Chapter 1: Overview of Marketing

Tran Thu Trang, MSc. Faculty of Economics and International Business, FTU tranthutrang.ktnt@gmail.com

CONTENT
I. Terms & definitions:
1. Definition of marketing 2. Nature of marketing 3. Basic terms in marketing: needs, wants, demands, product, exchange, transaction,...

II. Evolution of marketing

1. From Traditional to modern marketing 2. Five business concepts in marketing (marketing philosophies)

III. Targets & functions of marketing

1. Targets of marketing 2. Functions of marketing

IV. Fundamental elements of marketing & marketing mix

1. Fundamental elements of marketing (4Ps) 2. Marketing mix

I.

Terms & definitions 1. Definition of Marketing

American Marketing Association - 1965: 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 stakeholders. Limitation? Narrow meaning of product (in fact, tangible & intangible product) Focus on organization objectives

AMA definition of Marketing

Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that will satisfy individual and organizational objectives

Philip Kotlers definition:

Marketing is social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Limitation? Emphasis: Exchange Needs & wants research before production

2. Nature of Marketing
Marketing is a process... Marketing means carrying out market research in order to discover needs... Marketing helps companies to satisfy customers needs... Marketing helps companies to obtain optimum profits...

3. Basic terms in marketing

3.1 Needs: a/ Definition: P.Kotler: Needs are states of felt deprivation
Eg. Need for food, safety, affection Basic part of human being Not created by marketers The core idea of Marketing is satisfying human needs

b/ Classification: 2 types - Present needs and potential needs - Needs hierarchy of Maslow

Present needs: are essential needs which were or are being satisfied. For consumers, they are, in general, the most important needs and are ranked first. Potential needs: needs have already appeared but have not been satisfied yet. Needs are going to appear in the near future.

Maslows Hierarchy of Needs

5.
Selfactualization

(self-development, self fulfilment)

4. 3.

Esteem needs (self-esteem, recognition)

Social needs (sense of belonging, love)

2.
1.

Safety needs (security, protection)

Physiological needs (food, clothing, shelter)

* Conclusions of Maslows Hierarchy of Needs :

Human needs develop from low to high, from simple to complicated When low hierarchy needs are satisfied, customers will have high hierarchy needs The satisfied need level of everybody is different from the others

3.2. Wants
Wants: The form taken by a human need as shaped by culture and individual personality
Described in terms of specific objects that will satisfy needs Shaped by ones society Eg. - Need for relaxing but want of seeing movies, reading books, listening to music - A Vietnamese needs food but wants rice, fish, orange - An Italian needs food but spaghetti, tomato sauce, bunch of grapes

3.3. Demands
Demands: Human wants that are backed by buying power
Specific things will be purchased by human being People will demand products that provide them most value and satisfaction Choices of products depend on peoples income

Differentiate: needs, wants & demands

Human needs

Feel of deprivation

Selection of specific products

Wants

Income & Solvency

Demands

3.4 Product
Product is anything that is offered to the market for sale or consumption
Commodities: Cars, shoes Services: Transportation, hotel, entertainment,...

PRODUCTS & PRODUCTS BENEFITS

What do customers buy?

Benefits !!

Examples:
Products
T.V Camera/film Cosmetics Restaurant Kids toys

Benefits
Entertainment/information Memory Hope Relationship, business opportunity Education, entertainment

CUSTOMER DELIVERED VALUE:

The differences between the values that customers gain from owning and using a product and the costs of obtaining the product

Kellogg
Northwestern University

Determinants of Customer Delivered Value

Product value Services value Personal value Total customer value

Image value
Monetary cost Time cost
Energy cost

Customer delivered value Total customer cost

Psychic cost

Where is the value of a product found?

In the customers mind!!

Things to remember!
Customers buy benefits not products Value of the product is in the customers head Customers are different with different needs, wants & tastes. Therefore, products values are different.

Use the customers language

CUSTOMER SATISFACTION:
Customer satisfaction is the degree to which the products perceived performance matches the customers expectation
Customer expectations are based on their past experiences, opinions of friends, and marketer and competitor information and promises Marketers set too low expectation fail to attract enough buyers Marketers set too high expectation buyers will be disappointed

Importance of Customer Satisfaction

Key influence on future buying behavior Builds loyalty Word of mouth (Satisfied customers buy again and tell others about their good experiences) Minimize complaint behaviors (Dissatisfied customers switch to competitors and disparage the product to others)

CUSTOMER RELATIONSHIPS DELIGHTING CUSTOMER

1. Today, why should companies delight their customers? 2. How to delight them?

Satisfaction versus Delight

A satisfied customer is still willing to listen to what the competition has to offer. A delighted customer thinks you are the best (only) thing out there.

3.5 Exchange
Needs are satisfied by exchanging things.

Exchange is the act of obtaining an object from someone by offering something in exchange
Marketing is based on product & value exchange

The Simple Exchange Process

The company sends: goods & services, and communications to the market

The company receives: dollars, and information

Communications

Goods & Services

Company (seller) Dollars (sales) Market (buyer)

Information

For an exchange to occur.

There are at least two parties. Each party has something that might be of value to the other party. Each party is capable of communication and delivery. Each party is free to reject the exchange offer. Each party believes it is appropriate or desirable to deal with the other party.

3.6 Transaction
A trade of values between two parties
Transaction is measurement unit of exchange One exchange can be divided into many transactions

Exchange and Transactions

A) Exchange is a value-creating process because it normally leaves both parties better off.

B) A transaction is a trade of values between two or more parties and involves several dimensions:
1) 2) 3) At least two things of value. Agreed upon conditions. A time of agreement.

