Chemical Engineering Economics

MARKETING

Engr. Farhan Javed

Lecturer
Chemical Engineering Department
UET FSD Campus

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Lecture outline:
• Introduction to marketing
• Marketing system
• Sales versus marketing
• Marketing management philosophies
• Core concepts of marketing
• The marketing mix
• Strategic marketing
• Marketing plan
• Marketing environment
• Marketing process

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Marketing: An Introduction
Do you know??
What is Marketing…??

•Selling?
•Advertising?
•Promotions?
•Making products available in stores?
•Maintaining inventories?

• All of the above, plus much more!

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What is Marketing?
American Marketing Association Definition

Marketing is the process of planning and

executing the conception, pricing, promotion,
and distribution of ideas, goods, and services
to create exchanges that satisfy individual and
organizational goals.

©2003 South-Western 5
 The Concept of Exchange
At Least Two
Parties Something of
Value

Necessary Ability to
Communicate
Conditions Offer
for Exchange

Freedom to
Accept or Reject
Desire to Deal
With Other
©2003Party
South-Western 6
Why Study Marketing?
 Plays an important role in society

 Vital to business survival, profits

and growth

 Offers career opportunities

 Affects your life every day

©2003 South-Western 7
What is a Market?
Potential consumers make up a
market, which is:
1. People
2. with the Desire and
3. with the Ability to Buy a
specific product.

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Simple Marketing System

Communication

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

Information
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Five Basic Market

Manufacturer markets
Resource markets
Government markets
Intermediary markets
Consumer markets
 Structure of Flows
Resources Resources
Money Resource Money
markets
Services,
money Taxes,
goods
Services, Taxes
money
Manufacturer Government Consumer
markets markets markets
Taxes,
goods Services
Services, Taxes,
money goods
Money Money
Intermediary
Goods, services markets Goods, services
Difference Between - Sales & Marketing ?

Sales
trying to get the customer to want what the
company produces

Marketing
trying to get the company produce what the
customer wants

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 Marketing Concept versus
Selling Concept
Starting
point Focus Means Ends

Existing Selling and Profits through

Factory products promotion sales volume

(a) The selling concept

Customer Integrated Profits through

Market needs marketing customer
satisfaction

(b) The marketing concept

 Comparing Sales and Market
Orientations
Organization’s Firm’s For Primary Tools to
Focus Business Whom? Profit Goal? Achieve

Inward Selling goods Everybody Maximum Primarily

Sales and services sales promotion
Orientation volume

Outward Satisfying Specific Coordinated

groups Customer use of all
Market wants and
needs of people satisfaction marketing
Orientation activities

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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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Marketing Management
Philosophies
Production

Sales

Competing Market
Philosophies
Product

Societal Marketing
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Marketing Management Philosophies
Consumers prefer products that are
Production widely available and inexpensive

Consumers favor products that

Product offer the most quality, performance,
or innovative features
Consumers will buy products only if
Sales the company aggressively
promotes/sells these products
Focuses on needs/ wants of target
Market markets & delivering value
better than competitors

Focus on satisfying customer needs

Societal and wants while enhancing
individual and societal well-being
The Marketing Mix

The marketing mix is the combination of

variables that a business uses to carry out
its marketing strategy and meet customer
needs.
The marketing mix is often called the 4Ps:
• Product
• Price
• Place
• Promotion 18
 The 4 Ps & 4Cs

Marketing Convenience
Mix

Place
Product

Customer
Solution Price Promotion

Customer Communication
Cost
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Core Concepts of Marketing
Target Markets & Segmentation
Needs, Wants, and Demands
Product or Offering
Value and Satisfaction
Exchange and Transactions
Relationships and Networks
Marketing Channels
Supply Chain
Competition
Marketing Environment
 Core Concepts of Marketing

Needs, wants Utility Value &

demands Satisfaction

Marketing & Xchange, Transaction

Markets
Marketers Relationships

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Core Concepts of Marketing

 Need – food ( is a must )

 Want – Pizza, Burger, French fry's ( translation of a
need as per our experience )
 Demand – Burger ( translation of a want as per our
willingness and ability to buy )
 Desire – Have a Burger in a five star hotel

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Marketing Triangle

Customers

Company Competition

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Who is a Customer ??

