Revision of

Marketing Concepts

REVISION OF MARKETING CONCEPTS FOR MAKETING SPECIALIZATION STUDENTS

BOOK AUTHOR: PHILIP KOTLER 12E Prepared by: Muhammad Irfan TEACHER S NAME: SIR ABDUL SAMAD

If we define marketing in two words it is satisfying customers if we elaborate this simple definition further it is satisfying needs and wants of customers better than the competitors NEED is a necessity without which a man can not live or survive. Those needs which are shaped by culture or society are WANTS. Needs are a sense of self deprivation and wants are supported by the culture custom or society if a man feels hungry in America he will want a burger French fries with a soft drink similarly if a man feels hungry in Pakistan he will want a CHAPATI, BIRAYANI RICE etc those wants which are backed by purchasing power are called DEMAND. The American Marketing Association offers the following formal definition of marketing: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stockholders Here is the social definition of marketing: Marketing is a social process by individuals and groups obtain what they and want through creating, offering and freely exchanging products and services of value with each other How marketing is a social and managerial process? Consumer will have to bear a searching cost for the desired product marketing provides the solution for it therefore it a social process. Marketing involves planning, organizing, leading and controlling therefore it is also a managerial process.

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Revision of
Marketing Concepts Marketing management philosophy orientation
There are basically five concepts y Production concept This concept says that consumer will favor those products which are available and favorable basically there were no products Product concept Here the competition starts and the consumer will favor those products which are better in price quality, characteristics and price Selling concept Consumer will not buy enough of the products unless the producer exert the high level of efforts e.g. insurance policies Marketing concept It says, first analyzes the needs and wants of customer and then produce the value products to satisfy those needs Societal marketing concept Produce the value products to satisfy the customer but keeping in mind the welfare of the society

What is marketing mix?

Marketing mix is a combination of controllable technical marketing tools 4 Ps (for product) 1) 2) 3) 4) 4Cs (for customer)

Product --------------------------------is-------------------------- customer solution Price ------------------------------------is-------------------------- customer cost Place (distribution) ------------------is--------------------------- customer convenience Promotion -----------------------------is--------------------------- customer communication

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Revision of
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What is Customer Relationship Management (CRM)?

Customer relationship management CRM is the process of carefully managing detailed information about individual customer and all customers touch point to maximize customer loyalty. A customer touch point is any occasion on which a customer encounters the brand and product from actual experience to personal mass communications to casual observation.

What is customer perceived value and customer satisfaction?

Customer perceived value: the customers evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. Customer satisfaction: the extent to which a products perceived performance matches a buyer expectation

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Revision of
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Customer driven marketing strategy

Strategy: means of achieving long term objectives Policy: means of achieving short term objectives

What is the difference between mission statement and vision statement of the company? Mission statement: a statement of the organizations purposeswhat it wants to accomplish in the large environment. Vision statement: where company sees itself in the future

Business portfolio the collection of all the products and businesses made by the company is called the business portfolio.

What is BCG matrix and SBU? BCG is Boston Consulting Group it is also known as growth share matrix SBU is strategic business unit. Any unit that can separately be planned is SBU there may be more products and businesses in SBU

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Revision of
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If there are so many cash cows we will launch some new products or we can invest cash in stars to make them a cash cow

Disadvantages of BCG matrix

It is difficult to calculate market growth and market share There involve some technical techniques to calculate share BCG matrix analyses current portfolio it can not predict the future

Product/ market expansion grid

It tells that if we want to expand our business what options are available to us.

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Revision of
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Marketing environment
What is an environment? Generally speaking everything around us is environment. All things which are around the marketing are called marketing environment.

