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Chapter: 01

Defining Marketing for the 21st Century


The Scope of Marketing
To prepare to be a marketer, we need to understand what marketing is, how it works, who does it, and what is marketed.

What is Marketing Management?


Marketing Management is a business discipline which is focused on the practical application of marketing techniques and the management of a firm's marketing resources and activities. Rapidly emerging forces of globalization have compelled firms to market beyond the borders of their home country making International marketing highly significant and an integral part of a firm's marketing strategy.

What Is Marketing?
Marketing is about identifying and meeting human and social needs commercially. One of the shortest good definitions of marketing is meeting needs profitably. The American Marketing Association offers the following formal definition: 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. According to American Marketing Association Marketing Management is the art and science of choosing target markets and getting, keeping and growing customer through creating, delivering and communicating superior customer value. Marketing has a social definition also, here is a social definition: 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. 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 then is to make the product or service available.

What Is Marketed?
Marketers market 10 main types of entities: goods, services, events, experiences, persons, places, properties, organizations, information, and ideas. GOODS Physical goods constitute the bulk of most countries production and marketing efforts. Each year, U.S. companies market billions of fresh, canned, bagged, and frozen food products and millions of cars, refrigerators, televisions, machines, and other mainstays of a modern economy. M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 1

SERVICES As economies advance, a growing proportion of their activities focuses on the production of services. The U.S. economy today produces a 7030 services-to-goods mix. Services include the work of airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, and accountants, bankers, lawyers, engineers, doctors, software programmers, and management consultants. Many market offerings mix goods and services, such as a fast-food meal. EVENTS Marketers promote time-based events, such as major trade shows, artistic performances, and company anniversaries. Global sporting events such as the Olympics and the World Cup are promoted aggressively to both companies and fans. EXPERIENCES By orchestrating several services and goods, a firm can create, stage, and market experiences. Walt Disney Worlds Magic Kingdom allows customers to visit a fairy kingdom, a pirate ship, or a haunted house. PERSONS Artists, musicians, CEOs, physicians, high-profile lawyers and financiers, and other professionals all get help from celebrity marketers. Some people have done a masterful job of marketing themselvesDavid Beckham, Oprah Winfrey, and the Rolling Stones. PLACES Cities, states, regions, and whole nations compete to attract tourists, residents, factories, and company headquarters. Place marketers include economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies. PROPERTIES Properties are intangible rights of ownership to either real property (real estate) or financial property (stocks and bonds). They are bought and sold, and these exchanges require marketing. ORGANIZATIONS Organizations work to build a strong, favorable, and unique image in the minds of their target publics. Business firms, universities, museums, performing arts organizations, corporations, and nonprofits all use marketing to boost their public images and compete for audiences and funds. INFORMATION The production, packaging, and distribution of information are major industries. Information is essentially what books, schools, and universities produce, market, 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. Social marketers are busy promoting such ideas as Friends Dont Let Friends Drive Drunk and A Mind Is a Terrible Thing to Waste. M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 2

Who Markets?
MARKETERS AND PROSPECTS A marketer is someone who seeks a response (Attention, purchase) from another party, called prospects. Marketers are responsible to stimulate the demand for a companys product and for demand management. Eight demand states are possible to be managed by marketers, which are as follows: 1. 2. 3. 4. 5. 6. 7. 8. Negative demand Nonexistent demand Latent demand Declining demand Irregular demand Full demand Overfull demand Unwholesome demand

In each case, marketers must identify the underlying cause(s) of the demand state and determine a plan of action to shift demand to a more desired state. DEMAND MANAGEMENT 1. Negative Demand: The major part of the market dislike the product and even they are willing to pay a price to avoid it. Managing Negative Demand Analyze why the market dislike the product and whether a marketing program consisting of product redesign, lower prices, and more positive promotion can change the beliefs and attitudes. 2. Non Existent Demand: Target customer is unaware or uninterested in the product. Managing No Demand Find ways to connect the benefits of the product with peoples natural needs and interest 3. Latent Demand: Customers may feel a strong need that cannot be satisfied by any existing product. Managing Latent Demand Measure the size of the potential market and develop goods & services to satisfy the demand. 4. Declining Demand: It the state of demand when the total sales of any specific products is reduced day by day. Managing Latent Demand Analyze the causes of decline and determine whether demand can be restimulated by new target markets, by changing product features or by more effective communication.