CUSTOMER IS . . . . .

Anyone who is in the market looking at a product /

service for attention, acquisition, use or consumption
that satisfies a want or a need

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Customer –

• CUSTOMER has needs, wants, demands and desires

• Understanding these needs is starting point of the
entire marketing
• These needs, wants …… arise within a framework
or an ecosystem
• Understanding both the needs and the ecosystem is
the starting point of a long term relationship

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How Do Consumers Choose Among Products
& Services?

•Value - the value or benefits the customers

gain from using the product versus the cost
of obtaining the product.
•Satisfaction - Based on a comparison of
performance and expectations.
• Performance > Expectations => Satisfaction
• Performance < Expectations => Dissatisfaction

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 Customer looks for Value

•Value = Benefit / Cost

•Benefit = Functional Benefit + Emotional
Benefit
•Cost = Monetary Cost + Time Cost +
Energy Cost + Psychic Cost

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Strategic Marketing

Strategic marketing management is concerned

with how we will create value for the customer
Asks two main questions
 What is the organization’s main activity at a
particular time? – Customer Value
 What are its primary goals and how will these be
achieved? – how will this value be delivered

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Strategic Planning
• Strategic Planning is the managerial
process of creating and maintaining a fit
between the organization’s objectives and
resources and the evolving market
opportunities.

Also called Strategic Management

Process
All organizations have this

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The Strategic-Planning, Implementation,
and Control Process

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 Business Strategic-Planning Process
External environment
(Opportunity &
Threat analysis)

Business Mission Goal Formulation

Internal Environment

(Strength/ Weakness analysis)

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Strategy Formulation
Environmental Analysis

Competitor Internal Analysis

Customer
Supplier Technology Know-How
Regulatory Manufacturing Know-How
Social/ Political Marketing Know-How
Distribution Know-How
Logistics
Opportunities & Threats
Strength & Weaknesses

Identity Core Competencies

Identify opportunity

Fit internal Competencies with external opportunities

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Firm Strategies
The Marketing Plan

•A written document that acts as a guidebook

of marketing activities for the marketing
manager

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The Marketing Process/Plan

Business
Mission
Statemen
t

Objective
s

Situation
or SWOT
Analysis

Marketing Strategy
Target Market
Strategy

Marketing Mix
Product Place/Distribution

Promotion Price

Implementation
Evaluation, Control
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Marketing Environment
All the factors and forces
influencing the company’s ability to
transact business effectively with it’s
target market
Market Environment
 Includes:
 Microenvironment - forces close to the
company that affect its ability to serve its
customers.
 Macroenvironment - larger societal forces
that affect the whole microenvironment
 Demographic

Company
Cultural Economic

Public Suppliers
Company
Customers
Competitors Natural
Political
Intermediaries

Technological
 External Marketing Environment
External Environment
Social Ever-Changing
is not controllable Change Marketplace
Demographics

Economic
Product Physical / Natural Conditions
Distribution
Promotion
Price
Competition
Target Market
Political &
Legal Factors
Technology
Environmental
Scanning

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 The macro-environment

is the assessment of the external forces that act upon the

firm and its customers, that create threats & opportunities

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UNCONTROLLABLE FACTORS AFFECTING
MARKETING DECISIONS

Social

Natural

Economic

External Technologic
Environmental
Factors Political and Legal

Competitive

Helps identify market opportunities

The Company’s Microenvironment
Company’s Internal Environment- functional areas such as top
management, finance, and manufacturing, etc.

Suppliers - provide the resources needed to produce goods and

services.

