CBM 2 - Ch. 1 PDF - Marketing Concepts

Chapter 1 Wednesday, January 22, 2025 12:24 AM Metalanguage 1. Marketing is the "process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return" 2. Marketing is the activity, set of institutions,...

Chapter 1 Wednesday, January 22, 2025 12:24 AM Metalanguage 1. Marketing is the "process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return" 2. Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (AMA, 2007) Essential Knowledge The Development of Marketing. The basic idea of marketing as an exchange process has its roots in very ancient history, when people began to produce crops or goods surplus to their own requirements and then to barter them for other things they wanted. Elements of marketing, particularly selling and advertising, have been around as long as trade itself, but it took the industrial revolution, the development of mass production techniques and the separation of buyers and sellers to sow the seeds of what we recognize as marketing today. 1. Production orientation The product orientation assumes that consumers are primarily interested in the product itself, and buy on the basis of quality. Since consumers want the highest level of quality for their money, the organization must work to increase and improve its quality levels. At first glance, this may seem like a reasonable proposition, but the problem is the assumption that consumers want this product. Consumers do not want products, they want solutions to problems, and if the organization's product does not solve a problem, they will not buy it, however high the quality level is. An organization may well produce the best ever record player, but most consumers might well rather download their favorite music on to their phone. In short, customer needs rather than the product should be the focus. 2. Sales orientation The basis for the sales orientation way of thinking is that consumers are inherently reluctant to purchase, and need every encouragement to purchase sufficient quantities to satisfy the organization's needs. This leads to a heavy emphasis on personal selling and other sales stimulating devices because products 'are sold, not bought', and thus the organization puts its effort into building strong sales departments, with the focus very much on the needs of the seller, rather than on those of the buyer. Home improvement organizations, selling, Uni Learnings Page 1  much on the needs of the seller, rather than on those of the buyer. Home improvement organizations, selling, for example, double glazing and cavity wall insulation, have tended to operate like this, as has the timeshare industry. 3. Marketing orientation The organization that develops and performs its production and marketing activities with the needs of the buyer driving it all, and with the satisfaction of that buyer as the main aim, is marketing oriented. The motivation is to 'find wants and fill them' rather than 'create products and sell them'. The assumption is that customers are not necessarily price driven, but are looking for the total offering that best fits their needs, and therefore the organization has to define those needs and develop appropriate offerings. This is not just about the core product itself, but also about pricing, access to information, availability and peripheral benefits and services that add value to the product. Not all customers, however, necessarily want exactly the same things. They can be grouped according to common needs and wants, and the organization can produce a specifically targeted marketing package that best suits the needs of one group, thus increasing the chances of satisfying that group and retaining its loyalty. 4. Corporate social responsibility: societal and ethical marketing Corporate social responsibility (CSR) suggests that organizations should not only consider their customers and their profitability, but also the good of the wider communities, local and global, within which they exist. As Smith and Higgins (2000) put it, consumers now are not only looking for environmentally sensitive and ethically considerate products, but also for businesses to demonstrate a wider set of ethical commitments to society. Marketing within a CSR context is concerned with ensuring that organizations handle marketing responsibly, and in a way that contributes to the wellbeing of society. Consumers have become increasingly aware of the social and ethical issues involved in marketing, such as the ethics of marketing to children, fair trade with third- world suppliers, the ecological impact of business, and the extent of good 'corporate citizenship' displayed by companies, for example. Companies looking to establish a reputable and trustworthy image as a foundation for building long-term relationship with their customers thus need to consider the philosophy of CSR seriously if they are to meet their customers' wider expectations, and create and maintain competitive advantage (Balestrini, 2001). The scope and importance of marketing Why is Marketing Management Important? Marketing Management is important because it significantly contributes to the development of the economy and the improvement of the quality of life. Without marketing, there are no businesses, no income, no employment, no taxes; and all the things that we enjoy today such as the television, mobile phones, hygiene products, tourism, transportation, banking services and education just to name a few, would not be available for our consumption. Iacobucci (2016) stressed that just about anything can be marketed. This means that life without marketing would be a life deprived of all the goods and services that we enjoy. The core concepts of marketing Concepts. Refers to the foundational concepts that is necessary in understanding marketing, These includes: (1) needs, wants, demands; (2) products; value, cost and satisfaction; (3) value, cost and satisfaction; (4) exchange, transaction, and relationship; (5) market; (6) marketing and marketers. 