MN3141

MARKETING MANAGEMENT
Ch 2 OVERVIEW of Marketing: HISTORY & THEORY

Mabel Tan

© 2022 Singapore Institute of Management Group Limited

Aims

The aims of this chapter are to:

q show how and where the practice of marketing originated

q help ground the study of marketing in its historical antecedents
q identify which academic disciplines are the most important for the study
of marketing.

© 2022 Singapore Institute of Management Group Limited

Learning Outcomes
By the end of this chapter, and having completed the Essential reading and
activities, you should be able to:

q identify different definitions of marketing and the implications of the

differences
q explain the meaning of exchange and value in the context of marketing
q discuss the history of marketing theory and the different orientations that
firms can follow.

© 2022 Singapore Institute of Management Group Limited

Essential Reading
Kotler, P. and G. Armstrong Principles of marketing. (Harlow: Pearson,
2015)

Chapter 1, ‘Marketing: creating customer value and engagement’.

You should read the entire chapter to familiarise yourself with the Marketing
ethos.

© 2022 Singapore Institute of Management Group Limited

Further reading

Vargo, S.L., P.P. Maglio and M.A. Akaka ‘On value and value co-creation: a
service systems and service logic perspective’, European Management Journal
26 2008, pp.145–52.

Reiterated in Ch 8 Product Development

© 2022 Singapore Institute of Management Group Limited

q How do companies create value for customers?
q How do companies build strong customer relationships?
q How do companies capture value from customers in return?
(Kotler & Armstrong 2013, p.27)

© 2022 Singapore Institute of Management Group Limited

CORE MARKETING CONCEPTS

Creating and Capturing

Customer Value

© 2022 Singapore Institute of Management Group Limited

 Needs, Wants, and Demands
Need: States of felt deprivation including physical, social, and individual needs.

Physical needs: Food, clothing, shelter, safety

Social needs: Belonging, affection
Individual needs: Learning, knowledge, self-expression

Wants: Forms that a human needs take, as shaped by culture and individual
personality.

Wants + Buying Power = Demand

Demands: Human wants that are backed by buying power
(Kotler and Armstrong 2018, p.30)

© 2022 Singapore Institute of Management Group Limited

Maslow’s Hierarchy of Needs (1943)

https://www.youtube.com/watch?v=O-4ithG_07Q

© 2022 Singapore Institute of Management Group Limited

 Needs versus Wants versus Demand?

https://www.youtube.com/watch?v=PZIqV
7wNyyU

© 2022 Singapore Institute of Management Group Limited

What does Nike’s marketing offer / marketing offerings,
include?
Goods
Market Offerings – some
Services combination of products,
Events & Experiences services or experiences
offered to satisfy a need or
Persons want.
Places & Properties (Kotler and Armstrong 2018,
Organizations p.31)

Information
Ideas
Copyright © 2018 Pearson Education Ltd. All Rights Reserved.
© 2022 Singapore Institute of Management Group Limited
 Value and Satisfaction
Customer value is the difference
between the values that the
customer gains from owning and
using a product and the costs of
obtaining the product.
Customers form expectations
about the value of various
marketing offers and buy
accordingly.
Customer satisfaction depends
on a product’s perceived
performance in delivering value
relative to a buyer’s
expectations.
Customer satisfaction is a key
influence on future buying
behavior
(Kotler and Armstrong 2018, p.31)
© 2022 Singapore Institute of Management Group Limited
Value = Benefits
Value / Benefit

Utilitarian benefits / goods

Functional
Practical
Rational

Affective benefits / goods

Which of these brand values are
More sustainable? Emotional
Less replicable? Aesthetic
More unique? Hedonic benefits
© 2022 Singapore Institute of Management Group Limited
Hedonism / Hedonic benefits

© 2022 Singapore Institute of Management Group Limited

 Utilitarian versus Affective versus Hedonic
Value?

