OLC EUROPE

PRINCIPLES OF MARKETING

Eric Agyemang BSc., MA, PGCE, A1, V1

UNIT AIMSFirst, the unit looks at the definitions of marketing, and what is meant by a marketing orientation and the marketing process.

Next, we consider the use of environmental analysis in marketing at both macro and micro levels.

We then investigate the importance of market segmentation and how this leads to the identification and full specification of target groups.

We then consider buyer behaviour and positioning.

The unit looks at the main elements of both the original and the extended marketing mix.

Finally you will try to develop your own marketing mixes to meet the needs of different target groups within a range of contexts.

LEARNING OUTCOMES

On successful completion of this unit you will:

Understand the concept and process of marketing (LO1)

Be able to use the concepts of segmentation, targeting and positioning (LO2)

Understand the individual elements of the extended marketing mix (LO3)

Be able to use the marketing mix in different contexts. (LO4)

UNDERSTAND THE CONCEPT AND PROCESS OF MARKETING

On successful completion of Learning Outcome, you can:

1. explain the various elements of the marketing process

2. evaluate the benefits and costs of a marketing orientation for a elected organisation

BE ABLE TO USE THE CONCEPTS OF SEGMENTATION TARGETING AND POSITIONING

On successful completion of Learning Outcome, you can:

1. show macro and micro environmental factors which influence marketing decisions

2. propose segmentation criteria to be used for products in different markets

3. choose a targeting strategy for a selected product/service

4. demonstrate how buyer behaviour affects marketing activities in different buying situations

5. propose new positioning for a selected product/service

UNDERSTAND THE INDIVIDUAL ELEMENTS OF THE EXTENDED MARKETING MIX

On successful completion of Learning Outcome, you can:

1. Explain how products are developed to sustain competitive advantage

2. Explain how distribution is arranged to provide customer convenience

3. Explain how prices are set to reflect an organisation's objectives and market conditions

4. Illustrate how promotional activity is integrated to achieve marketing objectives

5. Analyse the additional elements of the extended marketing mix

BE ABLE TO USE THE MARKETING MIX IN DIFFERENT CONTEXT

On successful completion of Learning Outcome, you can:

1. Plan marketing mixes for two different segments in consumer market

2. illustrate differences in marketing products and services to businesses rather than consumers

3. Show how and why international marketing differs from domestic marketing

WHAT IS MARKETING ANYWAY?

“Merchants are to be accounted vulgar; for they can make no profit except by a certain amount of falsehood.”

Cicero

“Advertising . . . is a meretricious endeavor in which psychological appeals to “fear” and “shame” are developed to bamboozle the public into purchasing essentially worthless packaged goods at bloated prices.”

Thorstein Veblen

Other Perspectives . . . Corporate leaders nationwide are discovering

that their most powerful competitive weapon is marketing--the development, pricing, distribution, and promotion of products.

--Newsweek

More than half of the polled executives at 250 corporations ranked marketing as the most important element of strategy for the 1990’s.

--Yankelovitch, Skelly, and White

MARKETING DEFINED“Marketing is the management function which organises and directs all those business activities involved in assessing customer needs, and converting customer purchasing power into effective demand for a specific product or service, and in moving that product or service to the final consumer or user so as to achieve the profit target or other business objective set by the company or other organisation”

(Michael Fardon et al 1993)

“Marketing is human activity directed at satisfying needs and wants through exchange processes”

(Philip Kotler)

MARKETING DEFINED

Two most popular definitions of marketing are offered by, the UK's Chartered Institute of Marketing (CIM), and the American Marketing Association (AMA):

“Marketing is the management process responsible for identifying, anticipating and satisfying consumers requirements profitably”. (CIM)

“Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational goals” (AMA)

CIM AND AMA DEFINITIONS COMPARED

Both the CIM and AMA definitions make a good attempt at capturing concisely what is actually a wide and complex subject. Although they have a lot in common, each says something important that the other does not emphasise. Both agree on the following points.

Marketing is a management process

Marketing is about giving customers what they want

Marketing identifies and anticipates customer requirements

Marketing fulfils customer requirements profitably

Marketing offers and exchanges ideas goods and services

Pricing promotion and distribution of ideas, goods and services

RELATIONSHIP MARKETING

The traditional definitions of marketing tend to reflect a view that the transaction between buyer and seller is primarily:

seller-oriented, that each exchange is totally discrete, and That it lacks any of the personal and emotional overtones that emerge

in a long-term relationship.

