STRATEGIC

MARKETING
MANAGEMENT

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 CHAPTER – 1

Understanding the
Fundamentals of Marketing

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 Clark and Clark define market as,

“an area in which the forces leading to exchange of title

to a particular product operate, and towards which and
from which the actual goods tend to travel”.

From the point of view of economics, a market is defined

as, “an aggregate of the potential buyers for a product
or service”.

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 What is Marketing
Marketing is a comprehensive term covering
a large number of economic activities.

Marketing means not only buying and selling activities it

also includes all economic activities involved in flow of
goods from producer to ultimate consumer.

Marketing may be explained as a business function

entrusted with the creation and satisfaction of customers
to achieve the aims of business
that is to realize profit.
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 • “Marketing is the management process responsible for
identifying, anticipating and satisfying consumer
requirements profitably”
The Chartered Institute of Marketing (CIM)

 “Marketing is the task of creating, pricing, promoting and distributing

want-satisfying products to the target market to meet customer needs in
the changing market place for a mutual benefit’’
American marketing association (AMA)

• “Marketing is not about providing products or services

it is essentially about providing changing benefits to
the changing needs and demands of the customer”
P.Tailor – Learnmarketing.net 7/00

The common theme is meeting the needs and exchange

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 Marketing is defined as a social and managerial
process by which individuals and groups obtain what
they need and want through creating, offering, and
exchanging products and services of value with other.
Philip Kotler
• He means that marketing a process of Satisfying
needs and wants through an exchange process.

So, we can infer that marketing is the process of getting the right
product to the right people at the right place, time, and price, using
the right promotion and communication techniques and utilizing
the appropriate people to provide the customer service associated
with those product.

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 • Marketing is everyone’s business.

• Every person working for an organisation should

understand the importance of marketing.

† Effective marketing puts the products in the

hands of its targeted customers.

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 Marketing is one of the Major Business
Functions
PRODUCTION/ FINANCE
Operation

HUMAN RESOURCES
MARKETING

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 Short story:
A disappointed Coca Cola salesman returns from his
Middle East assignment. A friend asked, "Why weren't
you successful with the Arabs?" The salesman explained:
"When I got posted to the Middle East, I was very
confident that I would make a good sales pitch as Cola is
virtually unknown there. But, I had a problem I didn't
know to speak Arabic. So, I planned to convey the
message through three posters...
First poster: A man lying in the hot desert sand...totally
exhausted and fainting.
Second poster: The man is drinking our Cola.

Third poster: The man is now totally refreshed.

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 And Then these posters were pasted all over the place. "Then
that should have worked!" said the friend. "It should have!?"
said the salesman

"But I didn't realize that Arabs read from right to left!!“

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 Simple marketing system
Communication
Information

Goods/services
Industry Market
(a collection (a collection
of sellers) of Buyers)
Money

Communications
Information
Marketing is the process of transaction between industry (a collection of sellers) and market (a
collection of buyers) in which the sellers provide products (goods and services) to buyers, and
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buyers provide money to sellers.
 Marketing is an activity, which is concerned with the

product planning, pricing, and distribution (place) of

goods and services desired by the ultimate and intermediate

customer in exchange of these products for value (money).

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 1.2 Core concepts of marketing
Five Core (customer and marketplace) Concepts:

(1) Needs, Wants, and Demands;

(2) Market offerings (products, services, and experiences);

(3) Value, cost and satisfaction;

(4) Exchanges, transaction and relationships; and

(5) Markets.

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 Needs, wants,
and demands

Target Products and

Markets Customer services

Exchange, transactions, Value, satisfaction,

and relationships and cost
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 1. Needs, Wants and Demands
A. Needs
 Human needs (intrinsic and extrinsic) are the basic
reasons for the emergence and existence of marketing.
 A need is a necessity or basic for human being. They
are states of felt deprivation.
 Marketing Process starts when the individual comes to
know of a particular need.
 If this need is not satisfied it creates a state of tension
within the minds of the person.
 This state will drive the people to adopt a behavior
that will help reduce the tension.
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“Marketing begins and ends with customers”
 S.A

Achievement

Esteem
Status

Social
Friendship
Safety
Insurance

Physiological
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Food
 B. Wants
Human wants are the form taken by human needs as a result
of socio-cultural and individual personality they are shaped
by culture and individual personality.
Needs are general and common to all human beings whereas
wants are specific which differ between and among people.
Wants are best described in terms of objects. For example,
all people have a need for food but not all people try to
satisfy their hunger or thirsty with identical products.
Enjera is a favorite food for Ethiopians; rice is a staple food
for Indians; pourage is a favorite food for Kenyans; etc.

