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Principles of Marketing

Part 1

Lesson 1 & 2

� Understanding Marketing Management

Lesson 1 & 2

Understanding Marketing Management

� defining marketing

� the marketing concept

� orientations toward the marketplace

� marketing management

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2

Defining marketing

� Marketing is societal process by which individuals and groups (target market) obtain what they need and want through understanding, creating and delivering and freely exchanging products and services of value with others

Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper

Saddle River, p. 9.

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Activities in the company

Financing

Human Resource Management

Research & Development

Marketing

Understanding of customer

value

Creating of customer value

Delivering of customer value

Marketing

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3

Customer needs and value

� Needs – are the basic human / organizational requirements

� Wants – needs become wants when they are directed to specific objects that might satisfy the need

� Customer value – ratio between what the customer gets and what he gives

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Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper

Saddle River, p. 9-10.

Customer needs and valueHuman needs

Self-actualization

needs

Self-actualization

needs

Esteem needsEsteem needs

Social needsSocial needs

Safety needsSafety needs

Physiological needsPhysiological needs

8Source: A.H. Maslow (1970). Motivation and Personality, 2nd ed., Prentice Hall,

Upper Saddle River.,

Customer needs and valueOrganizational needs

Direct

Understanding of customer

value

Creating of customer value

Delivering of customer value

Indirect

Capital items

Supplies

Services

9Source: own preparation .

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Customer needs and valueCustomer value

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Customer value

Customer benefits

Product benefits

Service benefits

Personnel benefits

Image benefits

Customer cost

Price

Purchasing cost

Using cost

Source:own preparation based

on: P. Kotler (2003). Marketing

Management, 11th, Prentice

Hall, Upper Saddle River, p. 60.

Understanding of customer value

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Market information

Marketing Research

Marketing intelligence

system

Managers experience

Managers Intuition

Source: own preparation .

Creating and delivering customer

value – marketing mix

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Marketing mixCreating value Delivering value

Marketing mixCreating value Delivering value

Product

Price

Personnel

Physical evidence

Target market Target market

Promotion Distribution Procedures

Source: own preparation .

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Creating and delivering customer

value

Source: own preparation based on: R. Lauterborn (1990). „New Marketing Litany: Four P’s Passe: C-Words Take Over”, Advertising Age, 1 October p. 26

„+3P”

Personnel

Physical Evidence

Procedures

Marketing Mix 7P’s or 7C’s?

Organizational perspective

� product

� price

� place

� promotion

� physical evidence

� people

� process

Customer perspective

• customer value

• cost

• convenience

• communication

• confirmation

• consideration

• co-ordination and

concern

Customer satisfaction

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Orientations toward the marketplace - 1

� Production concept

� Product concept

� Selling concept

� Marketing concept

� Customer concept

� Societal marketing concept

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Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper

Saddle River, p. 17.

Orientations toward the marketplace – 2

Concepts Starting point Focus Means Ends

Production Factory Widely available and

inexpensive products

High production efficiency

Low cost

Mass distribution

Profits through

volume and low cost

Product Factory Superior products Making superior products

and improving them over

time

Profits through high

quality product

Selling Factory Products Aggressive selling and

promotions

Profits through sales

volume

Marketing Target market Customer needs Integrated marketing Profits through

customer

satisfaction

Customer Individual customer Customer needs and

value

One-to-one marketing

Integration and value chain

Profits through

capturing customer

share, loyalty, and

lifetime value

Societal marketing Best long-run

interests customer

and society

Customer needs,

customer interests, and

long-run societal welfare

Integrated marketing and

education customer

Profits through

customer

satisfaction and

society’s well-being

17Source: own preparation based on: P. Kotler (2003). Marketing Management,

11th, Prentice Hall, Upper Saddle River, p. 17-27.

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Marketing Management -1

� Marketing management is art and science of choosing target markets and getting, keeping, and growing customers through understanding, creating and delivering superior customer value

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Source: own preparation based on: P. Kotler (2003). Marketing Management,

11th, Prentice Hall, Upper Saddle River, p. 17-27.

Marketing Management -2

The marketing management - is a delicate balance of creativity and structure/formal procedures.

