What is Marketing?

Process by which individuals and groups obtain what they needneed and

want want through creating and exchanging products exchanging products and value

with others.

Simply put: Marketing is the delivery of customer satisfaction at a profit.

The Steps in the Marketing Process (Fig. 1.1)

1. UnderstandCustomerNeeds & Wants

2. DesignCustomerDrivenStrategy

3. DeliverSuperior Value

4. Build ProfitableRelationships &Customer Delight

5. Capture Value Create Profits Customer Satisfaction

• Needs Needs - state of felt deprivation for basic items such as food and clothing and complex needs such as for belonging. i.e. I am hungry.

• WantsWants - form that a human need takes as shaped by culture and individual personality. i.e. I want a hamburger, French fries, and a soft drink.

• DemandsDemands - human wants backed by buying power. i.e. I have money to buy this meal.

Step 1: Identify Consumer’s Needs, Wants and Demands

Step 2. Designing a Customer-Driven Marketing

Strategy

• Selecting the right target markets

• Choosing a Value Proposition

• Choosing a Management Orientation

Production Concept

Product Concept

Selling Concept

Marketing Concept

Societal Marketing Concept

•Consumers favor products that are available and highly affordable.•Improve production and distribution.

•Consumers favor products that offer the most quality, performance, and innovative features.

•Consumers will buy products only if the company promotes/ sells these products.

•Focuses on needs/ wants of target markets & delivering satisfaction better than competitors.

•Focuses on needs/ wants of target markets & delivering superior value.

Marketing Management Philosophies

The Marketing Concept

• Emphasis is on offering products that satisfy customer’s wants and/or needs

• Customer drives production

• Management is profit-oriented

• Planning is long-run

• Company focuses on buyers

3. Prepare a Marketing Plan & Programs

• Successfully execute the 4P’s–Product

–Price

–Promotion

–Place

• Create a sustainable business

4. Build Relationships• Execute Strong CRM

– Customer Relationship Management

• Customer Value – Difference between

value and cost

• Customer Satisfaction – Perceived performance matches expectations

5. Capturing Value from Customers

• Create Customer Loyalty and Retention

• Increase Share of Customer’s Purchases

• Build Customer Equity = Lifetime Value• Build the Right Relationships with the

Right Customers

What is a Market?

A market is all of the customers who have a

common need or want for a product or service and have the money to pay for those products they need or want.

Market Segmentation

Through Market Segmentation, Companies

Divide Large, Heterogeneous Markets

into Smaller Segments that Can be Reached

More Efficiently And Effectively

With Products and Services

That Match Their Unique Needs.

Density or Climate

City or Metro Size

World Region or Country

Market SegmentationGeographic Segmentation

Market SegmentationDemographic Segmentation

• Dividing the market into groups based on variables such as:– Age– Gender– Family size or life cycle– Income– Occupation– Education– Religion– Race– Generation– Nationality

Market SegmentationPsychographic Segmentation

Divides Buyers Into Different Groups Based on:

Market SegmentationBehavioral Segmentation

• Dividing the market into groups based on variables such as:– Occasions– Benefits– User status– Usage rate– Loyalty status– Readiness stage– Attitude toward product

TargetCustomers

IntendedPositioning

Product“Goods-and-service”combination that a company offers a

target market

PriceAmount of moneythat consumers have to pay to

Obtain the product

Activities that persuade target customers to buy

the product

Promotion

Company activitiesthat make the

product available

Place

Developing the Marketing Mix

Product“Goods-and-service”combination that a company offers a

target market

Definitions

• Product– Anything offered to a market for attention, acquisition,

use, or consumption that might satisfy a need or want.

• Service– A form of product that consists of activities, benefits

or satisfactions offered for sale that are essentially intangible and do not result in the ownership of anything.

Goal 4: Discuss how companies position their products

Levels of Product and ServicesFigure 8.1

8 - 19

Choosing a Product Positioning Strategy

• Product’s Position - the way the product is defined by consumers on important attributes - the place the product occupies in consumers’ minds relative to competing products.

• Marketers must:– Plan positions to give their products the greatest

advantage in selected target markets,– Design marketing mixes to create these planned

positions.

What is a Brand?

– A name, term, sign, symbol, or design that identifies the product

– Branding can add value to a product– Branding helps buyers

• Identify products• Determine quality

– Branding helps sellers• Convey product quality• Provide legal protection• Segment markets

IdeaGeneration

IdeaScreening

ConceptDevelopmentand Testing

MarketingStrategy

BusinessAnalysis

ProductDevelopment

TestMarketing

Commercialization

Major Stages in New-Product Development (Fig. 9.1)

Customers Competitors Distributors Suppliers

Idea Generation is the Systematic Search for New Product Ideas Where Quantity of Ideas is Most Important and Obtained From Employees

and:

New Product Development Process Step 1. Idea Generation

New Product Development Process Step 2. Idea Screening

• Process to spot good ideas and drop poor ones as soon as possible.

