Marketing Basics @ tnmg4u.com

Marketing Basics Page 1 of 7 TNMG Classics Marketing Basics Welcome to the ‘Marketing Basics’ – dear friend!  This document is created for the purpose of spreading knowledge about basic marketing concepts and frameworks in a brief and easy to understand manner. You are free to use this document for personal non-commercial purposes. You can also share this document with anyone and everyone who you think will find the information useful. For any further queries about the content or copyright please write to us at: tnmg4u@gmail.com. Any feedback, suggestions or comments about this document or TNMG website (www.tnmg4u.com) or our YouTube channel (www.youtube.com/user/TNMGTube) is most welcome. We would love to hear back from you!  About the author: This document is authored by Angshuman - a PhD Scholar in Marketing Management at XLRI, Jamshedpur, India. He is a passionate marketing enthusiast, avid blogger and social media addict. He writes exclusive articles on marketing, advertising, branding and other topics on his personal blog: www.tnmg4u.com. If you want you can connect with him on Gtalk/Gmail: ghosh.angshuman.fpm@gmail.com or Twitter: http://twitter.com/angshu_tnmg4u Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 2 of 7 INTRODUCTION TO MARKETING “Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer’s point of view.” -Peter Drucker “Marketing is the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.” -Kotler “Marketing is the management process that identifies, anticipates and satisfies customer requirements profitably.” -The Chartered Institute of Marketing (CIM)  From the strategic perspective, marketing is satisfying customer needs profitably and better than the competition (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 the right 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 Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 3 of 7 SOCIETAL MARKETING CONCEPT ONCEPT  Focus on all the stakeholders (S (Short term consumer wants Long term consumer welfare) ong  Balancing all three aspects: consumer needs + business profit + society’s interests  Definitely the best approach – all preaches now-a-days but few follows! BASIC MARKETING PROCESS Marketing Marketing Situational Marketing Marketing Marketing Audit and Analysis Objectives Strategy Tactics Implementation Control SITUATIONAL ANALYSIS • External Environment Analysis (Analyzing factors outside the organization) • Macro Environment Analysis (PEST=Political-legal, Economic conomic-demographic, Socio- cultural and Technological) echnological) • Micro Environment Analysis (Value Chain Analysis= Customers, C Competitors, Suppliers and Distributors) 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 IT • 5M Framework= Framework=Men, Money, Machinery, Materials and Minute • Portfolio Analysis (BCG Matrix, GE McKinsey Matrix) • Internal + External Analysis (SWOT= (SWOT=Strength, Weakness, Opportunity and Threat) pportunity MARKETING OBJECTIVES : • Should be SMART = Specific, Measurable, Achievable, Realistic and Time- pecific, -bound MARKETING STRATEGY: • Deals with broader level strategic decisions • STP = Segmentation, Targeting and Positioning argeting MARKETING TACTICS: • Marketing Tactics or Marketing Mix d deals with more specific and tactical level decisions • Most widely used framework is 4Ps = Product, Price, Place and Promotion (by McCarthy) romotion • 4Cs= Customer solution, Customer cost, Convenience, and Communication • For services industry 7Ps = 4Ps + (People, Process and Physical Evidence) hysical MARKETING IMPLEMENTATION: TION: • Is equally important as planning but many a times not properly executed any MARKETING AUDIT AND CONTROL CONTROL: • You can’t manage what you can’t measure - so, measure and then manage! • Involves evaluation of marketing strategy and implementation • Provides inputs for future marketing strategy Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 4 of 7 MAJOR MARKETING FRAMEWORKS PORTER’S FIVE FORCES  Contributed by Michael E. Porter  Help 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 comers from entering  Examples of high entry barrier – strong distribution channel of ITC in the Cigarette industry  Example of low Supplier Power – HUL getting long credit periods from suppliers BCG MATRIX  Contributed by Boston Consulting Group  Best-known portfolio planning framework (simple to understand and use, provides quick guidelines in strategic investment planning)  Used to analyze current business portfolio at the SBU level (can be adapted to use for products also)  Four possible strategies for SBUs or products: build market share, hold, harvest and divest  Helps to decide which SBUs or products 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 high rates 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 Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 5 of 7 ANSOFF’S MATRIX  Contributed by Igor Ansoff (Harvard Business Review 1957) Harvard  Helps in deciding growth strategy; also called growth opportunities matrix Existing Products/Services New Products/Services Market Penetration Gain market share, Penetration: Product Development Sell more products Development: Existing Markets sell more to existing customers to current customers Market Development : Enter and develop Diversification: Launch new product in : New Markets new markets new markets (diversify portfolio) SWOT ANALYSIS • A tool for auditing an organization and its environment; used in early stage of planning • Strengths and Weaknesses are internal factors and Opportunities and Threats are external factors d • Objective of decision making will be to capitalize on Strengths and Opportunities and at the same time minimize the effects of Weaknesses and Threats Positive Factors Negative Factors Strengths: Weaknesses:  Good relationship with suppliers and distributors  Lack of goodwill or poor reputation  An innovative product/service and q quality process  Poor quality/undifferentiated goods or services ndifferentiated  Specialist marketing expertise and expert people  Lack of marketing expertise ack  Strong distribution channel and reputation  Weak supply chain; poor relation with vendors  Location of business (store location for retail)  Poor location of business Opportunities: Threats:  Potential international market (e.g. BRIC markets)  Competition: new competitors, price wars, new  A new or developing market (e.g. Internet) or better products, better distribution channel channels  Acquisition, mergers, JV or strategic alliances  Environmental factors: new laws with higher  New market segments that offer improved profits taxes, weak economy or recession, issues in  A market vacated by an ineffective competitor supply for flood, draught, strikes etc STP SEGMENTATION AND TARGETING  Bases of segmentation can be: (a) demographics, (b) psychographics, (c) behavioral, (d) benefits sought  Evaluation of segments and then targeting can be done based on following decision parameters HOMOGENEITY MEASUREABILITY ACCESSIBILITY SUBSTANTIALITY ATTRACTIVENESS ATTRACTIVENESS ACTIONABILITY •Companies •Can we •Can we •Does the •Market, •Can we should try to understand the communicate segment desire Competitive, Competitive, create a choose and size and needs with the the values that Channel, Internal Channel, competitive target of the market segment so an offering and Other and advantage segments that segment? that serving presents? Considerations Considerations with respect are the segment to the needs homogenous is possible? of the in the kinds of segment? value sought Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 6 of 7 POSITIONING  Positioning refers to the consumer's perception of a product or service in relation to its competitors  Perceptual map or positioning map is used to map competing products to analyse their positioning  Generic neric positioning: positioning New product; Differentiate on needs  Attribute positioning Growth positioning: market; Differentiate on attributes  Emotional positioning Mature positioning: market; Differentiate on intangible attributes/ brand image CONSUMER DECISION MA KING PROCESS Need Information Purchase Recognition Search Decision Consideration Alternative Post Set Evaluation Purchase Evaluation TYPES OF DECISION PROCESSES OCESSES Picking Variety seeking Legalistic Subcontracted •Low involvement and •Low involvement and Low •Requires approval •Buyer obtain a limited problem limited problem from external sources recommendation solving solving •Based on legal and from a personal or •Undifferentiated •Differentiated brands Differentiated societal norms non personal source brands (ex. doctor) Problem solving Heuristics Habit •Normally for complex, •Used for repeat •Absence of high priced decisions information search differentiated •Buyers uses rules of and alternative products thumb evaluation •High degree of • Very quick and easy •Standard decisions for Standard uncertainty decisions repeat purchases Copyright © 2009 - www.tnmg4u.com - All rights reserved.

