Module 1 course 1 mysore university pgdmmDocument Transcript
DEFINITION OF MARKETINGMarketing is a social process by which individuals and groups obtain whatthey need and want through creating and exchanging products and values withothers. (Philip Kotler)Marketing is the analysis, planning, implementation, and control of carefullyformulated programs designed to bring about voluntary exchanges of valueswith target markets for the purpose of achieving organizational objectives. Itrelies heavily on designing the organization’s offering in terms of the targetmarkets’ needs and desires, and on using effective pricing, communication,and distribution to inform, motivate, and service the markets.Marketing – is a social and managerial process by which individuals and groups obtain what they needand want through creating and exchanging products and value with othersConcepts refer pptMarketing EnvironmentBusiness environment comprises the exterior factors that influence the companyoperations either direct or indirect.Marketing environment is a component of business environment that influences thecompanys capacity to promote and perform efficient operations on the market.The environment can not be influenced by the company as it is comprised of externalfactors.An influence on these factors can be exerted, but it depends on the companys power andsize on the market. There are big companies that have a major influence on environmentfactors and small businesses that need to adapt continuously to environment changes.Considering this, the companys attitude towards the business environment can be: Active – The company tries to influence the environment factors Passive – The company continually adapts to the environment changesDespite the companys attitude, the environment always exerts influence on it, externalizedin: Opportunities ThreatsThe elements of marketing environment can be classified in: Marketing Micro-environment – the factors that influence directly the ability of the company to achieve an offer standard desired by the customers
Marketing Macro-environment – factors that affect the society as a whole and influence the company indirectlyMarketing Micro-environmentMicro-environment factors interact directly with the company and create pressure thatproduces a certain behavior of the company.There are opportunities the company can capitalize in its relations with business partners,but also threats to be avoided or prevented.Marketing micro-environment can also be classified in internal and external micro-environment.Internal micro-environment consists of strategic orientations and organization structuresthat capitalize on the human, material and financial resources of the company.Internal micro-environment factors are: The general vision of the company. This is developed by the management and leads the companys activities to operations focused on production, technology, sales or market. Its very important that the focus is on marketing, trying to appease both companys and markets objectives. Marketing integration. Related to the general vision of the company. The marketing function must be an integrator function for all other functions, so that the marketing concept can be promoted. Organizational culture. It represents a series of values and beliefs promoted company-wide, being a result of cultural elements that characterize the people that run the business or support it: employees, managers, shareholders, union. Development of organizational culture is crucial. Employees. This the main internal micro-environmental factor that influences the company, considering that the employees are involved in all companys operations. Employees satisfaction is important because it results in customer satisfaction.External micro-environment comprises the external factors that affect directly thecompany and exert mutual influence.External micro-environment factors are: Financial and material suppliers. Can create opportunities and threats related to suppliers disappearance or disconnection of usual supply. This sort of situations can lead to operation blockage caused by lack of resources. Therefor, the relation between supplier and company need to be long term, strategic partnerships. Marketing intermediates. Commissioners, brokers, transporters, logistics, consultants need also to be in strategic, long term partnerships with the company. Customers. Individuals or companies that buy our products. They are the main micro-environment element because they assure operation continuity by purchasing the companys products for consumption or use. Companys operations focus need to be on customer satisfaction and relational marketing implementation. Competitors. They are the micro-environment factor that causes most of the treats, being focused on reaching to more and more market segments, also by drawing customers from competitors over the market. The main concern relating to competitors in gaining competitive advantages. The public. Mass-media, public administration, politic groups, shareholders, all these factors can create both opportunities and threats for the company.Marketing macro-environment can also be classified in national macro-environment andinternational macro-environment.
