MANAGEMENT - II

Chapter # 1 Marketing Management

Prepared by

Anurag Pal 1

Marketing is a social and managerial process by which individuals and groups obtain what they want and need through creating, offering and exchanging products of value with othersKotler 1991

SOME BASIC CONCEPTSNEED

Needs are basic and necessary requirements of human beings, with out fulfillment of which life will not be possible.

For example food, shelter, clothing

1-33SOME BASIC CONCEPTS2. Wants

Those needs which are not basic in nature, but if we get them life becomes full of comforts A human need which is shaped by culture and individual. i.e. I want a Coca Cola. I want kebab.

1-44SOME BASIC CONCEPTS3 DemandDemand is the willingness to pay and ability to pay for the satisfaction of needs and wants.1-55This is Demand1-6Demand

Buying Power

Want SOME BASIC CONCEPTSProduct

A product may be a good, service, place or an idea. So all tangible and intangible attributes which can satisfy human wants are product.1-77SOME BASIC CONCEPTSMarketMarket means,

The people or organizations with needs to satisfy, money to spend and willingness to spend money.

A market is a place where buyer and seller met together.

1-88WHY MARKETING.?In order to fulfill the needs and wants, the buyers have a lot of options to purchase a particular product.

For example. if you want to purchase a sim card you can go for Roshan, Etisalat and MTN, etc similarly

if you want to purchase burger, you can have it from KFC, AFC or any other restaurant in Kabul city. 1-99What is Marketing?1-10Marketing is a total system of business activities designed to plan productprice, promote, and place (distribute) want-satisfying product to target markets in order to achieve oganizational objectives. 10Definitions of marketingMarketing is the management process that identifies and satisfies customer requirements profitably

The Chartered Institute of Marketing1-1111

Marketing is a social and managerial process by which individuals and groups obtain what they want and need through creating, offering and exchanging products of value with othersKotler 1991

Marketing MixThe Four Ps1-13

(Distribution)ProductPricingPromotionPlaceMarketing MixThe Four PsThe Marketing MixThe strategy (Planning) of designing the combination of products where and when it is distributed, how it is promoted and at what price.1-14ProductPricingPlacePromotionTargetMarket14The Four P`sThe Four C`s1-15PricePromotionPlaceCustomerSolutionCustomerCostCommunicationConven-ienceProductMarketingMix15Market Segmentation & Target MarketingMarket SegmentationDividing a market into customer categories1-16Target MarketingSelecting a category of customers with similar wants and needs who are likely to respond to the same products

Segmentation and Target Marketing

1-17Market Segmentation:Divide the market into segments of customersTarget Marketing:Select the segment to develop#1#217Marketing Management Philosophies18Production Concept

Product ConceptSelling ConceptMarketing ConceptSocietal Marketing Concept

Consumers favor products that are available and highly affordable.Improve production and distribution.

Consumers favor products that offer the most quality, performance, and innovative features.

Consumers will buy products only if the company promotes/ sells these products.

Focuses on needs/ wants of target markets & delivering satisfaction better than competitors.

Focuses on needs/ wants of target markets & delivering superior value.

Chapter118Design a customer-driven marketing strategy Marketing Concept

There are five alternative concepts under which organization designs and carry out marketing strategies. ( the production concept-the product concept-selling concept- the marketing concept-the social marketing concept)

1 The Production Concept

The idea that consumers will favor products that are available and highly affordable and that the organization should therefore focus on improving production and distribution efficiency.

1-19The product ConceptThe idea that consumers will favor products that offer the most quality, performance, features and that the organization should therefore dedicate its energy to making continuous product improvement.

3 The Selling Concept The idea that consumers will not buy enough of the firms products unless it undertakes a large scale selling and promotion effort.

1-20Design a customer-driven marketing strategy cont...4 Marketing ConceptThe marketing management philosophy that achieving organizational goal depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors do.

5 The Social Marketing ConceptThe company should make good marketing decisions by considering consumers long run interests, and society long run interests.

1-21Company Orientations Towards the MarketplaceProduction Concept

Consumers prefer productsthat are widely availableand inexpensiveProduct ConceptConsumers favor products that offer performance, most quality, or innovative featuresSelling ConceptConsumers will buy products only if company aggressivelypromotes/sells these productsMarketing ConceptFocuses on needs/ wants of target markets & delivering value better than competitors1-22Value and Satisfaction

1-23

ExpectationPerformance810If performance is lower than expectations, satisfaction is low.If performance is higher than expectations, satisfaction is high.ExpectationPerformance108Customer ValueCustomer value = customer benefits customer costs

Customer benefitsAnything desired by the customer that is received in an exchangeCustomer costsAnything a customer gives up in an exchange for benefits