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 One fundamental question:
Is Marketing creating or/and satisfying needs?

Needs are naturally endowed and marketers

 cannot create them

But, marketers can identify them and respond to them

 by developing a solution that will meet the aroused needs

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 C. Demands

Demand refers to the quantity of a particular item which

 customers are able to buy at a given price level.

 Human wants become demands when supported by buying

power.

A mere interest of customers to a particular product is

 not enough if are not able to afford the charged price.

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 Demand management

Irregular Unwholesome Declining

• Negative demand
• Full demand
• No demand • Overfull demand
• Latent demand • Unwholesome
• Falling demand demand
• Irregular demand
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Negative
 There are eight possible demand states

1. None-existent demand:
•Customers may be unaware of or uninterested in the product.

•They neither like nor dislike the product.

Marketing strategy-Stimulation marketing

The company tries to find the way to associate the

benefits of the product with people’s natural needs and

interests through advertisement.

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 2. Negative demand
• Customers dislike the company’s product.

• Marketing strategy- Conversional marketing

• Making attitudinal adjustment by promotion,
 features redesigning, lowering price, etc.

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 3. Declining demand
•Customers begin to buy the product less frequently or
not at all may be because of product obsolescence,
stiff competition, high price, etc.

•Marketing strategy- Remarketing

•Changing product features, searching for
new target markets, more effective communication, etc
will re-stimulate the declining demand.

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 4. Latent demand
•Customers may develop a strong need that can not be

satisfied by an existing product.

 Marketing strategy-Developmental marketing

The company decides to measure the size of

the potential market and develop a

product that satisfies the demand.

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 5. Irregular demand
• A products demand varies by time, such as on seasonally,
monthly, weekly, daily even hourly basis.

 Marketing strategy-Synchro marketing

 The company decides to increase price,
 decrease advertisement and
 augmented services
 during peak periods and
 doing the reverse during slack demand periods.

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6. Full demand
• Customers are adequately buying all the products
 put into the marketplace.

 Marketing strategy-Maintenance marketing

 Maintain the current level of demand in the face of
 changing customers preferences and
 increasing competition.

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 7. Over full demand
• Sometimes a demand level that is beyond
 an organization’s ability may arise.

Marketing strategy-De marketing

Marketers facing overfull demand decide a
 temporary or permanent reduction or
 shift of demand.

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 8. Unwholesome demand
• Customers may be attracted to products that have
 undesirable social consequences.

• These products are liked by some and

 disliked by others in the society.
E.g. cigarettes, alcohol, hard drugs, handguns, etc.

Marketing strategy-Destroy marketing

Marketers attach cautionary label on the package and
 reduce explicit, positive and direct promotion,
 fear messages, price hikes, reduce availability to
 get people to give it up.
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 2. Marketing offer (what is marketed?)

Goods, Places,
 Services, Properties,
Experiences, Organizations,
Events, Information &
Persons, Ideas.
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3. Customer value and satisfaction

Customer value is the difference between the benefit that the

customer gains from owning and using a product and the costs of
obtaining it.
 Or Value defined as a ratio between what the customer
gets and what he/she gives (Cost benefit)

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 • Value includes:
 Product value: Core Benefits

 Service Value: The augmented product

 Personnel Value: Experience, knowledge, honesty, politeness,

customer handling etc.

 Psychic Value: The image, set of beliefs that are attached with the
product

• Customers prefer products that offer high Value, therefore

 businesses need to provide a high value product

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 Customer satisfaction is the customer’s feeling that a
product has met or exceeded expectations
 If the product’s perceived performance equals to customer
expectation, customers are satisfied.
 If the product’s perceived performance is greater than customer
expectation, customers are delighted.
 If the product’s perceived performance is less than customer
expectation, customers are dissatisfied.
• Satisfied customers buy again and tell others about their good experiences.

• Dissatisfied customers often switch to competitors and

 disparage the product to others.
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 Continue……
 Customer value and customer satisfaction are key building
blocks for developing and managing customer relationships.

 Studies show that a satisfied customer will tell 2-3

people about his experience with your company.

 A dissatisfied consumer will share their lament with

8-10 people and some will push that number to twenty.

 An unhappy customer will become a loyal consumer if you fix

his complaint and do it quickly.

