Principle of marketing

Chapter 1- An overview of marketing and marketing management

1.1. Marketing and its core concepts.
What Is Marketing?
Many people think of marketing as only selling and advertising. Today, marketing must be
understood not in the old sense of making a sale “telling and selling” but in the new sense of
satisfying customer needs. If the marketer understands consumer needs, Develops products that
provide superior customer value and prices, distributes, and promotes them effectively, these
products will sell easily. Selling and advertising are only part of a larger “marketing mix”
Broadly defined;
Marketing is a social and managerial process by which individuals and organizations obtain
what they need and want through creating and exchanging value with others.
In a narrower business context,
Marketing involves building profitable, value addition exchange relationships with customers.
Hence, we define marketing as the process by which companies create value for customers and
build strong customer relationships in order to capture value from customers in return.

The Marketing Process

Understand the Design a Construct an Build Capture value

marketplace customer- integrated profitable from
and customer driven marketing Relationships consumers to
needs and program that and create create profit
marketing
wants delivers customer and customer
strategy superior value delight equity

A Simple Model of the Marketing Process

This important figure shows marketing in a nutshell! By creating value for customers, marketers capture value from
customers in return. This five-step process forms the marketing framework for the rest of the chapter and the
remainder of the text.

Understand the marketplace and customer needs and wants

Five core customer and marketplace concepts such as (1) needs, wants, and demands; (2) market
offerings (products, services, and experiences); (3) value and satisfaction; 4) exchanges and
relationships; and (5) markets are very important in this step.

Customer Needs, Wants, and Demands

Needs:- Human needs are basic part of the human makeup include basic physical needs for food,
clothing, warmth, and safety; social needs for belonging and affection; and individual needs for
knowledge and self expression.
Wants are shaped by culture and individual personality & described in terms of objects that will
satisfy those needs Wants are described in terms of objects that will satisfy needs. As a society
evolves, the wants of its members expand. As people are exposed to more objects that arouse
their interest and desire, producers try to provide more want-satisfying products and services.
People have narrow, basic needs (e.g. for food or shelter), but almost unlimited wants. However,
they also have limited resources.
Demands:- Thus they want to choose products that provide the most satisfaction for their
money. When backed by an ability to pay - that is, buying power - wants become demands.
Consumers view products as bundles of benefits and choose products that give them the best
bundle for their money. Marketing companies go to great lengths to learn about and understand
their customers' needs, wants and demands. They conduct consumer research, focus groups and
customer clinics. They analyze customer complaint, inquiry, and warranty and service data. They
train salespeople to be on the look-out for unfulfilled customer needs Understanding customer
needs, wants and demands in detail provides important input for designing marketing strategies.
Types of demand

1. Negative demand: A market is in a state of negative demand if major part of the market
dislikes the product and may even pay a price to avoid it. This kind of marketing strategy is
referred to as Conversion marketing as it involve changing attitude of customers towards
the product.

2. No demand: Target consumer may be unaware of or uninterested in the product. This

kind of marketing is called Simulative marketing as it involve stimulating customers to
buy the product by making them aware of the benefits of the product.

3. Latent demand: Many consumers may share a strong need that cannot be satisfied by an
existing product. In such circumstances, the marketing task is to identify and measure the
size of the potential market, examine the profitability of the market and then develop
effective products that would satisfy the demand and this strategy is called developmental
marketing as it is directed to developing a new product that can satisfy the unfulfilled
needs of customers.

4. Declining demand: Every organization, sooner or later, faces declining demand for one or
more of its products.. The marketing task is to reverse the declining demand through
creative marketing strategy of the product.

5. Irregular demand: Many organizations face demand that varies on a seasonal, daily, or
even hourly basis, causing problems of idle or overworked capacity. In such circumstance,
we may see companies trying to stimulate customers to visit their facilities during the
week’s working days by using different incentives such as decreasing price, providing
additional offers etc on the working days. Customers arriving on the week’s working days by
charging lower prices compared to the higher price they charge on the weekend days.
6. Full demand: Organizations face full demand when they are pleased with their volume of
business. The marketing task is to maintain the current level of demand in the face of changing
consumer preferences and increasing competition. The organization must maintain or improve
its quality and continually measure consumer satisfaction to make sure it is doing a good job
through the so-called maintenance marketing.