Actors and forces outside marketing that affect marketing management ability to build and maintain successful relationship with target customers There are two kinds of marketing environment Micro environment: the actors close to the companies that affect its ability to serve its customers. Following is the list of contents involved in the micro environment of the organization. The company: all departments can affect each other even marketing Suppliers: the one who is providing raw material to the company Marketing intermediaries: firms that help the company to promote sell and distribute its goods to final buyers Customer market kinds of markets Consumer market: goods for personal use PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
Marketing Concepts
Business market: goods are purchased to modify produce and sell to make profit Reseller market: goods are purchased to resell to others Government market: govt. purchase goods for the benefits of public International market: goods sold to the other countries in the world Competitors: producers of the same product produced by the firm Public followings are some kinds of public which affect the firm Local public: public residing around the organization Citizen public the associations acting on behalf of the public Government public official of the government Internal public employees of the organization General public: public of the region general public Media public media personnel Financial public the people and organizations providing company with the finance

Macro environment: the larger societal forces that affect micro environment. These are the large societal forces which affect the whole environment Demographic environment it is the study of human beings i.e. income, age, gender, population size, education etc. Economic environment: these are the forces that affect the income level and spending patterns. Technological environment: how technology can affect the marketing environment e.g. audio cassettes are replaced by the CDs and DVDs. Political and legal environment: political stability, law and order, new taxes, government rules and laws, duties, international laws, WTO, etc Natural environment: seasons and weathers, floods, disasters, natural resources PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Cultural environment: how culture affects the business shared values and beliefs characteristics of the society, values and customs make a culture.

Managing marketing information

Ways of getting information Internal data the information available within the organization Market intelligence is the continuous process of getting knowledge and information. Market research is the problem based study conducted by the professional individuals. What is a sample? Sample is a representative subset of the population Sampling unit: who should we survey? Teachers, doctors, general public Sample size: how many people should we survey? Sample procedure: how should we choose the respondents? There are two kinds of sample procedure A. Probability sampling: Simple random sampling: Every member of the population has an equal chance of selection The population is divided into mutual exclusive groups such as age groups and random samples are drawn from each group The population is divided into mutual exclusive groups such as city blocks and the researcher draws a sample of the group to interview.

Stratified random sampling:

Cluster (area) sampling:

B. Non probability sampling: Convenience sampling: The researcher selects population member the most accessible

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Revision of
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Judgment sampling: The researcher selects population members who are prospects of accurate information The researcher finds and interviews a prescribed of people in each of several categories. Sometimes the researcher does not know the respondent he meets one and asks him for the other this is also called refer to refer sampling

Quota sampling:

Snow ball sampling:

Steps involved in marketing research

     Define the problem and research objectives Develop the research plan research design or methodology Implementing the research plan Analyze the data Interpreting and reporting the findings

Types of Research
y Exploratory research: the research which is conducted to explore the problem is called exploratory research in which the hypothesis or level of confidence is defined. Descriptive research: one variable is involved in this type of research, the problem is studied in details and depth and the surveys are conducted. Causal research: the study of cause and its effects is called the causal research e.g. the effect of rise in the price of a commodity on its sales, the effect of advertising on the sales etc. Ethnographical research: is a type of observation research, it means that the people we are observing do not know that they are under observation or research.

Research instruments:
Marketing researcher has a choice of three main research instruments in collecting primary data: questionnaires, qualitative measures and technological devices PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Questionnaires: A questionnaire consists of set of questions presented to respondents. Because of its flexibility, it is by far the most common instrument used to collect the primary data. There are two types of questions used in a questionnaire:

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A. Close ended question: specify all the possible answers and provide answers that are easy to interpret and tabulate B. Open ended question: allow respondents to answer in their own words and often reveal more about how people think. They are specially useful in exploratory research. Qualitative measures Qualitative research techniques are relatively unstructured measurement approaches that permit a range of possible responses. Their variety is limited only by the creativity of the marketing researcher. Some researcher prefers more qualitative methods for gauging consumer opinion, because consumer actions dont always match their answers to survey questions. Technological devices Technological devices are occasionally useful in marketing research. Some advertising agencies use electronic devices attach it to the T.V of the consumer and collect data about the timings of the T.V watched and channels continuously watched.

Planning for primary data collection

Research approaches Observation research Survey research Experiment research Contact methods Mail Telephone Personal Sampling plan Research instrument Questionnaire Qualitative measures Technological devices ---------------------

Sample unit Sample size Sample technique

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online

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Revision of
Marketing Concepts
Customer driven marketing strategies creating value for customer
The starting point for discussing segmentation is mass marketing. In mass marketing, the seller engages in mass production, mass distribution and mass promotion of one product for all buyers.

