UNIT I - MARKETINGMarketing - Marketing is a societal process by which individuals and groups obtain what theyneed and want through creating, offering and freely exchanging products and services of valuewith others.Marketing Management - American Marketing Association defines Marketing Management asthe process of planning and executing the conception, pricing, promotion and distribution ofideas, goods, services to create exchanges that satisfy individual and organizational goals. CONCEPTS OF MARKETINGProduction Concept - The production concept is one of the oldest concepts in business. Theproduction concept holds that consumers will prefer products that are widely available andinexpensive.Managers of production oriented businesses concentrate on achieving high productionefficiency, low costs, and mass distribution. They assume that consumers are primarilyinterested in product availability and lower prices. This orientation makes sense in developingcountries, where consumers are more interested in obtaining the product than in its features. It isalso used when a company wants to expand the market.Product Concept - The product concept holds that consumers will favour those products thatoffer the most quality, performance and innovative features.Managers in these organizations focus on making superior products and improving them overtime. They assume that buyers admire well-made products and can appraise quality andperformance. However, these managers are sometimes caught up in a love affair with theirproduct and do not realize what the market needs. Management might commit the “better-mousetrap” fallacy, believing that a better mousetrap will lead people to beat a path to its door.The product oriented companies often design their products with little or no customer input.They trust that their engineers can design exceptional products. Very often they will not evenexamine competitors’ products. The product concept can lead to marketing myopia.Selling Concept - The selling concept holds that consumers and businesses if left alone, willordinarily not buy enough of the organization’s products. The organization must, therefore,undertake an aggressive selling and promotion effect.This concept assumes that consumers typically show buying inertia or resistance and must becoaxed into buying. It also assumes that the company has a whole battery of effective selling andpromotion tools to stimulate more buying.Most firms practice this concept when they have overcapacity. Their aim is to sell what theymake rather than make what the market wants.Marketing Concept - The marketing concept is a business philosophy that challenges the abovethree business orientation. The marketing concept holds that the key to achieving itsorganizational goals consists of the company being more effective than competitors in creating,delivering, and communicating customer value to its chosen target markets.This concept rests on four pillars: target market, customer needs, integrated marketing andprofitability.
The marketing concept has been expressed in many colourful ways:“Meeting needs profitably.”“Find wants and fill them.”Example:“Putting people first” (British Airways)“Love the customer, not the product.”“Have it your way.” (Burger king)Societal marketing concept - The organization task is to determine the needs, wants & interestof target markets & to deliver the desire, satisfactions more effectively & efficiently thancompetitors in a way that enhances the consumers & society well being. MACRO OR EXTERNAL MARKETING ENVIRONMENTDemographic EnvironmentThe first macro environmental force that marketers monitor is population be people make upmarkets. Marketers are keenly interested in the size and growth rate of population in differentcities, regions and nations; age distribution and ethnic mix; educational levels; householdpatterns; and regional characteristics and movements.Worldwide Population GrowthThe explosive world population growth has major implications for business. A growingpopulation does not mean growing markets unless these markets have sufficient purchasingpower. Nonetheless, companies that carefully analyze their markets can find major opportunities.Population Age MixA population can be subdivided into six age groups: preschool, school-age children, teens, youngadults age 25 to 40, middle-aged adults age 40 to 65, and other adults age 65 and up. Formarketers, the most populous age groups shape the marketing environment.Ethnic MarketsCountries also vary in ethnic and racial makeup. Each group has certain specific wants andbuying habits. Several foods, clothing and furniture companies have directed their products andpromotions to one or more of these groups.Educational GroupsThe population in any society falls into five educational groups: illiterates, high school dropouts,high school degrees, college degrees, and Professional degrees. Ex: In Japan 99% of thepopulation is literate, whereas in the United States 105 to 15% of the population may befunctionally illiterate.Geographical Shifts in Population:This is a period of great migratory movements between and within countries. The new countriesare making certain ethnic groups unwelcome (such as Russians in Latvia, or Muslims in Serbia)and many of these groups are migrating to safer areas. Population movement also occurs aspeople migrate from rural to urban areas, and then to suburban areas.
