AR2Chapter wise Content Plan

Subject: Marketing management

Class & Semester: I Sem MBA Session No.: Module I :AN INTRODUCTION TO MARKETING AND ITS BASIC CONCEPTS

Key ConceptsMeaning and Scope of Marketing,Fundamental Marketing Concepts,Company orientations towards the MarketplaceMarketing and customer valueStrategic Planning,Marketing plan,Marketing in the Indian Economy

Brief Theoretical FrameworkMeaning and Scope of Marketing

Marketing is so basic that it cannot be considered as separate function. It is the whole business seen from the point of view of its final result, that is, from the customer's point of view' Peter Drucker

According to American Marketing Association (2004) - "Marketing is an organizational function and set of processes for creating, communicating and delivering value to customers and for managing relationships in a way that benefits both the organization and the stakeholder."

Marketing may be narrowly defined as a process by which goods and services are exchanged and the values determined in terms of money prices. That means marketing includes all those activities carried on to transfer the goods from the manufacturers or producers to the consumers.

Nature of Marketing1. Marketing is an Economic FunctionMarketing embraces all the business activities involved in getting goods and services, from the hands of producers into the hands of final consumers. The business steps through which goods progress on their way to final consumers is the concern of marketing.

2. Marketing is a Legal Process by which Ownership TransfersIn the process of marketing the ownership of goods transfers from seller to the purchaser or from producer to the end user.

3. Marketing is a System of Interacting Business ActivitiesMarketing is that process through which a business enterprise, institution, or organisation interacts with the customers and stakeholders with the objective to earn profit, satisfy customers, and manage relationship. It is the performance of business activities that direct the flow of goods and services from producer to consumer or user.

4. Marketing is a Managerial functionAccording to managerial or systems approach - "Marketing is the combination of activities

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According to this approach the emphasis is on how the individual organisation processes marketing and develops the strategic dimensions of marketing activities.

5. Marketing is a social processMarketing is the delivery of a standard of living to society. According to Cunningham and Cunningham (1981) societal marketing performs three essential functions:-

1. Knowing and understanding the consumer's changing needs and wants;2. Efficiently and effectively managing the supply and demand of products and

services; and3. Efficient provision of distribution and payment processing systems.

6. Marketing is a philosophy based on consumer orientation and satisfaction

7. Marketing had dual objectives - profit making and consumer satisfaction

Scope of Marketing1. Study of Consumer Wants and NeedsGoods are produced to satisfy consumer wants. Therefore study is done to identify consumer needs and wants. These needs and wants motivates consumer to purchase.

2. Study of Consumer behaviorMarketers perform study of consumer behavior. Analysis of buyer behavior helps marketer in market segmentation and targeting.

3. Production planning and developmentProduct planning and development starts with the generation of product idea and ends with the product development and commercialization. Product planning includes everything from branding and packaging to product line expansion and contraction.

4. Pricing PoliciesMarketer has to determine pricing policies for their products. Pricing policies differs form product to product. It depends on the level of competition, product life cycle, marketing goals and objectives, etc.

5. DistributionStudy of distribution channel is important in marketing. For maximum sales and profit goods are required to be distributed to the maximum consumers at minimum cost.

6. PromotionPromotion includes personal selling, sales promotion, and advertising. Right promotion mix is crucial in accomplishment of marketing goals.

7. Consumer SatisfactionThe product or service offered must satisfy consumer. Consumer satisfaction is the major objective of marketing.

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8. Marketing ControlMarketing audit is done to control the marketing activities.

