Introduction to marketing - Part 1

1. Marketing
PART1 TO PART 3

2. How do
Formula 1
Racing Teams
Make Money?
CNBC Video Case: 13 Minutes

3. Income Sources: F1 team budgets come from
several key areas
• Sponsorships: Teams earn most of their income from
sponsorships
• Payments from Formula 1: Teams receive payments from
the sport's governing body which is a method of revenue
sharing.
• Prize Money : The total prize money distributed among the
teams based on their Constructors’ championship
standings was worth more than $900 million in 2022
• Manufacturers: Teams also derive their budget from
manufacturers such as Mercedes, McLaren, Ferrari, Honda
(for Red Bull) and Audi (from 2025 onwards)

4. F1 Team Sponsors: Some Examples

5. F1 Team Sponsors: Some Examples

6. PART I
Introduction to Marketing

8. MARKETING
ICEBERG
WHAT
YOU
SEE
AND
WHAT
YOU
DON’T
SEE

9. DEFINITIONS OF MARKETING
Marketing is NOT a hard science like physics or mathematics
It is a social science and hence there are many ways to define
marketing.
Sri Lanka Institute of Marketing (SLIM) Definition
Marketing is a corporate philosophy and a central business
function that creates value for its customers and other
stakeholders through competitive, profitable and sustainable
exchange processes.

10. Chartered Institute of Marketing (CIM), UK
Marketing is the management process responsible for
identifying, anticipating and satisfying customers’
requirements profitably
Phillip Kotler, The Father of Modern Marketing
Marketing is the process by which companies create value for
customers and build strong customer relationships in order to
capture value from customers in return.

12. Key functions and activities of marketing
• Identifying customer needs/wants
• Satisfying and delighting customers
• Identifying favorable emerging market opportunities
• Targeting the “right” customers
• Facilitating exchange relationships (product or service for a
payment)

13. Key functions and activities of
marketing
• Staying ahead in rapidly changing business environment
• Utilizing resources/assets effectively
• Differentiate a product or service from competitors
• Enhancing profitability through customer satisfaction
• Creating value to both the customer and the organisation

14. Different aspects of
marketing

15. (1) Marketing as an Exchange Process
• An important way to explain marketing and differentiate it
from the activities such as selling, advertising etc. is to
discuss marketing as an exchange process
• Exchange – There is something given and something taken
Marketing occurs when people decide to satisfy needs and
wants through an exchange

16. For an exchange to takes place, the
following conditions must exist
• Two or individuals, groups or organizations must be involved and
each must have wants to be satisfied.
• Each party must posses something of value that the other party
desires.
• The parties must be involved voluntarily. (willing to give up to
receive)
• The parties involved must be able to communicate with each
other to make their ‘something of value’ available.

17. The exchange process is the economics
basis of marketing
• In marketing, there is
an exchange of things
that are economically
valuable
• E.g. Money for a can of
Coke

18. (2) Marketing as a Managerial Function
• Marketing facilitates the exchange between two parties (as
we understood previously)
• It takes careful management to make sure that this
exchange benefits the business as well as the customers
• Therefore, marketing can be understood as a managerial
function as well.

19. As a managerial function, marketing
performs several activities
1. Identifying customer requirements through market research.
2. Anticipate customer requirements into the future by way of
forecasting.
3. Work with other functions in the organisation and develop
products to satisfy customer wants.
4. Work out associated costs, understand customer perceptions
and set prices and organise channels of distribution to
distribute the products.
5. Analysis, planning, implementation and control of all
marketing activities.

20. In other words, if someone asks – What do
managers in marketing do? – The answer
would be above activities (and more)
• There are many different managers with managerial
responsibilities who are carrying out these activities
• Marketing Managers
• Brand Managers
• Sales Managers
• Marketing Communication Managers
• Market Research Managers
• Distribution Managers

21. (3) Marketing as a Business Philosophy
• A business philosophy is how a business wants to conduct
itself in the market.
• Marketing is a business philosophy as it clearly states
how a business must conduct itself in finding and keeping
customers.
• For Example – Take Phillip Kotler's Definition for Marketing
Marketing is the process by which companies create value for
customers and build strong customer relationships in order to capture
value from customers in return.

22. Evolution of Marketing
• Marketing as a business philosophy is a result of a long
evolutionary process of business philosophies.
• It started with the ability of companies to mass produce
consumer goods during the industrial revolution period.
• Example : Ford Motor Company created the world’s first mass
produced car in 1908.
• Industrial Revolution was all about mass producing goods in
the most efficient manner at the lowest unit cost.
• Therefore, the business philosophy of the period reflected
this fact.

