Module 1: Understanding Marketing Management

Intended Learning Outcomes

After successful completion of this module, you should be able to:

1. Articulate the meaning of marketing and marketing

management concepts.
2. Apply basic concepts of marketing management in your
organization/business.

Marketing is about identifying and meeting human and social needs. It is about
meeting needs profitably (Kotler, 2012).

Marketing is the activity, set of institutions, and processes for creating,

communicating, delivering, and exchanging offerings that have value for customers,
clients, partners, and society at large (American Marketing Association).

Marketing Management is the art and science of choosing target markets and getting,
keeping, and growing customers through creating, delivering, and communicating
superior customer value.

Social definition of Marketing. It is a societal process by which individuals and groups

obtain what they need and want through creating, offering, and freely exchanging
products and services of value with others.

Managers sometimes think of marketing as “the art of selling products,” but many
people are surprised when they hear that selling is not the most important part of
marketing! Selling is only the tip of the marketing iceberg. Peter Drucker, a leading
management theorist, puts it this way: There will always, one can assume, be need
for some selling. But the aim of marketing is to make selling superfluous. The aim of
marketing is to know and understand the customer so well that the product or service
fits him and sells itself. Ideally, marketing should result in a customer who is ready to
buy. All that should be needed then is to make the product or service available.

What is Marketed?

 Goods
 Services
 Events
 Experiences
 Persons
 Places
 Properties
 Organizations
 Information
 Ideas

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Who Markets?

A marketer is someone who seeks a response—attention, a purchase, a vote, a

donation—from another party, called the prospect. If two parties are seeking to
sell something to each other, we call them both marketers.

Marketers are skilled at stimulating demand for their products, but that’s a limited view
of what they do. Just as production and logistics professionals are responsible for
supply management, marketers are responsible for demand management. They seek
to influence the level, timing, and composition of demand to meet the organization’s
objectives.

EIGHT DEMAND STATES

1. Negative demand—Consumers dislike the product and may even pay to avoid
it.

2. Nonexistent demand—Consumers may be unaware of or uninterested in the

product.

3. Latent demand—Consumers may share a strong need that cannot be satisfied

by an existing product.

4. Declining demand—Consumers begin to buy the product less frequently or

not at all.

5. Irregular demand—Consumer purchases vary on a seasonal, monthly,

weekly, daily, or even hourly basis.

6. Full demand—Consumers are adequately buying all products put into the
marketplace.

7. Overfull demand—More consumers would like to buy the product than can be
satisfied.

8. Unwholesome demand—Consumers may be attracted to products that have

undesirable social consequences.

In each case, marketers must identify the underlying cause(s) of the demand state
and determine a plan of action to shift demand to a more desired state.

MARKETS

Traditionally, a “market” was a physical place where buyers and sellers gathered to
buy and sell goods but economists describe a market as a collection of buyers and
sellers who transact over a particular product or product class.

Five basic markets and their connecting flows are shown in Figure 1.1.Manufacturers
go to resource markets (raw material markets, labor markets, money markets), buy
resources and turn them into goods and services, and sell finished products to
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intermediaries, who sell them to consumers. Consumers sell their labor and receive
money with which they pay for goods and services. The government collects tax
revenues to buy goods from resource, manufacturer, and intermediary markets and
uses these goods and services to provide public services. Each nation’s economy,
and the global economy, consists of interacting sets of markets linked through
exchange processes.

Figure 1.2 shows the relationship between the industry and the market. Sellers and
buyers are connected by four flows. Sellers send goods and services and
communications such as ads and direct mail to the market; in return they receive
money and information such as customer attitudes and sales data. The inner loop
shows an exchange of money for goods and services; the outer loop shows an
exchange of information.

KEY CUSTOMER MARKETS

Consumer Markets. Companies selling mass consumer goods and services, spend
a great deal of time establishing a strong brand image by developing a superior
product and packaging, ensuring its availability, and backing it with engaging
communications and reliable service.

Business Markets. Companies selling business goods and services often face well-
informed professional buyers skilled at evaluating competitive offerings. Business
buyers buy goods to make or resell a product to others at a profit.

Global Markets. Companies in the global marketplace must decide which countries
to enter; how to enter each (as an exporter, licenser, joint venture partner, contract
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manufacturer, or solo manufacturer); how to adapt product and service features to

each country; how to price products in different countries; and how to design
communications for different cultures.