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 Continue……

 It costs five times as much to attract a new customer than to

keep an existing one. ... 89% of companies

see customer experience as a big factor in
driving customer loyalty and retention.

 76% of companies see customer lifetime value as an

important concept in their business.

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 PRODUCT VALUE

SERVICE VALUE

PERSONNEL VALUE

IMAGE VALUE

CUSTOMER
DELIVERED
SATISFACTION
MONY COST VALUE

TIME COST

EFFORT COST

PSYCHIC COST
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 4. Exchange ,transactions, and market
Exchange is the act of obtaining a desired object from someone
by offering something in return.

Something of value

Goods, services, benefits

Supplier Customer

Money, exchange of goods

Something of value

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 Conditions of exchange include:
1. At least two parties must participate (the buyer and the seller).

2. Each party must have a resource to provide in return for the

other party.

3. Each party must believe that he/she will be benefited from the
exchange.

4. The parties must be capable to communicate each other.

5. Each party has the right to accept or reject the offer of

the counter party.

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 EXCHANGE TRANSACTION
(a trade of values between two parties) It is marketing’s unit of measurement.
Most involve money, a response, and action.
Consumers Costs & Benefits Organisations

Cash

Quench
thirst
Customer Pepsi

Fees

Education

Student University

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 4. Market, Marketer …
 Market: A market is the set of actual and potential buyers of a
product.

 Originally a market was a place where buyers and sellers

gathered to exchange goods (such as a village square).

 Economists use the term to designate a collection of buyers and

sellers

 Target market: is a group of customers who share common

wants and needs, and who have the ability to purchase a
particular product that the company decided to serve them.

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 Marketers and Prospects

 A marketer is someone who is seeking a

 response (attention, a purchase, a vote, a donation)

 from another party, called the prospect.

 If two parties are seeking to sell something to

 each other, both are marketers.

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 Marketing affects us in several ways.

1. As producers (sellers)
2. As consumers
3. As employees
4. As members of the society

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 As Producers (sellers) Marketing helps us to understand:
• Who are our customers?

• What are their needs?

• What are their behavior?

• What products to offer?

• What price to charge?

• What promotion to use?

• What distribution to select?

• How to keep customers satisfied?

• How to improve relationships and become profitable?

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 As customers marketing will help us:
• Satisfy our needs

• Solve our problems

• What products to buy

• What price to pay

•What supplier to deal with

• Improve relationship and lead quality life

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 As employees marketing:
• Provides us employment

• Payments to employees is one of the highest

(rewarding jobs)
• Provides variety of jobs

• Provides career opportunities (growth,

development)
• Leads quality life
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 As a member of society marketing:
• Provides employment to members of the
society
• Improves product efficiency and reduces
resource depletion
• Improves quality of life

• Participates in societies economic and

social development
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 Importance of Marketing
Marketing process brings goods and services to satisfy the
needs and wants of the people.
It helps to bring new varieties and quality goods to
consumers.
By making goods available at all places, it brings equipment
distribution.
Marketing converts latent demand into effective demand.

It gives wide employment opportunities.

It creates time, place and possession utilities to the products.

It creates to keep the standard of living of the society.

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 1.4. Marketing management concepts/
philosophies
There are Five alternative Concepts based on which
organizations design and carry out their marketing
strategies. These include
1. Production Concept
2. Product Concept
3. Selling Concept
4. Marketing or Relationship Marketing Concept and
5. Societal Marketing Concept.

The weight given to the interests of customers,

organization’s objectives and the society’s interests vary
in each philosophy.
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 I. Production Concept
Production concept holds that customers prefer products
that are highly available and affordable.
So, the management focuses highly on improving
production and distribution efficiency.
This philosophy works better when there is excess
demand in the market.
Again if producing the product at a small quantity is
costly and producing it in a high volume brings the high
unit production cost, this philosophy is preferred.
 It is outside-in approach. It starts every thing
from the organization and proceed to the customer.
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 II. Product concept
This philosophy holds that customers prefer quality
products and innovative features.
Management focuses on continuous product quality and
feature improvement.

Both production concept and product concept lead to

‘marketing myopia’(myopia=short sightedness; can’t
see properly need glasses) focusing too narrowly on
their own operations and losing sight of satisfying
customer needs and building customer relationships.
 It is also an outside-in approach. It starts every thing
from the organization and proceed to the customer.
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 III. Selling concept
Assumes that customers will not buy enough of the

firm’s products unless it undertakes large-scale selling

and promotion efforts.

