Basic Concepts of Marketing


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  • Article written comparing customer satisfaction with Southwest (where bags fly free) and American Airlines which habitually ranks low on satisfaction surveys Paying for checking bags, food, and increase in airline ticket costs lead to dissatisfied customers Sadly, airlines and waiting on the cable t.v guy were tied in customer satisfaction. Some airlines seem to get it, while others are going to suffer in the near future because of their cost strategy.
  • When Levitt wrote this article in 1960, the technology was mostly based on satisfying the military’s needs. Today while there is a portion of technology companies that are still focused on this especially in war times, many companies are gearing products toward the customer’s needs and wants. Ipod Ipad Smartphones
  • When Levitt wrote this article in 1960, the technology was mostly based on satisfying the military’s needs. Today while there is a portion of technology companies that are still focused on this especially in war times, many companies are gearing products toward the customer’s needs and wants. Ipod Ipad Smartphones
  • When Levitt wrote this article in 1960, the technology was mostly based on satisfying the military’s needs. Today while there is a portion of technology companies that are still focused on this especially in war times, many companies are gearing products toward the customer’s needs and wants. Ipod Ipad Smartphones
  • When Levitt wrote this article in 1960, the technology was mostly based on satisfying the military’s needs. Today while there is a portion of technology companies that are still focused on this especially in war times, many companies are gearing products toward the customer’s needs and wants. Ipod Ipad Smartphones
  • When Levitt wrote this article in 1960, the technology was mostly based on satisfying the military’s needs. Today while there is a portion of technology companies that are still focused on this especially in war times, many companies are gearing products toward the customer’s needs and wants. Ipod Ipad Smartphones
  • Basic Concepts of Marketing

    2. 2. What Is Marketing? Any Interpersonal And Inter-organisational Relationship Involving An Exchange Is Marketing . WILLIAM J.STANTON
    3. 3. What Is Marketing? The essence of Marketing is a transaction - an exchange- intended to satisfy human needs and wants. There are three elements in the marketing process : (A) MARKETERS (B) WHAT IS BEING MARKETED (C) TARGET MARKET
    4. 4. What Is Marketing? Marketing is a social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others PHILIP KOTLER Simply put: Marketing is the delivery of customer satisfaction at a profit.
    5. 5. Core concepts of Marketing
    6. 6. Needs, Wants And Demands  NEED : A state of felt deprivation of some basic satisfaction ( Food, Clothing, Shelter, Belonging etc. )  WANTS : Wants are desires for specific satisfiers of the deeper needs. Needs are few and wants are many .  DEMANDS : are wants backed by ------Ability to buy and Willingness to buy
    7. 7. Products / Offers / Satisfiers / Resources  Anything that can be offered to someone to satisfy a need or want is a product .  Product refers to physical object  Services refer to intangible object
    8. 8. Value and Satisfaction  Value is the customers’ estimate of the Product’s capacity to satisfy a set of goals  Value is the ratio between what the customer gets and what he gives (V=B/C)  Customer gets benefits & assume costs  WHEN :Customer Expectance=Performance (satisfied)  Customer Expectance>Performance (dis-satisfied)  Customer Expectance<Performance (Highly satisfied)
    9. 9. Three Basic Principles Of Marketing (1) The Customer Value and Value Equation: V=B/P Where; V=Value B= Perceived Benefits P= Price (Value is increased by increasing the numerator and/or reducing the denominator)
    10. 10. Value Map A B C DE VEL Value Advantaged Area Value Disadvantaged Area Customer Perceived Benefits Perceived Price
    11. 11. Value Proposition Involving all benefits: All benefits are a complete list of positive features that a supplier believes its offerings might deliver to end customers as a result of good knowledge about the customers and the competitors. Favourable points of difference: Favourable points of difference are the factors that distinguish the supplier’s offerings among the next alternatives. To achieve that, detailed knowledge about the next best competitor(s) is required in order to shape the company’s strategy. Resonating focus: The resonating focus approach differs in two respects: more is not always better and it is better to focus on one or two key points to deliver to the target customer. Suppliers in this approach must identify the elements that make their offer superior in order to demonstrate, document and communicate them clearly to the targeted customers.