23. (1) Production Concept
• The business philosophy which held that efficient and low
cost production is the most important business activity
• The businesses had the idea that consumers will favor
products that are available closest to where they live and
highly affordable.
• Therefore the organisation should focus on improving
production and distribution efficiency AND cut costs to make
the product most affordable.

24. The emphasis of Production
Concept/Production Philosophy are;
• Efficiency of production: A focus on manufacturing and improving
the process so as to reduce costs and increase efficiency.
• Efficiency of distribution: Mass distribution, thus making the
product available at all possible outlets. (Made possible with
railways and steam ships)
• Economies of Scale: By this try to achieve lower unit costs and
also increasing the supply.
• Profitability through production efficiency and mass selling.

25. Businesses that became extremely successful
through the Production Concept
• USA – Ford Motor Company with its Model T
• Germany – Volkswagen Beetle
• UK – Morris Minor
Apart from manufacturing industries, modern retailers like
Tesco (UK) and fast-food restaurant chain McDonald’s (USA)
used Production Concept to great success.

26. MASS PRODUCTION OF FORD MODEL T : 1908–1927
By the early 1920s more
than half of the
registered automobiles
in the world were Fords.
15,000,000 Model T’s
were built and sold
between 1908 & 1927

27. McDonald’s successfully used mass-
production techniques to make burgers
very quickly at very low prices.

28. Tesco founder Jack Cohen invented the
modern mass-market retailing philosophy –
“pile them high, sell them cheap”

29. (2) Product Concept
• Product concept holds that consumers will favour products that
offer the most in quality, performance and innovative features.
• Under this concept, the marketing strategy focuses on making
continuous product improvements.
• Product orientation tends to lead to ever more complex products
at ever-increasing prices; customers are being asked to pay for
features which they may not need, or which may even be
regarded as drawbacks.

30. How product concept replaced
production concept
• Production concept was the business philosophy that guided
business since 1900s with mass production enabled by the
use of machinery due to Industrial Revolution.
• However, by the end of World War II, the western world
(Europe & USA) entered a period of peace and prosperity.
• With rising purchasing power, people wanted more than a
mass produced basic product.

31. Alfred Sloan of General Motors (USA),
understood that people no longer wanted
Henry Fords' cheap Model T
• When Sloan became the President of General Motors(1923),
He created different divisions in the company to produce
different car brands with different features – people with
more money could buy luxurious cars.
• That is how GM came to have different divisions like
Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac
• Chevrolet was the most inexpensive entry level brand. Buick
& Cadillac were the luxury models

32. GM’s Sloan is also credited inventing with
annual model changes for cars
• To make people buy cars often, Sloan invented the annual model
change concept where every car brand would launch a slightly
modified, improved model every year.
• This method now called “Planned Obsolesce” where the firm
purposefully introduces new models to make older models
outdated and obsolete.
• Therefore, like Ford pioneered the Production Concept
philosophy, General Motors with Sloan's guidance popularized the
Product Concept philosophy.

33. The iconic 1958 GM Cadillac with “wings” :
One of the best examples for product
orientation business philosophy

35. 1959
Cadillac

36. Product orientation tends to lead to ever
more complex products at ever-increasing
prices;
Customers are being asked to pay for
features which they may not need

37. Product orientation philosophy is alive
even today!
• Steve Jobs famously said. Customers don’t know what they
want, so we don’t do marketing research.
• Apple iPhone is the best example
• New features every year
• More expensive every year
• Most customers don’t use many iPhone features BUT pay for
them.
• How many iPhone 13 Pro Max customers shoot 4K, professional grade
videos?
• Most people don’t have 4K capable TVs or Laptops to watch those
videos.

38. (3) Selling Concept
• Organization's that follow the selling concept, holds that
consumers will not buy enough of the firm’s products unless
it takes large scale selling and promotion efforts.
• The belief is that if customers are left alone, they will not
buy enough of the organisations products.
• Selling Concept as a business philosophy took hold after the
followers of Product Concept created expensive, feature laden
products that were too expensive.

39. How selling concept took hold of the
business world
• Product Concept that became popular in the early 1950s
lasted till about the mid 1960s to 1970s
• During this period, product features became more important
than usefulness or functionality.
• More features meant, higher prices as well.
• As the world moved into 1970s, the word faced the Middle
East oil crisis with OPEC severely restricting oil supply and
most western economies went into recessions.

