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.