The scope of marketing can be understood in terms of functions that an entrepreneur has to perform. These include the following:a. Functions of exchange: which include buying and assembling and selling?b. Functions of physical supply: include transportation, storage and warehousingc. Functions of facilitation: Product Planning and Development, Marketing Research, Standardization, Grading, Packaging, Branding, Sales Promotion, Financing

The Marketing Management Concepts

There are four marketing management concepts that companies will utilize in their marketing objectives. All of this aim to achieve profits and objectives, but the focus and means by which they do so will differ. They will typically follow one of these four major concepts:

1. Product Concept - This management orientation says that if you build a quality product and set a reasonable price, very little marketing effort is needed to sell it. The product generates the demand "build it, and they will come"

2. Selling Concept - This management orientation says that consumers will not normally buy enough of a product unless it is aggressively promoted to them.

3. Marketing Concept - This management orientation says the major purpose of an organization is to identify consumer needs and then adapt the organization in a way that will satisfy the customer’s needs more effectively and efficiently than competition. (i.e. Chain restaurants may alter their menu in different countries)

4. Societal Concept - This management orientation focuses on satisfying consumers needs and demonstrating long run concern for societal welfare in order to achieve company objectives and attend to its responsibilities for society. The idea is to find a balance between social welfare, consumer needs, and company profits.

Concept Focus Means Ends

1. Product Products

Quality product, reasonable price, little marketing effort

Achieve profits or objectives by products generating consumer demand

2. Selling ProductsAggressive advertising and selling efforts

Achieve profits or objectives by generating sales volume

3. Marketing Customer needs Integrated marketingAchieve profits or objectives through customer satisfaction

4. Societal-Marketing

Customer satisfaction and long run public welfare

Constant search forbetter products interms of appeal and benefit

Satisfy organizational goals and responsibilities for society

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Traditional vs. Integrated Marketing

To understand the fundamentals of marketing, it is important to understand two different approaches used when a company chooses to introduce a new product. Here we see traditional and integrated marketing.

There are typically 5 different departments directly involved with the product during creation and launch: Development, Engineering, Production, Marketing, and Distribution.

If a company opts to use a traditional approach, all of these departments work as separate entities. For example, development will draw up a product and then pass it along to engineering to create it. Engineering will then pass it along to production mass produce it. They will afterwards pass it to marketing, who will eventually move the product to distribution for a product launch.

If a firm opts to utilize an integrated marketing approach, all of the departments work together as a single unit. Engineering will not begin a product without ensuring that production has the capabilities to produce it. Development will check with marketing to ensure the product is line with the company image and approach. Basically, every department will at some point integrate their work with all other departments in the process.

Clearly, integrated marketing is the better approach. While it may take longer to launch a product, the likelihood of success is greater. The traditional approach leaves much room for interdepartmental conflicting interest and is therefore regarded as an outdated approach in marketing. It all too often ignores the consumer’s needs. The integrated marketing approach helps a business work collectively as one unit.

MARKETING VERSUS SELLING

The basic difference between marketing and selling lies in the attitude towards business. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the company’s existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses on customer needs, coordinates all the activities that will affect customers, and produces profits through creating customer satisfaction.

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Starting point Focus Means Ends

Selling Concept

Factory Products Selling and Profits through

Promoting sales volume

Marketing Concept

Market Customer Needs Coordinated Profits through

marketing customer satisfaction

Marketing Focuses on Customer’s needs. Customer enjoys supreme importance. Converting customer’s needs into product. Profits through customer satisfaction. Emphasis is given on product planning and development to match products with

the market. Integrated approach to marketing is practiced. The principle of caveat vendor (let the seller beware) is followed.

Selling

Focuses on seller’s needs. Product enjoys supreme importance. Converting product into cash. Profits through sales volume. Emphasis is placed on sale of products already produced. Fragmented approach to selling is practiced. The principle of caveat emptor (let the buyer beware) is followed

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Marketing and customer value

A customer perceived value is equal to the benefits derived divided by the costs.

Value = Benefits/Costs

Further, benefits can include functional and emotional benefits. Costs may include monetary costs, time costs, energy costs, and psychic costs.