    12. 12. Value Proposition - Advertisements AC ad 1.flv AC ad 2.flv AC ad 3.flv Bank ad.flv Insurance Ad.flv Insurance ad (2).flv Ketchup ad.flv ToothPaste Ad.flv Competitive Advertising.flv
    13. 13. Value Proposition – Assignment 1 Involving all benefits Favourable points of difference Resonating focus
    14. 14. Exchange and Transaction  Exchange is the act of obtaining a desired product by offering something in return .  Exchange takes place when 5 conditions are satisfied: (a) Two parties should be there (b) Each party must have something of value to the other (c) Each party is capable of communication & delivery (d) Each party is free to accept or reject the offer (e) Each party believes that it is appropriate to deal with the other party
    15. 15. Exchange and Transaction  Exchange is a process rather than event. It is a value creating process because it normally leaves both parties better off.  A transaction is a trade of values between two or more parties ( A BARTER TRANSACTION OR A MONETARY TRANSACTION ).
    16. 16. Strategic Concept of Marketing  Shifted the focus of Marketing from Product or customer to the CUSTOMER IN THE CONTEXT OF THE BROADER EXTERNAL ENVIRONMENT .  To succeed, marketers must know the customer in a context including the competition, Govt. Policy& regulation and the broader economic, social and political macro forces that shape the evolution of market.
    17. 17. Strategic Concept of Marketing  Shifted the Marketing Objectives from PROFIT TO STAKEHOLDER BENEFITS.  Stakeholders are individuals or groups who have an interest in the activity of a company . They include-----The employees and management, Customers, Society, Shareholders, Financiers/ Bankers, Government etc.
    18. 18. Strategic Concept of Marketing  Strategic Marketing Concept is Strategic Management, which integrates marketing with the other management functions. ( Major task is Profit for Stakeholders’ benefits ).
    19. 19. Marketing System  Marketing is concerned with the flow of goods and services from the points of production to the points of consumption.  There is a systematic arrangement of these functions of marketing to move the goods and services to the needy persons. This system is essential to the creation of time, place and possession utilities.
    20. 20. Marketing System  A dynamic marketing system must be willing to undertake the following specific activities: 1. Define market area. 2. Research consumer wants and needs. 3. Develop and redevelop product / service. 4. Select, train, motivate and control human resources. 5. Develop sales approach and advertising support.
    22. 22. Three Basic Principles Of Marketing The essence of marketing can be summarized in three great principles.  first identifies the purpose and task of marketing,  second is the competitive reality of marketing and  Third is the principal means for achieving the first two.
    23. 23. Three Basic Principles Of Marketing (2) Competitive or Differential Advantage : The total offer must be more attractive than that of the competition in order to create a competitive advantage. (3) Focus or the Concentration of Attention : The task of creating Customer Value at a Competitive advantage.
    24. 24. Customer As The Controlling Function Production Finance Marketing Personnel CUSTOMER
    25. 25. Marketing As The Integrative Function CUSTOMER Production HR Finance Marketing
    26. 26. Three Levels Of Marketing  Responsive Marketing  Anticipative Marketing  Need Shaping Marketing
    27. 27. Responsive Marketing It is the form of marketing when some company defines an existing clear need and prepare an affordable solution. (Recognizing that women wanted to spend less time for cooking and cleaning, led to the invention of modern washing machine, microwave oven etc.)
    28. 28. Anticipative Marketing It is a form of marketing when a company recognize an emergent or latent need, and come out with an affordable solution. Evian, Perrier anticipated growing market for bottled drinking water as the quality of water deteriorated in many places. Anticipative marketing is more risky than responsive marketing; companies may come into market too early or too late, or may even be totally wrong about thinking that such a market would develop.(eg. Dish washers in India)
    29. 29. Need Shaped Marketing The broadest level of marketing occurs when a company introduces product that nobody asked for and often could not even conceive of. (e.g. Sony Walkman, Sony Compact Disc ) Late Akio Morita, founder and chairman of Sony, who introduced these and many other new products, summarized his marketing philosophy in these words: “ I don’t serve markets. I create them.”