National macro-environment comprises factors that affect the entire society and havealso a influence on the company but long term and wide spread.National macro-environment factors are: Social factors: Demographic factors, related to the population structure in age, household, education, employment, geographical location.Cultural factors, related to values, beliefs, religion, customs. Technological factors Economical factors (economic policy, economy development, purchasing power) Ecological factors Political and legal factorsInternational macro-environment is a result of economic globalization, externalized ineconomic integration.The factors that influence the international macro-environment are: Commercial policies (regarding customs, import, export) International investment fluxes Financial and monetary international processes International markets Treaties between countries.http://www.quickmba.com/marketing/mix/ - open this and take print outMarketing MixWhat is the marketing mix?The marketing mix is probably the most famous marketing term. Its elements are the basic,tactical components of a marketing plan. Also known as the Four Ps, the marketing mixelements are price, place, product, and promotion.Pricing StrategiesThere are many ways to price a product. Lets have a look at some of them and try to understand the bestpolicy/strategy in various situations.Premium Pricing.Use a high price where there is a uniqueness about the product or service. This approach is used where a asubstantial competitive advantage exists. Such high prices are charge for luxuries such as Cunard Cruises,Savoy Hotel rooms, and Concorde flights.Penetration Pricing.The price charged for products and services is set artificially low in order to gain market share. Once thisis achieved, the price is increased. This approach was used by France Telecom and Sky TV.
Economy Pricing.This is a no frills low price. The cost of marketing and manufacture are kept at a minimum. Supermarketsoften have economy brands for soups, spaghetti, etc.Price Skimming.Charge a high price because you have a substantial competitive advantage. However, the advantage is notsustainable. The high price tends to attract new competitors into the market, and the price inevitably fallsdue to increased supply. Manufacturers of digital watches used a skimming approach in the 1970s. Onceother manufacturers were tempted into the market and the watches were produced at a lower unit cost,other marketing strategies and pricing approaches are implemented.Psychological Pricing.This approach is used when the marketer wants the consumer to respond on an emotional, rather thanrational basis. For example price point perspective 99 cents not one dollar.Product Line Pricing.Where there is a range of product or services the pricing reflect the benefits of parts of the range. Forexample car washes. Basic wash could be $2, wash and wax $4, and the whole package $6.Optional Product Pricing.Companies will attempt to increase the amount customer spend once they start to buy. Optional extrasincrease the overall price of the product or service. For example airlines will charge for optional extrassuch as guaranteeing a window seat or reserving a row of seats next to each other.Captive Product PricingWhere products have complements, companies will charge a premium price where the consumer iscaptured. For example a razor manufacturer will charge a low price and recoup its margin (and more)from the sale of the only design of blades which fit the razor.Product Bundle Pricing.Here sellers combine several products in the same package. This also serves to move old stock. Videosand CDs are often sold using the bundle approach.
Promotional Pricing.Pricing to promote a product is a very common application. There are many examples of promotionalpricing including approaches such as BOGOF (Buy One Get One Free).Geographical Pricing.Geographical pricing is evident where there are variations in price in different parts of the world. Forexample rarity value, or where shipping costs increase price.Value Pricing.This approach is used where external factors such as recession or increased competition forcecompanies to provide value products and services to retain sales e.g. value meals at McDonalds.Place, distribution, channel, orintermediaryAnother element of Neil H.Bordens Marketing Mix is Place. Place is also known as channel,distribution, or intermediary. It is the mechanism through which goods and/or services are movedfrom the manufacturer/ service provider to the user or consumer.There are six basic channel decisions:Do we use direct or indirect channels? (e.g. direct to a consumer, indirect via a wholesaler).Single or multiple channels.
Cumulative length of the multiple channels.Types of intermediary (see later).Number of intermediaries at each level (e.g. how many retailers in Southern Spain).Which companies as intermediaries to avoid intrachannel conflict (i.e. infighting between localdistributors).Types of Channel Intermediaries.There are many types of intermediaries such as wholesalers, agents, retailers, the Internet, overseasdistributors, direct marketing (from manufacturer to user without an intermediary), and many others.The main modes of distribution will be looked at in more detail.1. Channel Intermediaries - WholesalersThey break down bulk into smaller packages for resale by a retailer.They buy from producers and resell to retailers. They take ownership or title to goods whereasagents do not (see below).They provide storage facilities. For example, cheese manufacturers seldom wait for their product tomature. They sell on to a wholesaler that will store it and eventually resell to a retailer.Wholesalers offer reduce the physical contact cost between the producer and consumer e.g. customerservice costs, or sales force costs.A wholesaler will often take on the some of the marketing responsibilities. Many produce their ownbrochures and use their own telesales operations.2. Channel Intermediaries - AgentsAgents are mainly used in international markets.An agent will typically secure an order for a producer and will take a commission. They do not tend totake title to the goods. This means that capital is not tied up in goods. However, a stockist agent willhold consignment stock (i.e. will store the stock, but the title will remain with the producer. Thisapproach is used where goods need to get into a market soon after the order is placed e.g.foodstuffs).Agents can be very expensive to train. They are difficult to keep control of due to the physicaldistances involved. They are difficult to motivate.3. Channel Intermediaries - RetailersRetailers will have a much stronger personal relationship with the consumer.The retailer will hold several other brands and products. A consumer will expect to be exposed tomany products.Retailers will often offer credit to the customer e.g. electrical wholesalers, or travel agents.