4)

A place of agreement.

C) A transaction differs from a transfer. In a transfer, A gives X to B but does not receive anything tangible in return.

II. Evolution of marketing

Early 1900s: in the US. 1908: First marketing association in the US 1926: American marketing and advertising association, prerequisite of American Marketing Association (AMA) in 1973. Early 1990s: Marketing promulgation to Vietnam

1.Traditional marketing & modern marketing

Traditional marketing (early 20th cent. 50s) Organization Products Advertising & selling
Target: Consumption

Modern marketing (early 60s) Needs Customer Satisfaction

Target: customers satisfaction

Marketing-mix

2. Five business concepts (orientations) in marketing

Evolution of marketing orientation

Production orientation

Product orientation

Selling orientation

Marketing orientation

Societal Marketing Orientation

1930

1960 Core ideas of the concepts?

1980

Time

2.1 PRODUCTION ORIENTATION

Environment:
Beginning of the industrial revolution Companies were able to reduce cost so that their products were affordable by many consumers Output was limited and there was excess demand

Philosophy: Consumers will favor products that are available and highly affordable Focus: Improving production and distribution

efficiency
Disadvantage:
May have a risk of focusing too narrowly on their own operations & losing sight of the real objective: satisfying customers needs

Conditions:
Demand for a product exceeds the supply (Demand > Supply) Products cost is too high and improved productivity is needed to bring it down (Demand < Supply)

2.2 PRODUCT ORIENTATION

Environment:
More competition in the market Manufacturers believed that by focusing on certain product attributes to gain customer

Philosophy: Consumers will favor products that offer the most quality, performance, and features Focus: Improving product attributes like quality, performance and innovative features Disadvantage:
Assume that all customers like certain attributes, e.g. features marketing myopia

2.3 SELLING ORIENTATION

Environment:
High competition in the market Manufacturers believed that consumers can be persuaded to buy more if sold aggressively

Philosophy: Consumers will not buy enough of the organizations products unless the organization undertakes a large-scale

selling and promotion efforts Focus: Aggressive selling teams and promotion efforts
May create negative image of the organization or the product Focus on creating sales transactions rather than on building long-term, profitable customer relationships

Disadvantage:

Conditions:
Over capacity Suitable for unsought goods (eg.insurance)

2.4 MARKETING ORIENTATION

Environment:
Very high competitive market Marketers believed that by analyzing the needs of the target market, they still can supply product profitably

Philosophy: Achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do.

2.4 MARKETING ORIENTATION

Focus:

Understanding the targeted customer Customer satisfaction Co-ordinated marketing Business profitability
Conditions:
Poor sale performance Slow company growth Increased competition High consumer requirement More legislation (competition law, consumer protection law, etc.)

SELLING AND MARKETING ORIENTATION CONTRASTED

Starting point Factory Focus Existing products Means Selling & promoting Ends Profits through sales volume

The Selling Concept

Market
Customer needs

Integrated Profits through customer satisfaction marketing

The Marketing Concept

Source: Kotler & Armstrong, 2004

2.5 SOCIETAL MARKETING ORIENTATION

Environment:
General environment is more sensitive to the societys well-being e.g. green movement

Philosophy: Organization should determine the needs, wants and interest of target markets and deliver the desired satisfactions more effectively and efficiently than do competitors in a way that maintains or improves the consumers and societys well-being. Focus: Beside fufilling the customers needs at a profit, the organization must contribute to the society, e.g. participate in charity programs, support the green movement Disadvantage:
Higher cost

Conditions:
Conform to the rules and laws

3 considerations of the Societal Marketing Orientation

SOCIETY
(Human Welfare)

Today

Before 1970 Before 2nd world war

CONSUMERS
(Satisfaction)
Source: Kotler & Armstrong, 2004

COMPANY
(Profits)

III. Targets & functions of Marketing

1. Targets Revenues & profits Competitive advantages Business safety Which target is the most important? 2. Functions of marketing: focus on market research... formulate marketing plans... implement marketing plans & coordinate the firms marketing tools ... control, evaluate the results & take corrective action...

IV. Marketing fundamental elements & marketing mix

1. Marketing fundamental elements: 4Ps Product, Price, Place and Promotion

Products & Price

PRODUCT
Product is anything that is offered to consumers for use. It includes decisions about quality, features, design, packaging, product

PRICE
Pricing strategy deals with methods of setting justifiable and profitable prices. It is one of the most difficult areas of marketing decision making. Decisions about pricing include discount methods, adjustments to prices, payment terms

Place & Promotion

PLACE
ensure that their products are available in the proper quantities at the right time and place. Distribution decisions involve modes of transportation, warehousing, inventory control and selection of marketing channels and distribution network

PROMOTION
Promotion is the communication link between sellers and buyers. Organisations can use many different ways of sending messages about the products/services to their customers. The key methods used in promotion are advertising, personal selling, sales promotion, PR.

Marketing fundamental elements Robert Lauterborn suggests that the sellers 4Ps correspond to the customers 4Cs: 4Ps 4Cs Product Customer solution Price Customer cost Place Convenience Promotion Communication

2. Marketing mix
Marketing mix is the set of tools used to assist the company in achieving its marketing objectives.

MARKETING MIX

Quality Features Design Packaging Brand name Guarantee...

Marketing Mix
Distribution channel Wholesaling Retailing Stock Transportation

Product

Place

Targeted market
Mix pricing Discount Price Price change..

Promotion

Advertising Sales Promotion Public Relations Personal selling Direct marketing