PRINCIPLES OF MARKETING

Lecturer: Alexander Preko (PhD)Tel: 0241455462

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INTRODUCTION Q1. Why are you pursuing this course

of study? Plays an important role in society Vital to business survival, profits

and growth Offers career opportunities Affects your life everyday

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Why Study Marketing? Marketing Plays an Important Role in

Society Provides a delivery system for a complex

standard of living. The number of transactions go on everyday

in order to feed, clothe, and shelter a population is enormous and requires a sophisticated exchange mechanism.

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Marketing Is Important to Businesses profit and non profit organisations Contributes directly to achieving organisational objectives. Research or anticipate consumer needs and wants

Marketing provides the following vital business activities: Assessing the wants and satisfactions of present and

potential customers Designing and managing product offerings Determining prices and pricing policies Developing distribution strategies Communicating with present and potential customers

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Marketing Offers Outstanding Career Opportunities great percentage of the entire workforce

performs marketing activities. Offers career opportunities Increasing importance of the global

marketplace. Marketing Affects Your Life Every Day

We participate in the marketing process everyday.

Better informed customers Demand for customer satisfaction

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Q2. What do businesses generally hope to achieve in their objective or goal? survival, profits, and growth, etc.

Q3. What functions do businesses engage in to achieve these aims and objectives? Human resource activities Finance / Accounting Production / Operations Marketinga Etc.

Q4. What specific activities are undertaken under the marketing function? Marketing research Selling-personal selling, e-selling, cross and up selling Advertising, etc

Q5. What evidences of marketing do you see around you?At home, school, work Old traditional forms ( products in the local shops,

adverts on TVs, radio, mailbox) New forms (web sites, internet chat rooms, social

networks, interactive TV)

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What is Marketing? The AMA Definition

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 organizations and its stakeholders.

It can also be defined as 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.

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Marketing

Product

Price

Place

Promotion

ExchangeExchangeA BA B

Delivering value

Communicatingvalue

Creating value Customer value and beneficial relationships

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A. The Concept of Exchange

The idea that people give up something to receive something

they would rather have.

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The Concept of Exchange

Necessary Conditions for

Exchange

At Least Two Parties

Something of ValueWorth, merit or importance

Communication and Delivery

Freedom to Accept or Reject

Desire to Deal With Other Party

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B. Customer Value

The ratio of benefits to the sacrifice necessary to obtain those benefits

It is also the emotional end results that customers anticipate

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Customer Value Requirements Offer products that perform Give consumers more than they expect Avoid unrealistic pricing Give the buyer facts Offer organization-wide commitment in

service and after-sales support

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The feeling that a product or service has met or exceeded the customers’ expectations.

It might also be perceived performance relative to expectations

Dissatisfied, satisfied, delightedloyalty

C. Customer Satisfaction14

Maintaining Customer Satisfaction

Meet or exceed customer’s expectations Focus on delighting customers Provide solutions to customer’s problems Cultivate relationships,

NOT one-time transactions

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Relationship Marketing

The name of a strategy that entails forging or creating

long-term partnerships with customers, suppliers, both individuals and

firms.

Some have defined marketing as managing profitable customer relationships

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Developing Relationship Marketing

RequirementsRequirementsfor for

Building Building RelationshipsRelationships

Who are your customers

What do customers value

How do they prefer to interact

What do they want to buy

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Building Long-Term Relationships18

Customer-oriented personnel Effective training programs Empowered employees Teamwork

Defining a Firm’s Business19

“Benefits” instead of “goods/services”

Ensures a customer focus Encourages innovation and

creativity Stimulates an awareness of changes

in customer preferences

What is Marketed? Goods – Physical or tangible goods or products.

e.g. Cars, Eggs etc Services – activities, benefits or satisfactions

offered for sale e.g. education, healthcare etc Events – Time based events e.g. Sports events,

Trade fairs etc. Experiences – Several Services and goods can

be orchestrated to create an experience that can be marketed.

