Principles of Marketing

UNIT-1 (Improved)

According to the American Marketing Association (AMA) Board of Directors, 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.

Dr. Philip Kotler defines marketing as “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.”
Marketing is making connections between customers with your products, brand(s) and business,
such that they are likely to buy from you.

Or as Regis McKenna said, “Marketing is everything.”

Marketing is about identifying and meeting human and social needs. One of the shortest good
definitions of marketing is "meeting needs profitably."

What is marketed?
Goods:
Physical goods constitute the bulk of most countries production and marketing effort.
Companies market billions of cars ,refrigerator, television sets machines and various other
mainstays of a modern economy.
Services:
As economies advances a growing proportion of their activist is focused on the production of
services. Service include the work of airlines, hotels, car rental firms, barbers and
beauticians, maintenance and repair people, as well as professionals working within or for
companies ,such as accountants, bankers, lawyers, engineers, doctors, software programmers
and management consultants.
Events:
Marketing promote time based events, such as major trade shows, artistic performance, and
company anniversaries. Global sporting events such as the Olympic or world cup are
promoted aggressively to both companies and fans.
Experiences:
By orchestrating several services and goods, a film can create, stage and market experiences.
Disney Worlds represents experiential marketing for entertainment.
Persons: Celebrity market is a major business. Today , every major film star has an agent, a
personal manager, and ties to public relations agency. Celebrity marketers market themselves
(self branding)-think of Madonna, Oprah Winfrey, Shaharuk Khan.
Places: cities, states region and whole nation’s compare actively to attract tourist, factories
company headquarters, and new residents. Place marketers include economic 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 requires marketing.
Organizations:
Organizations actively work to build a strong, favorable and unique image in the minds of
their target publics. Companies spend money on corporate identity ads.
Information:
Information can be produced and marketed as a product. This is essentially what schools and
universities produce and distribute at a price to parents students and communities.
Ideas:
Every market offering includes a basic idea. Products and services are platforms for
delivering some idea or benefit.

Marketing mix
The set of controllable tactical marketing tools-product, price, place, and promotion-that the
firm blends to produce the response it wants in the target market.
The four Ps of the marketing mix-
Product
Variety
Quality
Design
Features
Brand name
Packaging and Services
Price
List price
Discount
Allowances
Payment period
Credit terms
Place
Channels
Coverage
Assortments
Locations
Inventory
Transportation
Logistics
Promotion
Advertising
Personal selling
Sales promotion
Public relations
4Ps 4Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication
Eight demand states
Eight demand states are possible:
Negative demand:
Consumer dislikes the product and may even pay a price to avoid it
Nonexistence demand:
Consumers may be unaware or uninterested in the product.
Latent demand:
Consumers may share a strong need that cant be satisfied by an existing product.
Declining product:
Consumers begin to buy the product less frequently or not all.
Irregular demand:
Consumers purchase varies on a seasonal, monthly, weekly, daily, or even hourly
basis.
Full demand
Consumers are adequately buying all products put into the marketplace.
Overfull demand
More consumers would like to buy the product than can be satisfied.
Unwholesome demand
Consumers may be attracted to products that have undesirable’s social
consequences.

Market
 Key customer market

Consumer market
Companies selling mass consumer goods and services such as soft drink,
cosmetics, air travel, and athletic shoes and equipment spend a great deal of time
trying to establish a superior brand image.
Business market
Companies selling business goods and services often face well-trained and well
informed professional buyers who are skilled in evaluating competitive offerings.
Global markets
Companies selling goods and services in the global marketplace face additional
decisions and challenges. They must decide which countries to enter.
Non-profit and government markets
Companies selling their goods to nonprofit organizations such as churches,
universities, charitable organizations, or government agencies need to price
carefully because these organizations have limited purchasing power.
Marketplaces
The marketplace is physical, as when you shop in a store.
Market spaces
Marketplace is digital, as when you shop on the internet.
Metamarkets
Metamarkets is cluster of complementary products and services that are closely
related in the minds of consumers but are spread across a diverse set of industries.
 Company Orientation toward the Marketplace
Given these new marketing realities, what philosophy should guide a company's marketing
efforts? Increasingly, marketers operate consistent with a holistic marketing concept. Let's
review the evolution of earlier marketing ideas.