Products and services are promoted and merchandised by the retailer.The retailer will give the final selling price to the product.Retailers often have a strong brand themselves e.g. Ross and Wall-Mart in the USA, and Alisuper,Modelo, and Jumbo in Portugal.4. Channel Intermediaries - InternetThe Internet has a geographically disperse market.The main benefit of the Internet is that niche products reach a wider audience e.g. Scottish Salmondirect from an Inverness fishery.There are low barriers low barriers to entry as set up costs are low.Use e-commerce technology (for payment, shopping software, etc)There is a paradigm shift in commerce and consumption which benefits distribution via the InternetThree Levels of a Product For many a product is simply the tangible, phsysical entity that they may be buying or selling. You buy anew car and thats the product - simple! Or maybe not. When you buy a car, is the product more complexthan you first thought? In order to actively explore the nature of a product further, lets consider it as threedifferent products - the CORE product, the ACTUAL product, and finally the AUGMENTED product.These are known as the Three Levels of a Product. So what is the difference between the threeproducts, or more precisely levels?The CORE product is NOT the tangible, physical product. You cant touch it. Thats because the coreproduct is the BENEFIT of the product that makes it valuable to you. So with the car example, thebenefit is convenience i.e. the ease at which you can go where you like, when you want to. Anothercore benefit is speed since you can travel around relatively quickly.
The ACTUAL product is the tangible, physical product. You can get some use out of it. Again with thecar example, it is the vehicle that you test drive, buy and then collect.The AUGMENTED product is the non-physical part of the product. It usually consists of lots of addedvalue, for which you may or may not pay a premium. So when you buy a car, part of the augmentedproduct would be the warranty, the customer service support offered by the cars manufacture, andany after-sales service.Another marketing tool for evaluating PRODUCT is the Product Life Cycle (PLC).The Product Life Cycle (PLC)The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted(introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes anadult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).The Product Life Cycle (PLC) is based upon the biological life cycle. For example, a seed is planted(introduction); it begins to sprout (growth); it shoots out leaves and puts down roots as it becomes anadult (maturity); after a long period as an adult the plant begins to shrink and die out (decline).In theory its the same for a product. After a period of development it is introduced or launched intothe market; it gains more and more customers as it grows; eventually the market stabilises and theproduct becomes mature; then after a period of time the product is overtaken by development andthe introduction of superior competitors, it goes into decline and is eventually withdrawn.However, most products fail in the introduction phase. Others have very cyclical maturity phaseswhere declines see the product promoted to regain customers.Strategies for the differing stages of the ProductLife Cycle.Introduction.The need for immediate profit is not a pressure. The product is promoted to create awareness. If theproduct has no or few competitors, a skimming price strategy is employed. Limited numbers ofproduct are available in few channels of distribution.Growth.Competitors are attracted into the market with very similar offerings. Products become moreprofitable and companies form alliances, joint ventures and take each other over. Advertising spend ishigh and focuses upon building brand. Market share tends to stabilise.Maturity.Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at adecreasing rate and then stabilise. Producers attempt to differentiate products and brands are key tothis. Price wars and intense competition occur. At this point the market reaches saturation. Producersbegin to leave the market due to poor margins. Promotion becomes more widespread and use agreater variety of media.