Persons – Efforts designed to cultivate attention, interest and preferences in an individual(s) eg. Celebrities, Politicians, Artists

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Con’t What is Marketed? Places – attempts to attract customers to particular

areas, especially in tourism. Properties – Intangible rights of ownership of either

real property (real estate) or financial property (stocks and bonds)

Organizations – Marketed to build a favourable image in the mind of the public.

Information – Information can be produced and marketed as a product e.g. in schools, books, CDs etc.

Ideas – Social issue, cause or idea eg. Literacy,

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MARKETING PHILOSOPHIES(ORIENTATIONS)

(LECTURE 2)Strongly influence the role of marketing

and marketing activities within an organization.

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Marketing Marketing PhilosophiesPhilosophies

Production

Product

Selling

Marketing

Marketing Philosophies

Societal Marketing

Holistic Marketing

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Marketing Philosophies Production orientation

This concept holds that customers will favour products that are widely available and highly affordable and that management should focus on improving production and distribution efficiency

It is a useful concept when demand for a product exceeds supply and when improved productivity can bring the cost of the product down.

There is however the tendency to overlook real customer needs

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Con’t Product orientation

This concept holds that customers favour products that offer, the most quality, performance and innovative features

Company focuses on product improvements

May lead to marketing myopia

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Marketing Philosophies Selling orientation

This concept holds that customers, if left alone, will not buy enough,

Need to undertake large scale selling and promotions,

Marketing orientation This concept holds that achieving organizational

goals depends on determining the needs and wants of target markets, and delivering the desired satisfactions more effectively and efficiently than competitors do.

Instead of “make and sell” you “sense and respond”

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• The Marketing orientation– Rests on four pillars which are Target market, Customer

Needs, Integrated Marketing and Profitability This concept rests on four important factors or pillars. i) Target Market – The marketing orientation takes the

view that it cannot serve the whole market. The Market is therefore segmented, and the segment(s) it can best serve is identified and targeted

ii) Customer Needs – The marketer must seek to correctly understand the customer needs within the target market. Some needs the customer will state, others he may not state or may not be aware of at all. The marketer must therefore do a balancing act between responsive, anticipative and creative marketing. *needs (states of felt deprivation), wants and demands

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iii) Integrated Marketing – All departments and individuals within the company must work together to serve and satisfy the customer. All the activities and tasks the organization undertakes must be coordinated from the customer’s point of view.

iv) Profitability – The ultimate purpose of the marketing concept is to help organizations achieve their objectives, very often profits. A company will continually make profits by creating long term customer relationships based on creating superior customer value and thereby satisfying its customers better than its competitors.

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Societal marketing orientation This concept holds that the organizations task is

to determine the needs, wants and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the customers and society’s well being (SCR)

Holistic marketing orientation everything matters 4 components: integrated marketing, internal

marketing, performance and relationship marketing.

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Relationship Marketing RM -Marketing to establish, maintain, and

enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met Long-term orientation, Commitment and fulfillment of promises, Customer share, not market share, Customer lifetime value, Two-way dialogue, and Customization.

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What then is the difference between marketing and selling?

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What then is the difference between marketing and selling?

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Selling Orientation Organization's focus is inward on the firm's needs Business is defined by its goods and services offered Product is directed to everybody Primary goal is profit through maximum sales volume Goals are achieved through intensive promotion

Marketing Orientation Focus is outward on the wants and preferences of customers Business is defined by benefits sought by customers Product is directed to specific groups (target markets) Primary goal is profit through customer satisfaction Goals are achieved through coordinated marketing

Sales vs. Marketing Orientations

Organization’sFocus

Firm’sBusiness

ForWhom?

Primary Profit Goal?

Tools to Achieve

Selling goods and services

Everybody Maximum sales volume

Primarily promotion

InwardSales Orientation

Marketing Orientation

Outward Coordinated use of all marketing activities

Customer satisfaction

Specific groups of people

Satisfying wants and needs

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THE MARKETING ENVIRONMENT

LECTURE 3 (MICRO ENVIRONMENT)

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The Marketing Environment Definition

Actors and forces (or elements) outside marketing that affect marketing management’s ability to build and maintain successful relationships with target customers.