So,

Value = Functional benefits + emotional benefits / monetary cost + time cost + energy cost + psychic costs

Satisfaction is a person's feelings of pleasure or disappointment resulting from comparing a products performance in relation to the person's expectations of performance.

Most expectations are derived from past buying experiences, friends, the marketer, peers, competitors, and promises of performance.

It is also important to keep in mind that a person is twice as likely to tell others about a negative product or experience as they are about a good product or positive experience. Dissatisfied customers can also have a negative impact on employee morale.

Strategic Planning

Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.

In order to determine the future direction of the organization, it is necessary to understand its current position and the possible avenues through which it can pursue particular courses of action. Generally, strategic planning deals with at least one of three key questions:[1]

1. "What do we do?"2. "For whom do we do it?"3. "How do we excel?"

MARKEYING PLAN

The marketing plan is an important document used by companies for planning. It is a road map and surveys the business environment, describes problems, threats and opportunities in the industry, contains a marketing strategy, and has financial projections/budgets. Do not confuse a marketing plan with a business plan. A marketing

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plan is concerned more with strategy whereas a business plan is more concerned with financial information. The primary purpose of a business plan is to raise money from venture capitalists or bankers; the primary purpose of a marketing plan is to provide direction for a company. The marketing plan is an integral part of the business plan.

Contents of the Marketing Plan

I.  Executive Summary and Table of ContentsThe marketing plan begins with a brief synopsis of the key points and major recommendations.  The Table of Contents follows the executive summary.

II. Environmental Analysis (also known as Situation Analysis) Before starting this section, the organization might first discuss its mission statement. Section II provides information about the firm's current situation with regard to the current marketing environment.  It is sometimes referred to as a situation analysis.   The marketing environment must be discussed.  This section will look at external environmental factors such as the market, competition, marketing channels, economy, political climate, technology, legal and political climates, and sociocultural factors.  This section will also examine internal environmental factors such as costs, profits, human resources, financial resources, and the age of plant and equipment.  The target markets also have to be studied.  Have their needs changed?  Is the company doing a good job of satisfying the needs of its customers?  Finally, the organization has to ascertain whether their marketing objectives are still reasonable given the changing environment. The information in section II is used to help the organization with the SWOT analysis

III. SWOT AnalysisSWOT has become a buzzword in marketing today: Companies should know their Strengths, Weaknesses, Opportunities, and Threats. A company has to understand its internal Strengths and Weaknesses and also be cognizant of external opportunities and threats. To do a SWOT analysis correctly, you must know about your competition and the industry. After the SWOT analysis is complete, a company has to build on the strengths that is has, do everything possible to eliminate or correct weaknesses, take advantage of opportunities, and do what it takes to minimize or avoid threats.

IV. Marketing ObjectivesBased on the SWOT analysis, The organization's major objectives are stated.  This makes it clear to all what the organization is trying to accomplish through its marketing plan. Objectives are in terms of such factors as market share,  profitability, and/or sales volume.  Other factors to be considered include innovation (introduce five new products), image, distribution, etc.

V.  Marketing StrategiesA marketing strategy, as you know, has two key components:  a target market and a marketing mix to satisfy the target market.  A good marketing strategy enables a firm to achieve its objectives.  A firm will succeed if it can use its strategy to achieve an advantage over the competition.  A successful product offers either a quality advantage and/or price advantage over competing brands. How the product or service will be positioned is also discussed in this section. Positioning will be discussed in a later chapter.

VI. Marketing Implementation/Action Program

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This section describes the actual marketing programs that will be undertaken in order to implement the marketing strategy.  Some issues that must be discussed include what specific actions must be taken?  Who will do it?  When is it going to be done?  How much will it cost? 

VII. Financial Projections/Evaluation and ControlFinancial projections are required so that the organization can determine whether the marketing plan is actually working.  The detailed financial projections are done on a monthly or quarterly basis. These projections are usually in terms of sales volume, profits, and/or market share.  Costs must also be projected since total profit = total revenue - total cost.  If the marketing plan is not working, it is very important for the organization to be able to pinpoint the cause as soon as possible and have a contingency plan.