• So, Quality NOT Quantity is most important.• Many companies have criteria for rating and

screening ideas based on such areas as: – Market Size– Number of Competitors & Competitive Offerings– Product Price– Development Time & Costs– Manufacturing Costs– Rate of Return

1. Develop New Product Ideas into Alternative Detailed

Product Concepts

2. Concept Testing - Test theNew Product Concepts with Groups of Target Customers

3. Choose the One That Has theStrongest Appeal to Target

Customers

New Product Development Process Step 3. Concept Development

Product Image is the Way Consumers Perceive an Actual or Potential Product

Part Three Describes Long-Term:Sales & Profit Goals

Marketing Mix Strategy

Part Two Describes First-Year:Product’s Planned Price

DistributionMarketing Budget

Part One Describes Overall:Target Market

Planned Product PositioningSales & Profit Goals

Market Share

New Product Development Process Step 4. Marketing Strategy

If No, Eliminate Product Concept

Business AnalysisReview of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Business AnalysisReview of Product Sales, Costs, and Profits Projections to See if They Meet Company Objectives

Step 5. Business AnalysisStep 6. Product Development

If Yes, Move to Product Development to turn the idea into a physical product

StandardStandardTest MarketTest Market

Full marketing campaignin a small number of representative cities.

Controlled Controlled Test MarketTest Market

A few stores that have agreed to carry newproducts for a fee.

SimulatedSimulatedTest MarketTest Market

Test in a simulated shopping environment

to a sample of consumers.

New Product Development Process Step 7. Test Marketing

When is the Right Time to

IntroduceProduct?

When is the Right Time to

IntroduceProduct?

Where to Launch a

New Product?

Where to Launch a

New Product?

Commercialization is the Introduction of the New Product into the Marketplace.

New Product Development Process Step 8. Commercialization

Awareness: Consumer is aware of

product, but lacks information.

Awareness: Consumer is aware of

product, but lacks information.

Interest: Consumer seeks Information about new product.

Interest: Consumer seeks Information about new product.

Evaluation: Consumer considerstrying new product.

Evaluation: Consumer considerstrying new product.

Trial: Consumer tries new product on a small scale.

Adoption: Consumer decides to make regular use of product.

Stages in the Adoption Process for a New Product

Adopter Categories (Fig. 5.7)P

erc

en

tag

e o

f A

dop

ters

Time of AdoptionEarly Late

Inn

ovato

rs

Early Adopters

Early Majority

2.5%

13.5%

34% 34%

16%

Laggards

Late Majority

Time

ProductDevelop-

ment

Introduction

Profits

Sales

Growth Maturity Decline

Losses/Investments ($)

Sales andProfits ($)

Sales and Profits Over the Product’s Life From Inception to Demise

Product Life Cycle (Fig. 9.2)

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Low sales Low sales

High cost per customerHigh cost per customer

Negative or lowNegative or low

Create product awareness and trialCreate product awareness and trial

Offer a basic productOffer a basic product

Usually is high; use cost-plus formulaUsually is high; use cost-plus formula

DistributionDistribution High distribution expensesHigh distribution expenses

AdvertisingAdvertising Build product awareness among early adopters and dealers

Build product awareness among early adopters and dealers

Summary of Characteristics, Objectives, & Strategies

Introduction Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Rapidly rising sales Rapidly rising sales

Average cost per customerAverage cost per customer

Rising profitsRising profits

Maximize market shareMaximize market share

Offer new product features, extensions, service, and warranty

Offer new product features, extensions, service, and warranty

Price to penetrate marketPrice to penetrate market

DistributionDistribution Increase number of distribution outletsIncrease number of distribution outlets

AdvertisingAdvertising Build awareness and interest in the mass market

Build awareness and interest in the mass market

Summary of Characteristics, Objectives, & Strategies

Growth Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Peak salesPeak sales

Low cost per customerLow cost per customer

High profits, then lower profitsHigh profits, then lower profits

Maximize profits while defending market share

Maximize profits while defending market share

Diversify brand and modelsDiversify brand and models

Price to match or best competitorsPrice to match or best competitors

DistributionDistribution Build more intensive distributionBuild more intensive distribution

AdvertisingAdvertising Stress brand differences and benefits

Stress brand differences and benefits

Summary of Characteristics, Objectives, & Strategies

Maturity Stage of the PLC

SalesSales

CostsCosts

ProfitsProfits

Marketing ObjectivesMarketing Objectives

ProductProduct

PricePrice

Declining salesDeclining sales

Low cost per customerLow cost per customer

Declining profitsDeclining profitsReduce expenditure and maintain,

reposition, harvest or drop the product

Reduce expenditure and maintain, reposition, harvest or drop the

productPhase out weak itemsPhase out weak items

Cut priceCut price

DistributionDistribution Go selective: phase out unprofitable outlets

Go selective: phase out unprofitable outlets

AdvertisingAdvertising Reduce to level needed to retain hard-core loyal customers

Reduce to level needed to retain hard-core loyal customers

Summary of Characteristics, Objectives, & Strategies

Decline Stage of the PLC

Price

Amount of moneythat consumers have to pay to

obtain the product

Two Definitions of Price• Manufacturer:

– The amount of money a company charges for a product or service that will cover costs and make a profit

• Consumer:– the sum of the values that consumers are

willing to pay for the benefits of having or using the product or service.

