Marketing Management PDF

Marketing Management 1 Module-1: Understanding Marketing in New Notes...

Marketing Management 1 Module-1: Understanding Marketing in New Notes e Perspective in Objectives 1. Explain what marketing is and how it’s used nl 2. To know the evidence of marketing in everyday life 3. To understand the importance of Strategic Planning in marketing O Outcomes After the completion of course the learner will be able to: 1. Differentiation between marketing and Selling ity 2. Develop skill in organizing for effective marketing and in implementing the market planning process 3. Determination of marketing environment and its feasibility s 4. Understanding of various models and principles of marketing er 5. Application of concepts, theories, models, and tools in developing 4P’s of marketing. “Defines marketing as the science and art of exploring, creating, and v delivering value to satisfy the needs of a target market at a profit”. Philip Kotler, the Marketing Guru- ni 1.1.1 Defining Marketing U Marketing is as ancient as civilizations. Although marketing is talked about and discussed today in terms of business, its origin goes back to the ancient civilization when man used symbols, signs and material artifacts to transact and communicate with others. Modern marketing revolves around the age-old conceptions. The first signs ity man had created to connect with others gave birth to the marketing idea. The evolution of marketing has made advertising a formal discipline; otherwise, in the ancient past, marketing existed. Marketing deals with the customers more than any other business function. m Creating value and satisfaction for customers is at the very heart of modern marketing thinking and practice. Marketing is an integral part of any enterprise. The marketing activities of today are linked to the aim, products, objectives, services and innovation. )A Marketing is an important functional business sector that produces revenue by selling needs that meet customers’ products and services. It includes taking decisions in the fields of product, quality, location and promotion and taking into account consumer business requirements” Marketing is a common trend at this time. (c Marketing is the bridge covering the void between two big economic axes, the manufacturer and the consumer. Marketing is considered as the back-bone of all Amity Directorate of Distance & Online Education  2 Marketing Management business activities in this age of rapid change. It is said that marketing is the eye and Notes e business years because it holds the business in close touch with its climate. According to Pyle - “Marketing comprises both buying and selling activities. in “Marketing consists of those efforts which effect transfers in the ownership of goods and services and which provide for physical distribution. According to American Marketing Association (AMA, 2004), “Marketing is an nl 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 O 1.1.2 The Scope of Marketing The early marketing ideas emerged from economics. It helped to clarify the ity theoretical disparities left by economists in the United States in the first part of the twentieth century. Marketing is considered to be both an art and a science. There is a marketing formulated and innovative side of it. The formulated part discusses conceptual models, established facts etc. Knowing and applying the formulated marketing concepts is important, as it helps marketers produce interesting findings s through marketing analysis, market modeling and predictive analytics. Creativity is equally important and leads to marketing success many times over. Therefore er marketing activities for efficient, effective and socially responsible marketing should be carried out in a thoughtful way. v What is marketed? There are 10 main types of entities that are marketed. They are: ni Goods - The goods constitute the bulk production and marketing efforts of a business. For Example: Laptops, Televisions, Soaps, etc. U Services - As economies advance, a growing proportion of their activities are also focused on the service production. The superstructure of developed economies today consists of 70-30 services-to-goods mix. Services include hotels, airlines, repair and maintenance and the professional services by ity accountants, lawyers, etc. Most market offerings consist of a variable mix of goods and services. Experiences – A firm can create, stage, and market experiences by combining several services and goods. For Example – Disneyland in Europe and USA, Esselworld in Mumbai, etc. m Events - Marketers promote time-based events, like trade shows, Olympics, sports events, and artistic performances. )A Persons - Celebrity marketing has become popular with popular personalities being marketed like - artists, musicians, CEOs, physicians, high-profile lawyers and financiers, etc. Places – Destination marketing is also becoming very popular with states, cities, regions, and also nations competing to attract tourists, factories, (c headquarters of Firms, and new residents. Place marketers can include economic development specialists, commercial banks, real estate agents, local business associations, and advertising and public relations agencies. Amity Directorate of Distance & Online Education  Marketing Management 3 Properties - Properties are intangible rights of ownership of either real estate Notes e or financial properties such as Stocks and Bonds. Properties are bought and sold involving marketing effort by real estate agents and investment Firms and in banks for securities. Organizations - Organizations actively work to build a strong and favourable image in the mind of their audience. Similarly, universities, museums, and nl performing arts organizations boost their public images to compete more successfully for audiences and funds. Information - The production, packaging, and distribution of information is an important entity that is marketed. Among the marketers of information are O Schools and Universities; publishers of Encyclopedias, nonfiction Books, and specialized magazines, CDs makers and Internet Web sites. Ideas - Every market offering has a basic idea at its core and in essence, ity products and services are platforms for delivering some idea or benefit to satisfy a core need. For Example – creating awareness about HIV/ AIDS, discouraging alcoholism and smoking, etc. 1.2.1 Needs, Wants, and Demands s Needs, wants and demands are the part of basic principles of marketing. A product er may also be distinguished according to how it meets the desires, wants or demands of a consumer. Needs are the basic requirements which include food, clothing and shelter without which humans cannot survive. Wants rely largely on the basic needs of humans. The needs become attractive when they are directed at specific goods which v meet the needs. If a person wants something that is premium, but still has the money to buy it, then such wishes are known as demands. The fundamental difference between ni demands and wants is based on ability to pay. A customer may want something but may not be able to fulfill his desire. The needs, wants and demands are very important components of marketing because they help the marketer decide the products which he U needs to offer in the market. 