Philosophies of marketing/ Evolution of Marketing

The production concept
The production concept is one of the oldest concepts in business. It holds that con sumers will
prefer products that are widely available and inexpensive. Managers of production-oriented
businesses concentrate on achieving high production efficiency, low costs, and mass
distribution. This orientation makes sense in developing countries such as China, where the
largest PC manufacturer, Lenovo, and domestic appliances giant Haier take advantage of the
country's huge and inexpensive labor pool to dominate the market. Marketers also use the
production concept when a company wants to expand the market.

The product concept

The product concept proposes that consumers favor products that offer the most quality,
performance, or innovative features. Managers in these organizations focus on making
superior products and improving them over time. However, these managers are sometimes
caught up in a love affair with their products. They might commit the "better-mousetrap"
fallacy, believing that a better mousetrap will lead people to beat a path to their door. A new
or improved product will not necessarily be successful unless it's priced, distributed, adver
tised, and sold properly.

The selling concept

The selling concept holds that consumers and businesses, if left alone, won't buy enough of
the organization's products. The organization must, therefore, undertake an aggressive selling
and promotion effort. The selling concept is expressed in the thinking of Sergio Zyman,
Coca-Cola's former vice president of marketing, who said: "The purpose of mar keting is to
sell more stuff to more people more often for more money in order to make more profit."37

The selling concept is practiced most aggressively with unsought goods, goods that buy ers
normally do not think of buying, such as insurance, encyclopedias, and cemetery plots. Most
firms also practice the selling concept when they have overcapacity. Their aim is to sell what
they make, rather than make what the market wants. However, marketing based on hard
selling carries high risks. It assumes that customers who are coaxed into buying a product
will like it, and that if they don't, they not only won't return or bad-mouth it or complain to
consumer organizations, but they might even buy it again.
The Marketing concept
The marketing concept emerged in the mid-1950s. Instead of a product-centered, "make-and-
sell" philosophy, business shifted to a customer-centered, "sense-and respond" philosophy.
The job is not to find the right customers for your products, but to find the right products for
your customers. Dell Computer doesn't prepare a perfect com puter for its target market.
Rather, it provides product platforms on which each person customizes the features he desires
in the computer.

The marketing concept holds that the key to achieving organizational goals is being more
effective than competitors in creating, delivering, and communicating superior customer value
to your chosen target markets. Several scholars have found that companies that embrace the
marketing concept achieve superior performance. This was first demonstrated by companies
practicing a reactive market orienta tion-understanding and meeting customers' expressed
needs. Some critics say this means companies develop only very basic innovations. Narver and
his colleagues argue that more advanced, high-level innovation is possible if the focus is on
customers' latent needs. Narver calls this a proactive marketing orientation.4! Companies such
as 3M, Hewlett Packard, and Motorola have made a practice of researching latent needs
through a "probe-and-learn" process. Companies that practice both a reactive and a proactive
marketing orientation are implementing a total market orientation and are likely to be the most
successful.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing
concepts:

Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is
preoccupied with the seller's need to convert his product into cash; marketing with the idea
ofsatisfyingthe needs ofthe customer by means ofthe product and the whole cluster of things
associated with cre ating, delivering, and finally consuming it.

The holistic marketing concept

Without question, the trends and forces defining the 21st century are leading business firms to
a new set of beliefs and practices. Today's best marketers recognize the need to have a more
com plete, cohesive approach that goes beyond traditional applications of the marketing
concept. "Marketing Memo: Marketing Righ t and Wrong" suggests where companies go
wrong-and how they can get it right-in their marketing.

The holistic marketing concept is based on the develop ment, design, and implementation of
marketing programs,

processes, and activities that recognizes their breadth and interdependencies. Holistic
marketing recognizes that "everything matters" in marketing-and that a broad, inte grated
perspective is often necessary.

