Chapter 1

Introduction to Marketing

Contents of the Chapter..

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Objectives of Study Definition Scope What do we market Functions of Marketing Tasks of Marketing Management Core Concepts of Marketing Marketing Orientations Concept of Marketing Myopia Customer Value Difference between Sales and Marketing Changing Economy New Marketing Challenges

Objectives of Study..
Understand the new economy. Learn the tasks of marketing. Become familiar with the major concepts and tools of marketing. Understand the orientations exhibited by companies. Learn how companies and marketers are responding to new challenges.

Marketing Defined..
Kotlers 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 AMA Managerial Definition: Marketing is a organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships that benefits organizations and its stakeholders. Marketing is Meeting Human Needs Profitably Marketing is the delivering customer satisfaction at a profit.

What can be Marketed?

Scope
Goods Services Experiences Events Persons Places Properties Organizations Information Ideas

Examples
Toothpaste, clothes Banking, Insurance Scuba Diving, River Rafting, Movies Drama, Trade Shows, Sports Miss Universe, World, Politicians Country, Tourist Place Real Estates, Bonds and Stocks MNCs, non profit organizations Universities, Schools, Encyclopedias Harmful effects of Tobacco, Alcohol. Child Labor

Functions of Marketing

Tasks of Marketing Management

Developing Marketing Strategies and Plans Capturing Marketing Insights Connecting with Consumers Building Strong Brand Shaping the Marketing Offer Delivering Value Communicating Value Creating Long Term Goals

Core Concepts of Marketing

Needs, Wants and Demand Exchange, Transaction and Transfer Goods Service Continuum Target Market, Positioning and Segmentation Product Offerings and Brands Value, Customer Satisfaction and Customer Delight Marketing Channels Marketplace, Market-space and Meta-markets Supply Chain Competition Marketing Environment Marketing Planning Consumer Relationship and Network

Core Concepts of Marketing

Needs, Wants and Demand
Needs describe basic human requirements such as food, air, water, clothing, shelter, recreation, education, and entertainment. Needs are Stated, Real, Unstated, Delight, Secret Needs. Needs become Wants when they are directed to specific objects that might satisfy the need. (Fast food) Demands are wants for specific products backed by an ability to pay. Desire Fulfilling demands with specific requirements.

Core Concepts of Marketing

Exchange, Transaction and Transfer
Exchange involves obtaining a desired product from someone by offering something in return. Eg: Barter System. Transaction involves trade of at least two things of value, agreed-upon conditions, a time of agreement, and a place of agreement. Eg: A sells Laptop to B in return of Money. Transfer involves giving but not receiving anything tangible in return. Eg: Donations, Gifts, Subsidies

Core Concepts of Marketing

Goods Service Continuum
Goods services continuum is a scale where marketers can position their products and services to design the marketing offer. All tangible products have intangible services and all intangible offers come with tangibles. Scale has 4 categories: Pure Goods Goods Related Service Related Pure Service

Core Concepts of Marketing

Advantages of Goods Service Continuum
Concept is applicable for Individual and Organizational consumers. Each location on the scale provides distinct marketing opportunity. Gives insight to Co to decide if to remain as a pure goods firm or shift to service orientation. The scale helps marketers to visualize difference and similarities between goods and services and plan the marketing strategies. A shift from pure goods to service helps co to build relations with clients and understand their expectations of the products better.

Core Concepts of Marketing

Target Market, Positioning and Segmentation
Differences in Consumer needs, behavior, demographics or psychographics are used to identify segments. The segment served by the firm is called the Target Market. The market offering is customized to the needs of the target market. After choosing the target market product offer is positioned in the minds of target markets.

Product Offerings and Brands

A Product is any offering that can satisfy a need or want, while a Brand is a specific offering from a known source. Product is a tangible offering while Services is Intangible offering and do not result in ownership of anything.

Core Concepts of Marketing

Value, Customer Satisfaction and Customer Delight
Value reflects the perceived tangible and intangible benefits the customer gains from owning and using the product/ services compared to the cost of obtaining the product. Value for Money Value is a combination of Quality, Service and Price (QSP) called as Customer Value Triad. Value = Benefit / Cost Benefit = Functional Benefit + Emotional Benefit Cost = Monetary Cost + Time Cost + Energy Cost + Psychic Cost Marketing = Identify, create, communicate, deliver and Monitor CV. Customer Satisfaction is the persons comparative judgment resulting from a products perceived performance in relation to the buyers expectation. If performance falls short of expectations client is dissatisfied, if performance meets expectations client is satisfied and when performance exceeds expectations client is delighted.

Core Concepts of Marketing

Enhancing Value
Marketers can enhance the value of an offering to the customer by: Raising benefits. Reducing costs. Raising benefits while lowering costs. Raising benefits by more than the increase in costs. Lowering cost by less than the reduction in benefits. Value increases with Quality & Service and reduces with price.