Decline.At this point there is a downturn in the market. For example more innovative products are introducedor consumer tastes have changed. There is intense price-cutting and many more products arewithdrawn from the market. Profits can be improved by reducing marketing spend and cost cutting.Problems with Product Life Cycle.In reality very few products follow such a prescriptive cycle. The length of each stage variesenormously. The decisions of marketers can change the stage, for example from maturity to declineby price-cutting. Not all products go through each stage. Some go from introduction to decline. It isnot easy to tell which stage the product is in. Remember that PLC is like all other tools. Use it toinform your gut feeling.The Customer Life Cycle (CLC) and CRMThe Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However,CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at theproducts or services that customers NEED throughout their lives.It is marketing orientated rather than product orientated, and embodies the marketing concept.Essentially, CLC is a summary of the key stages in a customers relationship with an organisation. Theproblem here is that every organisations product offering is different, which makes it impossible todraw out a single Life Cycle that is the same for every organisation.PromotionAnother one of the 4Ps is promotion. This includes all of the tools available to the marketer formarketing communication. As with Neil H.Bordens marketing mix, marketing communications has itsown promotions mix. Think of it like a cake mix, the basic ingredients are always the same. Howeverif you vary the amounts of one of the ingredients, the final outcome is different.The elements of the promotions mix are:Personal Selling.Sales Promotion.
Public Relations.Direct Mail.Trade Fairs and Exhibitions.Advertising.Sponsorship.The elements of the promotions mix are integrated to form a coherent campaign. As with all forms ofcommunication. The message from the marketer follows the communications process as illustratedabove. For example, a radio advert is made for a car manufacturer. The car manufacturer (sender)pays for a specific advert with contains a message specific to a target audience (encoding). It istransmitted during a set of commercials from a radio station (Message / media).The message is decoded by a car radio (decoding) and the target consumer interprets the message(receiver). He or she might visit a dealership or seek further information from a web site (Response).The consumer might buy a car or express an interest or dislike (feedback). This information will informfuture elements of an integrated promotional campaign. Perhaps a direct mail campaign would pushthe consumer to the point of purchase. Noise represent the thousand of marketing communicationsthat a consumer is exposed to everyday, all competing for attention.The Promotions Mix.Let us look at the individual components of the promotions mix in more detail. Remember all of theelements are integrated to form a specific communications campaign.1. Personal Selling.Personal Selling is an effective way to manage personal customer relationships. The sales person actson behalf of the organization. They tend to be well trained in the approaches and techniques ofpersonal selling. However sales people are very expensive and should only be used where there is a
genuine return on investment. For example salesmen are often used to sell cars or homeimprovements where the margin is high.2. Sales Promotion.Sales promotion tend to be thought of as being all promotions apart from advertising, personal selling,and public relations. For example the BOGOF promotion, or Buy One Get One Free. Others includecouponing, money-off promotions, competitions, free accessories (such as free blades with a newrazor), introductory offers (such as buy digital TV and get free installation), and so on. Each salespromotion should be carefully costed and compared with the next best alternative.3. Public Relations (PR).Public Relations is defined as the deliberate, planned and sustained effort to establish and maintainmutual understanding between an organization and its publics (Institute of Public Relations). It isrelatively cheap, but certainly not cheap. Successful strategies tend to be long-term and plan for alleventualities. All airlines exploit PR; just watch what happens when there is a disaster. The pre-planned PR machine clicks in very quickly with a very effective rehearsed plan.4. Direct Mail.Direct mail is very highly focussed upon targeting consumers based upon a database. As with allmarketing, the potential consumer is defined based upon a series of attributes and similarities.Creative agencies work with marketers to design a highly focussed communication in the form of amailing. The mail is sent out to the potential consumers and responses are carefully monitored. Forexample, if you are marketing medical text books, you would use a database of doctors surgeries asthe basis of your mail shot.5. Trade Fairs and Exhibitions.Such approaches are very good for making new contacts and renewing old ones. Companies willseldom sell much at such events. The purpose is to increase awareness and to encourage trial. Theyoffer the opportunity for companies to meet with both the trade and the consumer. Expo has recentlyfinish in Germany with the next one planned for Japan in 2005, despite a recent decline in interest insuch events.6. Advertising.Advertising is a paid for communication. It is used to develop attitudes, create awareness, andtransmit information in order to gain a response from the target market. There are many advertisingmedia such as newspapers (local, national, free, trade), magazines and journals, television (local,national, terrestrial, satellite) cinema, outdoor advertising (such as posters, bus sides).7. Sponsorship.Sponsorship is where an organization pays to be associated with a particular event, cause or image.Companies will sponsor sports events such as the Olympics or Formula One. The attributes of theevent are then associated with the sponsoring organization.The elements of the promotional mix are then integrated to form a unique, but coherent campaign.