Nonprofit and Governmental Markets. Companies selling to nonprofit organizations

with limited purchasing power such as churches, universities, charitable organizations,
and government agencies need to price carefully.

MARKETPLACES, MARKETSPACES, AND METAMARKETS

Marketplace is physical, such as a store you shop in.

Marketspace is digital, as when you shop on the Internet.

Metamarket is a cluster of complementary products and services closely related in

the minds of consumers, but spread across a diverse set of industries.

Example. The automobile metamarket consists of automobile manufacturers, new and

used car dealers, financing companies, insurance companies, mechanics, spare parts
dealers, service shops, auto magazines, classified auto ads in newspapers, and auto
sites on the Internet.

Core Marketing Concepts

Needs are the basic human requirements such as for air, food, water, clothing, and
shelter. Humans also have strong needs for recreation, education, and entertainment.
These needs become wants when they are directed to specific objects that might
satisfy the need.

Demands are wants for specific products backed by an ability to pay. It is also the
desire of purchasers, consumers, clients, employers, etc., for a particular commodity,
service, or other item.

Five types of needs:

1. Stated needs (The customer wants an inexpensive car.)

2. Real needs (The customer wants a car whose operating cost, not initial price,
is low.)
3. Unstated needs (The customer expects good service from the dealer.)
4. Delight needs (The customer would like the dealer to include an onboard GPS
navigation system.)
5. Secret needs (The customer wants friends to see him or her as a savvy
consumer.)

TARGET MARKETS, POSITIONING, AND SEGMENTATION

Target market refers to a group of people or organizations at which a firm directs a

marketing program

Positioning - refers to a product’s image in relation to directly competitive products

as well as other products marketed by the same company
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Market segmentation is a process of dividing a market into groups of similar

consumers and selecting the most appropriate group(s) for the firm to serve

It also refers to the process of dividing prospective buyers into groups that have
common needs and will respond similarly to a marketing action.

OFFERINGS & BRANDS

Value proposition- a set of benefits that satisfy those needs. The intangible value
proposition is made physical by an offering, which can be a combination of products,
services, information, and experiences

Brand is a set of values, a guarantee of good source, good product, it is experiential,

it has monetary value, it connects and owns the trust of the people and they belong to
the people. Brand stand for something, not a lot of thing but only one thing.

VALUE & SATISFACTION

The buyer chooses the offerings he or she perceives to deliver the most value, the
sum of the tangible and intangible benefits and costs to him/her

Value, a central marketing concept, is primarily a combination of quality, service, and

price (qsp), called the customer value triad.

Satisfaction reflects a person’s judgment of a product’s perceived performance in

relationship to expectations. If the performance falls short of expectations, the
customer is disappointed. If it matches expectations, the customer is satisfied. If it
exceeds them, the customer is delighted.

MARKETING CHANNELS

Communication channels deliver and receive messages from target buyers and
include newspapers, magazines, radio, television, mail, telephone, billboards, posters,
fliers, CDs, audiotapes, and the Internet.

The marketer uses distribution channels to display, sell, or deliver the physical
product or service(s) to the buyer or user. These channels may be direct via the
Internet, mail, or mobile phone or telephone, or indirect with distributors, wholesalers,
retailers, and agents as intermediaries

To carry out transactions with potential buyers, the marketer also uses service
channels are something used to carry out transactions with potential buyers, such
warehouses, transportation companies, banks, and insurance companies.

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MARKETING ENVIRONMENT

The task environment includes the actors engaged in producing, distributing, and
promoting the offering.These are the company, suppliers, distributors, dealers, and
target customers.

The broad environment consists of six components: demographic environment,

economic environment, social-cultural environment, natural environment,
technological environment, and political-legal environment.

MAJOR SOCIETAL FORCES

.
• Network information technology. The digital revolution has created an Information
Age that promises to lead to more accurate levels of production, more targeted
communications, and more relevant pricing.

• Globalization. Technological advances in transportation, shipping, and

communication have made it easier for companies to market in, and consumers to buy
from, almost any country in the world. International travel has continued to grow as
more people work and play in other countries.

• Deregulation. Many countries have deregulated industries to create greater

competition and growth opportunities. In the United States, laws restricting financial
services, telecommunications, and electric utilities have all been loosened in the spirit
of greater competition.