Core Concepts of Marketing

Marketing Channels
To reach Target Market, marketers use 3 kinds of channels. 1. Communication Channel: Deliver messages to and receive messages from target buyers. Includes traditional media like TV, radio, newspapers etc, non-verbal communication like clothing, facial expressions, and store atmospherics. 2. Distribution Channel: Display or deliver the physical products or services to the buyer / user. It includes distributors, wholesalers, retailers. 3. Service Channel: Marketers use service channel to carry out transactions with potential buyers. Service Channels include warehouse, insurance, banks and transportation companies that facilitate transactions.

Core Concepts of Marketing

Types of Markets: Consumer Markets Business Markets Global Markets Nonprofit and Governmental Markets

Core Concepts of Marketing

Marketplace, Market-space and Meta-markets
Market Place: Market place are the physical markets where one shops. Eg: Stores, Malls Market Space: Virtual marketing which involves shopping on the internet or teleshopping Eg: India Mart Meta-Markets: Meta Market is a web-based market centered around an event or an industry, rather than a single product These are markets of complementary products that are closely related in the minds of consumers, but spread across different industries. Eg: Car Manufacturer, Wedding Markets

Core Concepts of Marketing

Supply Chain
A supply chain stretches from raw materials to components to final products that are carried to final buyers. Supply chain represents the value delivery system and each company captures only a certain percentage of the total value generated by the supply chain.

Competition
Competition includes all actual and potential rival offerings and substitutes that the buyer might consider. Marketers have to constantly watch on the new substitutes that may replace its own business and try to mould its marketing plans accordingly. Four levels of competition can be distinguished by the level of product substitutability: Brand competition Form competition Industry competition Generic competition

Core Concepts of Marketing

Marketing Environment
Marketing Environment consists of Task Environment and Broad Environment. 1. Task Environment includes company, suppliers, distributors, dealers and Target customers. Suppliers include material and service suppliers like Market Research agencies, banking and insurance companies, transportation and telecommunication companies. Distributors and dealers are agents, brokers, manufacturer representatives. 2. Broad Environment include Demographic, Economic, Physical, Technological, Political-legal and Socio-culture environments. Broad environment contains forces that can have a major impact on the factors of task environment.

Core Concepts of Marketing

Marketing Planning: Marketing Planning process consists of Analyzing Marketing opportunities Selecting Target Markets Designing Marketing Strategies Developing Marketing Programs Managing the Marketing efforts. The marketing plan is developed to achieve the companys objectives.

Core Concepts of Marketing

Who is a Consumer?
Consumer 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. CUSTOMER has needs, wants, demands and desires. Understanding these needs is starting point of the entire marketing activity. 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.

Core Concepts of Marketing

Relationship and Network
Relationship marketing aims to build long-term mutually satisfying relations with key parties, which ultimately results in marketing network between the company and its supporting stakeholders. Relationship marketing involves building of Customer Relationship management (CRM) and also Partner Relationship Management (PRM). Marketing Network = Company, Customers, Employees, Suppliers, Distributors, Retailers, Ad Agencies,

Marketing Orientations
The orientation or philosophy of the firm typically guides marketing efforts. Several competing orientations exist: Production Concept Product Concept Selling Concept Marketing Concept Holistic Marketing Concept

Marketing Orientations
Production Concept
Oldest Concept Believes that consumers will prefer products that are available and inexpensive. The management of Production concept focuses on achieving high production efficiency, low costs and mass distribution. This concept runs well in developing countries which has inexpensive labor pool and where people prefer to buy products which are cheaper. Cos following this concept has production team as its core team while marketing dept is an appendage. Lower costs does not always attract customers and hence this concept fails when customers require more quality or variety.

Marketing Orientations
Product Concept
This concept gives utmost importance to the product quality and features. Marketers think that the consumers will favor those products that offer most quality, performance and innovation. Success of the business is aimed to be achieved through product attributes. Managers focus on making superior quality products and improve them over time. Cos invest lot of money in R n D and new product development. Since marketers fail to understand customer needs this concept fails to great marketing success.

Marketing Orientations
Selling Concept:
The concept believes that consumers will not buy the products unless the co undertakes a aggressive selling and promotion efforts. The purpose of marketing is to sell more stuff to more people to make more profit. The products sold under selling concept are the ones which the consumers do not think of buying. Hard core selling also involves bigger risks as if the customer feels he is pressed into buying he may bad mouth the co.

Concept of Marketing Myopia

Marketing Myopia: The term was coined by Prof Theodore Levitt in 1960. What is Myopia: Nearsightedness--not inherited. It can be prevented. When Co forgets that product is a mean to satisfy client needs, it results into marketing myopia. Marketing Myopia changed the way companies viewed the marketplace from a product orientation to a consumer based orientation. Excessive attention to production, product or selling at the cost of customer needs will drive the firm towards this myopia. The Co should focus on the changing needs of the customer and design new products as the products turn obsolete very soon.

