CONCEPTS IN

MARKETING

SeaChangeinIndianMarketingenvironment

Takesontheworld:nolongermanufacturesonlyNanobut
alsoaJaguar/Landrover
IndiasoutboundFDIcrosses$10billion
Fromwaitingforaconnectionto100millionmobile
connection
FromHMsAmbassadortoMahindrasXUV5OO.
FromB&WTVtoDTHandChitrahartoMTV
IndianAirlinestoAirDeccantoIndigo
ECommerceasamajorchannel
EmbracingIT(CRMsibel)
Bankingrevolution
TheworldseesIndiaasanelephantthathasstartedtodance.

 MarketDarwinismhastakenover:survivalofthe
fittest:marketingfitnessalonetakesover
Allcocoonsofprotectionhavedisappeared.(WTO)
Branddominanceandtakeovers
Tacklingthechangingprofile
RisingIncome
Changetolifestyleliving
Risingconsumerexpectations
Communicationrevolution
BOP/Belowpovertyline(BPL)
ChallengeindistributionthroughModernRetailing
Compulsiontogoglobalandthedifficultiesthereof
Valuedeliverybecomescrucial

Evolving Views of
Marketings Role
Production
Marketing
n
ma ces
Hu ur
so
re

Customer

a
n
Fi

e
c
n

e. The customer as the controlling function and

marketing as the integrative function

Needs,Wants,andDemands
Needs:
The most basic concept underlying marketing is that
of human needs.
Human needs are states of felt deprivation.
Human have many complex needs:
Physical needs for food, clothing, warmth, and
safety
Social needs or belonging and affection
Individual needs for knowledge and self
expression

Wants:
Wantaretheformtakenbyhumanneedsasthey
areshapedbycultureandindividualpersonality.
People have almost unlimited wants but limited
resources.
They want to choose products that provide the
mostvalueandsatisfactionfortheirmoney.

Demands:
When backed by buying power, wants become
demands.
Consumersviewproductsasbundlesofbenefits
and choose products that give them the best
bundlefortheirmoney.

Elements of Exchange
At
At Least
Least Two
Two
Parties
Parties

Necessary
Necessary
Conditions
Conditions
for
for Exchange
Exchange

Desire
Desire to
to Deal
Deal
With
With Other
Other Party
Party

Something
Something of
of
Value
Value
Ability
Ability to
to
Communicate
Communicate
Offer
Offer
Freedom
Freedom to
to
Accept
Accept or
or Reject
Reject

Whatdowemarket?
Goods:Physicalgoods:cars,trucks,tvsets,machines,
industrialchemicals,pharmaceuticals(missionary
selling),watches,cosmetics,
Services:Airlines,hotels,cars,barbers(Habibs),gyms
(Talwalkars),spa,bankers,lawyers,fastfood,KFC,
McDonald,CCD
Events:Olympics,worldcups,GoaCarnival,Femina
Experience:Waterpark,CCD,Themebased
restaurantsetc.
Persons:Celebrities
Places:KeralaGodsowncountry,IncredibleIndia
Ifyouhavenotshownyourwifethenyouhavent
lovedher.

 Properties:stocks,shares,derivatives,mutual
funds
Organisations:Corporatebrands/Tatas:
Microsoft:Infosys:Hero
Information:Itiswhatbooks,schools,and
universitiesproduce.
Ideas:Zuckerberg.

 Consumermarket:FMCG,FMCD
Businessmarkets:InformedBuyers.
GlobalMarkets:
NonprofitandGovernmentMarkets:Bids,lowprice
MarketPlace:physicalwhenyoustoreintheshop,digitalwhen
youbuyontheinternet
MetaMarkets:MohanSawhneyofNorthwesternUniversity:
clusterofcomplementaryproducts&servicescloselyrelated
RuralMarkets:1.5billionpeopleinSouthEastAsialivein
villages.
McKinsayGlobalInstitutestatesthatby2017thesizeofrural
marketwillreachthesizeofurbanmarketof2008.Thereal
Tiger
EstimatedRs6500billionforFMCGproducts,Rs500billionfor
FMCD,Rs800billionforautomobiles
TheconsumptionpatternandhencetheConsumerBehaviourwill
betotallydifferent.

Values,Satisfaction,andQuality
Values:

Customer value is the difference between the values

the customer gains from owning and using a product
and the costs of obtaining the products.

Customers often do not judge product value and

costs accurately or objectively. They act on
perceived value.

Satisfaction:

Iftheproductsperformancefallsshortofthe
customersexpectations,thebuyeris
dissatisfied.