Environmental scanning can be defined as ‘the study and interpretation of the political, economic, social and technological events and trends which influence a business, an industry or even a total market’. The factors which need to be considered for environmental scanning are events, trends, issues and expectations of the different interest groups. Issues are often forerunners of trend breaks. A trend break could be a value shift in society, a technological innovation that might be permanent or a paradigm change. Issues are less deep-seated and can be 'a temporary short-lived reaction to a social phenomenon'. A trend can be defined as an ‘environmental phenomenon that has adopted a structural character’

Marketing Environment

The term Marketing Environment refers to the forces and factors that affect the organization ability to build and maintain good relationship with its customers. Marketing environment surrounds the organization and it impacts upon the organization. Marketers have to interact with internal and external people at micro and macro level and builds internal and external relationships. The key elements of marketing environment are as follows :-

1. Internal Environment,

2. Micro Environment, and

3. Macro Environment.

Internal Environment

Internal factors like men, machine, money, material, etc., on which marketing decision depends consists internal marketing environment. The internal environment refers to the forces that are within the organization and affects its ability to serve its customers. It includes marketing managers, sales representatives, marketing budget, marketing plans, procedures, inventory, logistics, and anything within organization which affects marketing decisions and its relationship with its customers.

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Micro Environment

Individuals and organizations that are close to the marketing organization and directly impacts its ability to serve its customers, makes Marketing Micro Environment. The micro environment refers to the forces that are close to the marketing organization and directly impact the customer experience. It includes the organization itself, its suppliers, marketing intermediaries, customers, markets or segments, competitors, and publics. Happenings in micro environment are relatively controllable for the marketing organization.

Macro Environment

Macro environment refers to all forces that are part of the larger society and affects the micro environment. It includes demography, economy, politics, culture, technology, and natural forces. Macro environment is less controllable.

Marketing research & Marketing Information System

Marketing research is a systematic method of collecting, recording & analyzing of data. It is used to solve marketing problems. It finds out the needs & expectations of d consumers. So the co. makes it products according to the needs & expectation of the consumers. It helps co. to make it production & marketing policies

NATURE / CHARACTERISTICS

• Marketing research has a wide scope

• Systematic, scientific and objective

• Continuous and dynamic process

• Tool for decision making

• Benefits to the co. and consumers

• Similar to military intelligence

• Applied research

• Closely connected with marketing information system (MIS)

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• Reduces the gap between producers and consumers

• Use different methods

• Limitations

MARKETING INFORMATION SYSTEM

• Unified and centralized

• Facilitates decision making

• Provide quick and accurate information

• Economical

• Selective

• Future oriented

• Supply information regularly

• New techniques

• Used by all levels

• information

Importance of Marketing Research and MIS in marketing decisions

• Consumer needs and wants

• Competitors products

• Effectiveness of channels Of distribution

• Studies the sales promotion techniques

• Packaging design

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• Forecasting design

• Pricing decisions

• Helps to take advantage of business opportunities

• Marketing intelligence

• Co. to recognize change

• Quick supply of information

• Quality of decision making

• Facilitates marketing planning and control

• Recognize trends

• Integration of information

Demand Measurement And Forecasting

From your study of the previous chapters you have seen that marketing management continually scans the marketing environment for signs of opportunities and threats. Furthermore, you have seen that marketing management divides the heterogeneous mass market up into more homogenous segments to facilitate the identification and exploitation of opportunities.

Determining the potential of a market segment is indispensable for analysing the opportunities within a segment, and for deciding if it can possibly be chosen as a target market. It is not only the present market potential that is important and gives an indication of opportunities, but the firm must also be interested in market forecasts. As you have seen from the first chapter, the firm wants to survive in the long term and achieve its primary goal being to maximize profitability. Consequently market forecasting is also a very important aid for decision making by marketing management.