    30. 30. WHAT IS MARKET ?  A market consists of all the potential customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy that need or want.
    31. 31. WHAT IS MARKETING ?  Marketing is the management process which identifies, anticipates, and supplies customer requirements efficiently and profitably.  In other words, it is the process of understanding, creating, and delivering profitable value to targeted customers better than the competition.
    32. 32. WHAT IS MARKETING ?  Its aim is to establish, maintain, enhance long term relationship with customers at a profit so that the objectives of the parties involved are met.  In short marketing consists of attracting, developing, and retaining profitable customers.
    33. 33. BUSINESS IS MARKETING  Marketing can not be considered as a separate function , it is the whole business, seen from the point of view of its final results.................that is profit,through customer satisfaction PETER DRUCKER
    34. 34. A SIMPLE MARKETING SYSTEM Industry Market Communication Information/Feedback Goods & Services Money
    35. 35. WHAT IS MARKETING MANAGEMENT ?  Marketing Management is the analysis, planning, implementation and control of programs designed to create, build and maintain beneficial exchanges and relationships with target markets for the purpose of achieving Organisational objectives.
    36. 36. WHAT IS MARKETING MANAGEMENT ?  Marketing management is demand management or it involves the task of influencing the level, timing and composition of demand. At times the actual demand level may be below, equal to, or above the desired demand level and the major task of marketing management is to regulate the level of demand.
    37. 37. STATE OF DEMAND AND MARKETING TASK  State of demand  Negative Demand  No Demand  Latent Demand  Falling Demand  Irregular Demand  Full Demand  Overfull Demand  Un-wholesome Demand   Marketing task  Conversional Mktg.  Stimulational Mktg.  Developmental Mktg.  Remarketing  Synchro-marketing  Maintenance Mktg.  Demarketing  Counter-marketing
    38. 38. EVOLUTION OF MARKETING MANAGEMENT  Marketing management has evolved through following stages :  (1) Production Orientation Stage  (2) Sales Orientation Stage  (3) Marketing Orientation Stage  (4) Social Responsibility & Human Orientation Stage
    39. 39. COMPANY ORIENTATION FOR MARKETING ACTIVITIES  Marketing Management can be defined as the effort to achieve desired EXCHANGE outcomes with TARGET MARKETS.  Now the question arises : (1) What philosophy should guide the marketing activities? (2) What weights should be given to the interests of the organisation,the customers and the society?
    40. 40. MARKETING CONCEPTS  There are FIVE competing concepts under which organizations conduct their marketing activities:  The Production Concept  The Product Concept  The Selling Concept  The Marketing Concept  The Societal Marketing Concept
    41. 41. (1) THE PRODUCTION CONCEPT Produce Sell Consumers Company Produce more & more Practically sells itself
    42. 42. THE PRODUCTION CONCEPT  Consumers will favour those products that are widely available and low in cost.  Therefore increase production and cut down costs.  And build profit through volume.
    43. 43. (2) THE PRODUCT CONCEPT Produce Quality Products Sell Consumers Practically sells itself,if it gives most quality for money Buyers admire well-made products and can appraise product quality and performance.
    44. 44. THE PRODUCT CONCEPT  Consumers will favour those products that offer the most quality, performance, or innovative features.  Therefore, improve quality, performance and features.  This would lead to increased sales and profits.
    45. 45. (3) SELLING CONCEPT  Consumers have normal tendency to resist. Produce Sell it Consumers Aggressive selling & promotion efforts Making sales becomes primary function and consumer satisfaction secondary .
    46. 46. THE SELLING CONCEPT  Consumers , if left alone , will not buy enough of company’s products.  Therefore, promote sales aggressively.  And,build profit through quick turnover.