Marketing Intermediaries - help the company to promote, sell,

and distribute its goods to final buyers.
Contd..
Customers - five types of markets that purchase a
company’s goods and services.

Competitors - those who serve a target market with

similar products and services.

Public - any group that perceives itself having an interest

in a company’s ability to achieve its objectives.
The Company’s Macroenvironment
Demographic - monitors population in terms of age, sex, race,
occupation, location and other statistics.

Economic - factors that affect consumer buying power and

patterns.

Natural - natural resources needed as inputs by marketers or that

are affected by marketing activities.
 PEST analysis

 Political factors
 Economic factors
 Socio-cultural factors
 Technological factors
 Political/legal
 Monopolies legislation
 Environmental protection laws
 Taxation policy
 Employment laws
 Government policy
 Legislation
 Economic Factors

 Inflation
 Employment
 Income
 Energy availability and cost
 Sociocultural factors

 Demographics
 Distribution of income
 Social mobility
 Lifestyle changes
 Consumerism
 Levels of education
 Technological

 New discoveries and innovations

 Speed of technology transfer
 Rates of obsolescence
 Internet
 Information technology
Factors
Influencing
Company’s
Marketing
Strategy

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Product

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 Product is . . . . .

Anything that is offered to the market for

attention, acquisition, use or consumption that
satisfies a want or a need

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Types of Products

PRODUCTS

Consumer Industrial
Services
Products Products

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Product Items, Lines, and Mixes

A specific version of a product

that can be designated as a
Product Item
distinct offering among an
organization’s products.

A group of closely-related
Product Line
product items.

All products that an

Product Mix
organization sells.

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Product Mix

•Width – how many product lines a company has

•Length – how many products are there in a product line
•Depth – how many variants of each product exist within
a product line
•Consistency – how closely related the product lines are
in end use

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Gillette’s Product Lines & Mix

Width of the product mix

Depth of the product lines

Blades and Writing

razors Toiletries instruments Lighters
Fusion – 5 blade
Mach 3 Turbo
Mach 3 Series Paper Mate Cricket
Sensor Adorn Flair S.T. Dupont
Trac II Toni S.T. Dupont
Atra Right Guard
Swivel Silkience
Double-Edge Soft and Dri
Lady Gillette Foamy
Super Speed Dry Look
Twin Injector Dry Idea
Techmatic Brush Plus

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What is a Service? Defining the
Essence

•An act or performance offered by one party to another

(performances are intangible, but may involve use of
physical products)

•An economic activity that does not result in ownership

•A process that creates benefits by facilitating a desired

change in customers themselves, or their physical
possessions, or intangible assets

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Difference between physical
goods and services
Physical goods Services

tangible intangible

homogeneous heterogeneous

Production and distribution are Production, distribution and

separated from consumption consumption are simultaneous
processes
A thing An activity or process

Core value processed in factory Core value produced in the buyer-seller

interaction
Customers do not participate in the Customers participate in production
production process
Can be kept in stock Cannot be kept in stock

Transfer of ownership No transfer of ownership

Some Industries - Service Sector

• Banking, stock broking • Health care

• Lodging • Education
• Restaurants, bars, • Wholesaling and
catering retailing

• Insurance • Laundries, dry-cleaning

• Repair and maintenance
• News and entertainment
• Professional (e.g., law,
• Transportation (freight architecture, consulting)
and passenger)

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Classification of Services
Pure Intangible
Banking
Service

Good Transportation

Major Service with

Minor Product
Business Hotels
Product = Service

Computers

Major Product with

Minor Services
Materials / Components

Pure Tangible Product

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Major Characteristic of Services

 Intangibility – Services are intangibility cannot be seen,

tasted, felt, heard or smelled before purchase.
 Inseparability - Services are produced and consumed
simultaneously.
 Variability or Heterogeneity – Services are highly variable
 Perishability – Services cannot be stored.
 Non Ownership - Services are rendered but there is no
transfer of title

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The Give and Get of Marketing

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Stages of Customer Interaction

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Roles of marketing
main roles:
advertising (advertising and promotion managers)
selling (sales representatives/sales force)

but also:

product development
(brand and product managers)

packaging
(packaging designers)

pricing
(pricing specialists)

distribution
(sales personnel)
Marketing Process

three elements:
1. Market analysis
(Who will buy?)