Economic EnvironmentMarket requires purchasing power as well as people. The available purchasing power in aneconomy depends upon current income, prices, savings, debt and credit availability. Marketersmust pay close attention to major trends in income and consumer-spending patterns.i. Income DistributionNations vary greatly in level and distribution of income and industrial structure. There are 4types of industrial structure:1. Subsistence economiesIn a subsistence economy, the vast majority of people engage in simple agriculture, consumemost of their output, and barter the rest for simple goods and services. These economies offerfew opportunities for marketers.2. Raw-material-exporting economies:These economies are rich in one or more natural resources but poor in other respects. Much oftheir revenues come from exporting these resources. Examples are Zaire (copper) and SaudiArabia (oil).3. Industrialising economies:In an industrializing economy, manufacturing begins to account for 10% to 20% of grossdomestic product (GDP). Examples: India, Egypt, Philippines.4. Industrial economies:Industrial economies are major exporters of manufactured goods and investment funds. Theybuy manufactured goods from one another and also export them to other types of economies inexchange for raw materials and semi finished goods.Marketers often distinguish countries with 5 different income distribution patterns:Very low income, Mostly low income, Very low very high income, Low medium high income,Mostly medium income.Consider the market for Lamborghinis, an automobile costing more $1, 50,000. One of thelargest single markets for Lamborghinis turns out to be Portugal (income pattern 3) one of thepoorer countries in Western Europe, but one with enough wealthy families to afford expensivecars.ii. Savings, Debt and Credit AvailabilityConsumer expenditures are affected by consumer savings, debt and credit availability. Marketersmust pay careful attention to major changes in income, cost of living, interest rates, savings andborrowing patterns because they can have a high impact on business, especially for companieswhose products have high income and price sensitivity.Natural Environmenti. Shortage of Raw MaterialThe earth’s raw materials consist of the infinite, the finite renewable, and the finite non-renewable. Finite renewable resources such as forest and food must be used wisely. Finite non-renewable resource- oil, coal, platinum, zinc, silver- will pose a serious problem as the point of
depletion approaches. Firms making products that require these increasingly scarce minerals facesubstantial cost increases.ii. Increased Energy Costs One finite non-renewable resource, oil has created serious problems for the worldeconomy. Oil prices shot up from $2.23 a barrel in 1970 to $34.00 a barrel in 1982, creating afrantic search for alternative energy forms. The development of alternative sources of energy andmore efficient ways to use energy and the weakening of the oil cartel led to a subsequent declinein oil prices. Lower prices had an adverse effect on the oil- exploration industry but considerablyimproved the income of oil-using industries and consumers. In the meantime, the searchcontinues for alternative sources of energy.iii. Increased Population LevelsSome industrial activity will inevitably damage the natural environment. Consider the dangerousmercury levels in the ocean, the quantity of DDT and other chemical pollutants in the soil andfood supply, and the littering of the environment with bottles, plastics and other packagingmaterials. Smart companies are initiating environment-friendly moves to show their concern.New concern over the toxic nature of dry cleaning solvents has opened up opportunities for anew breed of “green cleaners”, although these new businesses face an uphill battle.iv. Changing Role of GovernmentsGovernments vary in their concern and efforts to promote a clean environment. Many poornations are doing little about pollution, largely because they lack the funds or the political will.The major hopes are the companies around the world will accept more social responsibility andthose less expensive devices will be invented to control and reduce pollution.Technological EnvironmentThe marketer should monitor the following trends in technology: the pace of change, theopportunities for innovation, varying R&D budgets, and increased regulation.i. Accelerating Pace of Technological ChangeMany of today’s common products were not available 40 years ago. More ideas are beingworked on; the time lag between new ideas and their successful implementation is decreasingrapidly; and the time between introduction and peak production is shortening considerably. 90%of all scientists who ever lived are alive today, and technology feeds upon itself.The advent of personal computers and fax machines has made it possible for people totelecommute- that is, work at home, instead of travelling to offices that may be 30 or moreminutes away. Some hope that this trend will reduce auto pollution, bring the family closertogether, and create more home-centered entertainment and activity. It will also have substantialimpact on shopping behaviour and marketing performance.ii. Unlimited Opportunities for InnovationScientists today are working on a startling range of new technologies that will revolutionalizeproducts and production processes. The challenge in each case is not only technical but alsocommercial- to develop affordable versions of these products.iii. Varying R&D BudgetsThe United States leads the world in annual R&D expenditures, but nearly 60% of these fundsare still earmarked for defence. There is a need to transfer more of this money into research on
