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Marketing Summaries: Chapters 1 - 2

Phillip Kotler and Kevin Keller

– Marketing decides:

Who the company wants as customers

Which needs to satisfy?

What products and services to offer

What prices to set?

What communications to send and receive

What channels of distribution to use

What partnerships to develop

Chapter 1 – Defining marketing for the 21st Century

Marketing is everywhere – it is embedded in everything we do. And it has become a key ingredient to
business success. Marketing is both an “art” and a “science” and good marketing is no accident. It takes
careful planning and execution.
The importance of marketing
Financial success often depends on marketing ability. Marketing managers need to make big decisions
what features to design into a new product, what prices to offer and where to sell products.
The scope of marketing – What is marketing?
– Marketing deals with identifying and meeting human and social needs. It is about “meeting needs
– Marketing is an organisational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that benefit the
organisation and its stakeholders.
– Marketing management is the art and science of choosing target markets and getting, keeping and
growing customers through creating, delivering and communicating superior customer value.
– The aim of marketing is not selling. It is to know and understand the customer so well that products
and services fits him and sells itself.
Exchanges and Transactions
Exchange is a key concept in marketing. It is the process of obtaining a desired product from someone
offering something in return. It is a value creating process because it leaves both parties better off. 5
must be satisfied in this scenario:
1. There must be at least 2 parties
2. Each party has something of value to the other party
3. Each party is capable of communication and delivery
4.Each party believes it is appropriate and desirable to deal with the other party
Transactionis a trade of value between 2 or more parties. Transactions need: at least 2 things of value,
agreed- upon conditions, a time and a place of agreement. This differs from a transfer where A gives to
B without anything tangible in return.
Marketing consists of actions undertaken to elicit desired responses from a target audience. To be
successful in marketing, marketers need to understand what each party expects from the transaction.
What is marketed?

There are 10 types of entities that can be marketed:
1. Goods – physical goods eg cars, fridges, TVs
2. Services – eg airlines, hotels, car rental firms
3. Events – time-based events such as trade shows, Olympics
4.Experiences – Walt Disney’s Magic Kingdom is experiential marketing
5. Persons – celebrity marketing
6. Places – Cities, states & regions are marketed to tourists, business and new residents
7. Properties – eg real estate, stocks and bonds
8. Organisations – Corporate identity ads and unique images in the market
9. Information – eg schools and universities market their information
10. Ideas – eg “Friends don’t let friends drive drunk”
Who markets?
Marketers – somebody who seeks a response from another party, called the prospect. Marketers are
responsible for demand management and there are 8 possible demands states:
1.Negative demand – consumers dislike a product
2.Nonexistent demand – consumers are unaware or uninterested in a product
3.Latent demand – consumers may have a strong need for a product but cannot be satisfied by existing
4.Declining demand – consumers buy less frequently
5.Irregular demand – consumers purchase seasonally, monthly etc
6.Full demand – consumers are adequately buying the product
7.Overfull demand – more consumers want the product than supply can meet
8.Unwholesome demand – consumers are attracted to products that have undesirable social
In each case, the marketer needs to understand the demand state and the underlying cause and
determine a plan of action to shift demand to a more desired state.
In marketing terms, a market is used to describe the various groupings of customers. Categories of
markets include: Product market, demographic market, needs market etc.
Key customer markets

○ Consumer – selling to the masses

○ Business – selling to business

○ Global – selling in the global marketplace

○ Non-profit and government – selling to churches, universities etc

New consumer capabilities (as a result of the digital revolution):
– Substantial increase in buying power
– Greater variety of goods and services
– Great amount of information about practically anything
– Greater ease of interacting and placing and receiving orders
– An ability to compare notes on products and services
Today we differentiate themark etplace (physical) and themarketspac e (digital). There is also the
concept of themeta market: cluster of complementary products and services in the minds of a consumer
but spread across a diverse industry.
How business and marketing are changing
Changing technology – Has created an information age that promises to lead to more accurate levels
of production, more targeted communications and more relevant pricing.

Globalisation – Technological advances make it easier for marketing across countries.


Deregulation – creates a greater competition and growth opportunities.

Privatisation – Increased efficiency of previously public companies.

Customer empowerment – Increased expectations of quality and service and some customization.
More information available and less brand loyalty

Customisation – Company is able to produce individually differentiated goods.

Heightened competition – Rising promotion costs and shrinking profit margins.

