting”., Go, Josiah, and
Chiqui Escareal-Go)

• Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and
exchanging offerings that have value for customers, clients, partners, and society at large. (American
Marketing Association, July 2013)

• The science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a
profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the
identified market and the profit potential. It pinpoints which segments the company is capable of serving
best and it designs and promotes the appropriate products and services. (Dr. Philip Kotler)

• MARKETING IS EVERYTHING. (Regis McKenna)

Components of Marketing

• Company, a commercial business; a shipping company

• Market, an actual or nominal place where forces of demand and supply operate, and where buyers and
sellers interact to trade goods, services, contracts, or instruments for money or barter.
• Customer, an individual or a business that purchases the goods or services produced by a business.
• Competition, Rivalry in which every seller tries to get what other sellers are seeking at the same time;
sales, profit, and market share by offering the best practical combination of price, quality, and service.

Strategic 3Cs of Marketing

Objective of 3Cs
• Customer - To satisfy the needs, wants, and expectations of target customers
• Competition - To outperform competitors
• Company - To ensure corporate health and profit.

Application of 3Cs
Customer : Q1. Who are the target market?
Q2. What are the needs and wants and expectations of the target market?
Q3. How can they be satisfied continuously?
Competition : Q4. Who are their direct and indirect competitors?
Q5. How can they be superior to competition?
Company : Q6. How can the show maximize its profitability without alienating its customer’s
needs wants and expectations?
Q7. What metrics do we use to measure success?

Sales

• Sales are the result of satisfying the customer’s needs and wants.
• Before one can sell, DEMAND must be created.
• To increase sales, a firm can either increase the price, or increase sales volume.

4U’s of Growing Sales Volume

a. New USERS – Who uses the product or service?

b. Extended USERS – Who can still use the product or service?
c. New USAGE – For what purpose is the product or service used?
d. More USAGE – When and in what occasions is the product or service used?
Market Shares

• Market share is the ratio of your brand sales vs. the total sales in your market
• Instead of directly attacking a strong leader in the market, companies usually enter underdeveloped market
segments

Profit

• Profit is an indispensable component for a firm to continuously satisfy its customers.

• One cannot justify any profit from business if the consequence is the destruction of lives.

Approaches to Marketing

A. Traditional Marketing

• Traditional marketing is an umbrella term that covers the wide array of advertising channels we see daily.
These may include print media, billboard and TV advertising, flyer and poster campaigns and radio
broadcast advertising.

• Traditional Marketing seeks to pull customers to a product, whatever the cost. It is, for this reason,
considered to be fairly outdated as it does not consider the customer they are selling to, more the market that
the company operates within. There are however channels that have developed from traditional marketing,
including digital, that aim for the same goal, however, use more subtle and approachable mediums so as to
capture their target audience. This may include Pay-Per-Click campaigns, social media posts, search engine
optimization and email marketing.

B. Contemporary Marketing

• Contemporary marketing refers to marketing strategies that are consumer-focused.

• A contemporary marketing strategy offer products and services based on what the target market desires
rather than what the company wants them to have, thereby, offering greater support for their customers and
becoming able to take advantage of more advanced marketing funnels to track progress.

What are the goals of Marketing?

Marketing helps target customers make a decision to buy without remorse, leading to a profitable lifetime
relationship.

ATAR Forecasting Model

The ATAR forecasting model is generally used to help marketers forecast sales volumes, sales revenue and
profit contribution – primarily for new products, but it can essentially be used for any marketing campaign or
project.

ATAR Formula

Units sold = Market Potential

X % of the market made Aware of the product
X % of the market aware that decide to Try the
product if they can get it
X % of intended tryers that have Access to it
+ % of first buyers that make a Repeat purchase

TO ILLUSTRATE:

Market Potential = 2.5 million customers (buying units) in the Philippines

First estimates:
60% of the market will be aware after one year
20% of the market who are aware of it will want to try the product
75% of the market will have access to the product
2% of first buyers will buy a second unit
By multiplying each of these ATAR components, this would work out to be:

Market Potential = (2,500,000 x 0.6 x 0.2 x 0.75)

+ (2,500,000 x 0.6 x 0.2 x 0.75) x 0.02

Let’s assume that every product unit is expected to have a per unit cost of $27 and the initial price is expected to
be $50.
The firm wants to estimate first year profits.

Sales price $50

Cost $27
Profit $23 x 229,500 buying units
As you can see the ATAR forecasting model essentially breaks down the overall target market progressively,
using the four inputs of awareness – trial – availability – repeat/rebuy – to estimate the size of the ongoing
customer base.

Marketing Mix

It is a set of controllable and inter-related variables that the company assembles to satisfy a target group better
than competition.

The 4Ps of marketing is a model for enhancing the components of your "marketing mix" – the way in which
you take a new product or service to market. It helps you to define your marketing options in terms of price,
product, promotion, and place so that your offering meets a specific customer need or demand.