Marketing Management - 3

The marketing management -consists of:

� analyzing market situation

� designing marketing strategies

� implementing and organizing the marketing effort

� controlling marketing performance

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Analysis

Analysis

External

Macroenvironment Microenvironment

SWOT

Internal

The Organisation’s Marketing

Environment

Theorganisation

The economy

Socialfactors

Culturalforces

Technology

Political structures

Legalstructures

Demography

Suppliers

Distributors& dealersMarket

demands

CompetitorsCustomers

Lesson 3 & 4

Analyzing Marketing Opportunities

Customer Analysis

Competitors and SWOT Analysis

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Lesson 3 & 4

Analyzing Marketing Opportunities -

Customer Analysis

Outline

� Analyzing Marketing Opportunities - Customer Analysis� types of customers

� the business market versus the consumer market

� decision - making unit

� types of buying behavior

� stages of the buying decision process

� factors Influencing buying behaviour

Lesson 3 & 4

Competitors and SWOT Analysis

Outline

� 5 forces framework

� product/market battlefield

� Macro environment analysis

� SWOT analysis

Customer Analysis

Basic Questions to Answer

� Who is our customer?

� What factors influence their behaviour?

� Does behaviour vary according to the type of product or service purchased?

� What process of decision making do they go

through?

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Types of Customer Markets

� consumer markets

� industrial markets

� reseller markets

� government and non-profit markets

� international markets

Characteristics of Organisational Markets

� Producer markets

� purchase to make profit from using operationally or to

produce other goods

� Reseller markets

� purchase to make profit from reselling with no or minor

alteration

� Government markets

� buy to support operations - normally purchase through bids

or negotiation

� Institutional markets

� seek to achieve charitable, community, educational or non-

business goals

What Influences the Buyer?

� Cultural factors� values, beliefs, ideas, artefacts and symbols

� Social factors� primary membership groups (family ..)

� secondary member groups (union, cim ..)

� aspirational groups (MBA…!)

� dissociative groups (hell’s angels…??)

� Personal factors� age, life cycle, occupation, lifestyle, personality ...

� Psychological factors� motivation, perception, attitude

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The Buyer ‘DMU’

Initiator

first suggests buying product

or service

Influencer

whose comments affect the decision

Decider

Ultimately make all or part

of buying decision

Buyer

Physically makes purchase

User

Consumes product or serviceInitiate process / define specs

Help define spec, help inevaluation of alternatives

Product requirementsand suppliers

Formal authority to selectsupplier - negotiate terms

User

Source:Webster and Wind, 1972

Does Behaviour Change in

Relation to What is Purchased?

Degree of involvement

Sig

nif

ican

t d

iffe

ren

ce

betw

een

bra

nd

s

low high

few

many

HABITUAL DISSONANCE

(differing of views)

VARIETY

(seeking)COMPLEX

Source:Assael, 1987

Levels of involvement

� High involvement

� by level of importance

� rational, benefit based

� factual information sought

� Low involvement

� by level of importance

� minimal care, faster decision

� emotional choice

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It Also Revolves Around ...

Perceived Risk

� Performance� Will it function properly?

� Financial� Can I afford it / is it good

value?

� Physical� Will it harm me / others?

� Ego� Will it satisfy self-esteem

/ image?

� Social� Will significant others

approve?

� Time� Have I got the time to go

and purchase?

Risk - the possibility that the outcome of a decision will not have the desired effect or may make the situation worse.

Source: Fill, 1999

Consumer Decision Making Process

� Need recognition� stimuli can be internal or external

� Information search� personal, commercial, public, experiential

� Evaluation of alternatives� forms judgement - conscious & rational

� Purchase decision� commit

� Post-purchase evaluation� re-evaluate and re-assure

The Organisational Buyer

� fewer

� highly concentrated

� close relationship between buyer and seller

� geographically concentrated buyers

� demand for industrial goods is ultimately

derived from the demand for consumer

goods

� inelastic and fluctuating demand

� professional purchasing

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The Industrial Buyer ‘DMU’