Holistic marketing is thus an approach that attempts to recognize and reconcile the scope and
complexities of marketing activities. Figure 1.4 provides a schematic overview of four broad
components characterizing holistic marketing: relationship marketing, inte grated marketing,
internal marketing, and performance marketing. We'll examine these major themes throughout
this book. Successful companies will be those that can keep their marketing changing with the
changes in their marketplace-and marketspace. "Breakthrough Marketing: Nike" describes how
that company has successfully changed and thrived-through the years.

Relationship marketing
Relationship marketing has the aim of building mutually satisfying long term
relationships with key parties –customers, suppliers, distributors, another market
patterns-in order o earn and retain their business. Relationship marketing builds
strong economic, technical, and social ties among the parties.

Integrated marketing
The marketer’s task is to devise marketing activities and assemble fully integrated
marketing programs to create, communicate, and deliver value for consumers. The
marketing program consists of numerous decisions on value enhancing marketing
activities to use. Marketing activities come in all forms.

Internal marketing
Holistic marketing incorporates internal marketing, ensuring that everyone in the
organization embraces appropriate marketing principles, especially senior
management. Internal marketing is the task of hiring, training, and motivating able
employees who want to serve customers well.

Social responsibility marketing

Holistic marketing incorporates social responsibility marketing and understanding
broader concerns and the ethical, environmental, logical, and social context of
marketing activities and programs. The cause and effects marketing clearly extend
beyond the company and the consumer to society as a whole. Social responsibility
also requires that marketers carefully consider the role that they are playing and
could play in terms of social welfare.

Difference between Selling and Marketing

Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing
concepts:

Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is
preoccupied with the seller's need to convert his product into cash; marketing with the idea
ofsatisfyingthe needs ofthe customer by means ofthe product and the whole cluster of things
associated with cre ating, delivering, and finally consuming it.
 Selling Marketing
Definition
The selling theory believes that if The marketing theory is a business plan,
companies and customers are dropped which affirms that the enterprise’s profit
detached, then the customers are not going lies in growing more efficient than the
to purchase enough commodities produced opponents, in manufacturing, producing
by the enterprise. The notion can be and imparting exceptional consumer value
employed argumentatively, in the case of to the target marketplace.
commodities that are not solicited.

Related to
Constraining customer’s perception of Leading commodities and services
commodities and services. towards the consumer’s perception.

Beginning point

Factory Marketplace

Concentrates on

Product Consumer needs

Business Planning

Short term Long term

Orientation
Volume and revenue Customer satisfaction with Profit
Emphasis
More on product and service More on consumer needs and wants
Approach
Selling has narrower approach as it is an Marketing has a wider approach than selling
integrated part of marketing process. as it contains number of activities.

Core Marketing concepts

A core set of concepts creates a foundation for marketing management and a
holistic marketing orientation.
Needs
Needs are the basic human requirements. People need food , air, water, clothing,
and shelter to survive.

Need, in terms of marketing can be divided into the following five types:

1. Stated Needs
Stated Needs are the ones which are specified clearly by the customer or the market. They are
also the expected needs for a particular product or service. These needs are at the most basic
level without which the need cannot be qualified. e.g. I need food to eat and i feel like having
a sandwich.

2. Real Needs

Real needs are at one level above the stated needs and put a boundary on the above. Real
needs define the parameter which are immediate to defining and fulfilling the need. e.g. I
need a cheese sandwich at affordable price.

3. Unstated Needs

Unstated needs are which are not obvious but are expected by the customer. These are the
needs which can be used to differentiate by the companies while designing the products to
fulfil the needs of the customer. e.g. I need basic vegetables to be added as part of my
sandwich. It should not be just a single slice cheese plain sandwich.

4. Delight Needs

Delight needs are the needs which provide the 'wow' factor. These needs like unstated needs
can make some products more popular than the other if they meet these needs. e.g. The
quality of the cheese used to be the best one with special sauce but still the price of the
sandwich would be below 2$.

