Introduction to Marketing

Prof. N. Bandyopadhyay

Content Flow

• Core marketing concepts

• Company orientations

• Marketing mix and its elements

• Concept Application Questions

Marketing

• Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfies individuals’ and goals of the company.

What is marketed?

• Goods• Services• Events• Experience• Persons• Places• Properties• Organization• Information• Ideas

Key Customer Markets

• Consumer Market• Business Market• Global Market• Non Profit and Governmental

Market• Marketplace: Physical• Marketspace: Digital• Meta market: A cluster

complimentary products and services

Core Marketing Concepts• Needs, Wants, and Demands• Segmentation, Targeting and Positioning• Offerings and Brands• Customer value• Customer Satisfaction• Customer Loyalty• Exchange / Transaction• Marketing Channels• Supply Chain• Competition• Marketing Environment

Need, Want & Demand

Need: A human need is a state of deprivation of some basic satisfaction.

Stated Need / Real need/ Secret need Want: Wants are desires for specific need satisfiers. Eg. An Indian need food & want biriyani. Want may be culturally conditioned by society

Demand: Demands are wants for specific products that are backed by purchasing power & willingness to buy them.

Eg. Many people want a Mercedes but only few of them are able & willing to buy it.

Offerings and Brands• Goods• Goods + Services• Services

• Brand: A brand is the identity of a specific product, service, or business. A brand can take many forms, including a name, sign, symbol, color or may be a combination of all. A legally protected brand name is called a trademark. The word brand has continued to evolve to encompass identity - it affects the personality of a product, company or service.

Market segmentation is the process of dividing the total market into

relatively distinct homogeneous sub-groups of consumers with similar

needs or characteristics that lead them to respond in similar ways to a

particular marketing programme.

A market segment is a portion of a larger market in which the individuals,

groups, or organizations share one or more characteristics that cause

them to have relatively similar product needs.

Segmentation, Targeting and Positioning

Targeting: Evaluate the market segment (on the basis of overall attractiveness and firm’s objectives and resources) and target the segment.

Product positioning is a decision reached by a marketer to try to

achieve a defined brand image relative to competition within a

market segment. Product positioning decisions are strategic

decisions and have an impact on long-term success of the brand.

Customer Value• Value-Component Models: • Kauffman’s theory (1998): states that three value perceptions govern the

consumer’s decision of acquiring the goods and services are of three types: Esteem Value, Exchange Value (Worth) and Utilitarian Value. • Kano’s (1994) model: which states that the attributes of the products or services

may be act as Dissatisfiers, Satisfiers or Delighters.

Customer Value (Contd….)

• Benefit/Cost Ratio models: Customer perceives an offering valuable when the benefits

received from the product and/ or services exceeds that sacrifices (costs) incurred to acquired that. In nutshell, benefit / cost ratio models can e presented as the following:

• Customer Perceived Value = (Total customer benefit – Total Customer Costs)

• Total Customer Benefit = Product benefit + Service Benefit + Personal Benefit + Image

benefit• Total Customer Costs= Monetary Costs + Non Monetary Costs (Time, Energy, and

Psychological Costs)

Satisfaction

• Disconfirmation of Expectation

• Positive Disconfirmation: Satisfaction

• Negative Disconfirmation: Dissatisfaction

Customer Loyalty

Loyalty is a deeply held commitment to rebuy or repatronise a preferred product or service consistently in the future, causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts. - R.L. Oliver, 1999

Basic types: Cognitive / Affective

Exchange/Transaction

• Exchange is the act of obtaining a desired product from someone by offering something (which is of some value to other) in return.

• Whether exchange actually takes place depends upon whether two parties can agree on terms of exchange that will leave them both better off (or at least not worse off) than they were before the exchange. Exchange is frequently described as value creating process because exchange normally leaves both parties better off.

• Exchange is a process rather than an event. Two parties are engaged in a exchange if they are negotiating and moving toward an agreement. When an agreement is reached we say that a transaction takes place.

• A transaction is a trade of value between two or more parties. It involved several dimensions: at least two things of value, agreed upon conditions, a time of agreement & a place of agreement.

• Transaction may be Monetary or Barter transaction

Supply Chain

• A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer

The Marketing Environment

• External Macro environment: Demographics, Social and Cultural, Economic, Technology, Competition, Political and Legal

• External Microenvironment: The Market, Suppliers, Intermediaries.

• Organization’s internal environment: HR, (Overall Orientation)

Company Orientations

Company Orientation towards marketplace (Ref. Philip Kotler)

• The Production concept• The Product concept• The selling concept• The marketing concept• The Holistic Marketing Concept

Production Concept/Orientation

• Consumers will prefer products that are widely available and inexpensive. Focus is on high production efficiency, low cost and mass distribution

Product Concept/Orientation

• Consumers will favor products that offer the most quality, performance or innovative features. Focus on making superior products and improving them over time.

Selling Concept/Orientation

• Consumers and businesses, if left alone, will not buy enough and so aggressive selling and is imperative.

Marketing Concept and the key elements of market orientation

Marketing Concept

Customer Focus Coordinated Marketing Profitability

Mktg Intelligence InterdepartmentalCognizance to Customer needs

Key Elements of Marketing Orientation: Intelligence generation -> IntelligenceDissemination-> Responsiveness to marketing intelligence

A program to increase/develop the Marketing Orientation

• Understand Existing Orientations

• Identify the present level of marketing effectiveness (Marketing effectiveness audit)

• Implementing a plan to improve marketing orientation.