The marketing Environment consists of a MICRO and a MACRO Environment.

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Micro-Environment Members of the value delivery system

and consists of the following:1. The Company2. Suppliers3. Competitors4. Marketing Intermediaries5. Customers6. The Publics

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The Company• The interrelated groups within the company

constitute it internal environment

• All these functions must “think customer”

• Decisions are made within the strategies and plans made by top management

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Suppliers Form a link in the overall customer value

delivery system

Supply availability and costs

Should be treated as partners in creating and delivering customer value

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Competitors Direct competitors and indirect

competitors

Local and foreign competitors

Competitor analysis

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Marketing Intermediaries Firms that help the company to promote, sell

and distribute its products to final buyers They include

Resellers, (Retailers and wholesalers) Help the company find customers or make sale to them Selecting and partnering

Physical distributing firms Move stock from one origin to another

Marketing service agencies Help the companies market the product

Financial intermediaries etc. Includes banks, insurance companies, credit companies

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Customers 1. Consumer Markets2. Business Market3. Reseller Markets4. Institutional Markets5. Government Markets6. International Markets

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Publics This is any group that has an actual or

potential interest in your products or services, or impact on, an organizations ability to achieve its objectives.

Seven types of Publics are identified.1. Financial Publics2. Media Publics3. Government Publics4. Citizen Action Publics5. Local Publics6. General Public7. Internal Publics

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MACRO ENVIRONMENT

LECTURE 4

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Macro-Environment1. Demographic environment2. Economic environment3. Technological environment4. Political and legal environment5. Natural environment6. Cultural environment

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Demographic environment The study of human populations in terms of

size, density, location, age, gender, race, occupation and other statistics

Relevant Issues Population size and growth trends eg. China Changing Age structure. Eg less older people The changing family and households

Traditional hh, men at home, working mothers, single mothers

Each group has distinctive needs and buying patterns

Rising number of educated people Increasing diversity- disabilities, races, gay Geographic shifts in Population

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Economic Environment Factors that affect consumer purchasing

power and spending patterns Subsistence/ emerging economies ,

developing and industrial economies Some of the relevant variables are

Income levels and distribution Changes in purchasing power Cost of living Savings and borrowing patterns Interest rates GDP etc.

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Technological Environment Accelerating pace of change

Technology can also make some products absolute.

Unlimited opportunities for innovation Delivering new ways in the performance of

business activities, etc. Producing new products

It creates new markets/industries/segregations

High R&D budgets Increased regulation

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Political and Legal EnvironmentRelevant issues include: The type of Government system in place

e.g. democracy, socialism etc. Increased Legislation regulating business

and business activities – to protect businesses, consumers and society at large

Special Interest Groups, Consumer Society etc.

Companies decide to comply, not to comply, fight regulations they deem unjust, or take advantage of opportunities they present.

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Natural Environment Availability of raw materials Increased cost of energy Increased Pollution Increased Government intervention in

natural resource management.

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Cultural Environment Institutions and other forces that affect society’s basic

values, perceptions, preferences and behaviours Core beliefs

Have high degree of persistence Beliefs passed on from parents, relative, friends They are reinforced by schools, religious bodies, etc. Shape specific attitudes in day to day activities

Peoples’ view of themselves. – serving themselves vrs serving others eg. adventurers and yourself Peoples view of others Peoples view of organizations Peoples view of society – patriots, malcontents, reformers Peoples view of nature – ruled, harmony , mastery Peoples view of the universe.

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Secondary beliefs Are open to change Marketers have the chance of changing

sec. beliefs

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How do we respond? Reactive approach

*we always don’t have control over the environment

Proactive approach Lobby Lawsuits Advertorials Invention

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MARKET SEGMENTATION

(LECTURE 5)

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Markets Traditional perspective

A physical place where buyers and sellers gathered to exchange goods.

Economic perspective A collection of buyers and sellers who transact

over a particular product (e.g. housing market) Marketing perspective

Marketers view sellers as constituting the Industry and buyers as constituting the market.