In B2B markets in particular, each of these exchanges could involve a complex web of interactions between the staff of both organisations, each seeking to work together for their mutual benefit against a history of previous exchanges.

Contemporary writers particularly highlight the importance of enduring buyer-seller relationships as a major influence on decision-making in international B2B markets. Companies such as Volvo have supplier relationships that go back fifty years,

RELATIONSHIP MARKETING CONT,

Relationship marketing is not just a B2B phenomenon, however.

Internet and direct marketing are creating new opportunities for organisations in mass markets to become much closer to their customers.

Consumers often stay loyal to familiar brands, retailers and suppliers for many years and with the enormous power of new technology, individual consumers can be identified and profiles developed, whether through loyalty schemes, monitoring Internet shopping behaviour or other ways of capturing detailed information.

It is now possible to track the purchase behaviour of individual shoppers and to create a database for directly targeted communication, and with such power it would be a foolish marketer who did not try to maintain customer loyalty to improve sales

WIDER DEFINITIONS OF MARKETING

The definitions of marketing are moving away from the single exchange, seller focused perspective adopted by the CIM and AMA definitions towards more socially relevant and relationship-oriented definitions that are considered to reflect the reality of modern marketing far better.

Although relationship marketing over time focuses on customers' needs and attitudes as important points of concern, it can also embrace social and ethical concerns as well as issues more directly related to the series of transactions.

A definition that includes the important elements of both the AMA and CIM definitions, but still embraces the evolving relationship orientation, is offered by Gronroos (1997):

“Marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfillment of promises”.

Such relationships are usually, but not necessarily always, long-term.

Marketing Defined

Another definition that embraces the relationship orientation, is offered by Boone and Kurtz (1998):

Marketing is… “The process of planning and executing the conception,

pricing, promotion, and distribution of ideas, goods, services, organizations, and events to create and maintain relationships that will satisfy individual and organizational objectives.“

-Contemporary Marketing Wired (1998) by Boone and Kurtz

Analysing Competition

Using new Technology

Analysing Change

MANAGING CHANGE IN THE MARKETPLACE

Planning & Coordination

Satisfactory Growth

Income and Profits

NEEDS OF THE ORGANISATION

Anticipating Future needs

Creating good perception of Organisation

Satisfying customer

needs

NEEDS OF THE CUSTOMER

MARKETING PRINCIPLES

MARKETING PRINCIPLES IN ACTION

MARKETING OBJECTIVES

a. To maximise sales, increase market share and be the market leader.

b. To saturate the market

c. To maximise profits

d. To dominate one region country or geographical area.

e. To be the technical leader in the product field

f. To be the recognised innovator, always first with the new ideas.

g. To enhance product image with best quality products (ISO 9000).

h. To become the leader in ‘social marketing’

MARKETING OBJECTIVES

In groups of two, come up with six objectives that an organisation may want to achieve with its corporate strategy:

a.

b.

c.

d.

e.

f.

MARKETING OBJECTIVES

a. To maximise sales, increase market share and be the market leader.

b. To saturate the market

c. To maximise profits

d. To dominate one region country or geographical area.

e. To be the technical leader in the product field

f. To be the recognised innovator, always first with the new ideas.

g. To enhance product image with best quality products (ISO 9000).

h. To become the leader in ‘social marketing’

EVOLUTIONARY ORIENTATION TORWARD THE MARKET PLACE

The Production Concept

The Product Concept

The Selling Concept

The Marketing Concept

Societal Marketing Concept.

Relationship Market Concept

The Production Concept

'Holds that consumers will favour those products that are widely available and low in cost. Managers of production-oriented organisations concentrate on achieving high production efficiency and wide distribution coverage‘

The main assumption is that the market is completely price sensitive, which means that customers are only interested in price as the differentiating factor between competing products and will buy the cheapest.

The Production Era

Mass production following industrialisation

Customers have what is available from a range of products rather than having a ‘choice’

MacDonald’s approach to the catering industry – specified range of products, process driven, limited deviation from prescribed menu possible

The Product Concept

Holds that consumers will favour those products that offer the most quality, performance or innovative features.