(Ref. ‘Developing a Marketing Oriented Organization’ by Adrian Payne)

Holistic Marketing

Marketing Mix and its elements

Marketing Mix• Nell Borden of HBS used the term ‘Marketing Mix’ to

describe the set of activities comprising the firm’s marketing program. He initially specified 12 elements which later regrouped into 4 marketing mix elements:

ProductPlace (Channels of distribution) PricePromotion (Communication strategy)Later, for Services another three elements were added:People / Process / Physical evidence.

Marketing Mix Variables:

Focus on satisfying Customer

needs profitably

PRODUCT {create value} Design, Package, Warranty,Product Line, Service

PRICE {capture value}

Pricing strategy &Policy, Basic Price,Terms of credit,Discount, Allowances

PLACE {Deliver Value}

Distribution ChannelWholesalers, Retailers,AgentsPhysical DistributionTransport, WarehousingInventory

PROMOTION{communicate value}

Advertising, Personal Selling, Direct Marketing, Sales PromotionPublicity

PEOPLE PROCESSPHYSICALEVIDENCE

What is a Product?

“A product is anything, tangible or intangible, which can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need or want.” Thus, a product can be a physical entity (e.g., computer, shirt, or soap), some service (e.g., healthcare, tuition, or bank), a retail store (e.g., music store, locality grocer, or supermarket), a person (e.g., a singer, physician, or politician), an organization (e.g., business organization, trade organization, or not-for-profit organization), a place (e.g., village, city, or country), or idea (e.g., social issues, concepts, or population control). We use the word ‘product’ innumerably in everyday life.

Product Mix and Product line

A PRODUCT LINE is a group of products that are closely related because they perform similar functions, are sold to the same consumer groups, are marketed through the same channels, or fall within given price ranges.

A Product Mix or Product Assortment is the set of all products and items that a particular seller offer to buyers.

Width : Number of product lines a company carries. (in the given fig. P&G is having 5 lines).

Length of a product line: Total no. of items in the product mix / Number of product lines (in the given figure Length=25/5=5)

Depth: Number of variants each product is having in the product line.

Introduction Growth Maturity Decline

(d) Classical Life Cycle Pattern

Time

Sales

Profits

Loss

Common Product Life Curves

Product Life Cycle

Place (Marketing Channels) A marketing channel system is the particular set of

interdependent organizations involved in the process of making a product or service available for use or consumption.

• Roles of marketing channel in marketing strategy: 1. Links producers to buyers. 2. Performs sales, advertising and promotion as required. 3. Influences the firm's pricing strategy. 4. Affecting product strategy through branding, policies, willingness to stock and customizes profits, install, maintain, offer credit, etc.

Figure: Different Levels of Marketing Channels

Distribution Intensity:

Exclusive Distribution: One outlet per market geographySelective Distribution: Several outletsIntensive Distribution: Many outlets

Price

• A. Price—amount of money or value of other items with utility needed to acquire a product.

• B. Utility—an attribute that has the potential to satisfy wants.

• C. Barter—exchanging of goods/services for other goods/services.

Approaches to Pricing

• Skimming Pricing

• Penetration Pricing

Promotion (Communication strategy)

• Marketing communications are the means by which firms attempt to inform, persuade & remind consumers-directly or indirectly-about the products or brands they sell. Marketing communications represent the ‘voice’ of the brand and are one way to establish a dialogue and build relationships with the consumers.

Common Communication Platforms• Advertising. Any paid form of nonpersonal presentation and promotion of

ideas, goods, or services by an identified sponsor.

• Sales promotion. Short-term incentives to encourage trial or purchase of a product or service.

• Events and experiences. Company-sponsored activities and programs designed to create brand-related interactions.

• Public relations and publicity. Programs promoting or protecting company or product image.

• Direct marketing. Use of mail, telephone, fax, e-mail, or Internet to communicate directly with or solicit response or dialogue from specific customers and prospects.

• WOM: Word of mouth publicity

• Personal selling. Face-to-face interaction with prospective purchasers for the purpose of making presentations, answering questions, and procuring orders.

Additional P’s for Services

People: Taking care of heterogeneity

Process: Taking care of perishability, heterogeneity, Inseparability

Physical Evidence : Tangiblize the intangible

Interactions within the mix

• Consistency

• Integration

• Leverage (whereby each element is used to the best

advantage in support of the total mix); Sales Response Curve

(Ref. ‘Rejuvenating the Marketing Mix’ by Benson P Shapiro)

Concept Applications

1. How the operation of a product oriented shoe manufacturer will be different from a marketing oriented shoe manufacturer

2. Suggest how each of the following could go beyond an exchange situation to establishing a relationship with a customer. Automobile dealership University

Appliance manufacturer

3. Suggest the marketing mix for:

Police Department in your City

Professor teaching a first year PG level course

Luxor hotel and Casino

Concept Application

• A private college in a metropolitan area wishes to increase its evening-school offerings of business-related certificate/degree courses such as marketing, accounting, finance, and management.

• Who are the target market customers (students) for these courses?• What actions involving the four marketing mix elements might be used

to reach the target market.• What environmental factors (uncontrollable variables) must the college

consider in designing its marketing program?