Promotion

Activities that persuade target customers to buy

the product

Marketing Communications Mix

• The specific mix of support a company uses to pursue its marketing objectives.

• Direct activities: personal selling and direct marketing

• Indirect activities: advertising, sales promotion, internet and public relations

Tools of the MixFigure 14.1

14 - 41

Elements in the Communication ProcessFigure 14.2

14 - 42

Place

Company activitiesthat make the

product available

Different Distribution Strategies

• Intensive distribution:–Offer the product in as many outlets as

possible (e.g. all convenience stores)

• Selective–Select the best outlets to offer the product

(e.g. only select stores in large malls)

• Exclusive distribution–Product is only offered to a very few

preferred outlets (e.g. only at Macy’s)

What are Marketing Intermediaries?

• A set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by the consumer or business user.

• Intermediaries facilitate the movement of the product from point of manufacture (e.g. trucks) to point of consumption (e.g. a retail store).

Buyer Decision Process (Fig. 5.6)

PostpurchaseBehavior

Purchase

Decision

Information

SearchNeed

Recognition

Evaluationof

Alternatives

Buyer Decision ProcessStep 1. Need Recognition

State Where the Buyer’s Needs are Fulfilled and the Buyer is Satisfied.

Needs Arising From:

Internal Stimuli –

Hunger

External Stimuli-

Friends

Buyer Recognizes

a Problem

or a Need.

•Family, friends, neighbors•Most effective source of information

•Advertising, salespeople•Receives most information from these sources

•Mass Media•Consumer-rating groups

•Handling the product•Examining the product•Using the product

Personal Sources Personal Sources

Commercial SourcesCommercial Sources

Public SourcesPublic Sources

Experiential SourcesExperiential Sources

The Buyer Decision ProcessStep 2. Information Search

Consumer May Use Careful Calculations & Logical ThinkingConsumer May Use Careful

Calculations & Logical Thinking

Consumers May Buy on Impulse and Rely on Intuition

Consumers May Buy on Impulse and Rely on Intuition

Consumers May Make Buying Decisionson Their Own.

Consumers May Make Buying Decisionson Their Own.

Consumers May Make Buying DecisionsOnly After Consulting Others.

Consumers May Make Buying DecisionsOnly After Consulting Others.

Marketers Must Study Buyers to Find Out How They Evaluate Brand

Alternatives

The Buyer Decision ProcessStep 3. Evaluation of Alternatives

Purchase IntentionDesire to buy the most preferred brand

Purchase IntentionDesire to buy the most preferred brand

Purchase DecisionPurchase Decision

Unexpected

Situational Factors

Attitudes of Others

The Buyer Decision ProcessStep 4. Purchase Decision

The Buyer Decision ProcessStep 5. Postpurchase Behavior

Consumer’s Expectations of Product’s Performance.

Product’s Perceived Performance.

Dissatisfied Customer

Satisfied Customer!

Cognit

ive D

isso

nan

ce

C

ognit

ive D

isso

nan

ce

Major Forces in the Company’s Macroenvironment (Fig. 3.4)

The Company’s Macroenvironment

• Demographic - studies populations in terms of size, density, location, age, gender, race, occupation and other statistics.

• Economic - factors that affect consumer purchasing power and spending patterns.

• Natural - natural resources needed as inputs by marketers or that are affected by marketing activities.

The Company’sMacroenvironment

• Technological - forces that create new technologies, creating new product and market opportunities.

• Political - laws, agencies and pressure groups that influence and limit organizations and individuals in a given society.

• Cultural - institutions and other forces that affect a society’s basic values, perceptions, preferences, and behaviors.

Company’s Internal Environment (Fig. 3.1)

The Company’s Microenvironment

• Company’s Internal Environment- functional areas inside a company that have an impact on the marketing department’s plans.

• Suppliers - provide the resources needed to produce goods and services and are an important link in the “value delivery system”.

• Marketing Intermediaries - help the company to promote, sell, and distribute its goods to final buyers. i.e. resellers.

The Company’s Microenvironment

• Customers - five types of markets that purchase a company’s goods and services.

• Competitors - those who serve a target market with similar products and services against whom a company must gain strategic advantage.

• Publics - any group that perceives itself having an interest in a company’s ability to achieve its objectives.

1. Market Penetration

2. Market Development

3. Product Development

4. Diversification

ExistingMarkets

NewMarkets

ExistingProducts

NewProducts

Product/ Market Expansion Grid

Developing Growth Strategies in the Age of Connectedness

Product/ Market Expansion Grid

• Market Penetration: making more sales to current customers without changing its products. – How? Add new stores in current market areas,

improve advertising, prices, service or store design.

Market Development: develop new markets for its current products.

How? Identify new demographic or geographic markets.

Product/ Market Expansion Grid

• Product Development: offering modified or new products to current markets. – How? New styles, flavors, colors, or modified

products.

• Diversification: new products for new markets. – How? Start up or buy new businesses.