MARKETING MANAGEMENT

1
Defining
Marketing
for the
21st Century

Kotler Keller
Chapter Questions
• Why is marketing important?
• What is the scope of marketing?
• What are some of the fundamental
marketing concepts?
• How has marketing management changed?
• What are the tasks necessary for
successful marketing management?

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MARKETING MANAGEMENT
• Marketing is everywhere. Formally or informally,
people and organizations engage in a vast number of
activities that could be called marketing.

• Marketing profoundly affects our day-to-day lives. It is

embedded in everything we do—from the clothes we
wear, to the Web sites we click on.

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The Importance of Marketing:
• Financial success often depend on marketing ability. Finance,
operations, accounting, and other business functions will not really
matter if there is not sufficient demand for products so the company
can make a profit.

• Many companies have now created a Chief Marketing Officer, or

CMO, position to put marketing on a more equal footing with other C-
level executives such as the Chief Executive Officer (CEO) and Chief
Financial Officer (CFO).

• Marketing managers must make major decisions such as what

features to design into a new product, what prices to offer customers,
where to sell products, and how much to spend on advertising or
sales.
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The Scope of Marketing

• To prepare to be a marketer, you need to

understand what marketing is, how it
works, what is marketed, and who does the
marketing.

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What is Marketing?

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.

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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.

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• 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.
• 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.

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Exchange and Transactions
A person can obtain a product in one of four ways :

1. One can self-produce the product or service

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Exchange and Transactions
2. One can use force to get a product or
service. (holdup)

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Exchange and Transactions
3. One can beg.

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Exchange and Transactions
4.One can offer a product, a service, or
money in exchange for something he or
she desired.

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EXCHANGE:
• Exchange is the core concept of
marketing.
• Exchange is the process of obtaining a
desired product from someone by offering
something in return.

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For an exchange to occur….
• There are at least two parties.
• Each party has something that might be of
value to the other party.
• Each party is capable of communication
and delivery.
• Each party is free to reject the exchange
offer.
• Each party believes it is appropriate or
desirable to deal with the other party.
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Are both forms of exchange

Transactions Transfers

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Transactions

• Two parties are engaged in exchange if

they are negotiating—trying to arrive at
mutually agreeable terms. When an
agreement is reached, we say that a
transaction takes place.
• Transaction is a trade of values between
two or more parties: A gives X to B and
receives Yin return. Smith sells Jones a
television and Jones pays $400 to Smith.
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Transfers:

• 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. Transfer behavior can also be understood
through the concept of exchange.

• Typically, the transferer expects to receive something in

exchange for his or her gift—for example, gratitude or
seeing changed behavior in the recipient.

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What Is Marketed?

• Marketing people are involved in marketing

10 types of entities:

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What is Marketed?
(cont’d)
Goods

Services
Events & Experiences

Persons

Places & Properties

Organizations
Information
Ideas
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What is Marketed? Cont’d
• Goods: physical goods
• Services: Services include the work of airlines, hotels,
car rental firms, etc.
• EVENTS Marketers promote time-based events, such as
major trade shows, Olympics or World Cup, etc.

• EXPERIENCES By coordinate several services and

goods, a firm can create, stage, and market experiences.
There is also a market for customized experiences, such
as spending a week at a baseball camp playing with some
retired baseball greats,

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What is Marketed? Cont’d
• PERSONS Celebrity marketing is a major
business. Today, every major film star has an
agent, a personal manager, and ties to a public
relations agency.

• PLACES Cities, states, regions, and whole

nations compete actively to attract tourists,
factories, company headquarters, and new
residents.

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What is Marketed? Cont’d
• Properties are intangible rights of ownership of
either real property (real estate) or financial
property (stocks and bonds). Properties are
bought and sold, and this requires marketing.

• Organizations actively work to build a strong,

favorable, and unique image in the minds of their
target publics. Companies spend money on
corporate identity.