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5. Irregular Demand: It is the demand state when the demand is fluctuated time to time. Managing Irregular Demand Find ways to alter the demand pattern (Synchromarketing) through flexible pricing, promotion and other incentives. 6. Full Demand: When the demand is adjusted with the supplying capacity of the marketer. Managing Full Demand Maintain or improves its quality and frequently measure the customer satisfaction. 7. Overfull Demand: When the demand exist in the higher level of supplying capacity of the marketer. Managing Overfull Demand Find ways to reduce the demand (Demarketing) through price hiking or reducing promotion. 8. Unwholesome Demand: The demand for those product which are harmful for the consumers. Managing Unwholesome Demand Encourage the people who like something to give it up by price increasing & reducing the availability. MARKETS Traditionally, a market was a physical place where buyers and sellers gathered to buy and sell goods. In the modern concept market means a group of existing and potential buyers. Five basic markets and their connecting flows are shown in Figure 1.

Figure 1. Structure of Flows in a Modern Exchange Economy M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 4

Manufacturers go to resource markets (raw material markets, 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. Each nations economy, and the global economy, consists of interacting sets of markets linked through exchange processes.

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 companys 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, licenser, 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. Nonprofit and Governmental Markets Companies selling to nonprofit organizations with limited purchasing power such as mosques, 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 Market Place: Market Place is physical, in where products are transferred from marketer to customer. Buyer & seller physically present in the market place. Market Space: Market space is digital, in where marketers/ channel members interact with customers through electronic media, not physically.

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Meta market : Meta market is a cluster of complementary products and services that are closely related in the minds of customers but spread across a diverse set of industries. Metamarkets are the result of marketers packaging a system that simplifies carrying out these related product/service activities. The automobile metamarket consists of automobile manufacturers, new and used car dealers, financing companies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet.

How Business & Marketing are Changing


We can say with some confidence that the marketplace isnt what it used to be. It is dramatically different from what it was even 10 years ago. The new marketing realities are as follows :

Network information technology


The digital revolution has created an Information Age that promises to lead to more accurate levels of production, more targeted communications, and more relevant pricing.

Globalization
Technological advances in transportation, shipping, and communication have made it easier for companies to market in, and consumers to buy from, almost any country in the world. International travel has continued to grow as more people work and play in other countries.

Deregulation
Many countries have deregulated industries to create greater competition and growth opportunities. In the United States, laws restricting financial services, telecommunications, and electric utilities have all been loosened in the spirit of greater competition.

Privatization
Many countries have converted public companies to private ownership and management to increase their efficiency, such as the massive telecom company Telefnica CTC in Chile and the international airline British Airways in the United Kingdom.

Heightened competition
Intense competition among domestic and foreign brands raises marketing costs and shrinks profit margins. Brand manufacturers are further buffeted by powerful retailers that market their own store brands. Many strong brands have become megabrands and extended into a wide variety of related product categories, presenting a significant competitive threat.

Industry convergence
Industry boundaries are blurring as companies recognize new opportunities at the intersection of two or more industries. The computing and consumer electronics industries are converging, for example, as Apple, Sony, and Samsung release a stream M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 6

of entertainment devices from MP3 players to plasma TVs and camcorders. Digital technology fuels this massive convergence.

Retail transformation
Retailers are building entertainment into their stores with coffee bars, demonstrations, and performances. They are marketing an experience rather than a product assortment. Dicks Sporting Goods has grown from a single bait-and-tackle store in Binghamton, New York, into a 300-store sporting goods retailer in 30 states. Part of its success springs from the interactive features of its stores. Customers can test golf clubs in indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range.