https://www.youtube.com/watch?v=PZIqV
7wNyyU

© 2022 Singapore Institute of Management Group Limited

Applying Concepts to Real-World Contexts (PYP) – for discussion; do NOT attempt
2018 Zone B
Brand A is a bottled drinking water which acquires its water supplies from public water
supplies local to its markets. This water makes no claims in its marketing about mineral
content. The water is then purified, bottled and sold. It is positioned as a relatively low
cost brand.
Brand B sources its water from France and it is then bottled and shipped to markets
around the world. Brand B’s water comes from the Alps and is said to contain minerals
that are not found in other waters. Brand B costs three times the price of Brand A.
(a) Which of these brands is more likely to address primarily physiological (physical)
needs? You should explain the reasons for your choice of brand. (5 marks)
(b) Identify which of these brands is more likely to address self-actualisation and/or
esteem needs, explain how the brand can use the marketing mix and the benefits
to the brand in doing so. (10 marks)
* RED denotes DO NOT ATTEMPT at this stage
Process Skill – The Steps
Step 1: identify the question focus – key words and requirements of
the question

Step 2: identify the key topics / concepts for the terms involved

Step 3: structure your essay to link the question focus through the
key concepts
- show your structure clearly (how you are addressing the question)
through sub-headers / sub-titles

© 2022 Singapore Institute of Management Group Limited

 Exchange, Transactions & Relationships
Marketing occurs when people Whereas exchange is a core
decide to satisfy needs and concept of marketing, a
wants through exchange. transaction (a trade of values
Exchange is the act of between two parties) is
obtaining a desired object marketing’s unit of
from someone by offering measurement. Most involve
something in return. money, a response, and action.
Marketing consists of actions taken to build and maintain desirable
exchange relationships with target audiences through the marketing
offer.
(Kotler and Armstrong 2018, p.33)
© 2022 Singapore Institute of Management Group Limited
 Three Types of Exchange (Bagozzi, 1975)
1. Restricted exchange:
Both marketers and customers form a relationship in the process of an exchange. Marketers sell
something to the customers in return for money.
2. Generalized exchange:
In addition to the formal relationship between marketers and customers in the exchange process. A third
party is involved who is engaged in an exchange of interest with marketers and customers separately.
However, the third party does not involve in the direct financial exchange / benefits.
3. Complex exchange:
It involves a number of parties (ie, more than 2) in the exchange process. It happens in the distribution
channel.

Manufacturer Wholesaler Retailer Customers

Two-way exchange
© 2022 Singapore Institute of Management Group Limited
The MILO truck at Yellow Ribbon Run –
which exchange type?

© 2022 Singapore Institute of Management Group Limited

 A brief history of marketing theory Evolution of Marketing Thinking

Four Eras by Wilkie and Moore (2012) Marketing Orientations / Concepts

1. Production Concept
First era: Founding the field 1900 - 1920

2. Product Concept
Second era: Formulating the field 1920 - 1950

3. Selling Concept
Third era: Paradigm shift 1950 - 1980

4. Marketing Concept
Fourth era:
A fragmentation of the mainstream 1980s - Societal Marketing
Present Concept

© 2022 Singapore Institute of Management Group Limited

https://www.youtube.com/watch?v=O-4ithG_07Q
© 2022 Singapore Institute of Management Group Limited
 Peter Drucker’s perspective on Marketing
Do you agree?
Sometimes referred to as ”father
of management thinking”; one of
the most widely known and
influential thinker and writer of
modern management theories
“There will always be need for
some selling. But the aim of marketing
is to make selling superfluous. 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. All that
should be needed is to make the product
or service available.”
Marketing Myopia – Which orientation?

Marketing myopia is an orientation toward

products rather than toward customer needs.

Companies that suffer from marketing myopia

see themselves providing products rather than
providing or solving customers’ problems.

If companies concentrate on doing what they

have always done, instead of changing with the
customers, they could find themselves selling
products that people no longer want. (Kotler and Armstrong 2018, p.31)
Applying to real-world context (think)

• WHY was there need to evolve and move from Production to Product to
Sales to Marketing, and lastly Societal Marketing concepts?
• Analyse the matrix of different orientations and consider the brands you
see around you – can you give an example of a company you perceive to
be using each of these orientations?
• Check against the situational factors for effectiveness – is this true of the
examples you provided?
• Now consider further the possible combinations of two or more
orientations – are there brands / companies you believe to fit within these
definitions?