    47. 47. (4) MARKETING CONCEPT  “ LOVE THE CUSTOMER , NOT THE PRODUCT ” Consumers Produce it Market it Learn what they want(MR) Sell what they want(Satisfy needs of customers)
    48. 48. THE MARKETING CONCEPT  The key to achieving organizational goals consist in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors.  And build profit through customer satisfaction and loyalty.
    49. 49. (5) THE SOCIETAL MARKETING CONCEPT  It is Marketing Concept (+) Society’s well being.  Balancing of following three considerations while setting marketing policies : -Customer’s want satisfaction -Society’s well being -Company’s profits
    50. 50. THE SOCIETAL MARKETING CONCEPT  The societal marketing concept holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well being. - It addresses conflicts between consumer’s and firm’s short run wants and long term welfare.
    52. 52. Marketing starts with the buyer and focuses constantly on  buyer’s needs. Selling starts with the seller and is preoccupied all the time with  the seller’s needs Seeks to convert “customer needs” into products’ Seeks to convert ‘products’ into “Cash”. Views business as a customer satisfying process Views business as a goods producing process Marketing effort leads to the products that the  customers actually want to buy in their own interest The company makes the product first and then figures out how to  sell it and make a profit Marketing  communication is  looked  upon  as  a  tool  for  communicating the benefits/ satisfactions provided by the  product Seller’s motives dominate marketing  communication  (promotions). Marketing views the customer as the very purpose of the  business.  It  sees  the  business  from  the  point  of  view  of  the  customer.  Customer consciousness permeates the entire  organization – all departments, all the people and all the  time. Selling views the customer as the last link in the business. ‘Customer satisfaction’ is the primary motive. ‘Sales’ is the primary motive. External market orientation ‘Sales’ is the primary motive Marketing concept takes an outside in Perspective. Selling concept takes an inside-out perspective.
    53. 53. Marketing is more ‘pull’ than ‘push’ Selling involves ‘push’ strategy. Marketing  begins  much  before  the  production  of goods and services, i.e. with identification of customers’  needs. It continues even after the sale to ensure customer  satisfaction through after sales services Selling comes after production and ends with the delivery of the  product and collection of payment. Marketing  has  a  wider  connotation  and  includes  many  activities  like  marketing  research,  product planning & development, pricing, promotion,  distribution, selling etc. Selling is a part of marketing. It concerns itself  primarily and truly  with  the  ‘value satisfactions’ that should flow to the  customer  from  the exchange It over emphasizes “the exchange’ aspect, without caring for the  ‘value satisfactions’ inherent in the exchange. It assumes: “Let the seller beware” It assumes: “Let the buyer beware” The  main job  is  to  find  the  right  products  for  your customers. The main job is to find the customers for your products. The mindset is “What is that we can make here or source  from outside to satisfy the needs of the target customers”. The mindset is “Hook the customer” Conceptual and analytical skills are required Selling and conversational skills are required.
    54. 54. To illustrate the relationship between sales objectives, strategies and tactics, consider: Sales Goals / Objectives Marketing Strategy Sales and Distribution Strategy Tactics / Action plans • Increase sales volume by 15 percent • Enter export markets • Identify the countries • Decide distribution channels • Marketing / sales head to get relevant information • Negotiate and sign agreements in 3-5 months with intermediaries • Penetrate existing domestic markets • Review and improve salesforce training, motivation and compensation • Use effective and efficient channels • Add channels and members • Train salespeople in deficient areas • Train field salesmanagers in effective supervision • Link sales volume quotas to the incentive scheme of the compensation plan
    55. 55. Sales & Marketing Thought Worlds Marketing says… Sales says… “Marketing people work long, hard hours, but salespeople make more money.” ‘Sales makes the money for the company; marketing just spends it.” “Marketing develops strategies and plans and sales is the implementation arm of marketing. Salespeople are paid agents of marketing.” “Marketers are locked in the ivory tower and don’t have a clue about what customers really want.” “Marketing is more reflective; sales is more reactive.” “Marketing is more bureaucratic than sales. Marketing is too internally focused.” “Salespeople are driven by specific accounts, the volumes and price discounts.” “The sales force will lose significant business if it accepts the marketing price.”