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What is Segmentation Dividing the market into distinctive group of buyer who might require separate marketing mix segment marketing offers key benefits over mass marketing the company can offer better design, price, disclose and deliver the product and services and also can fine tune the marketing program and activities to better reflect competitors marketing.

Segment market

Rifle approach Mass marketing

Ways to segment consumer market

 Geographic segmentation Segmentation on the basis of countries, cities, villages division.  Demographic segmentation Segmentation on the basis of population, age, gender, income, occupation, education  Psychographic segmentation PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Social classification, lifestyle, personality  Behavioral segmentation Occasions, benefits, user status, usage rate, loyalty status, readiness stage, attitude toward product.

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Requirements/ conditions for effective segmentation

Clearly there are many ways to segment a market, but all segments are not effective. To be useful, market segment must be:  Measurable: the size, purchasing power, and profits of the segment can be measured.  Accessible: the market segment can be effectively reached and serve. Suppose a fragrance company finds that heavy users of its brands are single men and women who stay out late and socialize a lot. Unless this group lives or shops at certain places and is exposed to certain media, its members will be difficult to reach.  Differentiable: the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. if married and unmarried women respond similarly on a sale of perfume, they do not constitute separate segment.  Substantial: the market segments are larger or profitable enough to serve. A segment should be the largest possible homogenous group worth perusing with a tailored marketing program. Segment must be profitable enough size of the segment should be nominal so can generate profit.

Positioning
Arranging for a product to occupy a clear, distinctive and desirable place relative to competing products in the minds of target consumers. In simple words the place occupies the product in consumers mind against competitors. Positioning creates differentiation in consumers mind it is also a source of competitive advantage e.g. safeguard is positioned as a germ buster. Before positioning the product in the mind of consumers the marketer should observe that how many difference should PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
Marketing Concepts
be promote. The benefits should be set to an extent that they satisfy the consumer if so many differences will be promoted the consumer expectation level will go high and if the product could not match those expectations level the consumer will not be satisfied with the product and will not favorably towards the product. There are some conditions for the promotion of the difference they are:       Different from competitor product Important difference for consumer Preemptive: difficult for the competitor to copy Communicable: the difference should be communicable and clear. Affordable: should be affordable for the consumer Profitable: should be profitable for the company.

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Value proposition
The full mix of benefits upon which the product is positioned

Product services and branding decision

What is a product? Anything which can be offered to the market which is essentially tangible What is service?

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Revision of
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Any benefit offered to the market which is essentially intangible and it will not result in the ownership of anything What is brand? Identification of maker of the product

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Classification of products
1. Consumer products 2. Industrial products

Classification of consumer products

Consumer products are those products which are purchased for personal use  Convenience products: Those products which can not be compared or differentiate in terms of characteristic at the time of purchase because they are frequently purchased. E.g. daily used products toothpaste, magazines, and laundry detergents.  Shopping products: These products are not frequently purchased. These kinds of products are relatively expensive like electronic items, shopping items i.e. shoes, cloth etc. these products are characteristically compared at the time of purchase.  Specialty products: Those products which are unique in characteristics a consumer will exert special efforts to buy these products. For example luxury goods such as Rolex watches or fine crystal.  Unsought products: The consumer does not know about the product and even he knows he is not willing or less willing to purchase the product e.g. pharmaceutical products, life insurance policies, blood donations

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Revision of
Marketing Concepts Level of products:
    Augmented product level Product support services Actual product level Core benefit level

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Industrial products
There are three classifications of industrial products

a. Material and parts

Raw material y y Farm products (wheat cotton) Natural products (fish iron ore)

Manufactured material y y Component material (cement iron) Component parts (small motor)

b. Capital items
Installation y y Building (office furniture) Fixed equipment (generators elevators)

Accessory equipment y y Portable factory equipment (hand tools) Office equipment (computers)

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Revision of
Marketing Concepts c. Supplies and services
Supplies y y Operating supplies (paper pencil) Repair and maintenance items (brooms paints)

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Services y y Repair and maintenance services Business advisory services (legal and consultancy)

Product and service decisions

There are three levels of product and services decisions y y y Individual product and services decisions Product line decisions Product mix decisions

Individual product and service decision Product attributes branding product support services Product line decision A group of products that are closely related because they function in similar manner, are sold to the same customer group, are marketed through the same type of outlets, or fall within given prices. Product mix (product portfolio) decisions The set of all product lines and items that a particular seller offers for sale. packaging labeling

What are quality, design and style of a product?