5. Secret Needs

These are the needs which a customer might not state or realize but can be one of the main
reasons for choosing a particular product to fulfil the basic stated need. e.g. i need this
sandwich to quickly eat my food and look cool.
Wants
People have strong needs for recreation, education, and entertainment. These needs
become wants when they are directed to specific objects that might satisfy the
need. Wants are shaped by one’s society.
Demands
Demands are wants for specific products backed by an ability to pay. How many
customers are actually willing and able to buy a product?

Segmentation, Targeting and Positioning

A marketer can rarely satisfy everyone in a market. Not everyone likes the same
cereal, hotel room, restaurant, automobile, college, or movie. Therefore, marketers
start by dividing the market into segments. They identify and profile distinct
groups of buyers who might prefer or require varying product and service mixes by
examining demographic, psychographic, and behavioral differences among buyers.
After identifying market segments, the marketer then decides which present the
greatest opportunity-which are its target markets. For each, the firm develops a
market offering that it positions in the minds of the target buyers as delivering
some central benefit(s). For exam ple, Volvo develops its cars for buyers to whom
safety is a major concern. Volvo, therefore, positions its car as the safest a
customer can buy. Companies do best when they choose their target market(s)
carefully and prepare tailored marketing programs.

Offerings and Brands

Companies address needs by putting forth a value proposition, a set of benefits that they offer
to customers to satisfy their needs. The intangible value proposition is made physi cal by an
offering, which can be a combina tion of products, services, information, and experiences.

A brand is an offering from a known source. A brand name such as McDonald's carries many
associations in people's minds that make up the brand image: hamburgers, fun, children, fast
food, convenience, and golden arches. All companies strive to build a strong, favorable, and
unique brand image.

Value and Satisfaction

The offering will be successful if it delivers value and satisfaction to the target buyer. The
buyer chooses between different offerings based on which she perceives to deliver the most
value. Value reflects the sum of the perceived tangible and intangible benefits and costs to
customers. It's primarily a combination of quality, service, and price ("qsp"), called the
"customer value triad." Value increases with quality and service and decreases with price,
although other factors can also play an important role in our perceptions of value.
Value is a central marketing concept. We can think of marketing as the identification, cre ation,
communication, delivery, and monitoring of customer value. Satisfaction reflects a person's
judgments of a product's perceived performance (or outcome) in relationship to expectations.
If the performance falls short of expectations, the customer is dissatisfied and disappointed. If
it matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted.

Marketing Channels

To reach a target market, the marketer uses three kinds of marketing channels. Communication
channels deliver and receive messages from target buyers and include newspapers, magazines,
radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet.
Beyond these, just as we convey messages by our facial expressions and clothing, firms
communicate through the look of their retail stores, the appearance of their Web sites, and
many other media. Marketers are increasingly adding dialogue channels such as e-mail, blogs,
and toll-free numbers to familiar monologue channels such as ads.

The marketer uses distribution channels to display, sell, or deliver the physical product or
service(s) to the buyer or user. They include distributors, wholesalers, retailers, and agents.

The marketer also uses service channels to carry out transactions with potential buyers. Service
channels include warehouses, transportation companies, banks, and insurance companies that
facilitate transactions. Marketers clearly face a design challenge in choosing the best mix of
communication, distribution, and service channels for their offerings.

Supply Chain

The supply chain is a longer channel stretching from raw materials to components to final
products that are carried to final buyers. The supply chain for women's purses starts with hides
and moves through tanning, cutting, manufacturing, and the marketing channels to bring
products to customers. Each company captures only a certain percentage of the total value
generated by the supply chain's value delivery system. When a company acquires com petitors
or expands upstream or downstream, its aim is to capture a higher percentage of supply chain
value.

Competition
Competition includes all the actual and potential rival offerings and substitutes a buyer might
consider. Suppose an automobile company is planning to buy steel for its cars. There are several
possible levels of competitors. The manufacturer can buy steel from U.S. Steel in the United
States, it can buy from a foreign firm in Japan or Korea, it can buy from a minimill such as
Nucor at a cost savings, or it can buy aluminum from Alcoa for certain parts to reduce the car's
weight or engineered plastics from Saudi Basic Industries Corporation (SABIC), purchasers of
GE Plastics, for bumpers instead of steel. Clearly, U.S. Steel would be thinking too narrowly
about its competition if it thought only of other integrated steel com panies. In fact, in the long
run U.S. Steel is more likely to be hurt by substitute products than by other steel companies.