A. PRODUCT

• It refers to tangible, physical product or service offered to the consumer. In the case of physical products, it
also refers to any services or conveniences that are part of the offering.

• to satisfy the needs and wants of the target market

a) Brand Name
b) Functionality
c) Styling
d) Quality
e) Safety
f) Packaging
g) Repair and Support
h) Warranty
i) Accessories
j) Variants

B. PRICE

• It takes into account profit margins, and the probable pricing response of competitors. Pricing includes not
only the list price, but also discounts, financing, and other options.

• to make the product affordable to the target market and reflect the value of benefits provided.

✓ Pricing Strategy
It refers to method companies use to price their products or services. Almost all companies, large or small, base
the price of their products and services on production, labor and advertising expenses and then add on a certain
percentage so they can make a profit.

✓ Suggested Retail Price

The list price, also known as the manufacturer's suggested retail price, or the recommended retail price, or the
suggested retail price of a product is the price at which the manufacturer recommends that the retailer sell the
product.

✓ Volume discounts / Wholesale pricing

The wholesale price or trade price is the price of products when they are sold in bulk by wholesalers to retailers,
hence the name.
✓ Price bundling
Bundling is when companies package several of their products or services together as a single combined unit,
often for a lower price than they would charge customers to buy each item separately.

✓ Price flexibility
Flexible pricing is the practice of pricing a product or service by negotiations between buyers and sellers, within
a certain range. It is one of many different pricing strategies used by management to stimulate demand. When
done correctly – companies are able to sell their products with a higher price than originally.

✓ Price discrimination
Price discrimination occurs when identical goods and services are sold at different prices by the same provider.
In pure price discrimination, the seller will charge the buyer the absolute maximum price that he is willing to
pay.

✓ Seasonal pricing
Seasonal rates are those that deviate from your standard basic price during certain times of the year or during
particular events. For example, you might charge more for your beachfront property during the peak of summer
due to high demand, but drop your prices in winter to encourage more guests.

✓ Cash & early payments

An early payment discount is one form of trade finance and a way for companies to obtain a discount on a
supplier's invoice in exchange for paying the supplier early. In other words, a company pays less than the full
amount due while the supplier receives payment earlier than they would under standard payment terms.

C. PLACE

• Those associated with channels of distribution that serve as the means for getting the product to the target
customers. The distribution system performs transactional, logistical, and facilitating functions.

• to make the product conveniently available to the target market consistent with their purchasing patterns.

✓ Distribution Channels
A distribution channel is a chain of businesses or intermediaries through which a good or service passes until it
reaches the final buyer or the end consumer. Distribution channels can include wholesalers,
retailers, distributors, and even the Internet.

✓ Market Coverage
It is the evaluation of the marketplace and determination of how much of it you should cover with your
promotional strategy of a product or business. Companies have to take into account factors like the economy,
culture, buyer behavior, etc. Once you understand your product's relationship to each market, you will be able to
make the right decision about your market coverage strategy.

An intensive distribution strategy involves selling a product in as many outlets as

possible. Selective distribution involves selling a product at select outlets in specific
locations. Exclusive distribution involves selling a product through one or very few outlets.

✓ Inventory management
It is a systematic approach to sourcing, storing, and selling inventory—both raw materials (components) and
finished goods (products). In business terms, inventory management means the right stock, at the right levels, in
the right place, at the right time, and at the right cost as well as price.

✓ Distribution Centers
A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration
or air conditioning, which is stocked with products to be redistributed to retailers, to wholesalers, or directly to
consumers.

✓ Order processing
It is the process or work-flow associated with the picking, packing and delivery of the packed items to a
shipping carrier and is a key element of order fulfillment. Order processing operations or facilities are
commonly called "distribution centers" or "DC's"

✓ Transportation
Transportation concerns the movement of products from a source—such as a plant, factory, or workshop—to a
destination—such as a warehouse, customer, or retail store.
✓ Warehousing
It is the act of storing goods that will be sold or distributed later. While a small, home-based business might
be warehousing products in a spare room, basement, or garage, larger businesses typically own or rent space in
a building that is specifically designed for storage.

D. PROMOTION

• It refers to the entire set of activities, which communicate the product, brand, or service to the user.

• to inform both customers and prospects of a company about their products, or services.

AIDA Model

• It is a model used in marketing that describes the steps a customer goes through in the process of purchasing
a product. The AIDA model has been in use since the late 19th century.

• The model was originally used to help explain how ads and marketing communications manage to become
engaging to prospects and how customers discern between brands to make an ultimate buying decision.

Kinds of Promotions
A. Sales promotion
B. Advertising
C. Public Relations
D. Personal selling

Sales Promotions

Sales Promotions is a marketing strategy where the product is promoted using short-term attractive initiatives to
stimulate its demand and increase its sales.

This strategy is usually brought to use in the following cases –

• to introduce new products,
• sell out existing inventories,
• attract more customers, and
• to lift sales temporarily.