1-2424The Marketing Concept 1-25MARKETING CONCEPTCustomerorientationOrganizationsperformanceobjectivesCoordinatedmarketingactivities+++CustomersatisfactionOrganizationalsuccessSocietal Marketing Concept 1-26Society(Human Welfare)Consumers(Wants)Company(Profits)SocietalMarketingConcept26Societal Marketing ConceptThis CTR corresponds to Figure 1-5 on p. 16 and relates to the material on pp. 16-17.The Societal Marketing Concept holds that the organization should determine the needs, wants, and interests of target markets. In delivering the desired satisfactions more effectively and efficiently than the competition, the company should also maintain or improve both the consumers and societys well being. Discussion Note: You may wish to consider extra-textual class discussion identifying the pros and cons of the societal marketing concept.Pros: Reasons for adopting the societal marketing concept include: 1. Public expectations. Social expectations of business have increased. 2. Long-run profits. Socially responsible marketing may lead to more secure long-run profits. 3. Ethical obligation. Business should recognize that responsible actions are right for their own sake. 4. Public image. A good public image helps firms gain more customers, better employees, access to money markets, and other benefits. 5. Better environment. Involvement by business can help solve difficult social problems, creating a better quality of life and a more desirable community in which to attract and hold skilled employees. 7. Balance of responsibility and power. Marketers have a large amount of power in society that requires an equally large amount of responsibility. 8. Stockholder interests. Socially responsible companies are considered less risky and safer investments 9. Possession of resources. Business has the financial resources, technical experts, and managerial talent to provide to support public causes.Cons: Reasons for not adopting the societal marketing concept include: 1. Violation of profit maximization. 2. Dilution of purpose. The pursuit of social goals dilutes businesss primary purpose. 3. Costs. Many socially responsible activities dont pay their way. 4. Too much power. Business is already one of the most powerful institutions in society. 5. Lack of skills. Marketers may be poorly qualified to deal with social issues. 6. Lack of accountability. There are no direct lines of social accountability from the business sector to the public. 7. Lack of broad public support. Even favorable attitudes are general and lack consensus on specific actions marketers should take on social issues. The Societal Marketing ConceptDemand forecastingPurposes of forecastingPurposes of short-term forecastingAppropriate production scheduling.Reducing costs of purchasing raw materials.Determining appropriate price policySetting sales targets and establishing controls and incentives.Evolving a suitable advertising and promotional campaign.Forecasting short term financial requirements.Purposes of long-term forecastingPlanning of a new unit or expansion of an existing unit.Planning long term financial requirements.Planning man-power requirements.

1-27Demand forecastingA forecast is a prediction or estimation of future situation under given conditions

Demand forecasting is different from demand estimation in the sense that forecasting predicts about future trends of sales while estimation tries to find out expected present sales level.1-28Demand forecasting continue..Passive forecast: where prediction about future is based on assumption that firm does not change the course of its action

Active forecast: where forecasting is done under the condition of likely future changes in the actions by a firm1-29Purpose of forecastingShort run forecast: seasonal patterns are more important. It helps in preparing sales policy, price policy, production planning to avoid under and over stock conditions.

Long run forecast: it is helpful for capital planning.

1-30Methods of forecastingMethods of forecasting

Opinion Polling method Statistical methodconsumers survey fitting trend line methodsales force opinion least square methodexperts opinion moving average exponential smoothing

1-31Opinion survey/consumers surveyRelatively simple and practicable method for forecasting demand of new productsOpinions are collected from prospective buyers regarding their future consumptionSampling technique is used to survey customersFrom sample it is possible to forecast demand of targeted population1-3232Experts opinionIn this method experts opinion is sought on the future demand for productIt is biased and subjectiveThe accuracy of predicted demand depends on skill, expertise and experience of person making forecastMethod is useful for forecasting demand of established product1-33Sales force opinion Expected sales is estimated by distributors survey through questionnaire or can be requested from retail outletCompanys sales force can also give estimation of future demandMany company heavily rely on judgment made by their sales personnelBut this judgment may suffer from over optimism or over pessimism

1-34Delphi technique It can make more realistic forecastA panel of experts are asked sequential question and from responses new questionnaire is produced.Opinions are collected from experts to arrive at reliable resultsEach questionnaire demands a detailed opinion from each expert and then these opinions are summarized to get result1-35Time series methods Time series refers to past data arranged in chronological order as a dependent variable and time as independent variable for ex.

This is called time series. This method does not study factors affecting demand. In this method all factors that affect demand are grouped into one factor Time and demand is expressed as a series of data with respect to time

Year1994199519961997Demand203040581-36Fitting Trend Line by observation methodThe given time series data are plotted on a graph paper by taking time on X-axis and the other variable on Y-axis.A smooth line or curve, drawn through the plotted points would represent the trend of the given data.1-37Least Square method (Regression Analysis)In regression analysis relation between dependent variable (y) and independent variable (x) can be expressed by equation:Y=a+bX1-38Moving AveragePast data can have fluctuations because of seasonal variation and random variation

Averaging the demand for previous period is going to hide the trend

MA consists series of arithmetic means calculated from overlapping groups of successive elements of time series.1-39The period of moving average should be carefully selected

Wrongly selected period will distort data.

Longer the period of M.A. greater is the smoothing effect 1-40Moving Average continueEach moving average is based on values covering a fixed time interval, called period of moving average and is shown against centre of the period.For the time series values Y1, Y2, Y3, the moving average for period n is given as follows:

1-41Moving average continue.1st value of M.A.= 1/n (Y1+Y2+Y3++Yn)2nd value of M.A.= 1/n(Y2+Y3+Y4++Yn+1)3rd value of M.A. = 1/n (Y3+Y4+Y5++Yn+2)And so on..1-42Continue.When period of M.A. is odd the successive values of the moving average are placed against the middle period. For ex. If n=7 then first moving average is placed against 4th value, the second moving average is placed against 5th value and so on.If the period of M.A. is even then centering method is used1-43