Disintermediation.
The amazing success of dot-coms such as AOL, Amazon.com, Yahoo!, eBay, and others created disintermediation (removal of intermediaries in a supply chain) in the delivery of products and services by intervening in the traditional flow of goods through distribution channels. In response, traditional companies became brick-andclick retailers, adding online services to their offerings.

Consumer buying power


In part, due to disintermediation via the Internet, consumers have substantially increased their buying power. From the home, office, or mobile phone, they can compare product prices and features and order goods online from anywhere in the world 24 hours a day, 7 days a week, bypassing limited local offerings and realizing significant price savings.

Consumer information
Consumers can collect information in as much breadth and depth as they want about practically anything. They can access online encyclopedias, dictionaries, medical information, movie ratings, consumer reports, newspapers, and other information sources in many languages from anywhere in the world. Personal connections and user-generated content thrive on social media and social networking sites such as Facebook, Digg, Wikipedia, YouTube, TripAdvisor, etc. - bring together consumers with a common interest.

Consumer participation
Consumers have found an amplified voice to influence peer and public opinion. In recognition, companies are inviting them to participate in designing and even marketing offerings to heighten their sense of connection and ownership. Consumers see their favorite companies as workshops from which they can draw out the offerings they want.

Consumer resistance
Many customers today feel there are fewer real product differences, so they show less brand loyalty and become more price- and quality-sensitive in their search for value, and less tolerant about undesired marketing. Reference: Marketing Management 14th Edition- Philip Kotler M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 7

COMPANY ORIENTATIONS TOWARDS MARKET PLACE


Production Concept
In this concept the company mainly tries to increase production irrespective of demands of the customer. The production concept is almost extinct now with companies paying more and more attention to the customer.

Product Concept
The product concept says that customers will always buy products which are better in terms of quality performance and features. The concept is especially applicable in terms of electronics and other techno gadgets nowadays.

Selling concept
The selling concept believes that customers will not buy products unless persuaded to do so. As we know, this is true even today in case of certain products such as insurance. Although the customer should use it, they rarely do.

Marketing Concept
Just like selling is a necessity, similarly branding and marketing are a necessity in some products. The marketing concept proposes that the success of a firm depends on the marketing efforts of the company in delivering a value proposition.

The Holistic Marketing Concept


Holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. Holistic marketing recognizes that "everything matters" with marketing and that a broad, integrated perspective is often necessary. Four components of holistic marketing are relationship marketing, integrated marketing, internal marketing, and social responsibility marketing. Holistic marketing is thus an approach to marketing that attempts to recognize and reconcile the scope and complexities of marketing activities.

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RELATIONSHIP MARKETING Increasingly, a key goal of marketing is to develop deep, enduring relationships with all people or organizations that could directly or indirectly affect the success of the firm's marketing activities. Relationship marketing has the aim of building mutually satisfying longterm relationships with key partiescustomers, suppliers, distributors, and other marketing partnersin order to earn and retain their business. Relationship marketing builds strong economic, technical, and social ties among the parties. INTEGRATED MARKETING Integrated marketing occurs when the marketer devises marketing activities and assembles marketing programs to create, communicate, and deliver value for consumers such that the whole is greater than the sum of its parts. Two key themes are that (1) many different marketing activities can create, communicate, and deliver value and (2) marketers should design and implement any one marketing activity with all other activities in mind.When a hospital buys an MRI from General Electrics Medical Systems division, for instance, it expects good installation, maintenance, and training services to go with the purchase. INTERNAL MARKETING Internal marketing, an element of holistic marketing, is the task of hiring, training, and motivating able employees who want to serve customers well. It ensures that everyone in the organization embraces appropriate marketing principles, especially senior management. Smart marketers recognize that marketing activities within the company can be as importantor even more important than those directed outside the company. It makes no sense to promise excellent service before the companys staff is ready to provide it. Internal marketing requires vertical alignment with senior management and horizontal alignment with other departments, so everyone understands, appreciates, and supports the marketing effort. M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 9

PERFORMANCE MARKETING Performance marketing requires understanding the financial and nonfinancial 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.

