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TNMG ClassicsMarketing Basics
Welcome to the ‘Marketing Basics’ – dear friend!This document is created for the purpose of spreading knowledgeabout basic marketing concepts and frameworks in a brief andeasy to understand manner. You are free to use this document forpersonal non-commercial purposes. You can also share thisdocument with anyone and everyone who you think will find theinformation useful. For any further queries about the content orcopyright please write to us at: tnmg4u@gmail.com. Anyfeedback, suggestions or comments about this document orTNMG website (www.tnmg4u.com) or our YouTube channel(www.youtube.com/user/TNMGTube) is most welcome. Wewould love to hear back from you!
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INTRODUCTION TO MARKETING
“Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses theentire business. It is the whole business seen from the point of view of the final result, that is, from thecustomer’s point of view.” -Peter Drucker
“Marketing is the social process by which individuals and groups obtain what they need and want throughcreating and exchanging products and value with others.” -Kotler
“Marketing is the management process that identifies, anticipates and satisfies customer requirementsprofitably.” -The Chartered Institute of Marketing (CIM)
From the strategic perspective, marketing is satisfying customer needs profitably and better than thecompetition (broader goal – creating value for all the stakeholders including society)
From the tactical perspective, marketing is about ensuring the right product, in the right place, at theright time, at the right price
Need is a generic desire(+) or problem (-) that consumers seek to fulfill or solve (e.g. Hunger) Want is the concrete form in which a need is being shaped (e.g. I want to eat Domino's Pizza) Demand is want backed by buying power (normally directed towards a specific product/brand) Maslow’s Needs: Physiological Safety Belongingness Self-esteem Self-actualization
MARKETING PHILOSOPHIES
PRODUCT CONCEPT
Focus on product quality, design and features – too much technical orientation Basic assumption is customer will purchase if the product is of higher quality, has maximum number
of features and best design Do not consider customer needs, external factors and competition leading to marketing myopia
PRODUCTION CONCEPT
Focus on production efficiencies, low costs and mass distribution Basic assumption is all output can be sold as demand for a product is greater than supply Beneficial when increasing production raises economies of scale and helps reduce price "Doesn't matter what color car you want, as long as it is black." - Henry Ford
SELLING CONCEPT
Focus on selling the product with the objective of profit maximization Basic assumption is any product can be sold if sales people can convince the customers Customer needs or satisfaction is not considered and can be counterproductive in long run Widely criticized yet widely used across industries!
MARKETING CONCEPT
Focus on determining customer needs and wants, produce product and sell it to consumers Basic assumption is supply for a product is greater than demand (high competitive intensity) Very important – market and product fit
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SOCIETAL MARKETING CONCEPT
Focus on all the stakeholders (S Balancing all three aspects: consumer needs + business profit + society’s interests Definitely the best approach
BASIC MARKETING PROCESS
SITUATIONAL ANALYSIS
• External Environment Analysis (Analyzing factors outside the organization)• Macro Environment Analysis
cultural and Technological)• Micro Environment Analysis (Value Chain Analysis=
and Distributors)• Industry or Competitive Analysis (Porter’s Five Forces)
• Internal Environment Analysis (Analyzing factors inside the organization)• Analyze all organizational functions=Marketing, Finance, Production, HR and IT• 5M Framework=• Portfolio Analysis (BCG Matrix, GE McKinsey Matrix)
• Internal + External Analysis (SWOT=
MARKETING OBJECTIVES:
• Should be SMART = Specific,
MARKETING STRATEGY:
• Deals with broader level strategic decisions• STP = Segmentation, Targeting and
MARKETING TACTICS:
• Marketing Tactics or Marketing Mix d• Most widely used framework is 4Ps =• 4Cs= Customer solution, Customer cost, Convenience, and Communication• For services industry 7Ps = 4Ps +
MARKETING IMPLEMENTATION:
• Is equally important as planning
MARKETING AUDIT AND CONTROL
• You can’t manage what you can’t measure• Involves evaluation of marketing strategy and implementation• Provides inputs for future marketing strategy
SituationalAnalysis
MarketingObjectives
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ONCEPT
Focus on all the stakeholders (Short term consumer wants Long term consumer welfare)Balancing all three aspects: consumer needs + business profit + society’s interestsDefinitely the best approach – all preaches now-a-days but few follows!