Practiced highly for unsought/new products and when the

company faces excess unsold inventory i.e. goods that

consumers do not normally think of buying such as insurance,
or encyclopedia; political party that tries to get votes to support
candidates.
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 Focuses on creating sales rather than building long-term
customer relationships.
• Undertakes hard selling efforts without concern to the
need of the customer
• It carries high risk because it focuses on short-
term selling strategy and ignores building long-term
customer relationship
Follows make and sell philosophy (inside out
perspective)-starts from the company’s existing products.
Looking for the right customers for the company’s
product

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 IV. Marketing concept
Holds that achieving organizational goals depends on
knowing/determining the needs and wants of
target markets and delivering desired satisfaction and
superior value than competitors.

It is based on the satisfaction of customer’s needs and

wants.
• Slogans used include: The customer is the
‘King/Boss”.
• We are not satisfied until our customers are satisfied

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 It is an outside-in perspective-starts from a
well defined market
Find the right products to the right customers

Sense and respond philosophy

Considers marketing as gardening (cultivating

customers to grow as a gardener cultivates his
crops in order to reap high volume).

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 Marketing & Sales philosophies
Contrasted

The Selling Concept

Profits
Customer Integrated
Market through
Needs Marketing
Satisfaction

The Marketing Concept

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 Difference between Selling and Marketing
Selling
Starts and focuses with the
seller existing on products and
needs
Preoccupied with the seller’s
need to convert his product
into cash; emphasizes on profit needs of the customers.
Views business as a ‘goods
producing processes’
The firm makes the product
first the then decides how to
sell it and make profit.
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Marketing
Starts and focuses on the
needs of the buyer. Buyer is
the Centre of the business
Emphasizes on identification
of a market
opportunity ,fulfilling the
Views business as a ‘customer
satisfying processes’.
Customer determines what is
to be offered as a ‘product’ and
the firm offering product that
would match the needs of the
customers.

Selling
Emphasizes accepting the
existing technology and
reducing the cost of
production.
Seller’s motives dominate
marketing communications.
Costs determine price.
Views the customer as the last
link in the business.
Seller’s convenience
dominates the formulation of
the ‘marketing mix’.
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Marketing
Emphasis’s on innovation of
adopting the most innovative
technology.
Marketing communications
acts as communicating the
benefits of the product.
Consumer determines price.
Views the customer as the
very purpose of the business.
Buyer determines the shape
of the ‘marketing mix’.
 V. Societal concept
This concept questions whether the pure marketing concept
overlooks possible conflicts between consumer immediate
wants and consumer long-run welfare.
 Societal concept is that marketing strategy should deliver
value to customers in a way that maintains or improves both
the consumers and the society’s well-being.
 In doing so, companies should balance three considerations
in setting their marketing strategies: company objectives,
consumer wants and society’s interests.
Society wants human welfare putting people before profit,
consumers want satisfaction, company wants profit

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 The Considerations Underlying the Societal
Marketing

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 BUSINESS ORIENTATION(Marketing Mgt
Philosophies
Orientation Profit Driver Approximate Characteristics
Time Frame
Production Production Methods Up to 1940’s Improvement of production in order
to achieve a reduction of costs and
improved efficiency.
Product Quality of Product Until 1960’s The quality of the product is paramount.
Focus on product not customer needs.

Selling Selling Methods 1950-1970’s Effective selling and promotion are the
new drivers to success.

Marketing Needs and wants of 1970 to date Focus on providing the goods and
customers services that satisfy the needs and wants
of consumers.
Further approaches to marketing
Relationship Building and keeping 1990’s to date Emphasis placed on keeping as well as
Marketing good customer winning customer strategies.
relations
Societal Benefit the society 1990’s to date Similar to marking orientation but also
Marketing concerned with the long term impact of
organisational activities on the
62 environment (society)
 Marketing to the 21st century customer
 Customers in the last decade only used to be concerned about
quantity, quality, and price.

 In today’s information-driven world, the customers have not

remained merely as people buying goods or services from a
business.

 Along from being concerned about the questions such as "how

many", “how much”, and "what", they are groomed smart
enough to ask, "why?".

 Today’s customers are hard to convince and are difficult to

please too.

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  Who is an Empowered Customer?
• Today’s customers are empowered.

• Empowered customers are

 those having the control to buy goods or services
 from a business when and where they want it,
 by selecting from a vast range of available choice.

Empowered customers access the Internet and collect

information about products, dealers, and prices.