Product quality: The characteristics of a product or service that bear on its ability to satisfy its stated or implied customer needs. PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Product design: It is basically structure of the product Product style: It is the appearance of the product

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Product mix dimensions

Product mix length number of products in all product lines Product mix width how many product lines are there in product mix Product mix depth number of versions offered of each product in line Consistency how closely products are related in product mix

Brand equity
The positive differential effect that knowing the brand name has on consumer response to the marketing of the product

Building strong brands

Brand positioning: Marketers need to position their brands clearly in target customers minds. They can position brands at any of the three levels. At lowest level, they can position the brand on product attributes about their products natural, environment friendly ingredients etc. A brand can be better positioned by associating its name with a PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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desirable benefit. The strongest brands go beyond attributes and benefit positioning. They are positioned on the strong beliefs and values Brand name selection The brand name should some thing about products benefits and qualities it should be easy to pronounce, recognize and remember it should be meaningful and flexible/ extendable, KFC offers most of the chicken products due to its brand because it is related to chicken Kentucky Fried Chicken whereas the brand name of McDonalds is more extendable than the KFC. The brand name should be distinctive, capable of registration and legal protection. Brand sponsorship: Manufacturers brand: One who actually produces the product and give the brand name Store brand: The product produced by the others and branded by other. These brands are usually created on the store as METRO creates some brands on its store. Licensing: Buying license from the global brand name. Co-branding: The practice of using two established brand name on a single brand it is created in the result of merger, selling of the weak brand name. The purpose is to build strong brand with the help of established brand

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Brand development
Product category Existing Line existing Existing name Brand name New name Multi brands New brand new Brand extension

Line extension: extending an existing brand name to new forms, colors, sizes, ingredients, or flavor of an existing product category. PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Brand extension: extending an existing brand name to new product categories. Multi brands: multi branding offers a way to establish different features and appeal to different buying motives. It also allows a company to lock up more reseller shelf space. New brands: a company might believe that the power of its existing brand name is waning and a new brand name is needed. Or it may create a new brand name when it enters a new product category for which none of the companys current brand names are appropriate.

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Services marketing
Characteristics of services Following are the characteristics of services: Services intangibility Services cant be touched, felt, seen, heard or smelled before purchasing, Services inseparability Services cant be separated from their producers. Services are consumed and produced at the same time. First the services are sold then produced but consumed at the same time. Services perish ability Services cant be stored for future use or later sales. Quality of the service depends upon who produces them when, where and how. Services variability Services are more variable than the product they change at times. You may not get the same service while traveling by P.I.A which you got before because that are produced and consumed by human interactions.

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Service profit chain

Price
Price is the amount of money which a consumer The sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale. Pricing approaches PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY pays for a product.

Revision of
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New product pricing a. Marketing skimming pricing: to set a high price of the product b. Market penetration pricing: to set low price to penetrate the new product at the time of launching.

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Product mix pricing strategies

Optional product pricing Some products are available with the options e.g. in car manual, automatic etc. To set the price of options available with the main product is called optional pricing. Captive production Captive products are those products which are useful with the other products as car for petrol, films for cameras, SIMs for mobile. These products are used with the main product. Setting price of these products is called captive pricing approach. Product bundle pricing Sometimes there are bundles of products available as KFC, McDonalds; pizza hut set the price on the basis of bundles which may result in reduced prices. By product pricing The products which are unintentialy made during the production. The price of these by products is set to make the main product more prices competitive. Product line pricing There are many products in a product line for example in the category of Suzuki cars there: Mehran, Alto, Cultus, and Liana there is always a difference of prices between all the products of a product line. Setting the price of these lines is called the product line pricing.