Analysis (Analyzing factors outside the organization)Macro Environment Analysis (PEST=Political-legal, Economic
echnological)Micro Environment Analysis (Value Chain Analysis= Customers, C
tors)Industry or Competitive Analysis (Porter’s Five Forces)
Internal Environment Analysis (Analyzing factors inside the organization)Analyze all organizational functions=Marketing, Finance, Production, HR and IT5M Framework=Men, Money, Machinery, Materials and MinutePortfolio Analysis (BCG Matrix, GE McKinsey Matrix)
Internal + External Analysis (SWOT=Strength, Weakness, Opportunity and
pecific, Measurable, Achievable, Realistic and Time-
Deals with broader level strategic decisionsargeting and Positioning
Marketing Tactics or Marketing Mix deals with more specific and tactical level decisionsMost widely used framework is 4Ps = Product, Price, Place and Promotion
Customer solution, Customer cost, Convenience, and CommunicationFor services industry 7Ps = 4Ps + (People, Process and Physical Evidence)
TION:
Is equally important as planning but many a times not properly executed
AND CONTROL:
You can’t manage what you can’t measure - so, measure and then manage!Involves evaluation of marketing strategy and implementation
for future marketing strategy
MarketingStrategy
MarketingTactics
MarketingImplementation
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ong term consumer welfare)Balancing all three aspects: consumer needs + business profit + society’s interests
Analysis (Analyzing factors outside the organization)conomic-demographic, Socio-
Customers, Competitors, Suppliers
Internal Environment Analysis (Analyzing factors inside the organization)Analyze all organizational functions=Marketing, Finance, Production, HR and IT
pportunity and Threat)
-bound
tactical level decisionsromotion (by McCarthy)
Customer solution, Customer cost, Convenience, and Communicationhysical Evidence)
any a times not properly executed
so, measure and then manage!
MarketingImplementation
MarketingAudit and
Control
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MAJOR MARKETING FRAMEWORKS
PORTER’S FIVE FORCES
Contributed by Michael E. PorterHelp analyze competitive scenario in
an industry Ideal scenario to enter:
Entry Barrier=High Buyer Power=Low Supplier Power=Low Threat of Substitution=Low Competitive Rivalry=Low to
medium Current players try to build high
entry barriers to prohibit new comersfrom entering
Examples of high entry barrier –strong distribution channel of ITC inthe Cigarette industry
Example of low Supplier Power – HULgetting long credit periods fromsuppliers
BCG MATRIX
Contributed by Boston ConsultingGroup
Best-known portfolio planningframework (simple to understandand use, provides quick guidelinesin strategic investment planning)
Used to analyze current businessportfolio at the SBU level (can beadapted to use for products also)
Four possible strategies for SBUsor products: build market share,hold, harvest and divest
Helps to decide which SBUs orproducts should receive more or less investment and which SBUs or products should be divested
Pitfall: oversimplifies a complex decision, assumes that higher rates of profit are directly related to highrates of market share (based on economies of scale or experience curve) – which might not be the case –a new or disruptive technology might give better profitability
The GE/McKinsey Matrix is a more advanced form of the BCG matrix which addresses its pitfalls
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ANSOFF’S MATRIX
Contributed by Igor Ansoff (Harvard Business Review 1957) Helps in deciding growth strategy; also called growth
Existing Products/Services
Existing Markets Market Penetrationsell more to existing customers
New MarketsMarket Developmentnew markets
SWOT ANALYSIS
• A tool for auditing an organization and its environment; used in early stage of planning• Strengths and Weaknesses are• Objective of decision making will be to capitalize on
time minimize the effects ofPositive FactorsStrengths: Good relationship with suppliers and distributors An innovative product/service and q Specialist marketing expertise and expert people Strong distribution channel and reputation Location of business (store location for retail)Opportunities: Potential international market (e.g. BRIC markets) A new or developing market (e.g. Acquisition, mergers, JV or strategic alliances New market segments that offer improved profits A market vacated by an ineffective competitor
STP
SEGMENTATION AND TARGETING Bases of segmentation can be: (a) demographics, (b) Evaluation of segments and then targeting can be done based on following decision parameters
HOMOGENEITY•Companiesshould try tochoose andtargetsegments thatarehomogenousin the kinds ofvalue sought
MEASUREABILITY•Can we
understand thesize and needsof the marketsegment?
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Harvard Business Review 1957)Helps in deciding growth strategy; also called growth opportunities matrix
Existing Products/Services New Products/Services
Market Penetration: Gain market share,sell more to existing customers
Product Developmentto current customers
Market Development : Enter and develop Diversification: Launch new product innew markets (diversify portfolio)
A tool for auditing an organization and its environment; used in early stage of planningStrengths and Weaknesses are internal factors and Opportunities and Threats areObjective of decision making will be to capitalize on Strengths and Opportunitiestime minimize the effects of Weaknesses and Threats
Negative Factors
relationship with suppliers and distributorsand quality process
Specialist marketing expertise and expert peopleand reputation
(store location for retail)
Weaknesses : Lack of goodwill or poor reputation Poor quality/undifferentiated goods or services Lack of marketing expertise Weak supply chain; poor relation with vendors Poor location of business
(e.g. BRIC markets)(e.g. Internet)
or strategic alliancesNew market segments that offer improved profitsA market vacated by an ineffective competitor
Threats: Competition: new competitors,
or better products, better distribution channel Environmental factors: new laws with higher
taxes, weak economy or recession, issues insupply for flood, draught, strikes etc
AND TARGETINGBases of segmentation can be: (a) demographics, (b) psychographics, (c) behavioral, (d) benefits soughtEvaluation of segments and then targeting can be done based on following decision parameters
ACCESSIBILITY•Can we
communicatewith thesegment sothat servingthe segmentis possible?