2. Marketing-mix planning
(What? Where? How much? How?)

3. Marketing control
(Have we been successful?)
 1. Market analysis (STP)

a) Segmentation
niche segment

individuals

b) Targeting: Who are my customers?

c) Positioning: What is my main selling point?

2. Marketing mix planning (4 P)

= developing a tactics to achieve strategic aims

aim: to make customers from the target group buy

elements:

a) Product
b) Price
c) Place
d) Promotion
 a) Product
Product development

 traditional economies: same things

produced and consumed
 nowadays:
- products have a life cycle
- product range is constantly expanded
- find out what target market desires

Consequence is adjustment of:

- production
- research & development
- personnel administration
- finance
- public relations
Packaging

Branding

create clear message

create credibility
involve emotionally
motivate
invite user loyalty

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 b) Price
Pricing strategies:
1. Market determines
the price

2. Price as an expression
of quality

3. Price as a method of
gaining market share

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 c) Place (distribution)
Production site Warehouse Wholesaler

- factory outlet
- mail order house
- internet
- TV shopping
- door-to-door selling

consumer Retailer

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 c) Promotion

Aims:
 communicate with customers

 influence customers

4 major tools:
1. Sales force
2. Advertising
3. Sales promotion
4. Public relations

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1. Sales force
Representatives who advertise for and sell products

 they personalize the promotion process

effective at selling complex goods

most expensive promotion

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 2. Advertising
Presents a reason to buy a product/service

Media:

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 3. Sales promotion
 is a short-term incentive
to buy a product/service

Techniques:

1 price reduction

2. loyalty reward points

3. two for one

 attracts brand switchers

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 4. Public relations

Does not aim to increase sales directly but tries to boost the
image of the company

Techniques:

- press conferences
- contests
- community events
- charitable events
- ecological projects

- foundations

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 3. Evaluation and control
= looking back at the entire process to find out
whether or not it was successful

Why control?
• planning is no guarantee for profit
• markets change constantly
• strategies not always effective

Tools:
a) Annual-plan control
b) Profitability control
c) Efficiency control
d) Strategic control
a) Annual-plan control

Tools:
1. Sales analysis
(Did we sell as much as we planned?)
2. Market-share analysis
(Have we lost or gained market share?)
3. Marketing expense-to-sales analysis
(Did the marketing efforts pay?)

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b) Profitability control
Do we have more earnings than expenditures?

Strategies:

few expensive products and few customers

many cheap products and many customers

Aim:
Which of my products is the most profitable?

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 c) Efficiency control

Are my marketing methods profitable?

Example: Avon Lady (sales representative)

 how many doors in what time?
 how many products sold?

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d) Strategic control
Is my marketing program effective
over a long period of time?

 marketing philosophy

Positioning USA: “big and powerful”

after few years: Is this positioning still OK?

 information policy
- enough advertisement?
- enough promotion?

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1. Sales analysis

Comparison  sales goals (100 units)

 actual sales (20 units)
_____________
discrepancies???

reasons

 better product of the competitors

 decline of the economic situation
 wrong calculation

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2. Market share analysis

analysis of the competition on the market

Rates of selling beauty cases

17%
28%
Gucci

13% Joop
Dolce & Gabbana
Kuniberg

42%

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3. Marketing expense-to-sales
analysis

• How much did my marketing activities cost?

• What sales numbers have these activities
generated?

Example: expenses (costs): € 200.000

sales revenues: € 200.001
=> We have a problem!!!

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