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Con’t A MARKET can therefore be defined as

the set of all actual and potential buyers of a product or services. It can also be defined as the individuals and / or organizations that have the desire and the ability to purchase a particular product

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Con’tOther important Definitions are: - INDUSTRY – A group of firms which

offer product(s) that are close substitutes for each other. That is the set of all sellers of a product or service.

POTENTIAL MARKET - The set of customers who profess some level of interest in a particular product.

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QUALIFIED AVAILABLE MARKET – The set of customers who have interest, income, access and qualification for a particular product.

SERVED MARKET – The part of the qualified available market that the company decides to pursue. Also known as the targeted market.

PENETRATED MARKET – The set of customers who have already bought a particular product.

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The Concept of Segmentation, Targeting and Positioning Mass marketing Using the same product, promotion and

distribution for all customers it is the process of subdividing a market

into distinct subsets of customers that behave in similar ways and/or have similar needs.

A Market Segment is a relatively homogenous collection of prospective buyers

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When is mass marketing appropriate? The total market is too small to divide

into different segments The total market has few differences in

customer needs and wants When it is operationally difficult to

develop distinct products and/or marketing programs to reach different customer groups or segments.

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Why segment markets? It helps in the design of marketing programs that

are most effective for reaching homogenous groups (segments) of customers

It also helps in the identification of opportunities for new product development

Helps in the strategic allocation of the organizations resources.

The organization may face less competition, if fewer competitors are focusing on the same segment

By going after segments, organizations serve their consumers better, and receive maximum rewards

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Bases for Segmentation1. Segmenting Consumer markets

Demographic Geographic Buyer Behaviour Psychographic

2. Organisational Buyers (Business Buyers) Geography Type of organisation Product application

3. Multiple Segmentation Bases The use of more than one variable Eg. Demographic and geographic

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Bases for Segmentation1. Segmenting Consumer markets

Demographic (age, sex, income, education, social class, lifecycle, religion, nationality and race)

Geographic (location, region, country, climate)

Buyer Behaviour (loyalty status - promiscuous nomads, immovable, loyal susceptible, buyer readiness stage, benefits sought, marketing factor sensitivity, usage rates)

Psychographic (personality and perceptions) Lifestyle (attitude, interests and opinions)

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Segmenting Organisational Markets2. Organisational Buyers (Business Buyers)

Geographical location Size (scale of operations) Type of industry Usage rate Structure of procurement (centralized or

decentralised) State of decision process Organisational policies/pre-disposition Type of organisation Type of buying situation (re-buy or new task) Product application

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Multiple Segmentation Bases

3. Multiple Segmentation Bases The use of more than one variable Eg. Demographic and geographic

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Requirements for effective Segmentation Measureability Substantiabilility Actionability Accessibility Differentiability

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Market Niches

A niche is a more narrowly defined group (or small market) whose needs are not well met.

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Con’t NichesAn Attractive Niche is characterized by – Customers with a distinct set of needs Customers who are willing to pay a premium

price for their needs to be met. The niche does not attract many competitors The niche must have size, profit and growth

potential. The Niche Marketer gains certain distinctive

competencies and economies through specialization.

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TARGETING

(LECTURE 6)

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Targeting A Target Market can be defined as the

part of the qualified available market the organization decides to pursue.

How do you evaluate market segments? Segment attractiveness Business strengths/Company fit

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Targeting Segment Attractiveness

Size of Segment Growth Potential of Segment Competition within the segment

Company Fit Organisational resources and strengths Cost of reaching the segment Objectives

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Targeting Approaches1. Single segment concentration

Economies of scale Strong market presence Specialisation Entrants of competitors Changes in the segment

2. Selective specialisation1. Greater sales volume2. Diversification

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Con’t1. Full market coverage

Undifferentiated marketing cost

Differentiated marketing

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Lecture 773

PRODUCT POSITIONING

(LECTURE 7)

Product Positioning Product Positioning refers to the

development of a distinct image for the product or service in the mind of the consumer; an image that will differentiate the offering from competing ones. Fizzy

A Product’s Position is the place the product occupies in the consumers mind relative to competing products.