material science, biotechnology and micromechanics. Many companies are content to put theirmoney into copying competitors’ products and making minor feature and style improvements.iv. Increased Regulation of Technological ChangeAs products become more complex, the public needs to be assured of their safety. Consequently,government agencies’ powers to investigate and ban potentially unsafe products have beenexpanded. Marketers must be aware of these regulations when proposing, developing, andlaunching new products.Political-Legal EnvironmentMarketing decisions are strongly affected by developments in the political and legalenvironment. This environment is composed of laws, government agencies, and pressure groupsthat influence and limit various organizations and individuals. Sometimes these levels also createnew opportunities for business.i. Legislation Regulating Business Business legislation has three main purposes;i. To protect companies from unfair competitionii. To protect consumers from unfair business practicesiii. To protect the interest of society from unbridled business behaviourA major purpose of business legislation and enforcement is to charge businesses with the socialcosts created by their products or production processes. Legislation affecting business hassteadily increased over the years. Marketers must have a good working knowledge of the majorlaws protecting competition, consumers, and society.ii. Growth of Special-interest Groups The number and power of special-interest groups have increased over the past threedecades. Political Action Committees (PACs) lobby government officials and pressure businessexecutives to pay more attention to consumer rights, women’s rights, senior citizen rights,minority rights. An important force affecting is the consumerist movement- an organizedmovement of citizens and government to strengthen the rights and powers of buyers in relationto sellers.Social-Cultural Environmenti. Society shapes our beliefs, values and norms. People absorb, almost unconsciously, aworldview that defines their relationship to themselves, to others, to organizations, to society, tonature and to the universe. • Views of Themselves • Views of Others • Views of organizations • Views of society • Views of nature • Views of the universe
ii. High Persistence of Core Cultural ValuesThe people living in a particular society hold many core beliefs and values that tend to persist.iii. Existence of SubculturesTo the extent that sub-cultural groups exhibit different wants and consumption behaviour,marketers can choose particular subcultures as target markets.MARKETING IN RELATION WITH FINANCE, HUMAN RESOURCE, PRODUCTION AND INFORMATION SYSTEMDrucker says that marketing should be seen as a business philosophy. The existence of anybusiness depends on satisfying customer needs and wants. This cannot be the sole responsibilityof the marketing department. Although the marketing function is normally carried out by aspecialized department. Developing an effective marketing plan will require close links withother functional areas of the business.OPERATIONS MANAGEMENT/PRODUCTIONThe link between production and marketing is also a dual link. On the one hand, productioncapabilities determine the number and type of products which can be marketed and, at the sametime, an accurate sales forecast for the product line is essential for efficient productionoperations. Given the fluctuations and uncertainties in the demand of most products and the difficulties thiscreate for a smooth and efficient production operation, management can undertake two majorstrategies. • Change the current production capacity by changes in current resources (e.g overtime, second shift etc.) • Influence the nature, level, or timing of demand to conform to the firm’s production constraints.The latter strategy can be achieved by appropriate use of marketing strategies such asadvertising, consumer and trade promotion and deals, and deletion or addition of products whichhelp smooth production and match it with demands. The marketing department will need to work closely with the production department to ensurethat: • Adequate research and development is planned to satisfy current and future customer needs. • The item must be manufactured to the quality and design specifications laid down by the consumer. • The volume of orders generated by marketing must be met within the time schedule required for delivery.It is likely that the marketing department will set deadlines that may stretch the capabilities ofthe production department. Marketers will wish to get products to market as soon as possible toensure competitive advantage, whereas production will want to test and development productsfully to ensure that they don not have to repair or replace defective items and that they meethealth and safety requirement.