7. Over full demand: Some organizations face a demand level that is higher than they can or
want to handle. The marketing task, called de marketing, requires finding ways to reduce the
demand temporarily or permanently. General de marketing seeks to discourage overall demand
and consists of such steps as raising prices and reducing promotion and service. For e.g. we may
see some hotels and bars that are always overcrowded beyond their capacity increasing the price
of their service to discourage price sensitive customers in their effort to balance their demand
with their capacity

8. Unwholesome demand: Unwholesome products are a kind of products that are considered to
be harmful by major part of the society. Hence, such products will attract organized efforts to
discourage their consumption. In such cases, the marketing task is to find out ways by which the
company can cope up with such actions. The marketing strategy is called counter marketing. For
e.g. in an effort to prevent youngsters from using tobacco products, the coalition of Japanese
Tobacco producers has recently introduced an automatic machine that distribute tobacco
products only to matured individuals (greater than 20 years).

Market offerings (Product and services)

Market offerings are some combination of products, services, information, or experiences offered
to a market to satisfy a need or want. A product is anything that can be offered to a market to
satisfy a need or want. Usually, the word product suggests a physical object, such as a car, a
television set or a bar of soap. However, the concept of product is not limited to physical objects
- anything capable of satisfying a need can be called a product. In addition to tangible goods,
products include services, which are activities or benefits offered for sale that are essentially
intangible and do not result in the ownership of anything. Many sellers make the mistake of
paying more attention to the physical products they offer than to the benefits produced by these
products. They see themselves as selling a product rather than providing a solution to a need.

Marketing myopia is focusing only on existing wants and losing sight of underlying consumer
needs.

Product:-anything that can be offered to a market for attention, use or consumption that might
satisfy a want or need. It includes physical objects, services, persons, places, organizations and
ideas.
Service:-Any activity or benefit that one party can offer to another which is essentially intangible
and does not result in ownership of anything
Value, Satisfaction and Quality
Consumers usually face a broad array of products and services that might satisfy a given need.
How do they choose among these many products? Consumers make buying choices based on
their perception of the value that various products and service delivered.
Customer value is the consumer's assessment of the product's overall capacity to satisfy his or
her needs. Customer satisfaction is the extent to -which a product's perceived performance
matches buyer’s expectations. If the product's performance fails short, of expectations, the buyer
is dissatisfied. If performance matches or exceeds expectations the buyer is satisfied, or
delighted.
Total quality management (TQM) Programs designed to constantly improve the quality of
products, Service and marketing processes.

Exchange, Transactions and Relationships

Marketing occurs when people decide to satisfy needs and wants through exchange.
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.
People can concentrate on making things they are good at making and trade them for needed
items made by others Thus exchange allows a society to produce much more than it would with
any alternative system. Exchange creates value just as production creates value. It gives people
more consumption choices or possibilities.
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. In a
transaction, we must be able to say that one party gives X to another party and gets Y in return.
Relationships: - Relationship marketing the process recreating, maintaining and enhancing
strong, value added relationships with customers and other stakeholders.

Who purchases goods and services? Market

Market is buyers who share a particular need or want that can be satisfied by a company’s
products or services. A market is the set of actual and potential buyers of a product. Market is
simply meant as a place where the buyers and sellers gather to  exchange of various products and
services among them. This is commonly known as the market place Marketing means managing
markets to bring about profitable relationships. However, creating these relationships takes
work. Sellers must search for buyers identify their needs, design good market offerings, set
prices for them, promote them, and store and deliver them. Activities such as product
development, research, communication, distribution, pricing, and service are core marketing
activities.
 1.2. Philosophies of marketing
There are several alternative philosophies that can guide organizations in their efforts to carry out
marketing goal(s). Marketing efforts should be guided by a marketing philosophy. Decisions
about the weight, given the interests of the organization, customers, and society need to be made
by marketing managers. There are five alternative concepts under which organizations conduct
their marketing activities.
a. The Production Concept
The production concept holds that consumers will favor products that are available highly
affordable and that management should, therefore, focus on improving production and
distribution efficiency. This is one of the oldest philosophies that guide sellers. The production
concept is useful when:
 Demand for a product exceeds the supply.
 The product’s cost is too high and improved productivity is needed to bring it down.
The risk with this concept is in focusing too narrowly company operations. The production
concept holds that consumers will favor products that are affordable and available, and therefore
management’s major task is to improve production and distribution efficiency and bring down
expenses. However, although useful in some situations, the production concept can lead to
marketing myopia. Companies adopting this orientation run a major risk of focusing too
narrowly on their own operations and losing sight of the real objective-satisfying customer
needs and building customer relationships.