40. The 1973 global Oil Shock sent most
western economies into recession
• Living standards of USA, UK and Europe fell drastically
• Unemployment was very high
• Natural result of these crisis was that people started saving
more and buying less.
• This convinced some businesses that the only way to get
people to buy was to push them with;
• A lot of advertising
• Sensational claims about the product’s ability
• Use of high-pressure selling tactics
• Novel pricing strategies to make products look more affordable

41. Companies using Selling Concept pioneered
many useful marketing strategies &
techniques
• Use of psychology to understand “Consumer Behaviour” &
use of psychology to sell products (e.g. Use of emotions, impulse
behaviour, response to colors and sounds)
• Pricing strategies like
• Easy payment schemes
• Buy now pay later schemes
• Psychological pricing
• Penetration pricing
• Time based / User based pricing

42. Selling Concept pioneered many useful
marketing strategies & techniques (2)
• The training of sales people in selling techniques and tactics
of objection handling and closing sales
• Novel advertising techniques developed by advertising
agencies like Saatchi and Saatchi
• The concept of consumerism – the happiness can be found by
buying things and consuming more

43. However, behaviour by many followers of
selling concept created serious issues.
• High pressure selling techniques by sales people created a deep
distrust of sales people & business corporations which continues
even today.
• False advertising, pricing strategies that hide the true cost of a
product (e.g. high interest charged on easy payment/buy now pay
later schemes) created many lawsuits
• Selling of low priced substandard products increase drastically.
• These forced governments to create laws to protect consumers

45. (4) The Marketing Concept
• Deep distrust of consumer facing businesses, advertising and
sales people created through the adoption of Selling Concept
forced a re-think of how to do business.
• The result was the Marketing Concept.
• Marketing Concept holds that achieving organizational goals
depends on knowing the needs and wants of target markets
and delivering the desired satisfactions better than
competitors do.

46. Key Components of Marketing Concept

47. PART II
Marketing Environment

48. MARKETING ENVIRONMENTAL
FRAMEWORK
• The firm operates within a complex and dynamic external
environment.
• It is the task of the marketing-oriented organisation to link
the resources of the organisation to the requirements of
customers.
• This is done within the framework of opportunities and
threats in the external environment.

49. The marketing environment is defined
as follows
• A company’s marketing environment consists of the actors
and forces internally (inside the business) and externally
(outside the business) that affect marketing management’s
ability to build and maintain successful relationships with
target customers.

51. THE INTERNAL ENVIRONMENT

52. Staff Relationships Resource Constraints Corporate Culture
Refers to the nature of the
staff (employees) have with their
organisation (employer)
The relationship can be a positive
where staff has trust in the
and its management.
A negative relationship means there
lack of trust between the
staff.
This can be very counterproductive
limit the ability of the business to
to consumer needs and competitive
threats.
Resources of an organisation are the
assets that it owns which can be
to produce and market products to
customers.
These resources are typically;
Physical resources such as factories,
research labs, offices, retail outlets,
marketing offices
Human Resources
Financial Resources which means
and working capital available
Intellectual Resources such as
brands, trademarks.
While these resources are limited in
supply, adequate resources should
available for marketing.
Culture is a set of shared rules and
Within the organisations beliefs will
develop, and a corporate culture will
eventually emerge.
Corporate culture has been called
way we do things around here” and
it can be a powerful influence on
behaviour.
Developing the appropriate
culture is a lengthy process, since
change
slowly.
Often the beginning of a corporate
is the firm’s mission statement, in
the organization lays down its long
aim and overall beliefs.

53. THE MICRO ENVIRONMENT / TASK
ENVIRONMENT
• The micro environment is made up of actors close to the
organisation that affects its ability to serve its customers.
These actors are as follows

54. Analyze Task
Environment using
Michael Porter’s Five
Forces

55. Five Forces Analysis
• According to Porter 5 forces in the Task
Environment gives Opportunities
(good) and Threats (bad)
1. Supplier Power
2. Buyer Power
3. Substitutes
4. New Competitors
5. Industry Rivalry

56. THE MACRO ENVIRONMENT
• The macro environment includes the major societal forces that
affect not only the organisation, but also on its competitors
and on elements in the micro-environment.
• The macro environment tends to be harder to influence than
the micro environment, but this does not mean that
organisations must simply remain passive; the inability to
control does not imply the inability to influence.

