Sunday, October 24, 2010

UNIT I MARKETING BASICS










Philip Kotler



DEFINITIONS OF MARKETING:

Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging of products of value with others.(kotler)

The art and science of choosing target markets and getting, keeping, rowing customers through creating, delivering and communicating superior customer value.

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.

Market: Traditionally, market was a physical place where buyers and sellers gather to buy and sell goods.

According to economists, market is collection of buyers and sellers who transact over a particular product or product class ( grain market, fruit market)

Meta Market: is a cluster of complementary products and services that are closely related in the minds of consumer but are spread across a diverse set of industries.

Eg: Automobile meta market consists of automobile manufactures, new and used car dealers, finance companies, insurance company, mechanics, spare par dealers, service shops, auto magazines.

MARKETING MIX






The Marketing Mix is also known as the 4 P’s, can be used by marketers as a tool to assist in implementing the Marketing strategy. This method is used to generate the optimal response in the target market by blending 4 variables in an optimal way. These four P’s controllable variables. These 4p’s are adjusted on a frequent basis to meet the changing needs of the target group and the other dynamics of the Marketing environment.

Product: A product is customer solutions and firms must define the characteristics of product or service that meet the needs of customers

Price: It is the amount the customers willing to pay for the product. And firms must be conscious in deciding the price of the product as customers are very sensible to it.

Place: Making the product available at right time, right place in right quantities.

Promotion: Its all about how chosen target markets are informed about organizations products and services and includes tools like advertising, sales promotion, publicity, public relations and direct marketing

EXPANDED MARKETING MIX







The 7-Ps model is more useful for services industries and also for knowledge-intensive environments.

5. People: All people directly or indirectly involved in the consumption of a service are an important part of the extended marketing mix. Knowledge Workers, Employees, Management and other Consumers often add significant value to the total product or service offering.

6. Process: Procedure, mechanisms and flow of activities by which services are consumed (customer management processes) are an essential element of the marketing strategy.

7. Physical Evidence: The ability and environment in which the service is delivered, both tangible goods that help to communicate and perform the service and intangible experience of existing customers and the ability of the business to relay that customer satisfaction to potential customers.


WHAT IS MARKETED (MARKETING OFFERINGS)

Marketing offers 10 types of entities that include goods, services, experiences, events persons, places, properties, organizations, information, and ideas.

Goods: All physical goods are marketed by marketing people like cars, trucks, Tv’s machine tools, machines, industrial chemicals, watches cosmetics and others.

Services: In modern economy, most of the services are marketed that includes airlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, accountants, bankers, lawyers, engineers, doctors software programmers and management consultants

Experiences: experiences are also be marketed eg: rides in amusement or water park

Events: Events like trade shows, artistic performances world cups or Olympics are aggressively promoted by companies.

Persons: Celebrity marketing is a major business today. Film stars and sports personalities are increasingly endorsed with many brands to promote them.

Places: Even cities, states, region, and whole nations can attract tourists, factories, companies and new residents.

Properties: Properties like real estate, stocks and bonds also requires marketing.

Organizations: Companies, universities, museums performing arts organizations all use marketing to boost their image and compete with others.

Information: Information can be produced and marketed as a product.

Ideas: Product or service ideas can also be marketed well in advance.


CORE CONCEPTS OF MARKETING (Needs, Wants, And Demands)

Needs are the basic human requirements. People need food, air, water, clothing, and shelter to survive. People also have strong needs for creation, education, and entertainment.

The above needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want a hamburger, French fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by one's society.

Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one.

Companies must measure not only how many people want their product but also how many would actually be willing and able to buy it.

Understanding customer needs and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. Consider the customer who says he wants an "inexpensive car.". The marketer must probe further. We can distinguish among five types of needs:

1. Stated needs (the customer wants an inexpensive car).

2. Real needs (the customer wants a car who operating cost, not its initial price, is low).

3. Unstated needs (the customer expects good service from the dealer).

4. Delight needs (the customer would like the dealer to include an onboard navigation system).

5. Secret needs (the customer wants to be seen by friends as a savvy consumer).


Target Markets, Positioning, And Segmentation: segmentation means dividing the total market in to groups of consumers with similar needs, wants, and preferences. Positioning is to place the company’s products in the minds of target buyers. Target market is the group of potential customers to whom the marketers offer their products.

