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1
Principles of Marketing
Part 1
Lesson 1 & 2
� Understanding Marketing Management
Lesson 1 & 2
Understanding Marketing Management
� defining marketing
� the marketing concept
� orientations toward the marketplace
� marketing management
3
2
Defining marketing
� Marketing is societal process by which individuals and groups (target market) obtain what they need and want through understanding, creating and delivering and freely exchanging products and services of value with others
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 9.
4
Activities in the company
Financing
Human Resource Management
Research & Development
Marketing
Understanding of customer
value
Creating of customer value
Delivering of customer value
Marketing
6
3
Customer needs and value
� Needs – are the basic human / organizational requirements
� Wants – needs become wants when they are directed to specific objects that might satisfy the need
� Customer value – ratio between what the customer gets and what he gives
7
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 9-10.
Customer needs and valueHuman needs
Self-actualization
needs
Self-actualization
needs
Esteem needsEsteem needs
Social needsSocial needs
Safety needsSafety needs
Physiological needsPhysiological needs
8Source: A.H. Maslow (1970). Motivation and Personality, 2nd ed., Prentice Hall,
Upper Saddle River.,
Customer needs and valueOrganizational needs
Direct
Understanding of customer
value
Creating of customer value
Delivering of customer value
Indirect
Capital items
Supplies
Services
9Source: own preparation .
4
Customer needs and valueCustomer value
10
Customer value
Customer benefits
Product benefits
Service benefits
Personnel benefits
Image benefits
Customer cost
Price
Purchasing cost
Using cost
Source:own preparation based
on: P. Kotler (2003). Marketing
Management, 11th, Prentice
Hall, Upper Saddle River, p. 60.
Understanding of customer value
11
Market information
Marketing Research
Marketing intelligence
system
Managers experience
Managers Intuition
Source: own preparation .
Creating and delivering customer
value – marketing mix
12
Marketing mixCreating value Delivering value
Marketing mixCreating value Delivering value
Product
Price
Personnel
Physical evidence
Target market Target market
Promotion Distribution Procedures
Source: own preparation .
5
13
Creating and delivering customer
value
Source: own preparation based on: R. Lauterborn (1990). „New Marketing Litany: Four P’s Passe: C-Words Take Over”, Advertising Age, 1 October p. 26
„+3P”
Personnel
Physical Evidence
Procedures
Marketing Mix 7P’s or 7C’s?
Organizational perspective
� product
� price
� place
� promotion
� physical evidence
� people
� process
Customer perspective
• customer value
• cost
• convenience
• communication
• confirmation
• consideration
• co-ordination and
concern
Customer satisfaction
6
Orientations toward the marketplace - 1
� Production concept
� Product concept
� Selling concept
� Marketing concept
� Customer concept
� Societal marketing concept
16
Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper
Saddle River, p. 17.
Orientations toward the marketplace – 2
Concepts Starting point Focus Means Ends
Production Factory Widely available and
inexpensive products
High production efficiency
Low cost
Mass distribution
Profits through
volume and low cost
Product Factory Superior products Making superior products
and improving them over
time
Profits through high
quality product
Selling Factory Products Aggressive selling and
promotions
Profits through sales
volume
Marketing Target market Customer needs Integrated marketing Profits through
customer
satisfaction
Customer Individual customer Customer needs and
value
One-to-one marketing
Integration and value chain
Profits through
capturing customer
share, loyalty, and
lifetime value
Societal marketing Best long-run
interests customer
and society
Customer needs,
customer interests, and
long-run societal welfare
Integrated marketing and
education customer
Profits through
customer
satisfaction and
society’s well-being
17Source: own preparation based on: P. Kotler (2003). Marketing Management,
11th, Prentice Hall, Upper Saddle River, p. 17-27.
7
8
9
Marketing Management -1
� Marketing management is art and science of choosing target markets and getting, keeping, and growing customers through understanding, creating and delivering superior customer value
25
Source: own preparation based on: P. Kotler (2003). Marketing Management,
11th, Prentice Hall, Upper Saddle River, p. 17-27.
Marketing Management -2
The marketing management - is a delicate balance of creativity and structure/formal procedures.