Marketing Environment

The marketing environment consists of the task environment and the broad environment. The
task environment includes the actors engaged in producing, distributing, and promot ing the
offering. These are the company, suppliers, distributors, dealers, and the target customers. In
the supplier group are material suppliers and service suppliers, such as marketing research
agencies, advertising agencies, banking and insurance companies, transportation companies,
and telecommunications companies. Distributors and dealers include agents, brokers,
manufacturer representatives, and others who facilitate finding and selling to customers.

The broad environment consists of six components: demographic environment, eco nomic
environment, physical environment. technological environment, political-legal environment,
and social-cultural environment. Marketers must pay close attention to the trends and
developments in these environments and make timely adjustments to their marketing strategies.

Analyzing the macro environment for marketing

Needs and Trends

Enterprising individuals and companies manage to create new solutions to unmet needs. FedEx
was created to meet the need for next-day mail delivery. Dockers was created to meet the needs
of baby boomers who could no longer really wear-or fit into!-their jeans and wanted a
physically and psychologically comfortable pair of pants.

We distinguish among fads, trends, and megatrends. A fad is ((unpredictable, short-lived, and
without social, economic, and political significance." A company can cash in on a fad such as
Beanie Babies, Furbies, and Tickle Me Elmo dolls, but getting it right is more a mat ter of luck
and good timing than anything else.

A trend is a direction or sequence of events that has some momentum and durability. Trends
are more predictable and durable than fads. A trend reveals the shape of the future and provides
many opportunities. For example, the percentage of people who value physi cal fitness and
well-being has risen steadily over the years, especially in the under-3D group, young women,
upscale consumers, and people living in the West.

Identify the major forces

Companies and their suppliers, marketing intermediaries, customers, competitors, and publics
all operate in a macroenvironment of forces and trends, increasingly global, that shape
opportunities and pose threats. These forces represent "noncontrollables," which the company
must monitor and to which it must respond.

The beginning of the new century brought a series of new challenges: the steep decline of the
stock market, which affected savings, investment, and retirement funds; increasing
unemployment; corporate scandals; and of course, the rise of terrorism. These dramatic
events were accompanied by the continuation of existing trends that have already pro foundly
influenced the global landscape. In 2005, more transistors were produced (and at a lower
cost) than grains of rice; the U.S. blog-reading audience is already 20% of the size of the
newspaper-reading population; and insatiable world oil consumption is expected to rise 50%
by 2030.24

Within the rapidly changing global picture, the firm must monitor six major forces: demo
graphic, economic, social-cultural, natural, technological, and political-legal. We'll describe
these forces separately, but marketers must pay attention to their interactions, because these
will lead to new opportunities and threats. For example, explosive population growth
(demographic) leads to more resource depletion and pollution (natural), which leads con
sumers to call for more laws (political-legal), which stimulate new technological solutions
and products (technological), which, if they are affordable (economic), may actually change
attitudes and behavior (social-cultural). "Breakthrough Marketing: Google" describes how
that company has successfully capitalized on the new marketing environment.
The content of macro environment is as follows:
The demographic environment
Worldwide population growth
Population age mix
Ethic and other markets
Educational groups
Household pattern
Graphical shifts in population
Other Major Macro Environments
Economic environment
In the economic arena marketers need to focus on income distribution and levels
savings, debt, and credit availability.
Social cultural environment
High persistence of core cultural values
Existence of subcultures
Shifts of secondary cultural values through time.
Natural environment
Shortage of raw materials
Increased energy cost
Anti population pressure
Changing role of government
Technological environment
Accelerating pace of change
Unlimited opportunities for innovation
Varying R&D budgets
Increased regulation of technological change
Political-legal environment
In the political-legal environment, marketers must work within the many laws
regulating business practices and with various special-interest groups.