Quality:
Customer satisfaction is closely linked to
quality.
Quality has a direct impact on product
performance.
Quality can be defined as freedom from
defects.
TQMprogramsdesignedtoconstantly
improvethequalityofproducts,services,and
marketingprocesses.

 Customisationvscustomerisation
Dizitisationandconnectivity:Anewsetof
intermediaries
Ecommercedomains:B2B,B2C,C2C,C2B
TheMicromarketingenvironment:TheCo.,
TheSuppliers,marketingintermediaries,
Customers,Competitors
TheMacroMarketingEnvironment:
Demographic,Economic,Technological,
Political,Culturalenvironment.

Porter Competitive Model

Potential
New Entrants

Bargaining
Power
of Suppliers

Intra-Industry
Rivalry
Strategic Business Unit

Substitute
Products
and Services
Source: Michael E. Porter
Forces Governing Competition in
Industry
Harvard Business Review, Mar.-Apr. 1979

Bargaining
Power
of Buyers

SUPPORT ACTIVITIES

Generic Value Chain

FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT
PROCUREMENT

INBOUND
LOGISTICS

OPERATIONS OUTBOUND
LOGISTICS

MARKETING
AND SALES

SERVICE

PRIMARY ACTIVITIES
Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from
COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright
1985 by Michael E. Porter.

Figure 3-6

Value Chain and Information System

The Value Chain can be used to determine
where IS can strengthen the flow of primary
and support activities within an
organization.
Every segment of an organization needs IT
and IS to be competitive. So this model is
essential to visualizing the flow of activities
within segments through the use of IS and
IT.

Awareness of competitive forces can

help a company stake out a position
in its industry that is less vulnerable
to attack.
Michael E. Porter
Competitive Strategy

Basic Objectives of the SBU

1. To create effective links with
buyers and suppliers.
2. To build barriers to new entrants
and substitute products.

Possible Barriers to Entry

Economies of scale.
Strong, established cost advantages.
Strong, established brands.
Proprietary product differences.
Major switching costs.
Limited or restrained access to distribution.
Large capital expenditure requirements.
Government policy.
Definite strong competitor retaliation.

Substitute Threats
Buyer propensity to substitute.
Relative price/performance of substitutes.
Switching costs.

Competitive Strategies
What is driving competition in my current or
future industry?
What are my current or future competitors
likely to do and how will we respond?
How can we best posture ourselves to achieve
and sustain a competitive advantage?

Strategy Options
According to Michael Porter
Primary Strategies
1. Differentiation
2. Least Cost
Supporting Strategies
1. Innovation
2. Growth
3. Alliance

Porter Competitive Model

Heavyweight Motorcycle Manufacturing Industry
North American Market
Parts Manufacturers
Electronic Components
Specialty Metal Suppliers
Machine Tool Vendors
Labor Unions
IT Vendors

Bargaining
Power of
Suppliers

Automobiles
Public Transportation
Mopeds
Bicycles

Potential
New Entrant

Intra-Industry Rivalry
SBU: Harley-Davidson
Rivals: Honda, BMW,
Suzuki, Yamaha

Substitute
Product or
Service

Foreign Manufacturer
Established Company
Entering a New Market
Segment
New Startup

Bargaining
Power of
Buyers
Recreational Cyclist
Young Adults
Law Enforcement
Military Use
Racers

Business Strategy Model Food Service Industry

Product Strategy
Limited
Specialized
Products

Broad Range
of Specialized
Products

Wide Range of
Non-specialized
Products

Health
Conscious
Products

Customer Strategy
Young Adults
Parents
Teenagers with Social
with
Focus
Kids

Time
Conscious
Adults

Leisure
Adults

Senior
Citizens

Store Format Strategy

Dine In
Wait Service

Dine In
Counter Service
or Buffet

Take Out

Drive
Through

Vendor Strategy
Competitive
Bids

Long Term
Contracts

Alliances

Vertically
Integrated

Market Strategy
Local

Regional

National

International

Ethnic
Focus

Company Structure Strategy

Independent

Alliances

Franchises

Subsidiary

Information Systems Strategy

Customer
Systems

Store
Logistical
Systems

Product
Analysis
System

Business
Systems

Porter Competitive Model

Tips
1. To incorrectly define the industry can cause major
problems in doing the analysis.
2. You must identify the specific market being evaluated.
3. Your analysis company is the Strategic Business Unit.
4. Identify rivals by name for majors, by category for minor
rivals if needed to present the best possible profile of
rivals.

Porter Competitive Model

5. Be sure to address the power implications of both
customers and suppliers. Power buys them what?
6. Identify buyers and suppliers by categories versus
companies.

WHAT IS MARKETING?