Marketing Orientations
Marketing Concept:
The philosophy shifted from the Product centered Make n Sell concept to Sense and Respond Customer centric approach. The job of marketer is to find customer needs and design a suitable product to satisfy the need. Concept holds that the key to achieve organizational goals is to be more effective than competitors in creating, delivering and communicating superior customer value to the target market. Customers needs, wants and satisfaction is of foremost importance to all departments of Organization and not just restricted to marketing. Cos that follow both Reactive and Proactive Marketing Orientation achieve more success.

Marketing Orientations
ey Attributes of Marketing Concept:
Unflinching Consumer Orientation Integrated management action with marketing as a function Emphasis on generating consumer satisfaction Emphasis on profit Attaining all Corporate goals through customer satisfaction.

Marketing Orientations
Holistic Marketing Concept: Everything Matters in Marketing
4 Dimensions of Holistic Marketing Concept are: Relationship Marketing Integrated Marketing Internal Marketing Social Responsible Marketing

Marketing Orientations
Holistic Marketing Dimension:

Marketing Orientations
Relationship Marketing: CRM and PRM
The key goal of marketing is to develop deep rooted, enduring relationships with all people or organizations that could directly or indirectly affect the success of firms marketing activities. The concept is Build a effective network of relationships with key stakeholders and profits will follow. RM involves in building strong ties with its 4 core constituents Customers, Employees, Marketing Partners and Members of Financial Community. Key Stakeholders / Marketing Network = Customers, Employees, Suppliers, Distributors, Retailers, Ad agencies, Shareholders, Investors,
Hotel Industry, Tanishq

Marketing Orientations
Integrated Marketing
Marketers activity is to design marketing tasks and assemble fully integrated marketing program to create, communicate and deliver value for consumers. Marketing activities are designed on the basis of Marketing Mix and each component of marketing mix delivers a customer benefit. 4Ps Product Price Place Promotion 4Cs Customer Solution Cost to Customer Convenience of buying Communication

Marketing Orientations
4 Ps Elaborated

Marketing Orientations
Two key themes of Integrated Marketing are: Marketers opt for different marketing activities to communicate and deliver value. All marketing activities are coordinated to maximize their joint effect.

Marketing Orientations
Internal Marketing
Internal marketing aims at ensuring everyone in the organization enhances the right marketing principles. Internal marketing is a task of hiring, training and motivating able employees to serve customers well. Customer orientation should be the goal of each department and employee. Internal Marketing should happen at 2 levels. 1. Various marketing functions should work together Sales, Advertising, Customer Service, Product Management and Marketing research. 2. Marketing approach must be embraced by all other depts. of the Co. Eg: Purchase, Manufacturing, Finance, Accounting, Public Relations

Marketing Orientations
Social Responsibility Marketing
SRM includes Ethical, Environmental, Legal and Social context of marketing activities and programs. Organizations should realize that along with satisfying customer needs it should also focus on delivering social welfare. SRM calls for marketers to build social and ethical considerations into marketing plans and practices. SRM is often called as Cause Related Marketing and Cos. see it as an opportunity to enhance their corporate reputation, raise brand awareness, increase customer loyalty, increase sales and press coverage.

Capturing Customer Value

ey Concepts:
1. Customer Loyalty and Retention:
Customer delight leads to emotional relationships and loyalty Customer Lifetime Value shows true worth of a customer

2. Share of Customer:
Share of customers purchase in a product category. Achieved through offering greater variety, cross-sell and up-sell strategies.

3. Customer Equity:
The combined customer lifetime values of all current and potential customers. Measures a firms performance, but in a manner that looks to the future. Choosing the best customers is key

Difference between Sales and Marketing

Selling
Selling starts with seller and relates to needs of seller. Seller is the center of business Universe. Emphasis is on selling available products. Emphasizes on exchange aspect. Seller determines the marketing mix. Emphasis on staying with the existing technology and reducing cost. Distribution function is a extension of production function. Cost determines the price of product. No coordination among the other functions exists. Customer is the last link of business.

Marketing
Marketing starts with buyer and focuses constantly on the needs of buyer. Buyer is the center of business Universe. Emphasis is on understanding and fulfilling client needs. Emphasizes on Value Satisfaction. Buyer decides the marketing mix. Emphasis on innovation and providing value to client through new technology. Distribution function is designed keeping client's convenience in focus. Buyer determines the price and price determines cost. Emphasis is on integrated marketing, covering all Ps Customer is the very purpose of Business.
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The Changing Economy..

Consumer benefits from the Globalization and Digital revolution include: Increased buying power. Globalization - Greater variety of goods and services. Increased information. Enhanced shopping convenience. Greater opportunities to compare product information with others.

The Changing Economy..

Marketers benefits from the Globalization and Digital revolution include: New promotional medium. Access to richer research data. Enhanced employee and customer communication. Ability to customize promotions.

New Marketing Challenges..