    56. 56. Division of work between Marketing & Sales
    57. 57. USP (Unique selling proposition) USP is a unique product attribute that a company uses to set its (brand) product apart from the competition. e.g. Volvo is a safe vehicle Big Bazaar is the low priced supermarket.
    58. 58. USP ??? Emphasizing a single attribute as the tactic to position your brand can be beneficial, as it allows us to focus all the marketing input towards one single attribute. Can also be dangerous as the attribute should be such, which is identified as valuable by the target consumer. In addition, since you are hanging your hat on one attribute to position your brand, the competitor may have easy time attacking you.
    59. 59. Conveying USP through a slogan… (1 sentence that says it all)  Consistency is the key when it comes to the slogans.  Slogan should be consistent with the intended positioning of the brand.  In general, should be consistent overtime.  When the market environment changes the positioning of a brand, the slogan should also change.
    60. 60. Some Examples  Domino's Pizza: "You get fresh, hot pizza delivered to your door in 30 minutes or less— or it's free."  Head & Shoulders: "You get rid of dandruff"  Anacin: "Fast, fast, incredibly fast relief.“  Nirma: “Doodh si safedi Nirma se Aaye”  Close-up: Freshness  Vicco Vajradanti: Ayurvedic
    61. 61. Marketing Mix
    62. 62. The Marketing Mix  The tools available to a business to gain the reaction it is seeking from its target market in relation to its marketing objectives  7Ps – Price, Product, Promotion, Place, People, Process, Physical Environment  Traditional 4Ps extended to cope with today's changing environment
    63. 63. The Marketing Mix
    64. 64. ProductProduct
    65. 65. Product  The firm must come up with a product or service that people will want to buy.  It must fulfil some need or want.  It must be (or at least seem) unique.
    66. 66. Product  Methods used to improve/differentiate the product and increase sales or target sales more effectively to gain a competitive advantage e.g.  Extension strategies  Specialised versions  New editions  Improvements – real or otherwise!  Changed packaging  Technology, etc. Image copyright:
    67. 67. Product or service Core Product Actual Product Augmented Product CAR Transportation A motor car Finance Availability Hotel Accommodation Rooms Room service Airline Transportation An air plane In flight Entertainment A Football Club Entertainment T-shirts – photos with players An Insurance Company Safety Insurance policy Online availability Air Condition Cooling AC Warranty
    68. 68. PricePrice
    69. 69. Price  Pricing Strategy - International  Comparative  Cost plus • The price must be one thatThe price must be one that the customer thinks is goodthe customer thinks is good value for moneyvalue for money.. • This is not the same asThis is not the same as beingbeing cheap!cheap! • Prices have a greatPrices have a great psychological effect onpsychological effect on customers.customers.
    70. 70. Price  Pricing Strategy  Importance of:  knowing the market  elasticity  keeping an eye on rivals Image copyright:
    71. 71. PromotionPromotion
    72. 72. Promotion  Strategies to make the consumer aware of the existence of a product or service  NOT just advertising
    73. 73. The promotional message should Grab Attention Stimulate Interest Create Desire Promote Action
    74. 74. PlacePlace
    75. 75. Place  The means by which products and services get from producer to consumer and where they can be accessed by the consumer  The more places to buy the product and the easier it is made to buy it, the better for the business (and the consumer?)
    76. 76. PeoplePeople
    77. 77. People  People represent the business  The image they present can be important  First contact often human – what is the lasting image they provide to the customer?  Extent of training and knowledge of the product/service concerned  Do staff represent the desired culture of the business?
    78. 78. People  People represent the business  The image they present can be important  First contact often human – what is the lasting image they provide to the customer?  Extent of training and knowledge of the product/service concerned  Mission statement – how relevant?  Do staff represent the desired culture of the business?
    79. 79. People  People represent the business  The image they present can be important  First contact often human – what is the lasting image they provide to the customer?  Extent of training and knowledge of the product/service concerned  Mission statement – how relevant?  Do staff represent the desired culture of the business?
