MBA 5206 MARKETING MANAGEMENT

Chapter 1:

Defining Marketing for the 21st Century

Khondaker Sazzadul Karim, Associate Professor, Marketing Faculty of Business, NUB.

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We will address the following questions:

■ What are the tasks of marketing?

■ What are the major concepts and tools of

marketing?

■ What orientations do companies exhibit in the

marketplace?

■ How are companies and marketers

responding to the new challenges?

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What is Marketing?

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.

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Core Marketing Concepts

• Target markets and segmentation

• Marketplace, marketspace, and metamarket

• Marketers and prospects

• Needs, wants, and demands

• Product, offering, and brand

• Value and satisfaction

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Core Marketing ConceptsMarket segmentation :They identify and profile distinct

groups of buyers who might prefer or require varying products and marketing mixes.

Market segments can be identified by examining demographic, psychographic, and behavioral differences among buyers.

A market offering: The offering is positioned in the minds of the target buyers as delivering some central benefit (s).

For example, Volvo develops its cars for the target market of buyers; for whom automobile “safety” is a major concern. Volvo, therefore, positions its car as the “safest” a customer can buy.

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Core Marketing ConceptsThe metamarket, a concept proposed by Mohan

Sawhney, describes a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries.

The automobile meta-market consists of automobile manufacturers, new and used car dealers, financing companies, insurance companies, mechanics, spare parts dealers, service shops, auto magazines, classified auto ads in newspapers, and auto sites on the Internet.

Car buyers can get involved in many parts of this metamarket.

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Needs, Wants, and DemandsNeeds describe basic human requirements such

as food, air, water, clothing, and shelter. People also have strong needs for recreation, education, and

entertainment.

These needs become wants when they are directed to specific objects that might satisfy the need.

American needs food but wants a hamburger, French fries, and a soft drink. A person in Mauritius needs food but wants a mango, rice, lentils, and beans.

Clearly, wants are shaped by one’s society.

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Examples of Different Types of Needs: • Stated Needs e.g. wanting an inexpensive car• Real Needs e.g. ..with low operating costs• Unstated Needs e.g. expects good after-sales

service • Delight Needs e.g. would like a gift with the car• Secret Needs e.g. wants to be seen by friends as

Toyota publica or EE 90.

Customer Needs

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Customer Needs

A distinction needs to be drawn between responsive

marketing, anticipative marketing ,and creative

marketing.

• A responsive marketer finds a stated need and fills it,

• An anticipative marketer looks ahead to the needs

that customers may have in the near future.

• A creative marketer discovers and produces

solutions that customers did not ask for, but to which

they enthusiastically respond.

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Needs, Wants, and Demands

Demands are wants for specific products backed by an

ability to pay.

Many people want a Mercedes; only a few are able and

willing 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.

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Product, Offering and Brand

People satisfy their needs and wants with products.

A product is any offering that can satisfy a need or

want, such as one of the 10 basic offerings of

goods, services, experiences, events, persons,

places, properties, organizations, information, and

ideas.

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Value and Satisfaction

Value as a ratio between what the customer gets and what he gives.

The marketer can increase the value of the customer offering by:

(1) raising benefits,

(2) reducing costs,

(3) raising benefits and reducing costs,

(4) raising benefits by more than the raise in costs, or

(5) lowering benefits by less than the reduction in costs.

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Value and Satisfaction

A customer choosing between two value offerings, V1 and V2, will examine the ratio V1/V2 =?

She will favor V1 if the ratio is larger than 1; she will favor V2 if the ratio is smaller than 1; and she will be indifferent if the ratio equals 1.

The customer gets benefits and assumes costs, as shown in this equation:

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Core Marketing Concepts

• Exchange and transactions

• Relationships and networks

• Marketing channels

• Supply chain

• Competition

• Marketing program

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Exchange and TransactionsExchange involves obtaining a desired product from

someone by offering something in return. For exchange potential to exist, five conditions must be

satisfied:1. There are at least two parties.2. Each party has something that might be of value to

the other party.3. Each party is capable of communication and delivery.4. Each party is free to accept or reject the exchange

offer.5. Each party believes it is appropriate or desirable to

deal with the other party.

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Exchange and Transactions

A transaction involves at least two things of value,

agreed-upon conditions, a time of agreement, and a

place of agreement.

Usually a legal system exists to support and enforce

compliance among transactors.

Transaction marketing is part of a larger idea called

relationship marketing.

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Relationship and Networks

Relationship marketing aims to build long-term mutually satisfying relations with key parties—

customers, suppliers, distributors—in order to earn and retain their long-term preference and business.

A marketing network consists of the company and its supporting stakeholders (customers, employees, suppliers, distributors, university scientists, and others) with whom it has built mutually profitable business relationships.

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Marketing ChannelsTo reach a target market, the marketer uses three kinds of

marketing channels.

1. Communication channels deliver messages to and receive messages from target buyers.

They include newspapers, magazines, radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet.

Communications are conveyed by facial expressions and clothing, the look of retail stores, and many other media.

Dialogue channels (e-mail and toll-free numbers) to counterbalance the more normal monologue channels (such as ads).

