TOPIC 1 – DEFINING MARKETING FOR THE 21ST CENTURY

LEARNING OBJECTIVES

At the end of this lesson, you will be able to:

1. Define marketing management.

2. Discuss the scope of marketing.
3. Discuss some fundamental marketing concepts.
4. Discuss the different task necessary for successful marketing management.

A. THE IMPORTANCE OF MARKETING

 Financial success often depends on marketing ability due to sufficient demand for
products and services to the companies can make a profit.
 Newly empowered customers and new competitors make the companies rethink their
business models: Change or Die
 Therefore, the right decisions on new products, prices, promotion mix budget, and sales
force from short term sales to long-term relationship (satisfy their stockholders)

B. THE SCOPE OF MARKETING

To prepare to be marketers, you need to understand what marketing is, how it works, what is
marketed, and who does the marketing.

WHAT IS MARKETING?

Marketing deals with identifying and meeting human and social needs. One of the shortest
definition of marketing is “meeting needs profitably.”

A) The American Marketing Association offers the following formal definition: “Marketing is
the process of planning and executing the conception, pricing, promotion, and distribution of
ideas, goods, services to create exchanges that satisfy individual and organization goals.”

B) A social definition of marketing is that “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.”

C) Marketing is an organizational function and a set of processes for creating, communicating,

and delivering value to customers and for managing customer relationships in ways that benefit
the organization and its stakeholders.

WHAT IS MARKETING MANAGEMENT?

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.

EXCHANGE AND TRANSACTIONS

Exchange is the process of obtaining a desired product from someone by offering something in
return. For exchange potential to exist, the following conditions must be satisfied:

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.

A transaction is a trade of values between two or more parties and involves several dimensions:

1. At least two things of value.

2. Agreed upon conditions.
3. A time of agreement.
4. A place of agreement.

A transaction differs from a transfer. In a transfer, A gives X to B but does not receive anything
tangible in return. Gifts, subsidies, and charitable contributions are all transfers.

WHAT IS MARKETED?

Marketing people are involved in marketing ten types of entities: goods, services, events,
experiences, persons, places, properties, organizations, information, and ideas.

A. GOODS. Physical goods constitute the bulk of production and marketing efforts. Cars,
trucks, television sets, machine, watches, cosmetics, etc.

B. SERVICES. It includes work of airlines, hotels, accountants, bankers, lawyers, engineers,

doctor, software programmers, etc.

C. EVENTS. Marketers promote time based events such as trade shows, artistic performances,
and the Olympics.

D. EXPERIENCES. By orchestrating several services and goods, a firm can create and market
experiences such as Walt Disney World’s Magic Kingdom.

E. PERSONS. Artists, CEO, musicians, financiers, lawyers also get help from celebrity
marketers.

F. PLACES. Cities, states, regions, and whole nations compete actively to attract tourists,
factories, and new residents.

G. PROPERTIES. Are intangible rights of ownership of either real property (real estate) or
financial property (stocks and bonds).

H. ORGANIZATIONS. Actively work to build a strong, favorable, and unique image in the
minds of their target publics.

I. INFORMATION. Can be produced and marketed as a product. Schools, universities, and

others produce information and then market it.

J. IDEAS. Every market offering includes a basic idea. Products and services are platforms for
delivering some idea or benefit.

WHO MARKETS?

Marketers and Prospects

A marketer is someone seeking a response (attention, purchase, vote, donation, etc.) from
another party called the prospect.

A. Marketers are responsible for stimulating demand for a company’s product.

B. Marketing managers seek to influence the level, timing, and composition of demand to meet
the organization’s objectives. Eight demand states are possible:

1. Negative demand – Consumers dislike the product and may even pay a price to avoid it.
2. Non-existent demand – Consumers may be unaware or uninterested in the product.
3. Latent demand- Consumers may share a strong need that cannot be satisfied by an existing
product.
4. Declining demand – Consumers begin to buy the product less frequently or not at all.
5. Irregular demand – Consumer purchases vary on a seasonal, monthly, weekly, daily, or even

hourly basis.
6. Full demand – Consumers are adequately buying all products put in the marketplace.
7. Overfull demand – Too many consumers would like to buy the product that can be satisfied.
8. Unwholesome demand – Consumers may be attracted to products that have undesirable
social
consequences.

MARKETS

Economists describe a market as a collection of buyers and sellers who transact over a particular
product or product class.