Offering And Brands: An offering can be a combination of product, services, information and experiences. Brand is an offering from a known source that carries many associations in the minds of people (brand image)

Value And Satisfaction: Value reflects the perceived tangible and intangible benefits and costs to customers. Value is a combination of quality, service and price (customer value triad). Value increases with quality, service and decreases with price.

Marketing Channels: Channels helps to reach target customers. Communication channels deliver and receive message or feed back from their customers, whereas distribution channels enables deliver of physical products.

Competition: Competition includes all actual and potential rival offering and substitutes that a buyer might consider.

Marketing Environment: It includes both micro and macro environment factors that influence a company performance. The Microenvironment consists of the following factors close to the company that affect its ability to serve its customers.The company, Suppliers, Marketing intermediaries, Customer, Competitors, and Public. The macroenvironment factors include political, cultural, technological and demographical factors.


MARKETING MANAGEMENT PHILOSOPHIES:

What philosophies should guide the marketing efforts. There six alternative concepts under which organization carryout their marketing strategies.

Production Concept: The concept is of the idea that consumers will favor those products which are widely available and highly affordable. Therefore, management should focus on production and distribution efficiency.

Product Concept: The product concept hold that consumer will favor a product that offers Most quality, performance and innovative feature. So under this, marketing strategy focuses on product improvement through design, packaging and price.

Selling Concept: The concepts hold that consumers will not buy the products unless aggressive marketing efforts are pursued. This concept is mainly applicable incase of unsought goods (like insurance).

Marketing Concept: The concept holds that achieving goals depends o knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors. The concept mainly focuses on customer.

Holistic Marketing Concept: is an integrated perspective that is based on the development, design, and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies. It contains four components that include relationship marketing, integrated marketing, internal marketing, and social responsibility marketing.

Relationship Marketing: It aims at building mutually satisfying long-term relationships with key parties that includes customers, suppliers, distributors and other marketing partners in order to earn and retain their business.

Integrated Marketing: the marketer’s task is to design marketing activities and integrated marketing programs to create, communicate and deliver value for consumers.

Internal Marketing: It ensures that everyone in the organization holds appropriate marketing principles. The main task of internal marketing is hiring, training and motivating able employees who want to serve customers well.

Social Responsibility Marketing Concepts holds that the organization’s 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 preserve or enhances the consumer’s and society’s well-being.



MARKETING TASKS: (OR) TASKS OF MARKETING

Developing Marketing Plan and Strategies: The first step is to identify the potential long run opportunities and core competencies of the company, and to devise marketing plans and strategy and can move forwards.

Capturing Marketing Insights: Every company needs reliable marketing information to understand what is happening inside and outside the company.(marketing environment). MIS also includes marketing research, an important tool, which assess buyer wants and behaviour, actual and potential market size.

Connecting With Customers: Marketing management must also consider how to best create value for its chosen target customers and develop, strong profitable, long run relationship with customers.

Building Strong Brands: Every company must understand the strength and weakness of the brands with customers. Companies must initiate new product development based on their product positioning that helps build strong brands. At the same time they must think about life cycle stages and competition and other activities.

Shape Market offerings: Firms offers variety of products to cater the needs of customers. And product is the heart for any marketing program that includes product quality, design, features, packaging and also provides support services which gives competitive advantage over the competition. Pricing is the one of the critical decision, and it must based on their product perceived value.

Delivering Value: Every company must properly deliver value embodied in products through careful identification and selection of channel intermediaries who performs channel activities. It must also understand the various types of middleman like retailers, wholesalers and physical distribution firms and how they make decisions.

Communicating Value: Firms need to communicate the value in products/services. Marketing communication are the means by which firms attempt to inform, persuade and remind customers directly or indirectly about the products or brands. One can opt for mass communication or personal communication channels or integrated communication.

Creating Long-term Profits: Another important task of marketing is to have long-term view of its products and profitability. Companies must continuously search for changing global opportunities and develop new products to meet the changing needs of consumers.