A Philosophy
An Attitude
A Perspective
A Management
Orientation

A Set of Activities,
including:
Products
Pricing
Promotion
Distribution

AttemptstoDefineMarketing
Many people think of marketing only as selling and
advertising.
Selling and advertising are only the tip of the marketing
ice-berg.
Marketing is one of three key core functions that are
central to all organizations.
Marketers act as the customers voice within the firm and
marketers are responsible for many more decisions than
just advertising or sales:
Analyse industries to identify emerging trends.
Determine which national and international markets to
enter or exit.
Conduct research to understand consumer behavior.
Design integrated marketing mixes products, prices,
channels of distribution, and promotion programs.
Marketing is a social and managerial process by which
individuals and groups obtain what they need and want
through creating and exchanging products and value with
others.

WHAT IS MARKETING?

American Marketing Association Definition

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

Marketing = Using Exchanges to Satisfy Needs

WHO DO I AIM AT?

Market All people with both the desire and ability

to buy a specific product

Target Market One or more subgroups I can satisfy

McCarthys4Ps

Price:Listprice,Discounts,Allowances,Paymentperiods,Creditterms
Product:Variety,Quality,Design,Features,Brandname,Packaging,
Sizes,Services,Warranties,Returns.
Place:Channels,Coverage,Assortments,Locations,Inventory,
transport,logistics
Promotion:Salespromotion,Advertising,salesforce,PR,Direct
marketing

THE CONTROLLABLE MARKETING FORCES

TheFourPs
thearrow

Price
Price
Promotion
Promotion

Place
Place
Product
Product

THE UNCONTROLLABLE MARKETING

FORCES
Social
Social
Natural
Natural
Economic
Economic
External
External
Environmental
Environmental
Factors
Factors

Technologic
Technologic
Political
Politicaland
andLegal
Legal
Competitive
Competitive

Helps identify market opportunities

Modern Marketing 4Ps

People: People reflects internal Marketing and that
they are critical to marketing success. Ex: Fedex

Processes: institute the right set of processes

Programmes: Regardless of whether they are off line
or online, traditional or non traditional , they must be
integrated so as to sum total customers expectations.

Performance: range of possible outcomes that have

financial and non-financial implications (profitability as
well as brand and customer equity.

Factors affecting organizations marketing program

Marketings task: satisfying consumer needs

HOW MARKETING BECAME

SO IMPORTANT
Evolution of the Market Orientation
Production Era
Sales Era
Marketing Concept Era
Societal Era

Four different orientations in the history of business

Societal

MARKETING MANAGEMENT
PHILISOPHIES
Orientation
Orientation

Key Ideas

Production
Production Focus on efficiency of internal operations
if we make it, they will buy it

Sales
Sales
Market
Market
Societal
Societal

Focus on aggressive sales techniques and

believe that high sales result in high profits
Focus on satisfying customer needs and wants
while meeting objectives - if they will buy it, we
will make it
Focus on satisfying customer needs and
wants while enhancing individual and
societal well-being. I.e.-mfg using recyclables

THEDIFFERENCEBETWEENSELLINGVS.MARKETING
Mktgisamuchbroaderconceptandmoredynamic
Sellingrevolvesaroundtheneedsandinterestofthesellerwhere
asmarketingaroundtheneedsandinterestofthecustomer.
Sellingstartswiththeproductwhereasmarketingbeginswith
customerbothexistingaswellasprospective
Marketingcallsupontochoosetheproduct,priceandmethodsof
distributionandpromotion

SellingMarketing
1.Startswithseller,preoccupiedMktg.startswiththebuyer
hisexistingproductsfocusesconstantlyonneeds
2.SelleristhecenterofuniverseBuyeristhecenter
3.EmphasisonsaleablesurplusIdentification/conversionofneed
4.TricksthecashoutforproductFulfillcustomerneeds
5.BusinessaproductionprocessAcustomersatisfyingprocess.
6.OveremphasisonexchangeValuesatisfaction
7.SellerdominatestheMktgMixBuyerdeterminestheMix
8.FirmmakestheproducttosellDeterminedbythebuyer.
9.EmphasisonexistingtechnologyInnovationtobettervalueadd
10.DistributionasaproductionextnVitalkeepingcustomersconvenience
inmind
11.Sellingmotivedominatescommn.Aimsatsatisfactionofthecustomers
needs
12.CostdeterminespriceConsumerdecidespriceleadingtocost
13.EmphasisonsomehowsellingIntegratedmktgcovering4Ps
14.SellingviewscustomerastheMktg.viewscustomerastheverypurpose
lastlinkinbusinessAlldepartments&peopleareorganised
aroundthemarketingfunction.