Physical Evidence - Part of the MarketingMixPhysical evidence as part of the marketing mixPhysical evidence is the material part of a service. Strictly speaking there are no physical attributesto a service, so a consumer tends to rely on material cues.There are many examples of physical evidence, including some of the following:Packaging.Internet/web pages.Paperwork (such as invoices, tickets and despatch notes).Brochures.Furnishings.Signage (such as those on aircraft and vehicles).Uniforms.Business cards.The building itself (such as prestigious offices or scenic headquarters).Mailboxes and many others . . .People and Services MarketingPeople as part of the marketing mixPeople are the most important element of any service or experience. Services tend to be produced andconsumed at the same moment, and aspects of the customer experience are altered to meet theindividual needs of the person consuming it. Most of us can think of a situation where the personalservice offered by individuals has made or tainted a tour, vacation or restaurant meal. Remember,people buy from people that they like, so the attitude, skills and appearance of all staff need to be firstclass. Here are some ways in which people add value to an experience, as part of the marketing mix -training, personal selling and customer service.Training.All customer facing personnel need to be trained and developed to maintain a high quality of personalservice. Training should begin as soon as the individual starts working for an organization during aninduction. The induction will involve the person in the organizations culture for the first time, as wellas briefing him or her on day-to-day policies and procedures. At this very early stage the trainingneeds of the individual are identified. A training and development plan is constructed for the individualwhich sets out personal goals that can be linked into future appraisals. In practice most training iseither on-the-job or off-the-job. On-the-job training involves training whilst the job is being
performed e.g. training of bar staff. Off-the-job training sees learning taking place at a college,training centre or conference facility. Attention needs to be paid to Continuing ProfessionalDevelopment (CPD) where employees see their professional learning as a lifelong process of trainingand development.Personal SellingThere are different kinds of salesperson. There is the product delivery salesperson. His or her maintask is to deliver the product, and selling is of less importance e.g. fast food, or mail. The second typeis the order taker, and these may be either internal or external. The internal sales person wouldtake an order by telephone, e-mail or over a counter. The external sales person would be working inthe field. In both cases little selling is done. The next sort of sales person is the missionary.Here, as with those missionaries that promote faith, the salesperson builds goodwill with customerswith the longer-term aim of generating orders. Again, actually closing the sale is not of greatimportance at this early stage. The forth type is the technical salesperson, e.g. a technical salesengineer. Their in-depth knowledge supports them as they advise customers on the best purchase fortheir needs. Finally, there are creative sellers. Creative sellers work to persuade buyers to give theman order. This is tough selling, and tends to o ffer the biggest incentives. The skill is identifying theneeds of a customer and persuading them that they need to satisfy their previously unidentified needby giving an order.Customer ServiceMany products, services and experiences are supported by customer services teams. Customerservices provided expertise (e.g. on the selection of financial services), technical support(e.g. offeringadvice on IT and software) and coordinate the customer interface (e.g. controlling service engineers,or communicating with a salesman). The disposition and attitude of such people is vitally important toa company. The way in which a complaint is handled can mean the difference between retaining orlosing a customer, or improving or ruining a companys reputation. Today, customer service can beface-to-face, over the telephone or using the Internet. People tend to buy from people that they like,and so effective customer service is vital. Customer services can add value by offering customerstechnical support and expertise and advice.Process and Services MarketingProcess as part of the marketing mixProcess is another element of the extended marketing mix, or 7Ps.There are a number ofperceptions of the concept of process within the business and marketing literature. Some seeprocesses as a means to achieve an outcome, for example - to achieve a 30% market share acompany implements a marketing planning process.At each stage of the process, markets:Deliver value through all elements of the marketing mix. Process, physical evidence and peopleenhance services.Feedback can be taken and the mix can be altered.Customers are retained, and other serves or products are extended and marked to them.
The process itself can be tailored to the needs of different individuals, experiencing a similar service atthe same time.Processes essentially have inputs, throughputs and outputs (or outcomes). Marketing adds value toeach of the stages. Take a look at the lesson on value chain analysis to consider a series of processesat work.