Managers in these product-oriented organisations must therefore focus their energy on making superior products and improving them over time.

Since consumers want the highest level of quality for their money, the organisation must work to increase and improve quality levels.

The Product Concept

At first glance, the Product concept may seem like a reasonable proposition, but the problem is the assumption that “consumers want this product”.

In groups of two, discuss the problem with this assumption

The Selling (Sales) Concept Holds that consumers, if left alone will ordinarily not buy

enough of the organisation's product. The organisation must therefore undertake an aggressive selling and promotion effort.

This leads to a heavy emphasis on personal selling and other sales stimulating devices because products “are sold, not bought”.

Thus the organisation puts its effort into building strong sales departments, with the focus very much on the needs of the seller, rather than on those of the buyer.

The Sales Era Mid 1920s to 1950s, when competitive forces and the

desire for high sales volume led businesses to emphasise selling and the salesperson in its business strategy

Organisations ‘push’ product/service onto the buyer

Companies employ a sales force to encourage corporate clients to book their facilities, looking for a one-off bookings rather than an on going relationship.

Sales orientation usually emerged from commission-based reward and remuneration packages for sales people

The Marketing Concept Holds that the key to achieving organisational goals consists

in determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors.

The motivation is to 'find wants and fill them' rather than 'create products and sell them'.

The assumption is that customers are not necessarily price driven, but are looking for the total offering that best fits their needs and therefore the organisation has to define those needs and develop appropriate offerings.

Marketing Era Period in which product and aggressive selling were no

longer seen to suffice, if customers either did not desire a product or preferred a rival brand, and in which customer needs were identified and satisfied

Managers learn about their clients’ preferences and cater to their needs and requirements

This is not just about the core product itself, but also about pricing, access to information, availability and peripheral benefits and services that add value to the product.

Societal Marketing Concept.

Also referred to as Ethical and Sustainable marketing.

Holds that the organisations 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 society's well being.

It involves serving the needs of the buyer with due respect for the welfare of society and the environment

Societal Marketing Concept Era.

Integrated ethical marketing

Defining needs and designing and producing products to minimise harm or damage

Profit through customer satisfaction and loyalty and through societal acceptance

Relationship Marketing Era

Current period in which the focus is not on a single transaction but on developing ongoing relationships with customers.

New technologies assist this type of marketing by allowing better targeting and faster processing of information

Relationship Marketing Era

Companies use new technology to develop business with clients’

Websites and virtual business environments are established to promote facility

Emails and newsletters are sent to customers to thank them for their business and update them with news about products and services

The business adopts a holistic approach to cater for the individual needs of their customers

Implementing The Marketing Concept

It needs to be adopted by top management of the organisation

High level executives must incorporate the marketing concept into their philosophies

It should become the basis for all goals and decisions within the organisation

Implementing The Marketing Concept

Establishment of information system to discover customer needs.

Organisational restructuring and coordination of activities across entire organisation.

Active management support, explaining reasons for any changes

PRODUCT LAUNCHAND SALES

Test Marketing

Decision to Proceed

Pricing Policy

Promotional Policy

Merchandising

Selling

Distribution

After SalesService

ProductLife Cycle

Regular Productand Market Review

StatisticalAnalysis

PRODUCT AND SALESMONITORING & ANALYSIS

MARKET AND PRODUCTRESEARCH

Marketing Research &new Product Research

FUNCTIONS OF MARKETING

Ice – breaker Activity

In February 2012 the Pepsi Next product was launched into the US market.

The new product is described as a mid-calorie cola beverage, having a mix of sugar and artificial sweeteners, designed to deliver a full cola taste with reduced calories. While filling the market gap between full sugar and diet soft drinks, PepsiCo has indicated that its prime target market is lapsed cola drinkers (giving them a reason to return to the product category

Ice – breaker Activity 1

Question for you

1. PepsiCo has been quite persistent with pursing mid-calories beverage products – why do you think this is the case? Do you agree with their decision to introduce Pepsi Next? Why/why not?

2. How is the performance and market acceptance of Pepsi Next likely to impact the overall brand equity of Pepsi? Should PepsiCo have launched this product under a new brand instead?