Marketing Basics Page 7 of 7 PLC OR PRODUCT LIFECYCLE  A popular tool to decide Marketing Strategy and Investment  Basic steps: which stage in PLC  Overall Marketing Mix  Reshape and control PLC  Find below an indicative guideline for normal products based on PLC stage but cannot be generalized PLC Stage Introduction Growth Maturity Decline Marketing Market development by Maintain and build Defend market Harvest (‘milk’ Objective creating awareness market + Stress share + Maintain the cow) or differentiation brand loyalty Delete (‘divest’ the dog) Competition Almost not there Increasingly more Many but stable Reduced Product Limited variety New variety and Improvement and Withdraw less models introduced upgrade of profitable product products Price Skimming or penetration Aggressive pricing Defensive pricing At least break- pricing to increase sales to defend MS & even (> profit marginal cost) Promotion Brochures, ads etc to Build preference by Reminder ads + Minimal educate people stressing difference Trade promotion promotion Place Exclusive/selective More outlets to Maximum reach to Reduced (Distribution) distribution ensure reach ensure availability number of outlets  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 reach decline phase will actually lead to the decline! INNOVATION DIFFUSION PROCESS Copyright © 2009 - www.tnmg4u.com - All rights reserved.

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Marketing Basics @ tnmg4u.com

by Angshuman Ghosh on Dec 09, 2009

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