Marketing Management - 3
The marketing management -consists of:
� analyzing market situation
� designing marketing strategies
� implementing and organizing the marketing effort
� controlling marketing performance
10
Analysis
Analysis
External
Macroenvironment Microenvironment
SWOT
Internal
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
Lesson 3 & 4
Analyzing Marketing Opportunities
Customer Analysis
Competitors and SWOT Analysis
11
Lesson 3 & 4
Analyzing Marketing Opportunities -
Customer Analysis
Outline
� Analyzing Marketing Opportunities - Customer Analysis� types of customers
� the business market versus the consumer market
� decision - making unit
� types of buying behavior
� stages of the buying decision process
� factors Influencing buying behaviour
Lesson 3 & 4
Competitors and SWOT Analysis
Outline
� 5 forces framework
� product/market battlefield
� Macro environment analysis
� SWOT analysis
Customer Analysis
Basic Questions to Answer
� Who is our customer?
� What factors influence their behaviour?
� Does behaviour vary according to the type of product or service purchased?
� What process of decision making do they go
through?
12
Types of Customer Markets
� consumer markets
� industrial markets
� reseller markets
� government and non-profit markets
� international markets
Characteristics of Organisational Markets
� Producer markets
� purchase to make profit from using operationally or to
produce other goods
� Reseller markets
� purchase to make profit from reselling with no or minor
alteration
� Government markets
� buy to support operations - normally purchase through bids
or negotiation
� Institutional markets
� seek to achieve charitable, community, educational or non-
business goals
What Influences the Buyer?
� Cultural factors� values, beliefs, ideas, artefacts and symbols
� Social factors� primary membership groups (family ..)
� secondary member groups (union, cim ..)
� aspirational groups (MBA…!)
� dissociative groups (hell’s angels…??)
� Personal factors� age, life cycle, occupation, lifestyle, personality ...
� Psychological factors� motivation, perception, attitude
13
The Buyer ‘DMU’
Initiator
first suggests buying product
or service
Influencer
whose comments affect the decision
Decider
Ultimately make all or part
of buying decision
Buyer
Physically makes purchase
User
Consumes product or serviceInitiate process / define specs
Help define spec, help inevaluation of alternatives
Product requirementsand suppliers
Formal authority to selectsupplier - negotiate terms
User
Source:Webster and Wind, 1972
Does Behaviour Change in
Relation to What is Purchased?
Degree of involvement
Sig
nif
ican
t d
iffe
ren
ce
betw
een
bra
nd
s
low high
few
many
HABITUAL DISSONANCE
(differing of views)
VARIETY
(seeking)COMPLEX
Source:Assael, 1987
Levels of involvement
� High involvement
� by level of importance
� rational, benefit based
� factual information sought
� Low involvement
� by level of importance
� minimal care, faster decision
� emotional choice
14
It Also Revolves Around ...
Perceived Risk
� Performance� Will it function properly?
� Financial� Can I afford it / is it good
value?
� Physical� Will it harm me / others?
� Ego� Will it satisfy self-esteem
/ image?
� Social� Will significant others
approve?
� Time� Have I got the time to go
and purchase?
Risk - the possibility that the outcome of a decision will not have the desired effect or may make the situation worse.