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Marketing Channels

2. Distribution channels to display or deliver the physical product or service (s) to the buyer or user, which include warehouses, transportation vehicles, and various trade channels such as distributors, wholesalers, and retailers.

3. Selling channels to effect transactions with potential buyers. Selling channels include not only the distributors and retailers but also the banks and insurance companies that facilitate transactions.

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Supply Chain

• Supply chain describes a longer channel stretching from raw materials to components to final products that are carried to final buyers.

For example, the supply chain for women’s purses starts with hides, tanning operations, cutting operations, manufacturing, and the marketing channels that bring products to customers.

This supply chain represents a value delivery system.

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Competition

Competition, a critical factor in marketing management, includes all of the actual and potential rival offerings and substitutes that a buyer might consider.

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CompetitionFour levels of competition, based on degree of product

substitutability:1. Brand competition: A company sees its competitors

as other companies that offer similar products and services to the same customers at similar prices.

Volkswagen might see its major competitors as Toyota, Honda, and other manufacturers of medium price automobiles, rather than Mercedes or Hyundai.

2. Industry competition: A company sees its competitors as all companies that make the same product or class of products.

Thus, Volkswagen would be competing against all other car manufacturers.

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Competition3. Form competition: A company sees its competitors

as all companies that manufacture products that supply the same service.

Volkswagen would see itself competing againstmanufacturers of all vehicles, such as motorcycles,

bicycles, and trucks.

4. Generic competition: A company sees its competitors as all companies that compete for the same consumer dollars.

Volkswagen would see itself competing with companies that sell major consumer durables, foreign vacations, and new homes.

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Marketing mix

Marketing mix is the set of marketing tools

that the firm uses to pursue its marketing objectives in the target market.

As shown in Figure 1-3, McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place, and promotion

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Figure 1.4 The Four P’s

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How Business and Marketing are changing

• We can say with some confidence that the

marketplace isn’t what it used to be.

• It is changing radically as a result of major

societal forces such as technological advances,

globalization, and deregulation.

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How Business and Marketing are changing

• The major forces that have created new behaviors and challenges are:

• 1. Customers– …increasingly expect higher quality and

service and some customization. – They perceive fewer real product differences

and show less brand loyalty.

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How Business and Marketing are changing

• 2. Brand manufacturers

– …are facing intense competition from

domestic and foreign brands, which is

resulting in rising promotion costs and

shrinking profit margins.

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How Business and Marketing are changing

• 3. Store-based retailers

– …are facing growing competition from catalog

houses; direct mail firms; home shopping TV;

and e-commerce on the Internet.

– As a result, they are experiencing shrinking

margins.

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Company responses and adjustments

• Reengineering: From focusing on functional departments to reorganizing by key processes, each managed by multidiscipline teams.

• Outsourcing: From making everything inside the company to buying more products from outside if they can be obtained cheaper and better.

• E-commerce: From attracting customers to stores and having salespeople call on offices to making virtually all products available on the Internet.

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Company responses and adjustments

• Business-to-business purchasing is growing fast on the Internet, and personal selling can increasingly be conducted electronically.

• Benchmarking: From relying on self-improvement to studying world-class performers and adopting best practices.

• Alliances: From trying to win alone to forming networks of partner firms.

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Company responses and adjustments

• Partner–suppliers: From using many suppliers to using fewer but more reliable suppliers who work closely in a “partnership” relationship with the company.

• Market-centered: From organizing by products to organizing by market segment.

• Global and local: From being local to being both global and local.

• Decentralized: From being managed from the top to encouraging more initiative and “intrepreneurship” at the local level.

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Marketer responses and adjustments

• Relationship marketing: From focusing on transactions to building long-term, profitable customer relationships.

Companies focus on their most profitable customers, products, and channels.

• Customer lifetime value: From making a profit on each sale to making profits by managing customer lifetime value.

Some companies offer to deliver a constantly needed product on a regular basis at a lower price per unit because they will enjoy the customer’s business for a longer period.

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Marketer responses and adjustments

• Customer share: From a focus on gaining market share to a focus on building customer share.

Companies build customer share by offering a larger variety of goods to their existing customers and by training employees in cross-selling and up-selling.

• Target marketing: From selling to everyone to trying to be the best firm serving well defined target markets.

Target marketing is being facilitated by the proliferation of special-interest magazines, TV channels, and Internet newsgroups.

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Marketer responses and adjustments

• Individualization: From selling the same offer in the same way to everyone in the target market to individualizing and customizing messages and offerings.

• Customer database: From collecting sales data to building a data warehouse of information about individual customers’ purchases, preferences, demographics, and profitability.

Companies can “data-mine” their proprietary databases to detect different customer need clusters and make differentiated offerings to each cluster.

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Marketer responses and adjustments

• Integrated marketing communications: From reliance on one communication tool such as advertising to blending several tools to deliver a consistent brand image to customers at every brand contact.

• Channels as partners: From thinking of intermediaries as customers to treating them as partners in delivering value to final customers.

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Marketer responses and adjustments

• Every employee a marketer: From thinking that

marketing is done only by marketing, sales, and

customer support personnel to recognizing that every

employee must be customer-focused.

• Model-based decision making: From making

decisions on intuition or slim data to basing decisions

on models and facts on how the marketplace works.

End of the Chapter

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