MARKETING ENVIRONMENT

A company’s marketing environment consists of the factors and forces outside marketing that affect the marketing management ability to develop and maintain successful transactions with its target customers(Kotler & Armstrong ).


Marketing Environment is composed of a micro environment and macroenvironment. The Microenvironment consists of the following factors close to the company that affect its ability to serve its customers.

1) The company
2) Suppliers
3) Marketing intermediaries
4) Customer
5) Competitors
6) Publics


Company: Marketing mangers while formulating the marketing program and plans must consider other groups such top management, R&D, production and purchasing and accounting and think about consumers and work in harmony

Suppliers: Suppliers are very important in value delivering system who provides resources for the company to achieve its goals. Any change in the suppliers environment such as price change, labour strike, supply shortage can impact marketing operations seriously.

Marketing intermediaries: Marketing intermediaries are the firms engaged in selling and distributing the goods/services to end users. These include middlemen, physical distribution firms, marketing service agencies, and financial intermediaries. Middlemen include retailers, wholesales, dealers, and agents

Customers: The organization must know customers needs and wants, what they require and their characteristics. Customers may come from consumer market, business, resellers, and government markets.

Competitors: Marketing must try to gain strategic advantage over its competitors through proper positioning of their offer in the consumer minds. While designing and implementing marketing strategies, one has to track the competitors activities and strategies.

Publics: The company’s marketing environment includes various groups such financial, media government, citizen, and general public.

Macroenvironment:

Economic environment: Marketer requires to study the buying power of people. Changes in income and spending pattern would influence marketing environment. So marketer has to study income levels and distribution.

Political Factor: Most of marketing decisions are strongly affected by development in the political environment. This environment includes government agencies and other pressure groups that influence organizations.

Cultural Factors: The cultural environment is made of up institutions and other forces that affect society’s basic values, perceptions, preferences and behavior. Marketer must focus on the cultural shifts.

Technological factors: The major impact on the society is the technological advancement and changes in product that effect on consumers. Technology will be advanced further and consumer demands better and sophisticated product and services. These factors effect the company and consumers.

Deomographic Environment: Demography means the study of human population in terms of age, sex, occupation, income and other statistics. Any change in demographic environment would impact business organizations. So, marketing manager has to identify the changes in these factors that would affect businesses.


Why the study of marketing environment is important for a marketer?

The task environment includes the immediate actors involved in producing, distributing and promoting the offering. The main actors are the company, suppliers, distributors, dealers and target customers. Includes in the supplier group are – material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation and telecommunication companies. Included with distributors and dealers are agents, brokers and others who facilitate finding and selling to customers.

The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment and social-cultural environment. these environments contain forces that can have major impact on the actors in the task environment.

The major responsibility for identifying significant market place changes falls to the company’s marketers. More than any other group in the company, they must be the trend trackers and opportunity sectors.

Marketers are keenly interested in the size and growth rate of population in cities, regions and nations; age distribution etc. Exposure population growth has major implications for business. A growing population does not mean growing markets unless these markets have sufficient power nonetheless the companies that carefully analyse their markets and find major opportunities.

National populations vary in their age mix. At one extreme is Mexico a country with a very young population and rapid population growth. At the other extreme is Japan, a country with one of the world’s oldest populations. Milk diapers, school supplies and toys would be important products in Mexico. Japan’s population would consume many more adult products. A population can be sub divided into six age groups – pre-school, school-age children, teens, young, adults age 25 to 40, middle-aged adults aged 40 to 65 and older adults aged 65 and up. For marketers, the most populous age groups shape up the marketing environment.

Marketing require purchasing power as well as people. The available purchasing power in an economic depends on current income, prices, saving, debt and credit availability. Marketers must pay close attention to major trends in income and consumer-spending patterns because they can have a strong impact on business especially for companies whose products are geared to high income price-sensitive consumers.

The deterioration of the natural environment is a major global concern. Steel companies and public utilities have hard to invest billions of dollars in pollution-control equipment and more environmentally friendly fuels marketers need to be aware of the threats and opportunities associated with four trends in the natural environment, the storage of raw materials especially the water, the increased cost of energy, increased pollution levels and the changing rate of the governments.