• Privatization. Many countries have converted public companies to private ownership

and management to increase their efficiency, such as the massive telecom company
Telefónica CTC in Chile and the international airline British Airways in the United
Kingdom.

• Heightened competition. Intense competition among domestic and foreign brands

raises marketing costs and shrinks profit margins. Brand manufacturers are further
buffeted by powerful retailers that market their own store brands. Many strong brands
have become megabrands and extended into a wide variety of related product
categories, presenting a significant competitive threat.

• Industry convergence. Industry boundaries are blurring as companies recognize

new opportunities at the intersection of two or more industries. The computing and
consumer electronics industries are converging, for example, as Apple, Sony, and
Samsung release a stream of entertainment devices from MP3 players to plasma TVs
and camcorders. Digital technology fuels this massive convergence.

• Retail transformation. Store-based retailers face competition from catalog houses;

direct-mail firms; newspaper, magazine, and TV direct-to-customer ads; home
shopping TV; and e-commerce. In response, entrepreneurial retailers are building
entertainment into their stores with coffee bars, demonstrations, and performances,
marketing an “experience” rather than a product assortment.

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• Disintermediation. The amazing success of early dot-coms such as AOL,

Amazon.com, Yahoo!, eBay, E*TRADE, and others created disintermediation in the
delivery of products and services by intervening in the traditional flow of goods through
distribution channels. These firms struck terror into the hearts of established
manufacturers and retailers. In response, traditional companies engaged in
reintermediation and became “brick-and-click” retailers, adding online services to their
offerings. Some became stronger contenders than pure-click firms, because they had
a larger pool of resources to work with and established brand names.

• Consumer buying power. In part, due to disintermediation via the Internet,

consumers have substantially increased their buying power. From the home, office, or
mobile phone, they can compare product prices and features and order goods online
from anywhere in the world 24 hours a day, 7 days a week, bypassing limited local
offerings and realizing significant price savings. Even business buyers can run a
reverse auction in which sellers compete to capture their business. They can readily
join others to aggregate their purchases and achieve deeper volume discounts.

• Consumer information. Consumers can collect information in as much breadth and

depth as they want about practically anything. They can access online encyclopedias,
dictionaries, medical information, movie ratings, consumer reports, newspapers, and
other information sources in many languages from anywhere in the world. Personal
connections and user-generated content thrive on social media such as Facebook,
Flickr (photos), Del.icio.us (links), Digg (news stories), Wikipedia (encyclopedia
articles), and YouTube (video).

• Consumer participation. Consumers have found an amplified voice to influence

peer and public opinion. In recognition, companies are inviting them to participate in
designing and even marketing offerings to heighten their sense of connection and
ownership. Consumers see their favorite companies as workshops from which they
can draw out the offerings they want.

• Consumer resistance. Many customers today feel there are fewer real product
differences, so they show less brand loyalty and become more price- and quality-
sensitive in their search for value, and less tolerant about undesired marketing.

COMPANY ORIENTATION TOWARD THE MARKETPLACE

The Production Concept is one of the oldest concepts in business. It holds that
consumers prefer products that are widely available and inexpensive. Managers of
production-oriented businesses concentrate on achieving high production efficiency,
low costs, and mass distribution.

The Product Concept proposes that consumers favor products offering the most
quality, performance, or innovative features. However, managers are sometimes
caught in a love affair with their products. They might commit the “better-mousetrap”
fallacy, believing a better product will by itself lead people to beat a path to their door.
A new or improved product will not necessarily be successful unless it’s priced,
distributed, advertised, and sold properly.

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The Selling Concept holds that consumers and businesses, if left alone, won’t buy
enough of the organization’s products. It is practiced most aggressively with unsought
goods—goods buyers don’t normally think of buying such as insurance and cemetery
plots—and when firms with overcapacity aim to sell what they make, rather than make
what the market wants. Marketing based on hard selling is risky. It assumes customers
coaxed into buying a product not only won’t return or bad-mouth it or complain to
consumer organizations but might even buy it again.