© 2022 Singapore Institute of Management Group Limited

Applying Concepts to Real-World Contexts (PYP) – class discussion; do NOT attempt
2020 ZB **Other relevant chapters:
Ch 4; Ch 5; Ch 6; Ch 8; Ch 10; Ch 11; Ch 13 CSR
Question 3
A new restaurant whose prices are relatively high, promotes itself to customers by
stating that its food is organic, and its food does not contain artificial flavourings,
powdered chicken or meat that has been injected with hormones. Some people have
criticised the use of such additives and ingredients, for example on the grounds of
impact on health. Most other competing restaurants do not make these claims. Using
course concepts explain why this restaurant is making these claims and discuss the
benefits to the restaurant in doing so.
(25 marks)
Ø what orientation does the new restaurant has, as compared to its competitors?
Ø what needs on Maslow’s Hierarchy does this new restaurant seek to fulfil? What value /
benefits?
Ø what are some of the issues / potential pitfalls for this new restaurant?
Moving into value co-creation – Service-dominant logic

Co-Creation & Value

Co-created Value of Brands and Products by Customers

Value-in-exchange: value at point of exchange / transaction

versus

Value-in-use: additional value derived from continual use /

consumption

© 2022 Singapore Institute of Management Group Limited

 Moving into value co-creation – Service-dominant logic

• Marketing moved from a “goods-dominant logic” to a “service-dominant

logic”.
• Goods-dominant logic: focus firm’s output and value-in-exchange; on
tangible products and discrete transactions / exchanges
• service-centred marketing logic: focus on how intangible services
add to the total value-in-exchange between firm & customers
• service-dominant logic: focus on firm’s ability to facilitate services
and co-created value being exchanged to maximise value-in-use
• How can companies be a “service-dominant logic”?
• Develop and maximise network for “service flow” between firm, users,
customers and stakeholders
• Involve users / customers as co-creators of value
© 2022 Singapore Institute of Management Group Limited
 Service-Dominant Logic (Vargo and Lusch, 2004)

Goods-centred marketing: focused on the making and distribution of

goods; creating benefits and value for customers.
versus
Service-centred marketing – adding on / augmenting core products with
services to differentiate and enhance the value offering;
Service-dominant logic - “developing customised, competitively
compelling value propositions to meet specific needs” (Vargo and Lusch,
2004, p.5); application of specialised competencies (knowledge and skills)
through deeds, processes and performances to produce benefits / value.

© 2022 Singapore Institute of Management Group Limited

Service-dominant logic

Tangible goods are

appliances for service
provision, rather than
ends in themselves;

© 2022 Singapore Institute of Management Group Limited

Service-dominant logic

The customer as operant

resource – a collaborative
partner who co-creates
value.

Value proposition is dynamically

co-created – watch Mark
Zuckerberg’s first TV interview:
https://www.facebook.com/watc
h/?v=437944313235561

© 2022 Singapore Institute of Management Group Limited

Service-dominant logic
The role of the 4Ps changes (Vargo and Lusch, 2004):

ü Products become service flows – where products provide services.

ü Promotion may need to move from being one-way to becoming a dialogue, where
questions are asked and answered.

ü Price becomes a value proposition co-created by the exchange network.

ü Place is replaced by value networks and processes.

© 2022 Singapore Institute of Management Group Limited

 Compare & Contrast – Service-dominant logic
Goods-centred marketing / Service-dominant logic
Service-centred marketing
Business Approach Inside-Out Outside-In

View of Users As customers to purchase / exchange / As operant resource to collaborate with

transact with
Value Proposition Static – relatively fixed set of elements of Dynamic – value dynamically created based
marketing offer incl products and/or on co-creation between marketer, users,
services customers and stakeholders
Product Fixed set of product layers including Service flows between marketer, users,
services customers and stakeholders
Promotion One-way execution of planned positioning Two-way interactive dialogue between
strategy using promotional tools marketer, users, customers and
stakeholders
Price Fixed – determined by marketer / business Dynamic – according to value being created

Place (Distribution) Fixed distribution channel & intermediaries Through value network and processes
within

© 2022 Singapore Institute of Management Group Limited

Example:
Value-in-exchange: who, what, when?

Value-in-use: who, what, how, why?

What value / benefits to different parties?
How does it differ from traditional goods-dominant and service-
centred marketing?

Network externalities as an integral component of value-in-use

© 2022 Singapore Institute of Management Group Limited