Marketers use the term “market” to cover various groups of customers. They view the sellers as
constituting the industry and the buyer as constituting the market. They talk about need markets,
product markets, demographic markets, and geographic markets.

Figure 1.1 Structure of flows in a Modern Exchange Economy

Figure 1.1 show five basic markets and their connection flows. Manufacturers go to resource
markets (raw materials, labor markets, money markets), buy resources and turn them into goods
and services, and sell finished products to intermediaries, who sell them to consumers.
Consumers sell their labor and receive money with which they pay for goods and services. The
government collects tax revenues to buy goods from resource, manufacturer, and intermediary
markets and uses these goods and services to provide public services.

Figure 1.2 A Simple Marketing System

Figure 1.2 shows the relationship between the industry and the market. Sellers and buyers are
connected by flows:

1. Seller sends goods, services, and communications (ads, direct mail) to the market.
2. In return they receive money and information (attitudes, sales data)
3. The inner loop shows an exchange of money for goods and services.
4. The outer loop shows an exchange of information.

KEY CUSTOMER MARKETS

Consider the following key customer markets:

Consumer Markets – Companies selling mass consumer goods and services such as juices,
cosmetics, athletic shoes, and air travel spend a great deal of time establishing a strong brand
image by developing a superior product and packaging, ensuring its availability and backing it
with engaging communications and reliable service.

Business Markets – Companies selling business goods and services often face well-informed
professional buyers skilled at evaluating competitive offerings. Business buyers buy goods to
make or resell a product to others at a profit. Business marketers must demonstrate how their
products will help achieve higher revenue or lower costs. Advertising can play a role, but the
sales force, the price, and the company’s reputation may play a greater one.

Global Markets – Companies in the global marketplace must decide which countries to enter,
how to enter each (as an exporter, licensee, joint venture partner, contract manufacturer, or solo
manufacturer); how to adapt product and service features to each country; how to price products
in different countries, and how to design communications for different cultures. They face
different requirements for buying and disposing of property, cultural, language, legal and
political differences and currency fluctuations. Yet, the payoff can be huge.

Non-profit and Governmental Markets – Companies selling to non-profit organizations with

limited purchasing power such as churches, universities, charitable organizations, and
government agencies need to price carefully. Lower selling prices affect the features and quality
the seller can build into the offering. Much government purchasing calls for bids, and buyers
often focus on practical solutions and favor the lowest bid in the absence of extenuating factors.

MARKETPLACES, MARKETSPACES AND METAMARKETS

MARKETPLACES – is a physical location where the buyer and seller meet each other
individually and share information. Example: Amazon and eBay

MARKETSPACES – is an information and communication technology based electronic online

exchange environment where the buyers and sellers interact and transact in a virtual
environment.

METAMARKETS – are closely related markets from the customer point of view but are
different sets of industries. For example, in the automobile meta market different industries are
Automobile Manufacturers, Insurance Providers, Service Centers, Spares, Driving Academy,
Finance Companies etc.

Marketplace-physical; marketspace-digital; metamarket – both physical and digital

COMPANY ORIENTATIONS TOWARD THE MARKETPLACE

The competing concepts under which organizations have conducted marketing activities include;
the production concept, product concept, selling concept, marketing concept, and holistic
marketing concept.

PRODUCTION CONCEPT
 The production concept holds that consumers will prefer products that are widely
available and inexpensive.

PRODUCT CONCEPT
 The product concept holds that consumers will favor those products that offer the most
quality, performance, or innovative features.

SELLING CONCEPT
 The selling concept holds that consumers and businesses, will ordinarily buy enough of
the organization’s products, therefore, the organization must undertake aggressive selling
and promotion effort.

MARKETING CONCEPT
 The marketing concept holds that the key to achieving organizational goals consists of
the company being more effective than competitors in creating, delivering, and
communicating superior customer value to its chosen target markets.

1. Reactive market orientation – understanding and meeting consumers’ expressed needs.

2. Proactive marketing orientation – researching or imagining latent consumers’ needs
through a “probe-and-learn” process.

 Companies that practice both reactive and proactive marketing orientation are
implementing a total market orientation.
HOLISTIC MARKETING CONCEPT
 Holistic marketing can be seen as the development, design, and implementation of
marketing programs, processes, and activities that recognizes the breath and
interdependencies of their efforts. Holistic marketing recognizes that “everything
matters” with marketing – the consumer, employees, other companies, competition, as
well as society as a whole.