b. The Product Concept

The product concept holds that consumers favor quality products that are reasonably priced, and
therefore little promotional effort is required. The selling concept holds that consumers will not
buy enough of the company’s products unless they are stimulated through a substantial selling
and promotion effort. The product concept states that consumers will favor products that offer
the most quality, performance, and features, and that the organization should, therefore, devote
its energy to making continuous product improvements. The product concept can also lead to
“marketing myopia,” the failure to see the challenges being presented by other products.
c. The Selling Concept
Many organizations follow the selling concept. The selling concept is the idea that consumers
will not buy enough of the organization’s products unless the organization undertakes a large-
scale selling and promotion effort.
 This concept is typically practiced with unsought goods (those that buyers do not
normally think of buying e.g. insurance policies).
 To be successful with this concept, the organization must be good at tracking down the
interested buyer and selling them on product benefits.
 Industries that use this concept usually have overcapacity. Their aim is to sell what they
make rather than make what will sell in the market. There are no high risks with this
approach but low satisfaction by customers.
Such aggressive selling, however, carries high risks. It focuses on creating sales transactions
rather than on building long-term, profitable customer relationships

d. The Marketing Concept

The marketing concept 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. The marketing and selling concepts are often confused. The
primary differences are:
 The selling concept takes an “inside-out” perspective (focuses on existing products and
uses heavy promotion and selling efforts).
 The marketing concept takes an “outside-in” perspective (focuses on needs, values, and
satisfactions). Many companies claim to adopt the marketing concept but really do not
unless they commit to market-focused and customer-driven philosophies:
• Customer-driven companies research current customers to learn about their desires,
gather new product and service ideas, and test proposed product improvements.
• Such customer-driven marketing usually works well when there is a clear need and
when customers know what they want.
• When customers do not know what they want, marketers can try customer driving
marketing--understanding customer needs even better than customers themselves do,
and creating products and services that will meet existing and latent needs now and in
the future.
e. The Societal Marketing Concept
The societal marketing concept holds that the organization should determine the needs, wants,
and interests of target markets. It should then deliver the desired satisfactions more effectively
and efficiently than competitors in a way that maintains or improves the consumer’s and the
society’s well being.
 The societal marketing concept is the newest of the marketing philosophies.
 It questions whether the pure marketing concept is adequate given the wide variety of
societal problem .
  According to the societal marketing concept, the pure marketing concept overlooks
possible conflicts between short-run consumer wants and long- run consumer welfare.
 The societal concept calls upon marketers to balance three considerations in setting their
marketing policies:
a). Company profits.
b). Customer wants.
c). Society’s interests.
 It has become good business to consider and think of society’s interests when the
organization makes marketing decisions

1.3. Importance of marketing

Marketing is a very important aspect in business since it contributes greatly to the success of the
organization. Production and distribution depend largely on marketing. Many people think that
sales and marketing are basically the same. These two concepts are different in many aspects.
Marketing covers advertising, promotions, public relations, and sales. It is the process of
introducing and promoting the product or service into the market and encourages sales from the
buying public. Sales refer to the act of buying or the actual transaction of customers purchasing
the product or service.

Since the goal of marketing is to make the product or service widely known and recognized to
the market, marketers must be creative in their marketing activities. In this competitive nature of
many businesses, getting the product noticed is not that easy.

Strategically, the business must be centered on the customers more than the products. Although
good and quality products are also essential, the buying public still has their personal
preferences. If you target more of their needs, they will come back again and again and even
bring along recruits.

If you push more on the product and disregard their wants and the benefits they can get, you will
lose your customers in no time. The sad thing is that getting them back is the hardest part.

Marketing Promotes Product Awareness to the Public

It has already been mentioned in the previous paragraph that getting the product or service
recognized by the market is the primary goal of marketing. No business possibly ever thought of
just letting the people find out about the business themselves, unless you have already
established a reputation in the industry. But if you are a start-out company, the only means to be
made known is to advertise and promote. Your business may be spending on the advertising and
promotional programs but the important thing is that product and company information is
disseminated to the buying public.
Various types of marketing approaches can be utilized by an organization. All forms of
marketing promote product awareness to the market at large. Offline and online marketing make
it possible for the people to be educated with the various products and services that they can take
advantage of.

A company must invest in marketing so as not to miss the opportunity of being discovered. If
expense is to be considered, there are cost-effective marketing techniques a company can embark
on such as pay-per-click ads and blogging.

Marketing Helps Boost Product Sales

Apart from public awareness about a company’s products and services, marketing helps boost
sales and revenue growth. Whatever your business is selling, it will generate sales once the
public learns about your product through TV advertisements, radio commercials, newspaper ads,
online ads, and other forms of marketing. The more people hear and see more of your
advertisements, the more they will be interested to buy.

If your company aims to increase the sales percentage and double the production, the marketing
department must be able to come up with effective and strategic marketing plans.