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What is Marketed? Cont’d
• Information information can be produced and
marketed as a product. This is essentially what
schools and universities produce and distribute at
a price to parents, students, and communities.

• Ideas every market offering includes a basic

idea. The CEO of Revlon observed: "In the
factory, we make cosmetics; in the store we sell
hope." Products and services are platforms for
delivering some idea or benefit.

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Who Markets?

• Marketers and prospects

• A marketer is someone who seeks 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, we call them both
marketers.

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Who Markets? (cont’d)
• Marketers are skilled in stimulating demand
for a company's products.
• Marketers are responsible for demand
management.
• Marketing managers seek to influence the
level, timing, and composition of demand to
meet the organization's objectives.
• Eight demand states are possible:

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Demand States

Negative Nonexistent Latent

Declining Irregular

Full Overfull Unwholesome

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Demand States
1. Negative demand: consumer dislike the
product.
2. Nonexistent demand: consumer 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: consumer begin to buy
the product less frequently or not at all.
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Demand States: CONT’D
5. Irregular demand: consumer purchase vary on
seasonal, monthly, weekly, daily, or even hourly
basis.
6. Full demand: consumers are adequately buying
all products put into marketplace.
7. Overfull demand: more consumers would like to
buy the product than can be satisfied.
8. Unwholesome demand: consumers may be
attracted to products that have undesirable social
consequences

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Demand States: CONT’D
• In each case, marketers must identify the
underlying cause(s) of the demand state
and then determine a plan for action to shift
the demand to a more desired state.

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MARKETS:

• The concept of exchange leads to the

concept of a market.
• Traditionally a “market” was a physical
place where a buyers and sellers
gathered to buy and sell the goods.

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MARKETS( cont’d):

• Economists describe a market as a

collection of buyers and sellers who
transact over a particular product or
product class. (e.g., the housing
market).

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MARKETS( cont’d):

• Marketers, however, see the sellers as

constituting an industry and the buyers as
constituting a market. The relation between
the industry and the market is shown in
the following figure:

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Figure 1.2 A Simple Marketing System

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Key Customer Markets

• Consider the following key customer

markets:
• Consumer markets
• Business markets
• Global markets
• Nonprofit markets.

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Consumer Markets
A defined group of consumers. All
the individuals and households
who purchase goods and services
for personal use.

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Consumer Markets (cont’d)
• Companies selling mass consumer goods
and services such as soft drinks,
cosmetics, air travel, etc,spend a great deal
of time trying to establish a superior brand
image.

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Business Markets
• Business buyers buy goods in order to
make or resell a product to others at a
profit.
• Companies selling business goods and
services often face well-trained and well-
informed professional buyers who are
skilled in evaluating competitive offerings.

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Business Markets (cont’d)
• Business marketers must demonstrate how
their products will help these buyers
achieve higher revenue or lower costs.
Advertising can play a role, but a stronger
role may be played by the sales force,
price, and the company's reputation for
reliability and quality.

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Global market
• Companies selling goods and services in the
global marketplace face additional decisions
and challenges:
1. They must decide which countries to enter.
2. How to enter each country.
3. How to adapt their product and services
features to each country.
4. How to price their product in different countries.
5. How to adapt their communications to fit
different cultures.
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Global market (cont’d)
• These decisions must be made in the face
of different culture, language, and legal and
political systems; and a currency that might
fluctuate in value.

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Non profit & Governmental markets

• Companies selling their goods to

nonprofit organizations such as:
mosques, universities, charitable
organizations or government agencies
need to price carefully because these
organizations have limited purchasing
power.

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Marketplaces,
Marketspaces,
Metamarket

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Marketplaces
• The marketplace is physical, as when you
shop in a store.

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Marketspaces
• Marketspace is digital, as when you shop in
the internet.