The Marketing Enviroment:

Environment that is specifc to the business:
The Market/demand
The consumer
The Industry
The competition
Supplier related factors
Trade environment/distribution factor
Influence of society upon businesses

BCG Matrix
• The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to
help with long-term strategic planning, to help a business consider growth opportunities
by reviewing its portfolio of products to decide where to invest, to discontinue, or
develop products. It's also known as the Growth/Share Matrix.
• The Matrix is divided into 4 quadrants based on an analysis of market growth and
relative market share, as shown in the diagram below.
• BCG Matrix is mainly used by companies to analyse the performance of their multiple
products and for decision making. Companies with very large product portfolios have
one major issue – Which product to put money in and which product to take money out
of? This question is answered by the BCG Matrix.
1. Dogs: These are products with low market share and low growth rate (less
profitable or may even be negative profitability). Low Share, Low
Growth. Companies should liquidate, divest, or reposition these “pets.”
2. Question marks or Problem Child: Products in high growth markets with
low market share (Uncertainty). With High Growth, Low Share companies
should invest in or discard these “question marks,” depending on their chances of
becoming stars.
3. Stars: Products in high-growth markets with high market share. (High
Competition) . With High Growth, High Share companies should significantly
invest in these “stars” as they have high future potential.
4. Cash cows: Products in low growth markets with high market share. (Most
Profitable) Low Growth, High Share. Companies should milk these “cash cows”
for cash to reinvest.

Key Features and Strategies

 (1) Cash Cows
The cornerstone of any multi-product business, cash cows are products
which are having a high market share in a low growing market. As the
market is not growing, that cash cow gains the maximum advantage by
generating maximum revenue due to its high market share for BCG Matrix.
Thus for any company, the cash cows are the ones which require least
investment but at the same time give higher returns. These higher returns
enhance the overall profitability of the firm because this excess revenue
can be used in other businesses which are Stars, Dogs or Question marks.
Strategies
The cash cows are the most stable for any business and hence the strategy
generally includes retention of the market share. As the market is not
growing, acquisition is less and customer retention is high. Thus customer
satisfaction programs, loyalty programs and other such promotional
methods form the core of the marketing plan for a cash cow product.
(2) Stars
The best product which comes in mind when thinking of Stars is the
telecom products. Stars are products with high market growth rate with
high market share. Thus, there is a lot of competition in this segment.
If you look at any top 5 telecom company, the market share is good but the
growth rate too is good. Thus because these two factors are high, the
telecom companies are always in competitive mode and they have to juggle
between investment and harvesting vis investing money and taking out
money time to time.
Strategies
All types of marketing, sales promotion and advertising strategies are
used for Stars. This is because in cash cow, already these strategies have
been used and they have resulted in the formation of a cash cow. Similarly
in Stars, because of the high competition and rising market share, the
 concentration and investment needs to be high in marketing activities so as
to increase and retain market share.

(3) Question Marks

High Growth, Low Share

Question marks are products which may have high market growth and low
market share, but the market of the product is in question – whether it will
grow further or decline.
Strategies:
As they are new entry products with high growth rate, the growth rate
needs to be capitalized in such a manner that question marks turn into high
market share products.
New Customer acquisition strategies are the best strategies for converting
Question marks to Stars or Cash cows. Furthermore, time to time market
research also helps in determining consumer psychology for the product as
well as the possible future of the product and a hard decision might have
to be taken if the product goes into negative profitability.

(4) Dogs
Products are classified as dogs when they have low market share and low
growth rate. Thus these products neither generate high amount of cash nor
require higher investments.
However, they are considered as negative profitability products mainly
because the money already invested in the product can be used somewhere
else. Thus over here businesses have to take a decision whether they should
divest these products or they can revamp them and thereby make them
saleable again which will subsequently increase the market share of the
product.
Strategies
Depending on the amount of cash which is already invested in this quadrant,
the company can either divest the product altogether or it can revamp the
product through rebranding/innovation/adding features etc.
However, moving a dog towards a star or a cash cow is very difficult. It
can be moved only to the question mark region where again the future of
the product is unknown. Thus in cases of Dog products, divestment
strategy is used.