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By using various digital devices, they can find out the specifications
of a product or service before arriving at buying decision. They are
smart and alert buyers who also keep high expectations. When a
business fulfills most of the expectations, the empowered customers
can be loyal to them.

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 Characteristic of 21st century customers
 Customers reign supreme. 
 They control the experience they want;
 they research, explore, and share.

 Customers are ALWAYS connected. 

 24 hours a day, 7 days a week, on any internet-enabled device.
 77% of Americans own a smartphone today,
 compared to 35% in 2011

 Customers expect personal interactions. 

 87% of customers believe brands could deliver more
 consistent experiences 
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  Customers compare, and compare, and compare. 
 They look at products they’re interested in across multiple
 channels and devices, and it’s likely any brand-owned
 channels are the last place they look.

 Customers trust word-of-mouth over brands. 

 70% of consumers trust online recommendations more than
 brand statements.

 Customers think in terms of “I want it now.” 

 They expect to be able to get everything right away.
 64% of customers expect real-time service.

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  Customers are highly opinionated. 
 They’re ready to talk to anyone about a good or bad experience.

 Customization.
 The era of mass production of goods and services is over

 Empathy.
 This one has been the hallmark of good customer service for
centuries, and it won’t change.

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 Types of Customers
 A consumer is a user of a product or a service, whereas
 a customer is a buyer of a product or service.

 There can be various types of customers a business have to

 deal with.

 Here are some prominent types of customers

 Loyal Customers − They are completely satisfied customers

 Discount Customers − They visit the business outlets frequently,

 but transact only when business offers discounts on
 regular products and brands
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 Impulsive Customers − They don’t plan for buying anything
 specific in advance, but they urge to buy anything that they
 find good and productive at the time when they are in the store.
These customers are challenging and very difficult to convince

Need-oriented Customers − They have a specific

 product on mind and they often plan before buying.
They only buy when they need a product.

Wanderers −they are not sure what to buy.

• They are normally new in the industry and
 mostly visit the suppliers only to confirm their
 needs on products.

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 High Volume Customers − They are the ones who
 consume a high volume of products

Benchmark Customers − They are the ones

 whom other customers follow

Inspiring Customers − They force the suppliers to

 change for betterment.

They suggest product improvements or inform the

 suppliers about opportunities of cost reduction

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 Customer-centric service provision
When you hear the word ‘customer service’ what does it
make you think of?

Customer service is the support you offer

 your customers — both before and after they buy and
 use your products or services — that helps them
 have an easy and enjoyable experience with you.

Offering good customer service is important if you

 want to retain customers and grow your business.

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 Continued…

Good customer service is all about improving that contact

point i.e. “moment of truth”.

It is any episode in which a customer comes into

contact with any aspect of the organisation and
gets an impression of the quality of service”
(Albrecht
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1988).
 Customer focused

 Delighting the customer

 Satisfying the customer

Meeting the customer’s expectation

Exceeding the customer’s expectation

• Giving the customer what they want,


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not what we think they want
Forum corporation found out that customers which
account:

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Customer-centric Approach
A company that has customers as its main focus is known

as a customer-centric business.
It focuses on customers while designing its marketing

strategies (KOTLER, P., WONG, V., JOHN S., ARMSTRONG, G., 2005).

Which one is advisable to, a Company–centric

approach or a customer - centric approach for 21st
century customers?
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 In a customer - centric approach:
 Believing that I am here because of customers

 Believing that customer is a king

 A company perceives itself as a solution finder to

customers’ problems
 A company strives to get its products preferred to

competitors
 Excellence is not an act but a habit

77 Characterized by good service culture

 Continued…
 Believing that I am here to serve customers instead of to
sell something

 A service provider is there till the customers get served

 The service provider is there because customers need his

services

 The service provider considers complaints as opportunities

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 The fundamental belief of a customer-focused organisation
“Customers are the reason for work, not an interruption of
work”.
“Service personnel are the face and voice of your
company!”
Look after the customers and the business will take care of
itself.” – Ray Kroc
“We see our customers as invited guests to a party, and we
are the hosts. It’s our job every day to make every important
aspect of the customer experience a little bit better.” Jeff
Bezos, CEO, Amazon.com

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 A company–centric approach sticks to the
following

 A company worries for its profit regardless of its customers

 A company strives to get its sold to customers at any

condition

 A service provider is there till the time expected of

him is over
 A service provider is there because he is paid
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 The service provider considers complaints as threats
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