Industry convergence – Blurring industry boundaries create opportunities at the intersection of the two

Retail transformation

Company orientation towards the marketplace:
There are 5 competing concepts under which organisations conduct marketing activities:
1.Production concept – states that consumers prefer products that are widely available and inexpensive.
Therefore focus on high production, low cost and mass distribution.
2.Product concept– Consumer favour quality, performance or innovation. Therefore focus on superior
products and constant improvement
3.Selling concept– consumers will not buy enough if left on their own. Therefore focus on aggressive
selling and promotion
4.Marketing concept– consumer-centred philosophy. Therefore focus on being more effective than
competitors in creating, delivering and communicating superior customer value
5.Holistic marketing concept – going beyond traditional applications of marketing to a more complete
and cohesive approach. Focus on multiple marketing approaches that work synergistically ie broad and
integrated approach ie relationship, integrated, internal and social responsibility marketing

a.Relationship marketing– building mutually satisfying, long-term relationships with key

parties ie customers, channels and partners, in order to earn and retain their business. The ultimate
outcome is to build a marketing network(company and its supportive stakeholders). The ability of a
company to understand each client individually is greatly enhanced with technology. Operating
principle: Build an effective network of relationships with key stakeholders, and profits will follow.

b.Integrated marketing – using all components of the marketing mixin a coordinated manner.

McCarthy classifies these into the 4 P’s of marketing:

Product (diversity, quality, design, features, brand name, packaging, size etc)
Price (list price, discounts, allowances, payment period, credit terms)
Place (channels, coverage, assortments, locations, inventory, transport)
Promotion (sales promotion, advertising, sales force, public relations, direct marketing)
Lauterborn says that the 4 P’s correspond with the customers’ 4C’s:
Four P’s Four C’s
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication

Integrated marketing also looks at the communication mix ie advertising, sales promotion,
events and experiences, public relations, direct marketing, personal selling.
c.Internal marketing – The task of hiring, training and motivating able employees who want
to serve customers well. Ensuring that everyone in the organisation embraces appropriate
marketing principles. Marketing must become a company orientation.
d.Social responsibility marketing– understanding the broader concerns (social welfare) and
ethical, environmental, legal and social context of marketing activities and programs. Companies can
adopt “cause” marketing where they support a particular cause eg Avon and breast cancer.
Core marketing concepts
The marketer must understand these within the target market:

○ Needs= basic human requirements. There are 5 types: stated, real, unstated, delight, secret needs

○ Wants = needs become wants when they are directed at a specific object that might satisfy needs

○ Demands = wants for a specific product backed by the ability to pay (willing and able)

Target market, positioning and segmentation =dividin g / segmenting the market into distinct groups of
buyers and identifying which presents the greatest opportunity (target market). For each target market,
marketer develops an offering, which is positioned in the minds of the target buyers as delivering some
Offering = value proposition, a set of benefits to satisfy customer needs
Brands = an offering from a known source. Associations make up the brand image. Aim is to make the
brand strong, favourable and unique.
Value = a central marketing concept that reflects perceived tangible and intangible benefits and costs to
Value = combination of quality, service and price (customer triad)
Satisfaction = reflects a persons comparative judgements resulting from a perceived performance in
relation to his/her expectations
Marketing channels = connect the marketer to the target market. 3 types of channels to reach
Communication – deliver and receive messages from target buyers
Distribution – to display, sell, or deliver the physical product or service(s) to the buyer or user
Service channels – to carry out transactions with potential buyers.
Supply chain = channel stretching from the raw materials to the components of the final product. The
supply chain is a value delivery system.
Competition = actual and potential rivalry offerings and substitutes that a buyer might consider.
Marketing environment= consists of a task environment (immediate actors in the production,
distribution and promotion of the offering) and the broad environment (demographic, economic,
physical, social, technological, political-legal and social-cultural environment).
Marketing planning = Logical process to follow eg analysing marketing opportunities, selecting target
markets, designing marketing strategies, developing marketing programs and managing the marketing

Marketing management tasks

1. Developing marketing strategies and plans
2. Capturing marketing insights
3. Connecting with customers
4. Building strong brands
5. Shaping the market offering
6. Delivering value
7. Communicating value
8. Creating long-term growth
2 – Developing marketing strategies and plans
Marketing and customer value
Marketing involves satisfying consumer needs and wants. The task of the business is to deliver
customer value at a profit.
The value delivery process:each phase has cost implications

Choosing the value – represents the “homework” marketing must do before any
products exist.

Providing the value - marketing must determine specific product features, prices and distribution
Communicating the value - through utilisation of sales force, sales promotion,
advertising, and other communication tools to announce and promote the product

Kumar uses the 3 V approach to marketing:

– Define the value segment (value definition).
– Define the value proposition (value developing process).
– Define the value network (value delivering process)
Porter’s value chainis a tool to identify ways to create more customer value. The value chain
identifies nine strategically relevant activities that create value and cost in a specific business. These
nine value creating activities consist of five primary activities and four support activities.
Primary activities – inbound logistics, operations, outbound logistics, marketing & sales, and service.
Support activities – procurement, technology development, human resource management, and firm

Core Business Processes

The market sensing process – all activities involved in gathering market intelligence,
disseminating it within the organisation, and acting on the information.

The new offering realisation process – all activities involved in researching, developing,
and launching new high quality offerings quickly and within budget.

The customer acquisition process – all the activities involved in defining target markets
and prospecting for new customers.

The customer relationship management process – all activities involved in building
deeper understanding, relationships, and offerings to individual customers.

The fulfilment management process – all activities involved in receiving and approving
orders, shipping the goods on time, and collecting.