Initiator

first suggests buying product

or service

Influencer

whose comments affect the decision

Decider

Ultimately make all or part

of buying decision

Buyer

Physically makes purchase

User

Consumes product or serviceInitiate process / define specs

Help define spec, help inevaluation of alternatives

Product requirementsand suppliers

Formal authority to selectsupplier - negotiate terms

Approvers

Gatekeepers

User

Authorise decider andbuyer proposals

Control random contactfrom sellers / flow of information

Source: Webster and Wind, 1972

Types of Purchase

� New Task

� First time purchase, full buying process

� Modified re-buy

� E.g. faster delivery, lower price, specification

� Straight re-buy

� Routine re-purchase, same terms

� Truncated buying process

Organisational Buying Process

� recognise the problem

� develop product specification to solve problem

� search for products / suppliers

� evaluate products to specification

� select and order most appropriate product

� evaluate product and supplier performance

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Types of Purchase

Source:Robinson et al, 1967

YYYPerformance review and feedback

YPossiblyNEstablish order routine

YPossiblyNSelection of supplier

YPossiblyNDetailed evaluation of suppliers

YPossiblyNSearch for potential suppliers

YYYSpecific description of product required

YPossiblyNDetermining general need

YPossiblyNRecognition of problem

New

Task

Modified

Re-buy

Straight

Re-buy

Phases of the buying process

Buy classes

Lesson 3 & 4

Analyzing Marketing Opportunities

Competitors and SWOT Analysis

The Organisation’s Marketing

Environment

Theorganisation

The economy

Socialfactors

Culturalforces

Technology

Political structures

Legalstructures

Demography

Suppliers

Distributors& dealersMarket

demands

CompetitorsCustomers

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Porter’s Industry Analysis:

The 5 Forces Model

INDUSTRYCompetitive rivalry

POTENTIALENTRANTS

BUYERSSUPPLIERS

SUBSTITUTES

Threat ofrivalry

Bargainingpower

Threat ofsubstitution

Bargainingpower

Source: Porter, 1985

Bargaining Power of Suppliers

• the strength of the supplier brand

• the source of supply spans only a small number

of suppliers

• switching supplier

• substitute products of suppliers

• forward integration

Bargaining Power of Buyers

• where few buyers control a large volume of the

market

• where there is a large number of smaller

suppliers fighting for a share of the market

• the cost of switching supplier is low

• the supplier’s product is a mass-market

product and not necessarily differentiated

• strong customer power

• threat of backward vertical integration

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The Threat of Potential Entrants

• economies of scale

• access to new distribution channels

• brand loyalty

• capital investment

• competitor retaliation

• regulatory influence

Threat of Substitutes

• a new product or service equivalent

• a new product replacing an existing product

• consumer substitution

Key Factors Influencing

Competitive Rivalry

• stage of product life cycle of competing product

• use of specialized production techniques

• liquidity of competitor

• ability to achieve differentiation and brand

loyalty

• competitor intentions

• the relative size of the competitor

• barrier of exit from the industry

• number of sellers & degree of products

differentiation

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Industry’s Competitive Structure

One seller Few sellers Many sellers

Undifferentiated product

Differentiated product

Pure

monopoly

Pure oligopoly

Differentiated

oligopoly

Pure

competitive

Monopolistic competitive

....How does it matter?

Roles in the Target Market

• market leader

• market challenger

• market follower

• market nicher

.... and main implications.....

Product/Market Battlefield

• Does competitors offers differ?

- type od product....?

- type of customer (market)...?

• Product/market battlefield map and main

findings.....

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Analysis of the Macro Environment

Macro Analysis Frameworks

PEST

PESTEL

SLEPT

The PEST Framework

Political / Legal

Legislative structures

Monopoly restrictions

Political / gov. stability

Political orientation

Taxation policies

Employment legislationForeign trade regulations

Socio-Cultural

Demographics

Lifestyles

Social mobility

Education levels

Attitudes

Consumerism

Religion

Economic

Business cycles

Money supply

Inflation rates

Investment levels

Unemployment

Energy costs

Technological

Speed of change

Rate of technological transfer

Product life-cycles

Availability

Cost

Levels of industrial and gov. R&D expenditure

Org

an

isa

tio

n

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SWOT Analysis

SWOT analysis draws together key strengths, weaknesses, opportunities and threats that have been derived as a result of the marketing audit, i.e. the macro and micro analysis and assessment

SWOT Analysis

Financial resources, product portfolio, economies of scale, technical capability,management ability, innovative design, profitability, R&D, marketing

intelligence

Global markets, investment opportunities, diversification, technology innovation, internet, high quality products

Lack of skilled labour, high workforce turnover, lack of financial investment, poor internal communications, lack of management commitment, supplier

relationships, management weaknesses, over-capacity

Global markets, competitive activity, competitive investment, supplier desertion, substitute products, market saturation,

resistance to change

Internal

External

Strengths Weaknesses

Opportunities Threatsconvert

convert