Marketing Builds Company Reputation

In order to conquer the general market, marketers aim to create a brand name recognition or
product recall. This is a technique for the consumers to easily associate the brand name with the
images, logo, or caption that they hear and see in the advertisements. For some companies,
building a reputation to the public may take time but there are those who easily attract the
people. With an established name in the industry, a business continues to grow and expand
because more and more customers will purchase the products or take advantage of the services
from a reputable company.
Marketing disseminates information about the company

Marketing plays a very essential role in the success of a company. It educates people on the latest
market trends, helps boost a company’s sales and profit, and develops company reputation. But
marketers must be creative and wise enough to promote their products with the proper marketing
tactics. Although marketing is important, if it is not conducted and researched well, the company
might just be wasting on expenses and time on a failed marketing approach.

1.4. Scope of marketing

Marketing people are involved in marketing 10 types of entities: Goods, services, experiences,
events, persons, places, properties, organizations, information, and ideas.
Goods:-Physical goods constitute the bulk of most countries’ production and marketing effort.
Countries produces and markets billions of physical goods, from eggs to steel to hair dryers. In
developing nations, goods—particularly food, commodities, clothing, and housing—are the
mainstay of the economy.
Services:-As economies advance, a growing proportion of their activities are focused on the
production of services. Services include airlines, hotels, and maintenance and repair people, as
well as professionals such as accountants, lawyers, engineers, and doctors. Many market
offerings consist of a variable mix of goods and services.
Experiences: - By orchestrating several services and goods, one can create, stage, and market
experiences.
Events:-Marketers promote time-based events, such as the Olympics, tradeshows, sports
events, and artistic performances.
Persons:-Celebrity marketing has become a major business. Artists, musicians, CEOs,
physicians, high-profile lawyers and financiers, and other professionals draw help from celebrity
marketers.
Places:-Cities, states, regions, and nations compete to attract tourists, factories, company
headquarters, and new residents.
Place marketers include economic development specialists, real estate agents, commercial banks,
local business associations, and advertising and public relations agencies.
Properties:-Properties are intangible rights of ownership of either real property (real estate) or
financial property (stocks and bonds). Properties are bought and sold, and this occasions a
marketing effort by real estate agents (for real estate) and investment companies and banks
(for securities).
Organizations:-Organizations actively work to build a strong, favorable image in the mind of their
publics. Ethiopian Air Lines advertises with the tag line, “Going to the great length to please.”
The Universities, museums, and performing arts organizations boost their public images
to compete more successfully for audiences and funds.
Information:-The production, packaging, and distribution of information is one of
society’s major industries.
Among the marketers of information are schools and universities; publishers of encyclopedias,
nonfiction books, and specialized magazines; makers of CDs; and Internet Web sites.
Ideas:-Every market offering has a basic idea at its core. In essence, product s and services are platforms for
delivering some idea or benefit to satisfy a core need.

1.5 Goals of marketing system

Marketing involves serving a market of final consumers in the face of competitors. The company
and competitors research the market and interact with consumers to understand their needs.
A distribution channel moves goods from producers to consumers. They create and send their
market offerings and messages to consumers, either directly or through marketing intermediaries.
Each party in the system is affected by major environmental forces (demographic, economic,
natural, technological, political, and social/cultural). Each party in the system adds value for the
next level. Thus, a company’s success at building profitable relationships depends not only on
its own actions but also on how well the entire system serves the needs of final consumers.
The members of the marketing channel perform many key functions.
 Information. Gathering and distributing marketing research and intelligence information
about actors and forces in the marketing environment needed for planning and facilitating
exchange.
 Promotion:-Developing and spreading persuasive communications about an offer.
 Contact:-Finding and communicating with prospective buyers.
 Matching:-Shaping and fitting the offer to the buyer's needs, including such activities as
manufacturing, grading, assembling and packaging.
 Negotiation:-Reaching an agreement on price and other terms of last offer, so that
ownership or possession can be transferred.
 Physical distribution: - Transporting and storing goods.
 Financing:-Acquiring and using funds to cover the costs of the channel work.
 Risk taking: - Assuming the risks of carrying out the channel work.
The question is not 'whether these functions need to be performed, but rather who is to perform
them. The producer can eliminate or substitute institutions in the channel system, but the
functions cannot be eliminated. When channel members arc eliminated, their functions are
moved either forwards or backwards in the channel, only to be assumed by other members. In
short, the producers can do without intermediaries, but they cannot eliminate their functions.
All these functions use up scarce resources and can often is performed better through
specialization. To the extent that the manufacturer performs these functions, its costs go up and
its prices have to be higher. At the same time, when some of these functions are shifted to
intermediaries, the producer's costs and prices may be lower, but the intermediaries must charge
more to cover the costs of their work. In dividing the work of the channel, the various functions
should he assigned to the channel members that can perform them most efficiently and
effectively to provide satisfactory assortments of goods to target consumers.