Finacial accountability: Marketers are increasingly asked to justify their investments


in financial and profitability terms, as well as in terms of building the brand and growing the customer base. Theyre employing a broader variety of financial measures to assess the direct and indirect value their marketing efforts create and recognizing that much of their firms market value comes from intangible assets, particularly brands, customer base, employees, distributor and supplier relations, and intellectual capital.

Social responsibility marketing: Because the effects of marketing extend beyond the
company and the customer to society as a whole, marketers must consider the ethical, environmental, legal, and social context of their role and activities. The organizations task is thus to determine the needs, wants, and interests of target markets and satisfy them more effectively and efficiently than competitors while preserving or enhancing consumers and societys long-term well-being. LG Electronics, Toshiba, and NEC Display Solutions offer electronic recycling programs, for instance, often providing consumers with prepaid postage to return old items. Retailers such as Office Depot, Best Buy, and AT&T offer similar programs in their stores.

Marketing Mix
Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix: Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. As shown in the below figure McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion.

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Robert Lauterborn suggested that the sellers four Ps correspond to the customers four Cs.

Three Service Ps Physical Evidence People Process

Updating The Four Ps


McCarthy classified various marketing activities into marketing-mix tools of four broad kinds, which he called the four Ps of marketing: product, price, place, and promotion. The marketing variables under each P are shown in the below figure. Given the breadth, complexity, and richness of marketing, howeveras exemplified by holistic marketingclearly these four Ps are not the whole story anymore. 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 the below figure. 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

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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 firms consumer-directed activities. It encompasses the old four 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 nontraditional, 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. We define performance as in holistic marketing, to capture the range of possible outcome measures that have financial and nonfinancial implications (profitability as well as brand and customer equity), and implications beyond the company itself (social responsibility, legal, ethical, and community related). Finally, these new four Ps actually apply to all disciplines within the company, and by thinking this way, managers grow more closely aligned with the rest of the company.

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FUNDAMENTAL MARKETING CONCEPTS, TRENDS & TASKS Core Concepts:


Need, Want & Demand:
Need: Need is the feelings of deprivation from something. Want: Need becomes to want when are directed to specific object that might satisfy the need. Demand: Demands are wants for specific product backed by an ability to pay.

Target Market, Segmentation & Positioning:


Target Market: Target market is segment(s) of total market which is targeted by a marketer to satisfy the need of that/those segment(s) through delivering his (Marketer) products. Segmentation: Segmentation is the process of classifying the total market into some different classes on the basis of geographic, demographic and Psychographic differences. Each Class is called a segment. A segment consists of a group of customer who share a similar set of want. Positioning: Create a distinctive place in the mind of target customer in relation to competitors

Offerings and Brands:


Offerings: Offering is a combination of products, services, information offered by a company to its target customers. Brands: Brand is a name, term, sign, symbol or design or combination of them intended to identify the good or services of one seller or group of seller and to differentiate them from those of competitors.

Value and Satisfaction:


Value: Value reflects the perceived tangible and intangible benefits and costs of an offering to a customer. Satisfaction: It is the comparison between expectation about the performance of a product and actual performance of that product.

Marketing Channels:
Communication Channel: 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. Distribution Channel: The marketer uses 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. M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 13

Service Channel: To carry out transactions with potential buyers, the marketer also uses service channels that include warehouses, transportation companies, banks, and insurance companies.

Supply Chain: The supply chain is a longer channel stretching from raw materials
to components to finished products carried to final buyers. The supply chain for coffee may start with Ethiopian farmers who plant, tend, and pick the coffee beans, selling their harvest to wholesalers or perhaps a Fair Trade cooperative.