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Metamarket
• Metamarket describes a cluster of
complementary products and services that are
closely related in the minds of consumers, but are
spread across a diverse set of industries.
• Example: car metamarket consists of car
manufacturers, new car and used car dealers,
financing companies, insurance companies,
mechanics, spare part dealers, service shops,
and auto sites on the internet.

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Core Marketing Concepts
• To understand the marketing function, we need to understand
the following core set of concepts.
1. Needs, Wants, and Demands
• Needs are the basic human requirements such as for air, food,
water, clothing, and shelter.

• Humans also have strong needs for recreation, education, and

entertainment. These needs become wants when they are
directed to specific objects that might satisfy the need.

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Core Marketing Concepts
(cont’d)
• 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.

• These distinctions shed light on the frequent criticism that

“marketers create needs” or “marketers get people to buy things
they don’t want.”

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Core Marketing
Concepts(cont’d)
• Marketers do not create needs: Needs preexist marketers.

• Marketers, along with other societal factors, influence wants.

• They might promote the idea that a Mercedes would satisfy a

• person’s need for social status. They do not, however, create the
need for social status.

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Core Marketing Concepts(cont’d)

• 2.Target Markets, Positioning, and

Segmentation
• Not everyone likes the same cereal, restaurant, college, or
movie. Therefore, marketers start by dividing the market into
segments.

• They identify and profile distinct groups of buyers who might

prefer or require varying product and service mixes by
examining demographic, psychographic, and behavioral
differences among buyers.
• After identifying market segments, the marketer decides which
present the greatest opportunities—which are its target markets.
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Core Marketing Concepts(cont’d)

• 3. Offerings and Brands

• Companies address customer needs by putting forth a
value proposition, a set of benefits that satisfy those
needs.

• The intangible value proposition is made physical by an

offering, which can be a combination of products,
services, information, and experiences.
• A brand is an offering from a known source.
• A brand name such as McDonald’s carries many
associations in people’s minds that make up its image:
hamburgers, cleanliness, convenience, courteous service.
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Core Marketing Concepts(cont’d)

• 4.Value and Satisfaction

• The buyer chooses the offerings he or she perceives to deliver
the most value, the sum of the tangible and intangible benefits
and costs to her.

• Value, a central marketing concept, a combination of quality,

service, and price (qsp), called the customer value triad.

• Value perceptions increase with quality and service but

decrease with price.

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Core Marketing Concepts(cont’d
• 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.

• 5. Marketing Channels
• To reach a target market, the marketer uses three kinds
of marketing channels:

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Core Marketing Concepts(cont’d
• 1.Communication channels deliver and receive messages from
target buyers and include newspapers, magazines, radio,
television, mail, telephone, etc.

• 2. 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,

etc or indirect with distributors, wholesalers, retailers, and
agents as intermediaries.

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Core Marketing Concepts(cont’d)
• 3. The marketer also uses service channels that include
warehouses, transportation companies, banks, and insurance
companies.

• 6. 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.

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Core Marketing Concepts(cont’d)
• Each company captures only a certain percentage of the total
value generated by the supply chain’s value delivery system.

• When a company acquires competitors or expands upstream or

downstream, its aim is to capture a higher percentage of supply
chain value.
• 7. Competition
• Competition includes all the actual and potential rival offerings
and substitutes a buyer might consider.

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Core Marketing Concepts(cont’d)

• 8. Marketing Environment
• The marketing environment consists of the task environment
and the broad environment.

• The task environment includes the actors engaged in

producing, distributing, and promoting the offering.

• The broad environment consists of six components:

demographic environment, economic environment, social-
cultural environment, natural environment, technological
environment, and political- legal environment.

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The New Marketing Realities

• We can say with some confidence that the marketplace isn’t

what it used to be. It is dramatically different from what it was
even 10 years ago.

• Major Societal Forces

• Today, major, and sometimes interlinking, societal forces have
created new marketing behaviors, opportunities, and challenges.

• Here are 12 key ones;

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How business and marketing change?

