Marketing Management

CHAPTER ONE

An Overview of Marketing and Marketing Process

By: Daniel Tekle

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 Objectives of the chapter

After studying this chapter, you should be able to:

1. Define marketing and terms

2. Outline the steps in the marketing process

3. Explain the five core marketing concepts

4. Discuss the marketing management orientations that guide

marketing strategy

5. Identify the goals of Marketing

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 Introduction
Even if there are many factors (strategy,
dedicated employees, good information
systems, excellent implementation) that
contribute to company’s success, today’s
successful companies at all levels have one
thing in common. They are:
❖ Strongly customer-focused
❖ Heavily committed to marketing
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 Introduction
Every reward of organization’s business: market share,
profit, competitive advantage and survival come after
customers care.
More than any other organizational function, marketing
deals with customers.
Heart of All Kinds of
Organization
- Sensing customers’ needs - Large
- Serving customers’ needs - Medium
- Small
- Satisfying customers’ needs - Profitable
- Non-profitable
- Service providing co.
- Charity
- school

In general “Marketing” is every where

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 Definition of Marketing
➢ Marketing as making a sale, i.e. telling and selling.
➢ However, selling is only one function of marketing.
Selling is pushing the products to customers.
➢ In modern business understanding, marketing is
satisfying customer needs.
➢ Marketing is serving customers profitably or
managing profitable customer relationships.
➢ Broadly, marketing is social and managerial process.

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 Marketing as Social Process
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.

Marketing as Managerial Process

Marketing is “the art of selling products.” 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
(Peter Drucker)
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 The American Marketing Association
offers this managerial definition:
Marketing (management) is the process of
planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and
services to create exchanges that satisfy
individual and organizational goals.
• The exchange process requires
– work and Procedures.
– skills and creativity to manage demands for their products.
• It can be considered as an art and science.

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 Marketing Process

• Marketing encompasses a process of

creating value for customers through
strong customers relationships in order
to capture value from customers in
return.
• Marketing process has five steps:

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 Marketing process
Create value for Customers and Build Capture Value from
strong Customer relationships Customers in Return

Capture Value
from Customers to
Build create profits and
Profitable Customer Equity
customer
Constructing Relationship
integrated s and make
marketing Customer
programs that delight
Designing deliver superior
Customer- value
driven
Understa Marketing
nding Strategy
Marketpl Fig. 1 Marketing process
ace
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 1. Understanding Marketplace and Customer Needs
The first task of marketers is to understand the
customers needs, wants, demands and the market
place within which they operate in.
The marketers must aware of the following five
marketing concepts.
a. Needs, Wants, and Demands
b. Marketing Offerings
c. Exchange, Transaction and Relationships
d. Value and Satisfaction
e. Market

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 a. Customer Needs, Wants, and Demands
Needs:
state of felt deprivation. When people feel that they
lack some basic thing we mean they need that thing.
- Are basic parts of human makeup.
The most basic concept underling marketing is that of
human needs. It includes:
✓ Basic physical needs : foods, shelter, clothes
✓ Social needs: belonging and affection
✓ Individual needs : knowledge and self-expression

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 Wants
Want is the form of human needs shaped by culture and
individual personality.

For e.g. Feeling Hungry is needs

➢ Different individuals who feel hungry may want to eat

different food types: This is WANTS.

One may wants to eat Kay wot, one may want special pasta,
other may want Kitfo, some other may want Hamburger, etc

Wants are stated in terms of objects that will satisfy needs.

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 Demands
• Demand is wants backed by purchasing power. Given
their wants and resources, people demand products
with benefits that add up to the most value and
satisfaction.

• Successful marketers stay close to their customers to

understand, learn customers needs, to serve their
customers by delivering superior value and to make
customers delighted.
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 b. Marketing offerings/products
• Marketing offerings are any thing that fulfill human
needs.
• It is some combination of goods, services, information,
ideas, places, organizations, events, experiences,
person, and properties that can be offered to satisfy
needs and wants.
• Some marketers fail to understand the benefits,
features and experiences with the products and pay
more attention to specific products. This mistake is
called Marketing Myopia
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 c. Customer Value and Satisfaction
Customers select products on the bases of the value they expected
from the products.
Value is all benefits that the customer obtain from the product in
relation to what they incur to get the product. Mathematically:
𝐴𝑙𝑙 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠 𝑔𝑎𝑖𝑛𝑒𝑑 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡
Value =
𝐴𝑙𝑙 𝑐𝑜𝑠𝑡𝑠 𝑖𝑛𝑐𝑢𝑟𝑒𝑑 𝑡𝑜 𝑜𝑏𝑡𝑎𝑖𝑛 𝑡ℎ𝑒 𝑝𝑟𝑜𝑑𝑢𝑐𝑡
Functional benefits+emotional benefits
Value=
Costs Monetary costs time costs energy costs psychic costs
𝑝𝑒𝑟𝑐𝑒𝑖𝑣𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 = 𝐸𝑥𝑝𝑒𝑐𝑒𝑑 𝑣𝑎𝑙𝑢𝑒 → Satisfaction
Perception < Expectation → Dissatisfaction
Perceived value > Expectation → Delighted
Satisfaction is the feeling of pleasure that comes when a need or
want is fulfilled. Customer value and satisfaction are key building
blocks for developing and managing customer relationships.
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 d. Exchanges and Relationships
Marketing occurs when people decide to satisfy needs and
wants through exchange relationships.