1. Needs, Wants and Demands Uni Learnings Page 2 1. Needs, Wants and Demands Needs. refers to a state of felt deprivation of some basic satisfaction. For example, when a person is hungry, he needs to eat in order to satisfy that hunger. Thus, any food is good enough to satisfy his hunger Wants. Is the shape that human needs take into form as influenced by culture and individual preferences. These means that a very specific goods or service is needed in order to satisfy wants. For example, a person is hungry, but he is specifically looking for a burger to eat. Demands. Are needs and wants supported by purchasing power and the willingness to buy. Hence, the presence of needs or a want alone does not constitute demand. The market has to have the necessary ability to purchase and the willingness to spend to acquire the product. 2. Product. Is anything that can satisfy needs and wants 3. Value, Cost and Satisfaction. Value is perceived. This means that value is the consumer’s subjective perception on the ability of a product to satisfy needs or wants in relation to the cost of acquiring it. The higher the cost of the product, the greater the expectations. Satisfaction is based on how well a product performs in comparison to the expectations of the customer. Thus, if product performance fails to meet customer expectations, the result will be customer dissatisfaction. On the hand, when products meet or exceed the expectations of customers, then the result is customer satisfaction. 4. Exchange, Transactions and Relationship Exchange is a method of acquiring a product by offering something in return. For example, an exchange occurs when a jewelry is acquired by offering a car in return. There are five conditions for exchange to take place: a. There must be at least two parties involved; b. Each party have something that is valuable to the other party; c. Each party is capable of communicating and delivering; d. Each party have the freedom to accept or reject the offer; and e. Each party perceive the other party to be trustworthy to deal with. Transaction involves a trade of values between two parties. It is considered as the marketing’s unit of measurement. For a transaction to take place, it must have the following conditions: f. At least two things of value; g. There is an agreement on the terms and conditions; h. There is a time of agreement; and i. There is a place of agreement Relationship. Creating a mutually beneficial relationship is the focus of modern marketing. This is based on the premise that good relationship between the business and the customer leads to profitable transactions. Relationship will be discussed in detail in the later portion of this course. 5. Markets. Are people with specific needs or wants with the willingness and the ability to acquire products for their satisfaction. 6. Marketing. The American Marketing Association defines marketing as the “activity set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers , clients, partners, and society at large. 7. Marketers. Are people engaged in marketing activities to satisfy both the needs of the customer and the company. Marketing Management Orientation. There are four marketing management orientations. These marketing management orientations reflect the philosophy of the firm in their business and marketing actionsP. a. Production Concept. A firm operating under the production concept operates under the principle that customers will buy products that are widely available and affordable. Hence, as the name suggest, it is focused on mass production and effective and efficient distribution. b. Product Concept. A firm operating using a product orientation operates within the premise that customers Uni Learnings Page 3  b. Product Concept. A firm operating using a product orientation operates within the premise that customers will patronize a product with good quality. It is more focused on producing products to sell instead of the needs and wants of the customers. Hence, under a product orientation, a business creates a product first and then tries to find a market who will buy the product afterwards. Can you imagine if there is no market for the product after exerting so much energy and resources in creating it? c. Selling Concept. A firm practicing selling concept operates within a philosophy that in order for a business to succeed, it must implement massive selling activities and advertising. As its name suggest, the focus in the selling concept is to sell rather than to satisfy needs and wants which oftentimes backfires for the company in the end as customers who are convinced to purchase the product and felt dissatisfied will no longer patronize and have a tendency to spread negative word of mouth. In this concept, the approach of the firm is to create the product first then tries to apply a selling strategy that is suitable to a specific group of customers. Can you remember an experience where you were convinced to buy a product that you really do not need or simply does not deliver the benefit that it promise? How will it affect your future buying behavior? d. Marketing Concept. A firm operating under the marketing concept operates within a philosophy that a business needs to put customers at the center of every business activity. This means that the needs and wants of the market needs to be established before deciding to produce a product that can best satisfy their needs. Using this concept, a firm gathers as much relevant information about the market and then uses this information to be able to develop the most suitable marketing mix (product, price, place and promotion)to satisfy their customers. Armstrong, Kotler, Harker and Brennan (2018) affirmed the effectiveness of the marketing concept by elaborating that the attainment of organizational goals depends on how well it is able to respond to the needs and wants of the market. e. Societal Marketing Concept. This concept is similar to marketing concept because it is also focused on satisfying the needs and wants of the customers. However, businesses operating under the societal marketing concept principle recognizes the responsibility of the firm towards the environment and the society as a whole. Thus, the good of the majority will always take precedence over the good of the minority. This means that if the efforts of the firm to satisfy a group of customers will jeopardize the health and welfare of the larger society, then the firm should not proceed on doing it. For example: If there is a demand for a Narra Furniture in the market; would you continue producing it even if it would have grave consequences to the environment such as