Technology
•
Globalization
Deregulation
Privatization
Heightened competition
Industry convergence
Retail transformation
Disintermediation
Consumer buying power
Consumer information
Consumer participation
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Consumer resistance
How business and marketing
change? (CONT’D)
1.Changing technology
• The digital revolution has created an information age.

• The industrial age was characterized by mass production

and mass consumption, stores stuffed with inventory, ads
everywhere and rampant discounting .

• The information age promises to lead to more accurate

levels of production, more targeted communication, and
more relevant pricing.

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How business and marketing
change? (CONT’D)
• 2. Globalization
• Technological advances in transportation,
shipping, and communication have made it
easier for companies to market in other
countries and easier for consumer to buy
products and services from marketers in other
countries.

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How business and marketing change?
(CONT’D)

• 3. Deregulation:
• Many countries have deregulated industries to
create greater competition and growth
opportunities. In Sudan landline telephone
companies can now compete in mobile market.

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How business and marketing
change? (CONT’D)
• 4. Privatization
• Many countries have converted public
companies to private ownership to increase
their efficiency. Real estate commercial
bank, national authority for wire and
wireless telecommunication in Sudan.

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How business and marketing change?
(CONT’D)
• 5. Heightened competition
• Intense competition among domestic and
foreign brands raises marketing costs and
shrinks profit margins.

• Many strong brands have become megabrands

and extended into a wide variety of related
product categories, presenting a significant
competitive threat.
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How business and marketing change?
(CONT’D)
• 6. Industry convergence.
• Industry boundaries are haziness at an incredible rate as
companies are recognizing that new opportunities lie 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 of entertainment devices from MP3 players to plasma
TVs and camcorders. Digital technology fuels this massive
convergence.

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How business and marketing
change? (CONT’D)
• 7. Retail transformation

• Store based retailers are facing growing

competition from giant retailers (catalogue
houses; direct – mail firms; newspaper,
magazine, and TV direct – to – customer ads;
home shopping TV. and e. commerce on the
internet.

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How business and marketing change?
(CONT’D)
• 8. Disintermediation

• The amazing success of early online dot-coms such as yahoo,

hotmail, e Bay and dozens of others, created disintermediation
in the delivery of products and services by intervening in the
traditional flow of goods through distribution channels. These
firms struck terror into the hearts of established manufacturers
and retailers. lead many traditional companies to engage in
reenter mediation and adding on line service to their existing
offers.

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How business and marketing
change? (CONT’D)
• 9. 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.

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How business and marketing
change? (CONT’D)
• 10. Consumer information
• Consumers can collect information in as much breadth
and depth as they want about practically anything.
• They can access online dictionaries, medical
information, movie ratings, consumer reports,
newspapers, and other information sources in many
languages from anywhere in the world.

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How business and marketing
change? (CONT’D)
• 11. 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.

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How business and marketing
change? (CONT’D)
• 12. 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.

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New Company Capabilities
• These major societal forces create complex challenges for
marketers, but they have also generated anew set of capabilities
to help companies cope and respond.
• Marketers can use the Internet as a powerful information
and sales channel.
• Marketers can collect fuller and richer information about
markets, customers, prospects, and competitors.
• Marketers can tap into social media to amplify their brand
message.
• Marketers can facilitate and speed external communication
among customers.

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New Company Capabilities
(CONT’D)
• Marketers can send ads, coupons, samples, and information
to customers who have requested them or given the
company permission to send them.

• Marketers can reach consumers on the move with mobile

marketing.

• Companies can make and sell individually differentiated

goods.
• Companies can improve purchasing, recruiting, training,
and internal and external communications.

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New Company Capabilities
(CONT’D)
• Companies can facilitate and speed up internal
communication among their employees by using the
Internet as a private intranet.

• Companies can improve their cost efficiency by skillful use

of the Internet.

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Company Orientation Toward
the Marketplace
• Given these new marketing realities, what
philosophy should guide a company’s
marketing efforts?