GLOBAL MARKETING


A Global Firm is one that, in operating in more than one country, captures R&D, production, logistical, marketing and financial advantages in its costs and reputation that are not available to purely domestic competitors. Global firms plan, operate and coordinate their activities on a world wide basis.

Each national market has unique features that must be grasped. A global firm has to take into account economic, political – legal and cultural factors of target country while planning its expansion programmes.

Economic Environment:

Three characteristics reflect a country’s attractiveness as an export market.



  1. Size of country’s population: Large countries are more attractive to exporters than small markets.

  2. Country’s industrial structures, four types of industrial structures can be distinguished: -

    • Subsistence Economics: - In Subsistence economics the vast majority of people engage in simple agriculture. They consume most of their output and barter the rest for simple goods and services. They offer few opportunities for exporters.

    • Raw Material Exporting Economics: - These economics are rich in one or more natural recourses but poor in other respects. Much of their revenue comes from exporting these resources Examples are Chile (tin and copper); Zaire (rubber). These countries are good markets for extracting equipment, tools and supplies, materials handling equipment and trucks. Depending on the number of foreign residents and wealthy native rulers and landlords, they are also a market for western – style commodities and luxury goods.

    • Industrializing Economies: - In an industrializing economy, manufacturing begins to account for between 10 and 20 percent of the country’s grogs national product. Examples include India, Egypt etc. As manufacturing increases, the country relies more on imports of textile raw materials, steel and heavy machinery and less on imports of finished textiles, papers products and automobiles. The industrialization creates a new rich class and small but growing middle class, both demanding new types of goods, some of which can be satisfied only by imports.

    • Industrial Economies: - Industrial economies are major exporters of manufactured goods and investment founds. They trade manufactured goods among themselves and also export them to other type of economies in exchange of raw materials and semi-finished goods. The large and varied manufacturing activities of these industrial nations and their sizable middle class make them rich markets for all sorts of goods.

Economic characteristics of the country: characters like income distribution. Income distribution is related to a country’s industrial structure but is also offered by the political system.


Political – Legal Environment

A company should consider four factors in deciding whether to do business in a particular country.


  1. Attitude towards International Buying: - Some nations are very receptive, indeed encouraging to foreign firms and others are very protectionist. For example, Mexico for a number of years has been attracting foreign investment by offering investment incentives, while India in the post required the exporter to cope with import quotes, blocked currencies and so on.

  2. Political Stability: - Government in some countries changes hands, sometimes quite violently. And with changes in government foreign trade policies also change. The foreign company’s property might be expropriated, or its currency holdings might be blocked. In such conditions international marketers might prefer export marketing to direct foreign investment. They will convert their currency rapidly. As a result, the people in the host country pay higher prices, have fewer jobs and get less satisfactory products.

  3. Monetary Regulation: - Sellers want to realize profits in a currency of value to them. Foreign firms want payments in hand currency with profit repatriation rights, but that may not be available in many markets.

  4. Government Bureaucracy: - A fourth factor is the extent to which the host government runs an efficient system for assisting foreign companies: quick licensing procedures, efficient custom handling adequate market information and other factors conductive to doing business.

Cultural Environment: - Each nation has its own values, customs and taboos. Foreign business people, if they are to be effective, must drop their ethnocentrism and try to understand the culture and business practices of their hosts, who often out on different concepts of time, space and etiquette. The way foreign consumers perceive and use certain products must be checked out by the seller before planning the marketing programme.

Short Notes:

Marketing Strategy:

Marketing strategy combines product development, promotion, distribution, and pricing approach, identifies the firm's marketing goals, and explains how they will be achieved within a stated timeframe. Marketing strategy determines the choice of target market segment, positioning, marketing mix, and allocation of resources. It is usually a part of company’s corporate plan.

Marketing Program:

Once marketing plan is completed and is being implemented, it is referred to as marketing program, a term that holds all the activities associated with implementation and control of the individual elements of the marketing mix.

Marketing Myopia:

Short sightedness and inward looking approach to marketing that focuses on the needs of the firm instead of defining its products in terms of the customers' needs and wants. Such firms fail to adjust to the changes in the market and will disappear later.

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