deforestation, floods, and landslides to name a few? Market Segmentation, Targeting and Positioning Market Segmentation. As explained earlier, market segmentation is a process where a market that is large and heterogenous is divided into smaller subgroups based on their common characteristics. Camilleri (2018) described in detail that in conducting market segmentation, researchers look for similarities of the segments such as “common needs, common interests, similar lifestyles or even similar demographic profiles”. Hence, market segmentation provide valuable information to marketers about the customer needs and wants which will help them customize their marketing activities to achieve higher levels of satisfaction. There are four segmentation variables that are traditionally used to segment the market namely: Demographic, Geographic, Psychographic and Behavioral Segmentation. Table 1 shows how the consumer market is segmented using the aforementioned segmentation variables The Marketing Segmentation Variables Geographic Segmentation Example World region or country Philippines, Southeast Luzon, Asia, Europe Country region Visayas, Mindanao City or Metro Size Small, Medium, Large Population Density Rural, urban and Sub-Urban Demographic Segmentation Age Below 6 , 6-12, 13-18, 19-40, 41-65 Gender Male, Female Size of Family 1-2, 3-4, 5 above Generation X Income Below P10,000, P11,000-20,000 Occupation Teacher, Lawyer, Engineer Uni Learnings Page 4  Occupation Teacher, Lawyer, Engineer Religion Roman Catholic, Islam Generation Baby Boomer, Millennials, Generation Z Psychographic Segmentation Social Class Poor, Working Class, Lower Middle Class, Upper Middle Class, Upper Class Lifestyle Sporty, Outgoing Personality Creative, Innovator, Conservative Values (VALS) Values and Lifestyle Seasonal Behavioral Segmentation Special Occasions, Holidays, Occasion Benefits Quality, Convenience, Affordable, Experience User Status Non User, Light User, Heavy User Attitude towards product Enthusiastic, Positive, Indifferent Readiness stage Unaware, Aware, Informed, Interested Loyal, Switcher Brand Loyalty Characteristics of a good segmentation. There are many ways to segment the market. However, in order to ensure that the segment is useful, you have to make sure that it is measurable, substantial, accessible, differentiable, and finally actionable. Table 2 shows the criteria of an effective segmentation. Effective Segmentation Criteria Measurability Size of market, income/ purchasing power and other relevant data about the segment Substantiality The segments should provide sufficient profitability to the business or it should be large enough Accessibility The business should be able to serve or reach the segment Differentiability The segment should be differentiated in terms of their buying behavior or how they respond to a marketing activity Actionability The business should have the ability to serve the distinctive needs of the segment. Targeting. Now that you have learned how to conduct market segmentation, it is time for you to learn about targeting. Targeting as explained in the earlier part of this module is a process by which a business selects a segment of the market that it will concentrate all their marketing efforts. The logic behind target marketing is that no single product can ever satisfy everyone. By conducting target marketing, a firm is able to focus on a segment that makes the most business sense. Hence, the segment that provides the best opportunity to earn profit is generally selected. There are four ways to target a market. Table 3 shows the different targeting strategies with their respective descriptions. Undifferentiated Marketing Strategy (also known as Ignores the differences of the market mass marketing) Only one product is marketed for the entire market Most applicable for products like rice, sugar, salt, and flour Differentiated Marketing Strategy (also known as Using differentiated products to target different segmented marketing) types of customers Requires a separate marketing plan for every segment Greater cost Examples are Procter and Gamble, Nestle, Nike Uni Learnings Page 5  Examples are Procter and Gamble, Nestle, Nike Concentrated Marketing Strategy (also known as Suitable for business with small/ limited niche marketing) resources Focus only in one segment Micro Marketing Customizes every product for every customer Example are customized mugs and tailoring services Positioning. Refers to a marketing strategy where a firm positions their products or their brand in the market versus other competing products or brands in the eyes of the market. Thus, the focus in building a positioning strategy is to influence the mind of the customers/market to perceive our product the way we want them to think about us. For instance, the target market of Nike are athletes and sports minded people. Thus, their positioning in the market is more on performance as compared to being fashionable. Nike products therefore are positioned to be able to enhance the performance of their market (athletes) who believed that their products are lighter, durable, and make them run faster, jump higher, protected from injuries and make them perform better in their respective field compared to Nike’s competitors such as Adidas, Under Armour and New Balance. Moreover, Camilleri (2017) argued that there are four important characteristics of an effective product positioning: a. Positioning should be built around the benefits of the product for their market b. The positioning should be clearly differentiated compared to their key competitors c. The firm needs to have the relevant skills, resources, and the credibility to deliver on their implied statements and promises d. The positioning should be defensible that the competing firms cannot just easily counter it. Perceptual Mapping. Refers to an activity that allow marketing management to gain a perceptual view of the various positions of the key competitors in the market.. It gives you an understanding how each businesses are positioned versus the positions of key competitors. Figure 2 shows an example of a perceptual map. Note: The positioning factors (Performance, fashionable, expensive and budget friendly can be customized depending on the suitability or applicability to the business being analyzed. Uni Learnings Page 6