Place distribution
Distribution (or "Place") is the fourth traditional element of the marketing mix. The other three are Product, Price and Promotion. PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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The Nature of Distribution Channels Most businesses use third parties or intermediaries to bring their products to market. They try to forge a "distribution channel" which can be defined as "All the organizations through which a product must pass between its point of production and consumption" Why does a business give the job of selling its products to intermediaries? After all, using intermediaries means giving up some control over how products are sold and who they are sold to. The answer lies in efficiency of distribution costs. Intermediaries are specialists in selling. They have the contacts, experience and scale of operation which means that greater sales can be achieved than if the producing business tried run a sales operation itself. Functions of a Distribution Channel The main function of a distribution channel is to provide a link between production and consumption. Organizations that form any particular distribution channel perform many key functions: Information Gathering and distributing market research and intelligence important for marketing planning Promotion Contact Matching Developing and spreading communications about offers Finding and communicating with prospective buyers Adjusting the offer to fit a buyer's needs, including grading, assembling and packaging Negotiation Physical Reaching agreement on price and other terms of the offer Transporting and storing goods PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

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Revision of
Marketing Concepts
distribution Financing Acquiring and using funds to cover the costs of the distribution channel Risk taking Assuming some commercial risks by operating the channel (e.g. holding stock) All of the above functions need to be undertaken in any market. The question is - who performs them and how many levels there need to be in the distribution channel in order to make it cost effective.

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Indirect channels of distributions

Vertical Marketing System

Direct channel of distributions

A vertical marketing system (VMS) is one in which the main members of a distribution channelproducer, wholesaler, and retailerwork together as a unified group in order to meet consumer needs. In conventional marketing systems, producers, wholesalers, and retailers are separate businesses that are all trying to maximize their profits. When the effort of one channel member to maximize profits comes at the expense of other members, conflicts can arise that reduce profits for the entire channel. To address this problem, more and more companies are forming vertical marketing systems. PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

Revision of
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Vertical marketing systems can take several forms. In a corporate VMS, one member of the distribution channel owns the other members. Although they are owned jointly, each company in the chain continues to perform a separate task. In an administered VMS, one member of the channel is large and powerful enough to coordinate the activities of the other members without an ownership stake. Finally, a contractual VMS consists of independent firms joined together by contract for their mutual benefit. One type of contractual VMS is a retailer cooperative, in which a group of retailers buy from a jointly owned wholesaler. Another type of contractual VMS is a franchise organization, in which a producer licenses a wholesaler to distribute its products. The concept behind vertical marketing systems is similar to vertical integration. In vertical integration, a company expands its operations by assuming the activities of the next link in the chain of distribution. For example, an auto parts supplier might practice forward integration by purchasing a retail outlet to sell its products. Similarly, the auto parts supplier might practice backward integration by purchasing a steel plant to obtain the raw materials needed to manufacture its products. Vertical marketing should not be confused with horizontal marketing, in which members at the same level in a channel of distribution band together in strategic alliances or joint ventures to exploit a new marketing opportunity.

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Horizontal marketing system:

Joining of two or more corporations on the same level for the purposes of pursuing a new marketing opportunity. Usually a horizontal marketing system is established so that the individual members can combine resources to make the most out of the marketing situation. Products from each member can be marketed and/or distributed together, such as a bottle manufacturer combining with a producer of dehydrated salad dressing preparations. The two products are marketed together, allowing the two companies to combine their marketing resources and accomplish much more than either one might accomplish alone. Corporations in a horizontal marketing system also have the option of PREPARED BY: MUHAMMAD IRFAN MALIK MBA FEDERAL URDU UNIVERSITY

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combining their capital and production capabilities, in addition to their marketing and distribution resources, to produce synergistic benefits for all members. .

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Promotion mix
Advertising Following conditions must be fulfill for the advertising if any one is not fulfilled it would be called the advertising y y y Paid Non personal Identical sponsor

Sales promotion To increase sales on the short term basis Publicity and public relations Publicity is unpaid and uncontrollable. B to B communications B to C and C to C communications

Push and pull strategies

Push strategies: product is pushed towards customers through marketing distribution channels. The strategy is focused on channel members. Pull strategies: the customer is pulled towards product, pull strategies offers low prices and high quality.

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The End
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