UNDERSTANDING

MODERN
MARKETING

The Marketing Concept

Marketing Mix Model
Broadening Scope of Marketing
Marketing’s Role in the Organization
Creating Customer Value and
Satisfaction
Marketing and the “Value Chain”
“The underlying philosophy
of modern marketing
management (since the
1960’s) is the outward focus
on customers as the “Center
of the Universe”
The Marketing
Concept
Captured in terms such as:
 Customer orientation
 Customer focused
 Customer driven
 Customer centered
 Customer satisfaction
 Market driven
 Exceed customer
expectations
 Marketing Concept
Key Characteristics

Focus on profits
Profits = f (customer satisfaction)
Supply adjusts to will of demand
Assumes intense competitive environment
Long-term time horizon
Normative not descriptive model
 Selling and Marketing
Concepts Contrasted
Starting
point Focus Means Ends

Existing Selling and Profits through

Factory products promotion sales volume

(a) The selling concept

Target Customer Integrated Profits through

needs marketing customer
market satisfaction

(b) The marketing concept

 Problems in
Implementing the
Marketing Concept

 Inertia, entrenchment (old ways die hard)

 Projection of own beliefs and values
 Confusion of MC with superficial PR
 Learning about customer needs difficult to
operationalize
 Information lost in organizational maze
 Calls for integrated organization to support
marketing effort
 Requires continuous monitoring
 Conclusion
Marketing concept
is more relevant
than ever as we
approach the next
millenium
Operational Model for
Implementing the
Philosophy of the
Marketing Concept is
the:
The Marketing Mix Consists
of Four Basic Strategic
Variables
(the four “P’s”)

 Product Strategy
 Price Strategy
 Promotional Strategy
 Place Strategy (Channels of
Distribution)
The role of marketing
management is to mix
or blend these four
strategic variables in
such a way as to meet
the needs of...
 THE TARGET
MARKET

Product Price Promotion Place

Target Market
This process
does not take
place in a
vacuum
 Environment
(Exogenous Variables)
Main Categories of Environmental
Variables
Economic

Competitive

Technological

Socio-Cultural-Demographic

Legal-Political-Government
 Illustrative
Representation of the
Marketing Mix
Environment
Product
•Economic
•Competitive
Internal •Socio-Cultural-
Place

Price
Controllable
Variables Demographic
•Legal-Political-
(endogenous) Govt
•Technology
Target
Promotion Market
 The Marketing Mix Model
Portrays
Environment
Marketing Management as:
•Economic
•Competitive Target •Based on the marketing
•Socio-Cultural- Market concept
Demographic •Having a supply side
•Legal-Political-
Government
and demand side
•Technology •Supply adapting to
Price demand
•Highly interactive
Internal •An open system
Promotion
Product

Controllable •Requiring human

Variables direction
(endogenous) •Highly dynamic process
•An extremely
Place challenging managerial
task
 Marketing’s
Broadened Scope

 Manufacturers Non-profits
 Retailers  Universities
 Accounting  Government
 People (political

Law candidates)
 Etc.

Yes -- even applies to banks !

Marketing as a Strategic
Component of the
Organization

Marketing is elevated to a
level of strategic
position in the
organization
Marketing-Management
Inextricably Tied to
Decisions Involving:

Future direction of the organization

Markets to be served

Creation of competitive advantage

Long term organizational

performance
 Therefore Strategic Marketing
Management Consists of at
Least Six Major Areas

1) Defining the organization’s business

2) Specifying the purpose of the organization
3) Identifying opportunities
4) Formulating product/market strategies
5) Budgeting: financial, production, human
resources
6) Monitoring, evaluating, and adapting
 Defining the
Organization’s Business

 Type of customers (markets) to be served

 Needs of those customers
 Means by which organization will meet the
needs
 Competitive advantage (attainment and
sustained)
 Specifying the Purpose of
the Organization
Aspirations of the organization
and what it wishes to achieve
ie., objectives and goals

Production Finance Marketing

Output and ROI Sales Volume
efficiency ROS Margin
measures, e.g. Profit Market Share
output per Cash Flow Customer
Man hour Satisfaction
 Identifying
Organizational
Opportunities
External (environmental)
opportunities matched with internal
(organizational) capabilities

 What do we do best? (distinctive competency)

 What must we do? (success requirements)
 What might we do? (environmental opportunity)
 Formulating
Product/Market
Strategies

MARKETS
O
f EXISTING NEW
f
e Market Market
EXISTING Penetratio Developmen
r
i n t
n New
g NEW Offering Diversificati
s on
 Budgeting, Financial,
Production, and Human
Resources

Financial implications and allocations

relevant to the marketing plan

Revenue, expense, and profit

projections
 Monitoring, Evaluating
and Adapting Marketing
Strategy

Marketing audit --comprehensive,

systematic, independent, and periodic
examination of the organization’s
marketing objectives and strategies to
identify problems and opportunities as
well as to recommend ways of
improving marketing performance
 Customer Value and
Satisfaction

Input Customer Costs

= = CV
Output Customer Benefits

Note: Costs defined broadly

Benefits (customer’s viewpoint)
 Customer Satisfaction

Customer’s perception of perceived

performance of offering relative to experience

 Perceived performance below expectations = dissatisfied customer

 Perceived performance meets expectations = satisfied customer
 Perceived performance exceeds expectations = delighted customer
Marketing and the “Value Chain”
Michael Porter Competitive
Advantage
Every firm is a collection of activities

Primary Activities Support Activities

Firm infrastructure
Inbound logistics
Human resource mgt.
Operations Technology
Outbound logistics Procurement
Marketing and
sales
 The Generic Value
Chain
Firm infrastructure
Human resource management

Ma
rg
Technology development
Activities
Support

in
Procurement

Marketing

n
Inbound Opera- Outbound Service

rgi
and
logistics tions logistics sales

Ma
Primary Activities
 Marketing can be viewed
as the “heart” of the value
chain because it ties all of
the activities together from
the customer’s point of
view
 Relationship
Marketing

The development and maintenance

of long-term, cost effective
relationships with customers in order
to retain their preference
 Relationship Marketing
Compared to Transaction
(Traditional) Marketing

Factor Transaction Marketing Relationship Marketing

Time orientation
Organizational goal
Customer service priority
Customer contact
Customer commitment
Seller-customer interaction
Source of quality
Short-term Long-term______________
Make sale Retain customers________
Relatively low Very high______________
Low to moderate Frequent_______________
Low High__________________
Conflict manipulation Cooperation; trust________
Mainly from production Company wide _______
Tools for Implementing
Relationship Marketing

Affinity programs
Frequent-buyer/user programs
Database marketing
Partnerships (strategic alliances
Co-marketing and co-branding
EDI (electronic data interchange)
VMI (vender-managed inventory)
QR (quick response)
Life-time value of customer analysis