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Positioning Maps Marketers often prepare perceptual positioning

maps, showing consumer perceptions of the brand vrs competing products on important customer dimensions.

A means of displaying or graphing, in two or more dimensions, the location of products, brands, or groups of products in customers’ minds

These show consumer perceptions of their brands vrs competing products on important buyer dimensions.

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Positioning Strategy Development1. Identify possible value differences and

competitive advantages2. Choose the right competitive

advantages How many differences to promote Which differences to promote

3. Select overall positioning strategy

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Examples of Product Positioning Strategies

More for more More for same More for less Same for less Less for much less

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THE MARKETING MIX

(LECTURES 8,9,10,11)

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Product

PRODUCT DECISIONS

LECTURE 8

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The MarketingMix The marketing mix refers to the

controllable marketing variables that the firm or Marketer puts together to satisfy a target market or group. The four basic variables are; The Product The Price Promotions Place.

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PRODUCTSDefinitions• A product is anything that can be offered

to a market for attention, acquisition or consumption.

• A product mix is the full set of products for sale by an organization.

• A product line: - This refers to groups of products that share common characteristics, customers or uses.

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PRODUCT LEVELS82

PRODUCT LEVELS/ CUSTOMER VALUE HIERARCHY

First Level: - This is the fundamental level and is referred to as the CORE BENEFIT. This refers to the benefit the customer is really buying.

Second level: - This is referred to as the BASIC PRODUCT. Here the core benefit is turned into a product.

Third level: - This is the EXPECTED PRODUCT that is the set of attributes and conditions buyers normally expects when they buy this product. E.g., a hotel guest expects a clean room, fresh towels etc.

 

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Fourth level: - At this level, the marketer may provide an AUGMENTED PRODUCT, which exceeds customer expectations. Here marketers seek to differentiate their products based on factors including packaging, customer service, advertising, delivery arrangement etc.

Fifth level: - This is the POTENTIAL PRODUCT. It consists of all the possible augmentations and additions the product might undergo in the future. This is where marketers search for new ways to satisfy their customers and distinguish their products.

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Product Classifications

1. Tangibility Intangible products (services -

*characteristics) Tangible products ( durables, non

durables)2. Type of Customer

Consumer products Industrial products

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CharacteristicsIntangibility: This implies that services cannot be seen, tasted,

felt, heard, or smelt before they are purchased. The marketer must therefore make the service

tangible in some ways. E.g. organized routines, the people, physical evidences, etc

Inseparability: Services are produced and consumed

simultaneously, i.e. at the same time. This implies that services cannot be separated from their producers or customers. Therefore both the producer and the customer can affect the outcome.

Marketers may adopt strategies like training their providers well, and also establishing procedures for the provision of the service.

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 Variability: Service quality depends on who provides them, when,

where and how they are provided. Services are therefore very variable.

The variability can be reduced by establishing processes and procedures for the provision of services.

Perishability: Services cannot be stored for later sale or use. In other

words service value exists only at a particular point in time, and when not utilized it perishes.

Marketers must find ways to match demand and supply. Some of the strategies used include differential pricing, and peak time efficiency routines e.g. hiring part time staff at peak periods, etc.

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Tangible Products88

Industrial ProductsA. Material and Parts: - These are products that

enter a manufacturer’s product completely.Raw Materials: - These are unprocessed items like

farm products e.g. wheat, fruits, livestock etc and natural products e.g. crude oil, gold, etc.

Manufactured Materials and Parts: Component materials are further processed

before becoming part of the final product. (e.g. cement)

Component parts enter the final product with no further change in form. (small motors, tires etc).

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B. Capital Items:-These are long lasting products that facilitate the buyers production activities. They include Installations e.g. buildings, assembly lines etc, and Accessory Equipment e.g. hand tool, calculators. These products do not become part of the finished products.

C. Suppliers and Services: - These are short lasting goods and services that facilitate developing and managing the finished product. They do not enter the finished products at all.