Source: Fill, 1999
Consumer Decision Making Process
� Need recognition� stimuli can be internal or external
� Information search� personal, commercial, public, experiential
� Evaluation of alternatives� forms judgement - conscious & rational
� Purchase decision� commit
� Post-purchase evaluation� re-evaluate and re-assure
The Organisational Buyer
� fewer
� highly concentrated
� close relationship between buyer and seller
� geographically concentrated buyers
� demand for industrial goods is ultimately
derived from the demand for consumer
goods
� inelastic and fluctuating demand
� professional purchasing
15
The Industrial Buyer ‘DMU’
Initiator
first suggests buying product
or service
Influencer
whose comments affect the decision
Decider
Ultimately make all or part
of buying decision
Buyer
Physically makes purchase
User
Consumes product or serviceInitiate process / define specs
Help define spec, help inevaluation of alternatives
Product requirementsand suppliers
Formal authority to selectsupplier - negotiate terms
Approvers
Gatekeepers
User
Authorise decider andbuyer proposals
Control random contactfrom sellers / flow of information
Source: Webster and Wind, 1972
Types of Purchase
� New Task
� First time purchase, full buying process
� Modified re-buy
� E.g. faster delivery, lower price, specification
� Straight re-buy
� Routine re-purchase, same terms
� Truncated buying process
Organisational Buying Process
� recognise the problem
� develop product specification to solve problem
� search for products / suppliers
� evaluate products to specification
� select and order most appropriate product
� evaluate product and supplier performance
16
Types of Purchase
Source:Robinson et al, 1967
YYYPerformance review and feedback
YPossiblyNEstablish order routine
YPossiblyNSelection of supplier
YPossiblyNDetailed evaluation of suppliers
YPossiblyNSearch for potential suppliers
YYYSpecific description of product required
YPossiblyNDetermining general need
YPossiblyNRecognition of problem
New
Task
Modified
Re-buy
Straight
Re-buy
Phases of the buying process
Buy classes
Lesson 3 & 4
Analyzing Marketing Opportunities
Competitors and SWOT Analysis
The Organisation’s Marketing
Environment
Theorganisation
The economy
Socialfactors
Culturalforces
Technology
Political structures
Legalstructures
Demography
Suppliers
Distributors& dealersMarket
demands
CompetitorsCustomers
17
Porter’s Industry Analysis:
The 5 Forces Model
INDUSTRYCompetitive rivalry
POTENTIALENTRANTS
BUYERSSUPPLIERS
SUBSTITUTES
Threat ofrivalry
Bargainingpower
Threat ofsubstitution
Bargainingpower
Source: Porter, 1985
Bargaining Power of Suppliers
• the strength of the supplier brand
• the source of supply spans only a small number
of suppliers
• switching supplier
• substitute products of suppliers
• forward integration
Bargaining Power of Buyers
• where few buyers control a large volume of the
market
• where there is a large number of smaller
suppliers fighting for a share of the market
• the cost of switching supplier is low
• the supplier’s product is a mass-market
product and not necessarily differentiated
• strong customer power
• threat of backward vertical integration
18
The Threat of Potential Entrants
• economies of scale
• access to new distribution channels
• brand loyalty
• capital investment
• competitor retaliation
• regulatory influence
Threat of Substitutes
• a new product or service equivalent
• a new product replacing an existing product
• consumer substitution
Key Factors Influencing
Competitive Rivalry
• stage of product life cycle of competing product
• use of specialized production techniques
• liquidity of competitor
• ability to achieve differentiation and brand
loyalty
• competitor intentions
• the relative size of the competitor
• barrier of exit from the industry
• number of sellers & degree of products
differentiation
19
Industry’s Competitive Structure
One seller Few sellers Many sellers
Undifferentiated product
Differentiated product
Pure
monopoly
Pure oligopoly
Differentiated
oligopoly
Pure
competitive
Monopolistic competitive
....How does it matter?
Roles in the Target Market
• market leader
• market challenger
• market follower
• market nicher
.... and main implications.....
Product/Market Battlefield
• Does competitors offers differ?
- type od product....?
- type of customer (market)...?
• Product/market battlefield map and main
findings.....
20
Analysis of the Macro Environment
Macro Analysis Frameworks
PEST
PESTEL
SLEPT
The PEST Framework
Political / Legal
Legislative structures
Monopoly restrictions
Political / gov. stability
Political orientation
Taxation policies
Employment legislationForeign trade regulations
Socio-Cultural
Demographics
Lifestyles
Social mobility
Education levels
Attitudes
Consumerism
Religion
Economic
Business cycles
Money supply
Inflation rates
Investment levels
Unemployment
Energy costs
Technological
Speed of change
Rate of technological transfer
Product life-cycles
Availability
Cost
Levels of industrial and gov. R&D expenditure
Org
an
isa
tio
n
21
SWOT Analysis
SWOT analysis draws together key strengths, weaknesses, opportunities and threats that have been derived as a result of the marketing audit, i.e. the macro and micro analysis and assessment
SWOT Analysis
Financial resources, product portfolio, economies of scale, technical capability,management ability, innovative design, profitability, R&D, marketing
intelligence
Global markets, investment opportunities, diversification, technology innovation, internet, high quality products
Lack of skilled labour, high workforce turnover, lack of financial investment, poor internal communications, lack of management commitment, supplier
relationships, management weaknesses, over-capacity
Global markets, competitive activity, competitive investment, supplier desertion, substitute products, market saturation,
resistance to change
Internal
External
Strengths Weaknesses
Opportunities Threatsconvert
convert