Figure 1.3 HOLISTIC MARKETING DIMENSIONS

Figure 1.3 provides a schematic overview of the four broad themes characterizing holistic
marketing.

RELATIONSHIP MARKETING
 Relationship marketing has the aim of building mutually satisfying long-term
relationships with key parties--- customers, suppliers, distributors, and other marketing
partners. Relationship marketing builds strong economic, technical, and social ties among
the parties.

1. Marketing must not only do customer relationship management (CRM) but also
partnership relationship management (PRM).

2. Four key constituents for marketing are:

a. Customers
b. Employees
c. Marketing partners (channel partners)
d. Members of the financial community

3. The ultimate outcome of relationship marketing is the building of a unique company

asset called a marketing network.

A marketing network consists of the company and its supporting stakeholders (customers,
suppliers, distributors, retailers, ad agencies, university scientists, and others) with whom
it has built mutually profitable business relationships.

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.

Two key themes of integrated marketing are:

1. Many different marketing activities are employed to communicate and deliver value.
2. All marketing activities are coordinated to maximize their joint efforts.

INTERNAL MARKETING
  Holistic marketing incorporates internal marketing, ensuring that everyone in the
organization embraces appropriate marketing principles.
 Internal marketing must take place on two levels:
1. At one level, the various marketing functions (sales force, advertising, customer
services,
product management, and marketing research) must work together.
2. Secondly, marketing must be embraced by the other departments – they must “think
customer”. Marketing is not a department so much as a company orientation.

PERFORMANCE MARKETING
 Performance marketing requires understanding the financial and non-financial returns to
business and society from marketing activities and programs. Top marketers are
increasingly going beyond sales revenue to examine the marketing scorecard and
interpret what is happening to market share, customer loss rate, customer satisfaction,
product quality, and other measures. They are also considering the legal, ethical, social,
and environmental effects of marketing activities and programs.

SOCIAL RESPONSIBILITY MARKETING

 Holistic marketing incorporates social responsibility marketing and understanding
broader concerns, and the ethical, environmental, legal, and social context of marketing
activities and programs.

Table 1.2 displays some different type of corporate social initiatives, illustrated by McDonalds.

Figure 1.4 The Four P Components of the Marketing Mix

Figure 1.4 shows the particular marketing variables under each P. Marketing mix decisions must
be made for influencing the trade channels as well as the final consumers.
Robert Lauterborn suggests that the sellers 4Ps correspond to the customers’ 4 Cs:

4 Ps 4Cs
Product Customer solution
Price Customer cost
Place Convenience
Promotion Communication

Figure 1.5 The Evolution of Marketing Management

If we update them to reflect the holistic marketing concept, we arrive at a more representative set
that encompasses modern marketing realities: people, processes, programs, and performance, as
in Figure 1.5.

UPDATING THE 4 Ps

PEOPLE
 reflects, in part, internal marketing and the fact that employees are critical to marketing
success. Marketing will only be as good as the people inside the organization. It also
reflects the fact that marketers must view consumers as people to understand their lives
more broadly, and not just as they shop for and consume products and services.

PROCESSES
 reflects all the creativity, discipline, and structure brought to marketing management.
Marketers must avoid ad hoc planning and decision making and ensure that state-of-the-
art marketing ideas and concepts play an appropriate role in all they do. Only by
instituting the right set of processes to guide activities and programs can a firm engage in
mutually beneficial long-term relationships. Another important set of processes guides
the firm in imaginatively generating insights and breakthrough products, services, and
marketing activities.

PROGRAMS
 reflects all the firm’s consumer-directed activities. It encompasses the old 4 Ps as well as
a range of other marketing activities that might not fit as neatly into the old view of
marketing. Regardless of whether they are online or offline, traditional or non-traditional,
these activities must be integrated such that their whole is greater than the sum of their
parts and they accomplish multiple objectives for the firm.

PERFORMANCE
 as in holistic marketing, to capture the range possible outcome measures that have
financial and non-financial implications ( profitability as well as brand and customer
equity), and implications beyond the company itself ( social responsibility, legal, ethical,
and community related).

CORE MARKETING CONCEPTS

To understand the marketing function, we need to understand certain fundamental concepts and
tasks, along with current trends.

NEEDS, WANTS AND DEMANDS

Needs – are the basic human requirements such as for air, food, water, clothing, and shelter.

Wants – are desires for specific satisfiers of needs.