✓ Discount voucher means a voucher carrying a right to receive a price discount or rebate with regard to a
supply of goods or services which is expressed either as a percentage or as a fixed amount with a nominal
value.

✓ Raffles is a sort of lottery, linked to launch events, in which the participants can exclusively purchase
certain products, usually in a limited edition.

✓ Free gifts/Giveaway items

✓ Point of sale marketing refers to all efforts that increase sales at the point the purchase is actually made.
Primarily this revolves around a cash register (although a point of purchase for a business might be a
meeting table, or an Internet page), and is a staple of retail and restaurant environments.

✓ Loyalty cards often look like plastic credit cards and typically have a barcode or magnetic stripe that
allows the business to gather data about the customers.

Advertising

A paid form of persuasive communication that uses mass and interactive media to reach broad audiences in
order to connect an identified sponsor with buyers, provide information about products, and interpret the
product features in terms of the customer’s needs and wants.

Types of Media
A. Television
B. Radio
C. Internet
D. Mobile
E. Print
✓ Print advertising is an advertisement printed on paper, be it newspapers, magazines, newsletters, booklets,
flyers, or anything considered portable print medium.

✓ Guerrilla advertising is an unconventional type of advertising, and usually encourages the consumer to
participate or interact with the piece in some way.

✓ Broadcast advertising is a mass-market form of communication comprising of television and radio.

Broadcast advertising has recently been the most leading way to get to a huge number of consumers.

✓ Outdoor advertising is any type of advertising that gets to the consumers when they are outside of home.

✓ Public service advertisements. Public service ads (PSA) are mainly designed to enlighten and educate
instead of to sell a product or service.

✓ Product placement advertising. Product placement is the promotion of branded goods and services within
the context of a show or movie, instead of an explicit advertisement.

✓ Mobile advertising uses any mobile gadget such as cell phones, iPads, Tablets, and other portable
electronic devices with Internet connectivity.

✓ Online advertising. If Internet users see an advertisement via the internet, then it’s classified as online
advertising.

Public Relations

Public Relations is a form of promotion designed to favorably influence attitudes towards an organization, its
products, and its policies. It includes ongoing activities to ensure the overall company has a strong public
image. Public relations activities include helping the public to understand the company and its products.
The purpose of public relations is to build or maintain a favorable image for an organization with its customers,
prospects, stockholders, employees, labor unions, the local community, and the government.

Function of Public Relations

A. Building awareness and favorable image for a company or client within stories and articles found in relevant
media outlets.
B. Closely monitoring numerous media channels for public comment about a company and its products.
C. Managing crises that threaten company or product image.
D. Building goodwill among an organization's target market through community, philanthropic and special
programs and events.

THE GOAL IS TO:

• To build product awareness
• To create interest
• To provide information
• To stimulate demand
• To reinforce the brand
•
Public relations consist of two components: publicity and public affairs.

Publicity is the generation of news about a person, product, or organization that appears in broadcast or
electronic media. It is usually achieved by planting commercially significant news about the product or service
in a published medium or obtaining favorable presentation of the product or service upon radio, television, or
stage.

Publicity is used to achieve any of the following:

• To make people aware of a firm’s products, brands, or activities;
• To maintain a certain level of positive, public visibility;
• To protect a particular image; or
• To overcome negative images

Publicity takes two forms: news release and press agentry.

News release is a brief memo or report containing news information, such as announcement of a new product,
or change in management. The purpose of news release is to inform a newspaper, radio station, or other
medium, of an idea for a story.
Press agentry is the planning and staging of an event in order to generate publicity. The tools of press agentry
are:

a) Press kits which contain information about the event and key information for publication in news
stories.

b) Speakers bureau which are actually listings of company officials who will speak at civic and industry
events.

Public Affairs is that part of public relations that deals with community groups. It consists of two types:
lobbying, and community involvement.

Lobbying is the attempt to persuade a government official or governing body to adopt policies, procedures, or
legislation in favor of the lobbying group or organization.

Community involvement is that type of public affairs which undertakes company participation in community
activities like sponsoring a sports event, a musical show, or scholarship programs.

Examples of Public Relations

✓ Media Relations
• Includes all efforts to publicize products or the company to members of the press such as TV, radio,
newspaper, magazine, newsletter, and Internet.
• PR Professionals work with media to create stories about products companies and company spokespeople.

✓ Media Tours
On a media tour, a company spokesperson travels to key cities to introduce a new product by being booked on
TV and radio talk shows and conducting interviews with print and internet reporters or influencers.

✓ News Letters
Newsletters can be directed at trade customers, final consumers, or business buyers and can be distributed either
by regular mail or electronic means.

✓ Special Events
From elegant dinners to stunts, special events can be designed to reach a specific narrow target audience.

✓ Speaking Engagements
Speaking before industry conventions, trade association meetings, and other groups provide an opportunity for
company experts to demonstrate their expertise to potential clients or customers.