By

Ge/selassie M (Asst. Professor)

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 CHAPTER – ONE
UNDERSTANDING MARKETING
MANAGEMENT

Content:
• 1.1 Defining Marketing for the 21st Century
• 1.2 Core Marketing Concepts
• 1.3 Company Orientation towards the
Marketplace
• 1.4 Marketing environment
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 What is Marketing?
• Marketing is managing profitable customer
relationships
– Attracting new customers
– Retaining and growing current customers
• “Marketing” is NOT synonymous with
“sales” or “advertising”

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 Cont’d…

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.

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 The American Marketing Association defines
marketing as follows:

“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.”
Several key ideas are expressed in this definition.
1. Marketing is a managerial function involving
both planning and execution. Thus marketing is
not a group of unrelated activities but tasks
that are planned and executed to attain
identifiable objectives.
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 Cont’d…
2. Marketing involves the management of
specific elements or functions: product,
pricing, promotion, and distribution. These
functions constitute the work or substance of
what marketing is all about. To be involved in
marketing means being involved in the
planning, execution, and/or control of these
activities.

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 Cont’d…
3. Marketing is goal oriented. Its aim is to create
exchanges that satisfy individual and organizational
objectives.
Marketing’s concern is with customers and meeting
their need.
However, its concern is not just with any customers or
all customers but those preselected by management
as target markets on which the company will
concentrate. Thus, specific customers with their
specific needs become the focal point of an
organization’s marketing activities.

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 Kotler’s definition:

“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.”

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 Core Marketing Concepts
Core concepts
Needs, wants, demands
Products and services
Value, satisfaction, quality
Exchanges, transactions, relationships
Markets
+
Supply chain, Marketing Channels
Segmentation, and Target Markets, Positioning
Competition
Marketing Environment
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 Needs, wants, demands
• Needs
– States of felt deprivation, part of human
makeup
– Physical and social needs
• Wants
– The form needs take (e.g. food => Enjera)
– Shaped by culture and personality
• Demands
– When wants are backed by buying power
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 Products and services
• Products
Anything that can be offered to satisfy a need
or a want
Physical products, services, experiences, persons,
places, organizations, information, ideas
– Example: “smoking is bad” idea can be a
product, a person can be a product in an election
• Services
 Just one kind of a product- Ex. transportation
service, haircut service etc

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 Value, satisfaction, quality
• (Customer) Value
– Difference between “value gained by owning and using a
product” and “cost of obtaining the product”
– Value gained not necessarily monetary
– Similarly cost of obtaining not necessarily monetary
– Customers act on perceived value [and perceived cost]
• (Customer) Satisfaction
– Perceived performance relative to expectations
• Quality
– Closely related to satisfaction
– Narrow definition: no defects
– Broad definition: ability to satisfy customer needs
[circular definition!]
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 Exchange, transactions, relationships
• Exchange
 Obtaining a desired object from someone by offering
something in return
 Offerings could be money, product, service, ...
• Transaction
A trade of values between two parties; marketing's
unit of measurement!
 Monetary transactions and barter transactions
• Relationship (Marketing)
 Going beyond short term transactions
 Long-term relationships with valued customers, partners, etc
 Marketing network – company and all its supporting
stakeholders
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 Markets

• Market – Economist's definition

– Place (virtual or physical) where buyers and sellers
meet
• Market – Marketer's definition
– The set of actual and potential buyers of a product
– The sellers of a product are labeled as the “industry”

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 Marketing Channels:
• To reach a target market marketer uses three different
kinds of marketing channels.
1. Communication channel: The marketer uses
communication channels to deliver and receive messages
from target buyers. These consist of dialogue channels (e
mail, toll free numbers).
2. Distribution channels: To display and deliver the
physical product or service to the buyer or user. They
include warehouses and transportation vehicles and various
trade channels such as distributors, wholesalers and retailers
etc.
3. Selling channels: They include not only distributors and
retailers but also banks and insurance companies to facilitate
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 Supply chain:
Supply chain represents a value delivery system. When a company
moves upstream or downstream, the aim is to capture a higher
percentage of supply chain value.

Segmentation, Target Markets and positioning:

 Marketers can rarely satisfy everyone in the market. So they start
with ‘ market segmentation’.
 Identify and profile different groups of buyers.
 Target segments that present the greatest opportunity – those
whose needs the firm can meet in a superior fashion.
 Occupy unique place in mind of customers

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 Competition
• Competition includes all the actual and potential rival offerings
and substitutes that a buyer might consider.
• Four levels of competition:
1. Brand competition: Similar products or services to the same
customers at similar prices. Ex. Honda, Toyota and other medium
price
2. Industry competition: All companies making the same product
or the class of product. Ex. All automobile manufacturers
3. Form competition: All companies manufacturing the products
that supply the same service. Ex. Automobiles + Motorcycles +
Bicycles + Trucks
4. Generic competition: All companies that compete for the same
consumer dollars. Ex. Consumer durables + Foreign Vacations +
New Homes 17
 Marketing Management

• Customer Management:
– Marketers select customers that can
be served well and profitably.
• Demand Management:
– Marketers must deal with different
demand states ranging from no
demand to too much demand.
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 Types of Demand

Declining
Unwholesome Irregular creative Remarketing strateg
Counter Marketing synchro-marketing, • Nonexistent
Simulative marketing
• Latent
Developmental marketing
• Full
Negative Maintenance marketing
Conversion marketing • Overfull
De-marketing 19
 Company Orientations/
Marketing Concepts

Quality Create, deliver, and

Innovation communicate value

Production Product Selling Marketing Holistic

Mass production
Unsought goods
Mass distribution
Overcapacity

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Holistic Marketing Dimensions

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 Philosophies Cont’d…
1. Production era
‘Cut costs. Profits will take care of themselves’
2. Product era
‘A good product will sell itself’
3. Sales era
a. ‘Selling is laying the bait for the customer’
4. Marketing era
a. ‘The customer is King!’
5. Relationship marketing era
‘Long-term relationships with customers and other
partners lead to success’
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 Marketing Framework

• The basic elements of a marketing strategy

consist of
(1) the target market, and
(2) the marketing mix variables of product,
price, place and promotion that combine to
satisfy the needs of the target market.
• The outer circle in Figure 1.1 lists
environmental characteristics that provide the
framework within which marketing strategies
are planned.
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Elements of a marketing strategy and its
environmental framework

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 Marketing Environment cont’d…..
• All the actors and forces influencing the
company’s ability to transact business
effectively with it’s target market.

• Includes:
– Micro-environment - forces close to the company
that affect its ability to serve its customers.
– Macro-environment - larger forces that affect the
whole microenvironment.

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