SUBSTANTIALITY•Does the
segment desirethe values thatan offeringpresents?
ATTRACTIVENESS•Market,Competitive,Channel, Internaland OtherConsiderations
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New Products/Services
Product Development: Sell more productsto current customers
: Launch new product innew markets (diversify portfolio)
A tool for auditing an organization and its environment; used in early stage of planningd Opportunities and Threats are external factors
Opportunities and at the same
goodwill or poor reputationndifferentiated goods or services
ack of marketing expertiseWeak supply chain; poor relation with vendors
business
new competitors, price wars, newbetter distribution channels
Environmental factors: new laws with highertaxes, weak economy or recession, issues insupply for flood, draught, strikes etc
(c) behavioral, (d) benefits soughtEvaluation of segments and then targeting can be done based on following decision parameters
ATTRACTIVENESS
Competitive,Channel, Internaland OtherConsiderations
ACTIONABILITY•Can we
create acompetitiveadvantagewith respectto the needsof thesegment?
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POSITIONING
CONSUMER DECISION MA KING PROCESS
TYPES OF DECISION PROCESSES
NeedRecognition
ConsiderationSet
Picking•Low involvement and
limited problemsolving
•Undifferentiatedbrands
Variety seeking•Low involvement andlimitedsolving
•Differentiated brands
Problem solving•Normally for complex,high priceddifferentiatedproducts
•High degree ofuncertainty
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Positioning refers to theconsumer's perception of a product orservice in relation to its competitors Perceptual mapmap is used to map competing productsto analyse their positioning Generic positioningproduct; Differentiate on needs Attribute positioningmarket; Differentiate on attributes Emotional positioningmarket; Differentiate on intangibleattributes/ brand image
KING PROCESS
OCESSES
InformationSearch
AlternativeEvaluation
PurchaseDecision
Variety seekingLow involvement andlimited problemsolvingDifferentiated brands
Legalistic•Requires approval
from external sources•Based on legal and
societal norms
complex,
Heuristics•Used for repeat
decisions•Buyers uses rules of
thumb• Very quick and easy
decisions
Habit•Absence ofinformation searchand alternativeevaluation
•Standard decisions forrepeat purchases
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Positioning refers to theconsumer's perception of a product orservice in relation to its competitors
Perceptual map or positioningmap is used to map competing productsto analyse their positioning
neric positioning: NewDifferentiate on needsAttribute positioning: GrowthDifferentiate on attributesEmotional positioning: Mature
Differentiate on intangibleattributes/ brand image
PostPurchase
Evaluation
Subcontracted•Buyer obtain a
recommendationfrom a personal ornon personal source(ex. doctor)
information searchand alternative
Standard decisions forrepeat purchases
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PLC OR PRODUCT LIFECYCLE
A popular tool to decideMarketing Strategy andInvestment
Basic steps: which stage in PLC Overall Marketing Mix Reshape and control PLC
Find below an indicativeguideline for normal productsbased on PLC stage but cannotbe generalized
PLC Stage Introduction Growth Maturity DeclineMarketingObjective
Market development bycreating awareness
Maintain and buildmarket + Stressdifferentiation
Defend marketshare + Maintainbrand loyalty
Harvest (‘milk’the cow) orDelete(‘divest’ thedog)
Competition Almost not there Increasingly more Many but stable ReducedProduct Limited variety New variety and
models introducedImprovement andupgrade ofproduct
Withdraw lessprofitableproducts
Price Skimming or penetrationpricing
Aggressive pricingto increase sales
Defensive pricingto defend MS &profit
At least break-even (>marginal cost)
Promotion Brochures, ads etc toeducate people
Build preference bystressing difference
Reminder ads +Trade promotion
Minimalpromotion
Place(Distribution)
Exclusive/selectivedistribution
More outlets toensure reach
Maximum reach toensure availability
Reducednumber ofoutlets
No one knows how actual PLC curve will look like – will depend on product, industry and environment! Failure to recognize PLC stage will lead to wrong decisions; such decisions might lead to Pygmalion effect
(self-fulfilling prophesy); for example, stopping investment in a product thinking that it is going to reachdecline phase will actually lead to the decline!
INNOVATION DIFFUSION PROCESS