    80. 80. ProcessProcess
    81. 81. Process  How do people consume services?  What processes do they have to go through to acquire the services?  Where do they find the availability of the service?  Contact  Reminders  Registration  Subscription  Form filling  Degree of technology
    82. 82. Physical EnvironmentPhysical Environment
    83. 83. Physical Environment  The ambience, mood or physical presentation of the environment  Packaging.  Internet/web pages.  Paperwork (such as invoices, tickets,…..).  Brochures.  Furnishings.  Uniforms.  Business cards.  The building itself (such as prestigious offices or scenic headquarters).  Mailboxes and many others . . . . . .
    84. 84. Marketing Myopia
    85. 85. What is Myopia • Nearsightedness--not inherited. It can be prevented. • Short sighted and inward looking approach to marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customers' needs and wants.
    86. 86. “There is no such thing as a growth industry, what we have is growth opportunities.” -Theodore Levitt
    87. 87. Guarantee a Self-Deceiving Cycle  Believe growth is guaranteed by an expanding population  Believe there is no competitive substitutes  Have too much faith in mass production  Preoccupation with a product: focus on product instead of customer
    88. 88. Assured Growth by Expansion • Belief that increases in population and affluence ensure growth • Lack of innovation – A common characteristic ▫ Companies focus on efficiency, not innovation • Petroleum industry ▫ A prime example of this fallacy ▫ Reinforces Levitt’s caution of myopically defining one’s industry
    89. 89. No Threat of Obsolescence • The fallacy of believing competitive substitutes don’t exist • Petroleum industry ▫ A history of obsolete products due to competitive substitutes  Kerosene Lamp  Kerosene Space Heater
    90. 90. Mass Production • Lower product’s unit costs as output increases • Focus on production, neglect marketing • Selling is not marketing • Focus on company’s needs, not customer’s needs
    91. 91. Henry Ford Brilliant Marketer Senseless Marketer • Created a product customer’s needed • Created a product customer’s could afford • Created production system to fit market needs • Refused to make cars in any other color but black
    92. 92. Preoccupation with Product • Industry declines instead of growing • Example – Oil Companies • Survival entails change
    93. 93. Creative Destruction • When something new eliminates something old • Must become innovative – reinvent business • Must change business strategy to survive
    94. 94. Marketing Myopia Today  Airline Industry  - IndiGo V/s Kingfisher  - Private carriers v/s National Carriers
    95. 95. Marketing Myopia Today • Technology Industry ▫ More focused on the customer today than in 1960 ▫ Apple ▫ E-commerce and E-Business ranked high in customer satisfaction report
    96. 96. • The key question – “what business are you in?”
    97. 97. Vision Statements ITC: Sustain ITC's position as one of India's most valuable corporations through world class performance, creating growing value for the Indian economy and the Company's stakeholders GE: We bring good things to life Amazon: To be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online
    98. 98. Vision Statements SONY: To create exciting new digital entertainment experiences for consumers by bringing together cutting- edge products with latest generation content and services. TCS: TCS will be recognized and respected as professional, innovative, profitable information, and knowledge based logistics/services enterprise
    99. 99. Vision Statements Apple: "We believe that we are on the face of the earth to make great products and that's not changing. We are constantly focusing on innovating. We believe in the simple not the complex. We believe that we need to own and control the primary technologies behind the products that we make, and participate only in markets where we can make a significant contribution. We believe in saying no to thousands of projects, so that we can really focus on the few that are truly important and meaningful to us. We believe in deep collaboration and cross-pollination of our groups, which allow us to innovate in a way that others cannot. And frankly, we don't settle for anything less than excellence in every group in the company, and we have the self-honesty to admit when we're wrong and the courage to change. And I think regardless of who is in what job those values are so embedded in this company that Apple will do extremely well.
    100. 100. Conclusion  “Organizations must learn to think of itself not as producing goods or services but as buying customers, as doing the things that will make people want to do business with it.” Theodore Levitt