Measuring and forecasting requires an analysis of the market with an aim of expressing it in quantitative (numeric) quantities both present and in the future. The quantitative measurement and forecasting of the market, together with its qualitative characteristics, are used as a basis for decision making by marketing management. Market measurement and forecasting can be seen as a subdivision of market research which was discussed in the previous chapter. This is a very superficial description of the important role market measurement and forecasting play. However, you will learn a great deal more in the rest of this chapter.

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THE IMPORTANCE OF MARKET MEASUREMENT AND FORECASTING

As you can deduce from the previous section, the main goal of market measurement and forecasting is to serve as an aid in the decisions that marketing management has to make. As has already been emphasized, the quality of decisions cannot be better than the information they are based on. Information gathered enables marketing management to make their decisions in a more objective and scientific manner and to lessen the risk and uncertainty that accompany subjective decisions and guesswork.

Naturally marketing management often makes decisions which are not very important and/or do not hold a great risk. It would be ridiculous to arrange for the gathering of information by means of measurement and forecasting for all such small decisions of this nature. Thus it must be emphasized that just as with market research, the importance and risk of the decision must be weighed up against the cost and time involved in the gathering and processing of information. Luckily there are various secondary sources which contain information regarding market measurement and forecasting. These sources include various published research reports which can be bought at a fraction of the price of a new market research project, and other sources which, for example, are available on computer and can be processed for clients' needs. You learnt about examples of these information sources in the previous chapter.

Question Bank/quiz for tests :

1. Which of the following is central to any definition of marketing?a. Making a profit

b. Making a sale

c. Demand management

d. Transactions

e. Customer relationships

2. Introducing new products to existing markets is an example of:a. conglomerate diversification

b. vertical diversification

c. horizontal diversification

d. concentric diversification

3. Which of the following reflects the marketing concept philosophy?a. "You won't find a better deal anywhere."

b. "When its profits versus customers' needs, profits will always win out."

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c. "We're in the business of making and selling superior products."

d. "We don't have a marketing department, we have a customer department."

e. "We build them so you can buy them."

4. When backed by buying power, wants become ________.a. physical needs

b. demands

c. social needs

d. exchanges

e. self-esteem needs

5. Greater consumer control means that companies must rely more on marketing by ________ than by ________.a. socialization; information

b. producing; selling

c. inspiration; competition

d. interruption; involvement

e. interaction; intrusion

6. An increasingly large number of firms are changing their organizational focus from ________ to ________.a. product management; functional management

b. brand management; customer relationship management

c. territory management; functional management

d. product management; territory management

e. global management; regional management

7.When each party has something that could be of value to other party results toa. Exchange process

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b. Marketing Activity

c. Market place

d. Money exchange

8. In the history of marketing, when did the production period end?

a. In the late 1800s.

b. In the early 1900s.

c. In the 1920s.

d. After the end of the Second World War

9. The key term in the American Marketing Association's definition of marketing is

a. Process

b. Sales

c. Products

d. Values

10. There are ________ main types of buyer-seller exchanges in marketing.

a. Five

b. Four

c. Six

d. Three

SUBJECTIVE QUESTIONS

1.Brief ‘Selling Concept”

2. What is mean by strategic marketing plan?

3. Discuss the meaning, scope and role of marketing function in the exchange process.

Illustrate with suitable examples.

4 Differentiate between marketing and selling

5 What is modern concept of marketing? Dose it apply in India .Discuss.

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6 How is marketing a service different from marketing a good?

7. Explain how business and marketing are changing?

8. Does marketing orientation impact business performance? Discuss

9. Coordination between the marketing department and the other departments of an organization is crucial for implementing the marketing concept. Explain

10 What barriers may a marketing manager face when trying to convince other people

within an organization that they should adopt the marketing concept?

Signature of the Faculty:Ms Bhavana U Kanthy