Suppliers include operating suppliers e.g. paper, lubricating oils etc. Repair and maintenance suppliers e.g. paint, light bulbs,

nail etc. Business services include maintenance and repair services

e.g. computer repairs, and Advisory services e.g. legal, Accountancy.

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Product Life Cycle The stages of growth and sales in the life

of a product or The various stages a product goes

through from the time of its introduction until it is eventually withdrawn from the market Introduction Growth Maturity Decline *characteristics, objectives and strategies

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Branding A BRAND:- is a symbol, design, name, term, or

combination of these that uniquely identifies a seller’s product and distinguishes it from that of competitors. A BRAND NAME: - is that pat of a brand (including

numbers, letters and words) that can be voiced (e.g. Pepsi).

A BRAND MARK: - is that part of a brand that can be seen but not voiced (usually a symbol or design.)

A TRADE MARK: - is a brand name and / or brand mark that the seller has exclusive legal rights to use.

A TRADE NAME: - is the legal name of an organization. (Rather than a specific product) e.g. BMW.

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BENEFITS OF BRANDING

Importance of Brands to Consumers Identification of the source of the product Assignment of responsibility to product

maker Risk reducer Search cost reducer Promise, bond, or pact with product maker Symbolic device Signal of quality

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Importance of Brands to Firms To firms, brands represent enormously

valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues

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PACKAGING Packaging refers to the activities of

designing and producing the container or wrapper for a product.

Packages in which product are served serve several purposes including Functional Purposes  Promotional Purposes Informational Purposes Product Feature

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Price

PRICE

(LECTURE 9)

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Pricing Strategies/Approaches1. Cost-based

2. Value-based

3. Competition-based

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Pricing Decisions Price can be defined as the amount of money

charged for a product or service or The sum of the values that consumers

exchange for the benefits of having or using a product or service.

Factors influencing pricing decisions include Organisational considerations Cost considerations Customer considerations Competitor considerations Industry considerations• Other external factors

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Cost-based pricing Cost-plus

Break even pricing

Target return pricing

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Competition-based pricing Going rate pricing

Below the market pricing

Sealed bid pricing/Auction

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Value-based pricing Perceived value pricing

Value pricing

Prestige pricing

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PLACE DECISIONS(DISTRIBUTION CHANNEL)

LECTURE 11

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A Distribution channel is the set of independent organizations involved in the process of making a product or service available for use or consumption by the customer

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Marketing Channel Functions

1. Information: - Intermediaries may be involved in gathering and distributing marketing research about the forces in the marketing environment needed for planning and facilitating exchange

2. Promotion: - Developing and communicating effective promotions about products.

3. Contact: - Finding and communicating with prospective customers.

4. Matching: - Shaping and fitting the offer to the customers peculiar needs. This may include activities such as assembling and packaging.

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Con’t 5. Negotiation: - This involves reaching an

agreement on price and other terms of sale with the customers.

6. Physical Distribution: - This includes transporting and storage of products

7. Financing: - Acquiring the finances needed to cover the costs of channel work.

8. Risk taking: - Assuming the risk of carrying out channel work.

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Channels Decisions1. Channel Structure

Direct channel Indirect channel

2. Channel Levels

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Channel management decisions

1. Selection financial strength – reputation – competencies cooperativeness – location – other products carried future growth potential etc

2. Training3. Motivation• Training and capacity building programs, higher margins,

cooperative promotions, display allowances, sales contexts etc.

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Channel Decisions4. Evaluation

Under performers may need to be retrained, motivated or terminated

5. Modifying channel arrangements the channel is not working as expected change in customer buying patterns, new competitors etc.

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PROMOTIONS

(LECTURE 10)

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Promotional Objectives The promotional efforts is used to

Support sales increases To inform buyers about the benefit and features

of products. To encourage trial of products To create awareness To remind (about benefits they enjoy by using

the product.) To reassure customers To create an image To modify attitudes

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Promotional Mix

Advertising Sales promotions Personal selling Publicity/Public Relations Direct marketing

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The Promotional Mix112

Con’t Public relations

Credibility Cost Ability to reach specific groups Image building

Publicity Credible, less costly and high exposure rate Timing and accuracy

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