The selling and Marketing Concepts Contrasted

Starting
point

Focus

Factory Existing
products

Means
Selling
and
promoting

Ends
Profits through
sales volume

The selling concept

Market Customer Integrated

needs marketing

Profits through
customer
satisfaction

The marketing concept

45

Three Considerations Underlying The

Societal Marketing
Society
(Human welfare)

Societal
marketing
concept
Consumers

Company

(Want satisfaction)

(Profits)

46

HOW TO DELIVER VALUE

Customer value-benefits received by targeted buyers
that include quality, price, convenience, on-time
delivery, and both before-sale and after-sale service.

Offerproductsthatperform
Giveconsumersmorethantheyexpect
Avoidunrealisticpricing
Givethebuyerfacts
Offerorganizationwidecommitmentinservice
andaftersalessupport

KEEPING THE CUSTOMER SATISFIED

Meet
Meet or
or exceed
exceed customers
customers expectations
expectations

Provide
Provide solutions
solutions to
to customers
customers problems
problems

Cultivate
Cultivate relationships,
relationships,

NOT
NOT one-time
one-time transactions
transactions

1. What is marketing?
A: 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.

1. An organization cant satisfy the

needs of all consumers, so it must
focus on one or more subgroups,
which are its ____________.
targetmarkets

2. What are the four marketing mix

elements that make up the
organizations marketing program?
A: product, price, promotion, place

3. What are environmental forces?

A: Environmental forces are those that
the organizations marketing
department cant control. These
include social, economic,
technological, competitive, and
regulatory forces.

1. What are the two key characteristics

of the marketing concept?
A: (1) strive to satisfy the needs of
consumers (2) while also trying to
achieve the organizations goals.

2. What is the difference between goods

and services?
A: Goods are physical objects whereas
services are complex intangible
items, such as legal advice, a college
education, or airline travel.

Customer Value

Customer
Customer value
value is
is the
the unique
unique
combination
combination of
of benefits
benefits received
received
(including
(including perceived
perceived value)
value)
by
by targeted
targeted buyers
buyers that
that includes
includes quality,
quality,
price,
price, convenience,
convenience, on-time
on-time delivery,
delivery, and
and
both
both before-sale
before-sale and
and after-sale
after-sale service.
service.
Ex:
Ex: Revlon
Revlon

Customer Value
The ratio of benefits to sacrifice
necessary to obtain benefits.

Offer products that perform

Give consumers more than they expect
Avoid unrealistic pricing
Give the buyer facts
Offer organization wide commitment
in service and after sales support

What is Perceived Customer

Value?
Product
Product value
value
Services
Services value
value
Personnel
Personnel value
value

Total
Total
customer
customer
benefit
benefit

Image
Image value
value
Monetary
Monetary cost
cost
Time
Time cost
cost
Energy
Energy cost
cost

Psychic
Psychic cost
cost

Total
Total
customer
customer
cost
cost

Customer
Customer
delivered
delivered
value
value

Marketing Concept

The
The marketing
marketing concept
concept is
is the
the idea
idea that
that
an
an organization
organization should
should (1)
(1) strive
strive to
to satisfy
satisfy
the
the needs
needs of
of consumers
consumers (2)
(2) while
while also
also
trying
trying to
to achieve
achieve the
the organizations
organizations goals.
goals.

Market Orientation

An
An organization
organization that
that has
has aa market
market
orientation
orientation focuses
focuses its
its efforts
efforts on
on
(1)
(1) continuously
continuously collecting
collecting information
information
about
about customers
customers needs,
needs, (2)
(2) sharing
sharing this
this
information
information across
across departments,
departments, and
and
(3)
(3) using
using itit to
to create
create customer
customer value.
value.

 MarketingMyopia:CoinedbyProf.TheodoreLevitt:
WhileemphasisingheavilyontheproductCo.softenforgetthat
productafterallisonlyameanstosatisfyaparticularcustomer
need.ThisresultsinMarketingMyopia.

Co.ssufferingfromthesamebyexcessiveattentionto
production,orproductorsellingatthecostofthecustomerand
hisactualneeds.

Avoiding Marketing Myopia

Marketing Myopia is managements failure
to recognize the scope of its business.
To avoid marketing myopia, companies must
broadly define organizational goals toward
consumer needs.

Societal Marketing Concept

The
The societal
societal marketing
marketing concept
concept is
is the
the
view
view that
that an
an organization
organization should
should satisfy
satisfy
the
the needs
needs of
of consumers
consumers in
in aa way
way that
that
provides
provides for
for societys
societys well-being.
well-being.
The
The purpose
purpose of
of an
an enterprise
enterprise lies
lies outside
outside
the
the organisation.
organisation.
Customer
Customer Lifetime
Lifetime Value.
Value.