The Marketing Concept emerged in the mid-1950s as a customer-centered, sense-

and-respond philosophy. The job is to find not the right customers for your products,
but the right products for your customers. Dell doesn’t prepare a perfect computer for
its target market. Rather, it provides product platforms on which each person
customizes the features he or she desires in the computer. The marketing concept
holds that the key to achieving organizational goals is being more effective than
competitors in creating, delivering, and communicating superior customer value to
your target markets.

Harvard’s Theodore Levitt drew a perceptive contrast between the selling and
marketing concepts:

Selling focuses on the needs of the seller; marketing on the needs of the buyer.
Selling is preoccupied with the seller’s need to convert his product into cash;
marketing with the idea of satisfying the needs of the customer by means of the
product and the whole cluster of things associated with creating, delivering, and finally
consuming it.

The holistic marketing concept is based on the development, design, and

implementation of marketing programs, processes, and activities that recognize their
breadth and interdependencies. Holistic marketing acknowledges that everything
matters in marketing—and that a broad, integrated perspective is often necessary.

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Holistic marketing thus recognizes and reconciles the scope and complexities of
marketing activities. Figure 1.3 provides a schematic overview of four broad
components characterizing holistic marketing: relationship marketing, integrated
marketing, internal marketing, and performance marketing.

Relationship marketing aims to build mutually satisfying long-term relationships with

key constituents in order to earn and retain their business. Four key constituents for
relationship marketing are customers, employees, marketing partners (channels,
suppliers, distributors, dealers, agencies), and members of the financial community
(shareholders, investors, analysts). Marketers must create prosperity among all these
constituents and balance the returns to all key stakeholders. To develop strong
relationships with them requires understanding their capabilities and resources,
needs, goals, and desires.

Marketing network-is a unique company asset which is the ultimate outcome of

relationship marketing that consist of the company and its supporting stakeholders—
customers, employees, suppliers, distributors, retailers, and others—with whom it has
built mutually profitable business relationships.

Integrated marketing -occurs when the marketer devises marketing activities and
assembles marketing programs to create, communicate, and deliver value for
consumers such that “the whole is greater than the sum of its parts.”

Two key themes are that (1) many different marketing activities can create,
communicate, and deliver value and (2) marketers should design and implement
anyone marketing activity with all other activities in mind.

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Internal marketing-an element of holistic marketing, is the task of hiring, training, and
motivating able employees who want to serve customers well. It ensures that everyone
in the organization embraces appropriate marketing principles, especially senior
management.

Performance marketing requires understanding the financial and nonfinancial

returns to business and society from marketing activities and programs. Top marketers
are increasingly going beyond sales revenue to examine the marketing scorecard and
interpret what is happening to market share, customer loss rate, customer satisfaction,
product quality, and other measures. They are also considering the legal, ethical,
social, and environmental effects of marketing activities and programs.

Financial accountability Marketers are increasingly asked to justify their investments

in financial and profitability terms, as well as in terms of building the brand and growing
the customer base. They’re employing a broader variety of financial measures to
assess the direct and indirect value their marketing efforts create and recognizing that
much of their firms’ market value comes from intangible assets, particularly brands,
customer base, employees, distributor and supplier relations, and intellectual capital.

Social responsibility marketing Because the effects of marketing extend beyond the
company and the customer to society as a whole, marketers must consider the ethical,
environmental, legal, and social context of their role and activities.

Marketing is no longer the responsibility of a single department—it is a company-wide

undertaking that drives the company’s vision, mission, and strategic planning. It
succeeds only when all departments work together to achieve customer goals (see
Table 1.1) when engineering designs the right products, finance furnishes the right
amount of funding, purchasing buys the right materials, production makes the right
products in the right time horizon, and accounting
measures profitability in the right ways.

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Updating The Four Ps

People reflect, in part, internal marketing and the fact that employees are critical to
marketing success. Marketing will only be as good as the people inside the
organization.

Processes reflect all the creativity, discipline, and structure brought to marketing
management. Marketers must avoid ad hoc planning and decision making and ensure
that state-of-the-art marketing ideas and concepts play an appropriate role in all they
do.

Programs reflect all the firm’s consumer-directed activities. It encompasses the old
four Ps as well as a range of other marketing activities that might not fit as neatly into
the old view of marketing.

Performance as in holistic marketing, to capture the range of possible outcome

measures that have financial and nonfinancial implications (profitability as well as
brand and customer equity), and implications beyond the company itself (social
responsibility, legal, ethical, and community related).

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