• Increasingly, marketers operate consistent with

the holistic marketing concept. Let’s first
review the evolution of earlier marketing ideas.

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Company Orientation Toward
the Marketplace

Production Product

Selling Marketing

Societal marketing Holistic marketing

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Marketing Management Philosophies

Holistic Marketing Concept

Marketing Concept

Selling Concept

Product Concept

Production Concept
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Company Orientation Toward
the Marketplace (cont’d)
• The Production Concept
• The production concept one of oldest concepts in business. It
holds that consumers will prefer product that are widely
available and inexpensive. Managers of production oriented
business focus on improving production and distribution
efficiency. This concept is useful in two situations:

1. When the demand for a product exceeds the supply.

2. When the product cost is too high and improved productivity
is needed to bring it down.

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Company Orientation Toward
the Marketplace (cont’d)
• The product concept
• The product concept proposes that consumers favor
products offering the most quality, performance, or
innovative features.
• However, managers are sometimes caught in a love affair with
their products.
• They might commit the “better-mousetrap” fallacy, believing a
better product will by itself lead people to beat a path to their
door.
• A new or improved product will not necessarily be successful
unless it’s priced, distributed, advertised, and sold properly.

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Company Orientation Toward
the Marketplace (cont’d)
The Selling Concept
• Many organizations follow the selling concept, which holds that
consumers will not buy enough of the organization's products
unless it undertakes a large scale selling and promotion effort.

• Marketing based on hard selling is risky. It assumes customers

persuade into buying a product not only won’t return or bad-
mouth it or complain to consumer organizations but might even
buy it again.

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Company Orientation Toward
the Marketplace (cont’d)
The Marketing Concept
• The marketing concept emerged in the mid-1950s as a
customer-centered, sense-and-respond philosophy.
• The job is to find not the right customers for your products, but
the right products for your customers.

• Dell doesn’t prepare a perfect computer for its target market.

Rather, it provides product platforms on which each person
customizes the features he or she desires in the computer.

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Marketing and Sales Concepts Contrasted

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Company Orientation Toward
the Marketplace (cont’d)
• Holistic Marketing Concept
• The holistic marketing concept is based on the development,
design, and implementation of marketing programs, processes,
and activities that recognize their breadth and
interdependencies.

• Holistic Marketing is a term used to describe a strategy that

enables you to look at your marketing efforts as a 'whole',
which in turn helps you develop an overall or 'holistic
marketing' plan.

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Company Orientation Toward
the Marketplace (cont’d)
• Holistic marketing acknowledges that everything matters in
marketing—and that a broad, integrated perspective is often
necessary.

• The Figure below provides an overview of four broad

components characterizing holistic marketing: relationship
marketing, integrated marketing, internal marketing, and
performance marketing.

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Figure 1.3 Holistic Marketing Dimensions

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Company Orientation Toward
the Marketplace (cont’d)
• Relationship Marketing
• Increasingly, a key goal of marketing is to develop deep, enduring
relationships with people and organizations that directly or indirectly affect
the success of the firm’s marketing activities.

• Relationship marketing aims to build mutually satisfying long-term

relationships with key constituents in order to earn and retain their
business. (customers, employees, marketing partners (channels, suppliers,
distributors, dealers, agencies), and members of the financial community
(shareholders, investors, analysts).

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Company Orientation Toward
the Marketplace (cont’d)
• 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.

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Company Orientation Toward
the Marketplace (cont’d)
• 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 important—or even more important— than
those directed outside the company.
• It makes no sense to promise excellent service before the
company’s staff is ready to provide it.

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Company Orientation Toward
the Marketplace (cont’d)
• Performance Marketing
• Performance marketing requires understanding the financial and nonfinancial
returns to business and society from marketing activities and programs.

• FINANCIAL 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.

• They’re 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.

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Company Orientation Toward
the Marketplace (cont’d)
• 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 organization’s 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 society’s long-term well-being.

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