Competition: Competition includes all the actual and potential rival offerings and
substitutes a buyer might consider. An automobile manufacturer can buy steel from U.S. Steel in the United States, from a foreign firm in Japan or Korea, or from a minimill such as Nucor at a cost savings, or it can buy aluminum for certain parts from Alcoa to reduce the cars weight, or engineered plastics from Saudi Basic Industries Corporation (SABIC) instead of steel.

Marketing environment:
Task environment: The task environment includes the actors engaged in producing, distributing, and promoting the offering. These are the company, suppliers, distributors, dealers, and target customers. Broad environment: The broad environment consists of six components: demographic environment, economic environment, social-cultural environment, natural environment, technological environment, and political-legal environment.

SHIFTS IN MARKETING MANAGEMENT


Old Practice Organize by product units Focus on profitable transactions Look primarily at financial scorecard Focus on shareholders Marketing does the marketing Build brands through advertising Focus on customer acquisition No customer satisfaction measurement Overpromise, underdeliver New Trends Organize by customer segments Focus on customer lifetime value Look also at marketing scorecard Focus on stakeholders Everyone does the marketing Build brands through performance Focus on customer retention and growth Measure customer satisfaction and retention rate Underpromise, overdeliver

MARKETING MANAGEMENT TASKS


Developing Marketing Strategies and Plan: The first task facing a company is to identify its potential long-run opportunities, given its market experience and core competencies. Company can design its products, for example, cameras with better features. It can make a line of video cameras, or it can use its core competency in optics to design a line of binoculars and telescopes. Whichever direction it chooses, it M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 14

must develop concrete marketing plans that specify the marketing strategy and tactics going forward. Capturing Marketing insights: A company needs a reliable marketing information system to closely monitor its marketing environment so it can continually assess market potential and forecast demand. Its microenvironment consists of all the players who affect its ability to produce and sell products - suppliers, marketing intermediaries, customers, and competitors. Its macroenvironment includes demographic, economic, physical, technological, political-legal, and social-cultural forces that affect sales and profits. Connecting with customers: A company must consider how to best create value for its chosen target markets and develop strong, profitable, long-term relationships with customers. To do so, it needs to understand consumer markets. Who buys its products, and why? What features and prices are they looking for, and where do they shop? Building strong brands: A company must understand the strengths and weaknesses of its brand as customers see it. It must pay close attention to competitors, anticipating their moves and knowing how to react quickly and decisively. Shaping the market offerings: At the heart of the marketing program is the productthe firms tangible offering to the market, which includes the product quality, design, features, and packaging. To gain a competitive advantage, company may provide leasing, delivery, repair, and training as part of its product offering. A critical marketing decision relates to price. Company must decide on wholesale and retail prices, discounts, allowances, and credit terms. Its price should match well with the offers perceived value; otherwise, buyers will turn to competitors products. Delivering value: Company must also determine how to properly deliver to the target market the value embodied in its products and services. Channel activities include those the company undertakes to make the product accessible and available to target customers. Company must identify, recruit, and link various marketing facilitators to supply its products and services efficiently to the target market. It must understand the various types of retailers, wholesalers, and physical-distribution firms and how they make their decisions. Communicating value: Company must also adequately communicate to the target market the value embodied by its products and services. It will need an integrated marketing communication program that maximizes the individual and collective contribution of all communication activities. Company needs to set up mass communication programs consisting of advertising, sales promotion, events, and public relations. It also needs to plan more personal communications, in the form of direct and interactive marketing, as well as hire, train, and motivate salespeople. Creating long-term Growth: Based on its product positioning, company must initiate new-product development, testing, and launching as part of its long-term view. The strategy should take into account changing global opportunities and challenges. Finally, company must build a marketing organization capable of implementing the marketing plan. Because surprises and disappointments can occur as marketing plans unfold, company will need feedback and control to understand the efficiency and effectiveness of its marketing activities and how it can improve them. M.G. Mostafa-MBA Student-ID: 03120161534-NUB Khulna. 15