58. Result of Business Environment Analysis
• The Analysis of the Business Environment should result
in identification of
1. Strengths and Weaknesses -> Internal Environment
2. Opportunities and Threat -> External Environment
External Environment
Micro Env (Task Env)
Macro Env

61. PART III
Marketing Mix

63. What is the marketing mix?
• Marketing Mix is the set of controllable marketing tools that
the firm blends (mixes) to produce the response it wants in
the target market.
• In other words, the Marketing Mix is the set of tools or
ingredients managers in-charge of marketing can use to
develop marketing programs to create customer satisfaction
and, ultimately profits for the organisation.

64. Marketing Mix
• Product Marketing Mix (4 P’s - for tangible products)
1. Product
2. Price
3. Place
4. Promotion
• Extended Marketing Mix (7 P’s for intangible products & tangible
products with intangible aspect such as after-sales service)
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Processes
7. Physical Evidence

67. Use of Marketing Mix
• The 4 main elements and the 3 additional elements of the
extended mix are the tools available for a business to
implement its marketing strategies
1. Product element – Describes the product/service that the
company offers to the customer to satisfy his/her need
2. Price element – The price we want the customer to pay.
Customer must feel that it is value for money to buy our
product to satisfy the need

68. 3. Promotion – How we will let the customers know about our
product/service and why they should buy it and how it will
satisfy the need.
4. Place – Our way of making sure that the product/service is
available where customer prefer to buy it
5. People – The people who make the product/service, sell the
product, provide the after sales service and engage with all
customer interactions with our company
6. Processes – Various activities that produces the product/service,
sell it, deliver it, ensure quality and provide after sales service
to the customer.
7. Physical Evidence – The quality and appearance of our offices,
sales outlets and places where customers experience our
products of services

69. Why is it called a mix?
• It is called a mix because, the marketing managers, brand
managers can change these elements to fit the strategy, fight
competitors or respond to changes of customer needs.
• Example (1) – If a competitor reduces prices the company can
respond by reducing their price (change Price element of the mix)
• Example (2) – If customers prefer to buy online and have the
product delivered to home, we can do that by changing the
Place element of the mix and sell online

70. Another example of how the marketing mix
can be used to respond to changing customer
needs.
PROBLEM - Coca Cola found that many people are giving up
products like Coke due to its high sugar content. Diabetes is a
major issue.
SOLUTION – Coke Zero
MARKETING MIX FOR COKE ZERO
Product – Zero sugar Coke that tastes like the original Coke
Price – Slightly higher price as it is a new innovative product
Place – Wherever Coca-Cola drinks are sold
Promotion – Traditional & Digital media advertising and in-store
displays

71. Marketing Mix: The Customer View

72. Explanation of Customer View of the
Marketing Mix
• Product
• What we offer to customer to satisfy his/her need
• Customer Value
• Customer checks whether there is value for him/her in purchasing our
product.
• Value does not mean low price for all customers (low price is important for
some customers, but not all)
• Value means whether they are getting return for what they pay for.
• EXAMPLE OF CUSTOMER VALUE
• A BMW customer is not looking at price as a purchasing factor. He/She is
looking for the quality, prestige, image, comfort and recognition that comes
with driving a BMW. That is the value BMW customer is looking for. The
higher price of a BMW includes all that.

73. • Price
• The money we want in exchange for the product
• Cost
• The cost customer has to bear in order to buy the product to satisfy the need he/she is
having
• Customer may look at Total Cost of Ownership and not just the purchase price.
• Total Cost of Ownership includes – running costs (e.g. fuel, electricity), maintenance &
repair costs, cost of parts and accessories, how long the product will last before a new one
a new one is needed.
• This is why some customers may prefer to buy an expensive brand if it can guarantee low
running costs (less repairs and breakdowns) and lasts longer than a cheaper product.
• Total Cost of Ownership may be lower for the expensive product in the long run.

74. • Place
• Where we keep the product for sale / How we make sure that the customer get the product when
he/she wants it and where they want it.
• Convenience
• Customers is interested in the convenience. For some products, it may a high priority. A customer
may buy a brand that is not his/her choice simply because it is available while his/her preferred
preferred brand is not
• Example – A person who prefers to buy Highland Milk Power ends up buying Anchor Milk as
Highland is not available in the supermarket most of the time .
• Therefore, it is important that the company looks at the customer’s view and make sure that
sure that the product is available at the most convenient place.
• However, convenience may not be the only customer view for Place element.
• The place has to be appropriate for the product as well. For an example, customers expect a BMW
showroom to be in a nice part of the city and not in a run-down shanty area.
• The place has to match the product image

75. • Promotion
• How we let the customer know about our product and how it will satisfy their needs
• Communication
• Customer views on communication can be
• Do I see the product in websites, TV channels and newspapers/ Magazines I look at?
• Do I get all the information I need to decide whether this product is the best for me (value for money)
• Do I trust the sources of information that the company is sending me information about the product?
(Advertisements are less trustworthy than comments by actual buyers/users)
• Are additional information easily available if I need them?
• Can they make me remember the product?
• Can they excite me enough to try their brand?