Exchange is the act of obtaining a desired objects from

someone by offering something in return.

Relationships consist of actions to build and maintain

desirable relationships. A kind of link or connection between
two parties (marketer and their customers). Relationship
can be direct or indirect, positive or negative.

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 Requirements for the exchange process to occur:
1. There are at least two parties.
2. Each party has something that might be of value to the other
party.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with
the other party.
In the exchange process, the two negotiating parties try to arrive
at mutually agreeable terms. When the agreement is reach, we say
that a transaction takes place.
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Transaction is an instance where two or more parties
negotiate on something and mutually agree to
interchange what they have. A transaction involves
• At least two things of value,
• Agreed-up on conditions,
• A time of agreement, and
• A place of agreement.

Marketing goal, beyond attracting new

customers and creating transaction is to build
strong customer life-time relationship.

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 e. Market
Market can be understood from different perspectives

Traditionally, market was physical place where sellers and buyers

meet together to exchange their products.

Economists describe a market as a collection of buyers and sellers

who transact over a particular product or product class. They classify
the market into five categories.

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 Structure of Market flows in Modern Economy

Resource
Markets

Resource,
Service,

taxes
Money
Services, Money
Governmen Taxes
Manufacturer Consumer
Markets Goods, taxes,
t Markets Markets
Services

services
Money,
Goods,
taxes

Intermediary
Markets

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 Marketers describe market
✓As various groupings of customers. They view
sellers as constituting the industry and buyers as
constituting the market.

communication

Products
Industry Market
Money
(a collection of sellers) (a collection of buyers)

A simple Marketing System

Information

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 Key Customer Market
Marketers classify market into the following four groups:
1. Consumer Markets
e.g. juices, cosmetics, athletic shoes,
2. Business Markets
- buy goods to make or resell a product to others at a
profit
3. Global Markets
-buyers from different nations of the world.
4. Nonprofit and Governmental Markets
e.g. Churches, charity, schools, etc.

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 2. Designing Customer-Driven Marketing Strategies
The marketers must answer two questions:
1. What is our market? (selecting the customers to serve best
The company answer this by designing:
- Market segmentation = dividing the market into segments of customers
- Market targeting = selecting which segments it will go after
2. What is our value proposition (promising the superior value that will
capture the customer’s mind than competitors do)
This question can be answered by choosing the value proposition. The
company must know:
- how it will serve market?
- how it will differentiate and position it self in the target market’s mind
than its competitors?

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3. Developing an integrated marketing programs
Marketers then develop integrated marketing program that
actually deliver the intended value to target market. This
helps to build customer relationships by transforming the
marketing strategy into action. It consists of marketing mix:
• Product

• Price

• Place

• promotion

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 4. Building customer relationships
This step is the result of the preceding three steps. The
customer relationship management is the most important
concept of modern marketing.
Customer Relationships Management: is the over all process of
building and maintaining profitable customer relationships by
delivering superior value and satisfaction.
- Satisfying customers
- Building Customer loyalty
5. Capturing value from customer
The out come of creating customer value:
- Current and future sales - Customer loyalty and
retention
- Market share
- Profits - Customer equity

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 Importance of Marketing
Without sufficient demand, other organizational function is nothing.
- Business success depends of marketing ability. Marketing is art of managing
demand.
- Marketing is important for a society as a whole. It helps to introduce and
gain acceptance of new products that have eased or enriched people’s lives.
- Successful marketing also allows firms to more fully engage in socially
responsible activities
- Building strong brands and a loyal customer base
- Good marketers are always seeking new ways to satisfy customers and beat
competition.

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 Scope of Marketing
To understand the scope of marketing, it is important to understand what marketing is,
how it works, what is to be marketed, why it is important and who markets.

What is to be Marketed?.
Marketers marketed 10 different entities.
1. Goods : Physical things that have value to buyers.
E.g cars, refrigerators, televisions, machines,
2. SERVICES: intangible things of value that can be offered to the
market.
e.g. Services include the work of airlines, hotels, car rental firms, barbers and beauticians,
maintenance and repair people
3. Events: Marketers promote time-based events, such as major trade shows, artistic
performances
4. EXPERIENCES: company build experiences by producing a large number of products
for a long time and market its experiences.

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5. PERSONS: Artists, musicians, CEOs, physicians, high-profile lawyers and
financiers, and other professionals are marketed themselves. E.g Saladin Seid

6. PLACES: Cities, states, regions, and whole nations compete to attract tourists,
residents, factories, and company headquarters.

7. PROPERTIES: are intangible rights of ownership to either real property (real

estate) or financial property (stocks and bonds).

8. ORGANIZATIONS: Organizations work to build a strong, favorable, and unique

image in the minds of their target publics.

9. INFORMATION: Information is essentially what books, schools, and universities

produce, market, and distribute at a price to parents, students, and
communities.

10. IDEAS: Every market offering includes a basic idea.

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 Who Markets?
• Marketers and prospects

• A marketer is someone who seeks to sell something to other

party called prospects. Prospects has no selling intention but
buying intension.

• Organization who tries to offer its product s to customers is

marketer.

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 Summary
1. What is marketing?

2. Discuss the importance of marketing

3. Identify and explain steps in marketing process

4. What is celebrity marketing?

5. What are the goals of marketing?

6. Identify the core marketing concepts.

7. Differentiate between exchange, transaction, and transfer

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