FINANCEProfitability analysis and budgeting are key aspects of marketing planning and control whichrequire the resolution of important financially oriented issues such as the definition of profits.For Ex: Return on investment, return on equity, return on assets employed, return on sales etc.,and the identification of the controllable determinants of profits.Capital allocation to market efforts should not be based only on the evaluation of the expectedreturn from marketing activities. (Ex. New product or advertising campaign)Corporate financial theory can provide a useful and insightful framework for a number ofmarketing-based corporate decisions. Consider, for example portfolio theory and its conceptualrelevance to the firm’s product/market portfolio decisions.The marketing department will need to work closely with the finance department to ensure that:There is an adequate budget to meet the needs for research, promotion and distributionThe finance departments have a whole organization brief to ensure that all the business operatorswithin its financial capabilities. They will want all departments to work within their allocatedbudgets. Like all departments, marketing may wish to overspend if profitable marketingopportunities emerge over the year.HUMAN RESOURCEThe personnel function of the firm is concerned with the hiring, training, and management of theappropriate marketing personnel.Marketing should collaborate with the personnel department in developing job descriptions,screening candidates, and designing training program and incentive systems.The marketing department will need to work closely with the HRM to ensure that appropriateskills and staffing levels are in place to: • Research and develop new product ideas. • Meet production targets • Create an ambitious and competent sales teamThe HRM department will have recruitment and training demands from across the organization.It will have to balance its obligations to marketing with those to other departments.INFORMATION SYSTEMMarketing Information System (MIS) is a continuous and interacting Structure of people,equipment and procedures to gather, sort, analyse, evaluate and distribute permanent, timely andaccurate information for use by marketing decision makers to improve their marketing planning,implementation and control.MIS is directly concerned with marketing decisions like product, pricing, place, promotion,process, people and physical evidence. MIS includes internal record system, market intelligencesystem, marketing research and information analysis system.
i.Internal recordsInternal records consist of information gathered from sources within the company to evaluatemarketing performance and to detecting marketing problems and opportunities.ii.Marketing Intelligence (MI)It has all the information about day to day developments in the marketing environment. MI canbe gathered from company executives, dealers, customers and annual reports of otherorganizations.iii.Marketing ResearchIt is the branch of marketing intelligence that conducts specific enquiries in to problems and inorder to guide decisions. It is a design collecting data, analysing, communicating the finding andtheir implications.iv.Information AnalysisIt involves the collection of mathematical models that will help marketers to make betterdecisions. Marketing Information SystemMarketing ManagementDecisions Internal Records Marketing EnvironmentProduct Marketing Intelligence CompetitorsPricePlace Marketing Research ChannelsPromotionPeople Information Analysis Macro environmentProcess
CONCEPTUAL FRAMEWORK OF MARKETING MANAGEMENT Corporate Objectives Marketing Mix Product Price Promotion Place k c a b d e e F Marketing Analysis Product perception, Purchase behaviour Market target, Promotion appeal Promotion objective Marketing ProgramCultural/Socialenvironment Coordinating marketing & promotion ic environment Business/Econom Promotion mix Media selection Personal selling Sales promotion Public relations Evaluation & control mix Planning for the future Legal/Ethical environment ironment