76. • People
• The quality, training, commitment and motivation of our staff and our partners/contractors who will be involved
in selling, delivering, installing and giving service and support to customers. (This includes staff in other
customer touch-points as well such as payment handling, order processing, warehouse)
• Consideration
• Customers consider the following as they interact with our staff
• Do company people in the touch-points that I interact with consider me as an important enough person?
• Do they give me the information, support and service that I expect?
• Am I treated fairly and promptly?
• Are they knowledgeable and helpful?
• Did they make me feel welcome and valued?
• However, the importance of above may be different from product to product. Example, a rude counter girl at a
supermarket may not destroy your opinion about the Milo pack you bought at the supermarket or people at Nestle
people at Nestle Lanka.
• However, a rude/unhelpful counter girl at a Hospital may destroy your opinion about that hospital and you may not
and you may not go there again to consult doctors

77. • Process
• Hundreds of activities across the supply chain and the value chain that ensures that the
product/service is manufactured, sold and delivered to the customer’s hand.
• Coordination
• The customer looks at
• Are these activities or processes properly coordinated?
• Will the processes work correctly and I will get the product I ordered at the price I agreed?
• Will it be delivered and installed according to the terms agreed?
• Will it be on the timeline agreed?
• Will I be given the after-sales care as agreed?
• If there is any problems or deviations on the above, the customer will feel that the company is unable to
properly coordinate and manage its processes

78. • Physical Evidence
• How our facilities and other physical things look – are they well maintained, looks fresh, clean
and pleasant?
• Confirmation
• How the office, showroom, warehouse or other touch-points look physically gives the
confirmation to customer about the quality that was promised.
• Shabby, run-down facilities, unclean areas, unpleasant sights immediately makes the customer
doubt the ability of the company to deliver on what was promised.
• Therefore, customers take physical evidence as the confirmation of the quality of the business
as well as quality of the product.

79. 29 October 2021

80. KEY CHARACTERISTICS OF AN
EFFECTIVE MARKETING MIX

81. Key Characteristics of an Effective
Marketing Mix -1
• The Marketing Mix matches Customer needs
An analysis of customer choice criteria will reveal a set of key customer
requirements/expectations that must be matched by the marketing mix in
order to succeed in the marketplace
Not only the product must match customer’s expectations, its price, where it
available to buy (place) and how it is communicated (promotion) should
match the target customer group.

82. Key Characteristics of an Effective Marketing
Mix -2
• The Marketing Mix creates a Competitive Advantage
A competitive advantage is gained by creating and delivering superior
customer value that is sustainable.
All the marketing mix elements can be used to create sustainable
competitive advantage to the organisation.
Identifying and understanding the key requirements of the customers and
then creating the appropriate marketing mix, that meet or exceed these
requirements better than the competition leads to competitive advantage.

83. Key Characteristics of an Effective Marketing
Mix -3
• The Marketing Mix elements should be consistent with the Target Market & Positioning
Strategy for the product/service and each element should support and reinforce the others
If a product positioned as a superior quality product targeted at high income
upmarket customers - Its Marketing Mix should be;
Product
Well designed with high quality material
Price
Should be higher than average quality competitor products
Place
Should be sold at differentiated outlets and not among average products
Promotion
Advertisements and promotional messages should match the high quality image and price

84. Key Characteristics of an Effective Marketing
Mix -4
• The Marketing Mix should match Corporate Resources
How marketing mix elements are created is constrained by the Corporate
Resources.
Financial resources, in-house technology, staff-skills and competences
and production capabilities of the organisation are some critical
constraining resources.
E.g. An auto company like Maruti-Suzuki does not have the technology or the
staff skilled in advanced battery, computer and AI technologies to design or
manufacture a superior product like a Tesla Model 3
Marketing mix should be designed so that it can be implemented within
the available resources.

85. END OF PARTS 1, 2 & 3