Demands – are wants for specific products backed by an ability to pay. Many people want a
Mercedes; only a few are able to buy one. Companies must measure not only how many people
want their product, but also how many are willing and able to buy it.

There are five types of needs that marketers must understand:

TARGET MARKETS, POSITIONING AND SEGMENTATION

A. A marketer can rarely satisfy everyone in a market therefore the marketers must divide the
market into segments.
B. The marketer then decides which segment presents the greatest opportunity – which are its
target market.
C. For each chosen target market, the firm develops a market offering.
D. The offering is positioned in the minds of the target buyers as delivering some central
benefit(s).

OFFERINGS AND BRANDS

VALUE AND SATISFACTION

Value reflects the perceived tangible benefits and costs to customers. Value can be a
combination of quality, service, and prices called the customer value triad.

Satisfaction reflects a person’s judgment of a product’s perceived performance in relationship to

expectations. If the performance falls short of expectations, the customer is disappointed. If it
matches expectations, the customer is satisfied. If it exceeds them, the customer is delighted.

MARKETING CHANNELS

Marketing channels are the ways that goods and services are made available for use by the
consumers.

Three types of marketing channels:

1. 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.
2. Distribution channels to display, sell, or deliver the physical product or service(s) to the buyer

or user. These channels may be direct via the Internet, mail, or mobile phone or telephone, or
indirect with distributors, wholesalers, retailers, and agents as intermediaries.
3. Service channels that include warehouses, transportation companies, banks, and insurance
companies.

SUPPLY CHAIN
 Describes a longer channel stretching from raw materials to finished goods.
 Represents a value delivery system.

COMPETITION
 Includes all the actual and potential rival offerings and substitutes a buyer might consider.
MARKETING ENVIRONMENT
 Is the combination of external and internal factors and forces which affect the company’s
ability to establish a relationship and serve its customers.
 Consists of the task environment and the broad environment.
 Task environment includes the immediate actors involved in producing, distribution, and
promoting the offering: suppliers, company, dealers, and target customers.
 The broad environment consists of six components:
1. Demographic environment
 The demographic environment is made up of the people who constitute the
market. It is characterised as the factual investigation and segregation of the
population according to their size, density, location, age, gender, race, and
occupation.
2. Economic environment
 The economic environment constitutes factors which influence customers’
purchasing power and spending patterns. These factors include the GDP, GNP,
interest rates, inflation, income distribution, government funding and subsidies,
and other major economic variables.
3. Natural environment
 The physical environment includes the natural environment in which the business
operates. This includes the climatic conditions, environmental change,
accessibility to water and raw materials, natural disasters, pollution etc.
4. Technological environment
 The technological environment constitutes innovation, research and development
in technology, technological alternatives, innovation inducements also
technological barriers to smooth operation. Technology is one of the biggest
sources of threats and opportunities for the organisation and it is very dynamic.
5. Political-legal environment
 The political & Legal environment includes laws and government’s policies
prevailing in the country. It also includes other pressure groups and agencies
which influence or limit the working of the industry and/or the business in the
society.
6. Social-cultural environment
 The social-cultural aspect of the macro-environment is made up of the lifestyle,
values, culture, prejudice and beliefs of the people. This differs in different
regions.

MARKETING MANAGEMENT TASKS

1. Developing Marketing Strategies and Plans

 The first task is to identify and plan to the organization’s potential long-run opportunities,
given its market experience and core competencies.
2. Capturing Market Insights
 Each organization should closely monitor its marketing environment, continually assess
market potential, and forecast demand.
3. Connecting with Customers
 Management must decide how to best create value for the firm’s chosen target markets
and how to develop strong, profitable, long-term relationships with customers.
4. Building Strong Brands
 The organization must divide the market into major market segments, evaluate each one
and target those it can best serve.
5. Shaping the Market Offerings
 At the heart of the marketing program is the product ---the firm’s tangible offering to the
market --- which includes the product quality, design, features, and packaging.
6. Delivering Value
 Based on its products and services, how can the firm deliver value to its target market?
7. Communicating Value
  Each marketer needs to communicate to the target market the value embodied by its
offerings. This requires an integrated marketing program that maximizes the individual
and collective contribution of all communication activities.
8. Creating Successful Long-Term Growth
 The marketing strategy should take into account changing global opportunities and
challenges as well as social responsibility and ethics. Management must also establish an
appropriate marketing organization.