1.2.2 Segmentation, Target Markets, and Positioning ity Market segmentation is the process of dividing the overall market into relatively distinct homogeneous sub-groups of customers with specific needs or features that lead them to respond to a particular marketing campaign in similar ways. A market segment is a part of a larger market where individuals, groups, or organisations share one or more characteristics that cause them to have relatively similar product needs. m Segmentation is often necessary in both consumer and industrial markets. In each case, the marketer must decide on one or more useful segmentation variables, that is, dimensions that divide the total market into fairly homogenous groups, each with )A different needs and preferences. In targeting, the marketers evaluate the attractiveness of each potential segment and decide which of these groups they will invest resources against to try to turn them into customers. The customer group or groups selected are the firm’s target market. (c Instead of aiming a single product and marketing campaign at the mass market, most business identifies relatively homogeneous segments and accordingly develops suitable products and marketing campaigns matching the wants and preferences Amity Directorate of Distance & Online Education  4 Marketing Management of each segment. It should, however, be realised that all segments do not represent Notes e equally attractive opportunities for a business. Business need to categorise segments according to their present and future attractiveness and their business’s strengths and in capabilities relative to different segments’ needs and competitive situation. Positioning means the development of a marketing strategy aimed at influencing how a particular market segment perceives a good or service in comparison to the nl competition. Developing a positioning strategy entails gaining a clear understanding of the criteria target consumers use to evaluate competing products and then convincing them that your product will meet those needs. Positioning can be done in many ways. O 1.2.3 Offerings and Brands / Marketing Channels A marketing channel or distribution channel is a set of interdependent organizations involved in the process of making a product or service available for use or consumption ity by the consumer or business user. A business’s channel decisions directly affect every other marketing decision. Distribution channel decisions often involve long-term commitments to other firms. Therefore, management must design its channels carefully, with an eye on tomorrow’s likely selling environment as well as today’s. s Each layer of marketing intermediaries that performs some work in bringing the product and its ownership closer to the final buyer is a channel level. The number of er intermediary levels indicates the length of a channel. 1. A Direct marketing channel has no intermediary levels; the business sells directly to consumers. v 2. An Indirect marketing channel contains one or more intermediaries ni Some common business distribution channels are as follows: 1. A business marketer can use its own sales force to sell directly to business customers. U 2. It can sell to various types of intermediaries, who in turn sell to these customers. From the producer’s point of view, a greater number of levels mean less control and greater channel complexity. The institutions in the channel are connected ity by several types of flows. The flows include physical flow of the products, the ownership flow, the payment flow, the information flow, and the promotion flow. These flows can make even channels with only one or a few levels very complex. m 1.2.4 Owned, and Earned Media /Impressions and Engagement Communication is an interactive dialogue between the business and its customers )A that takes place during the pre-selling, selling, consuming, and post consuming stages. Business can now easily communicate through traditional media such as newspapers, radio, telephone, television, as well as through newer media forms such as computers, mobiles, fax machines, and pagers. By decreasing the costs of communication, new technologies have encouraged more business to move from mass communications to (c more targeted communication and also one-to-one dialogue. Amity Directorate of Distance & Online Education  Marketing Management 5 1.2.5 Value and Satisfaction Notes e The concept of customer value is important for the marketers because the primary goal of marketing is to deliver and enhance the customer value. Customer value can be in defined as the difference between the values a customer gains from owning and using a product and the costs of obtaining the product. It may also be defined as the sum of tangible and intangible benefits vis-à-vis cost to the customer. nl Often, customers don’t accurately or objectively assess the product values and costs. They act upon a value also known as the perceived value of the customer. In comparison, consumer satisfaction depends on the perceived success of a business O in providing value according to the expectations of a buyer. When the performance of the product falls short of consumer expectations, the buyer will be disappointed. The buyer will be delighted if performance exceeds expectations. Customer expectations are based on their past purchasing experiences, friends’ opinions and information and ity promises from marketers and competitors. They may satisfy those who buy but fail to attract majority if they set expectations too low, and if they raise expectations, buyers may become disappointed. s 1.2.6 Marketing Environment The process of business transformation does not occur within a vacuum. er Firms operate in a specific context, and they are influenced by this environment and can influence it. Marketing Environment is made up of actors and forces outside the organization that affect the ability of the management to build and maintain v relationships with targeted customers. Micro Environment: These are the factors which are close to the business ni and affect its ability to serve its customers, suppliers, marketing intermediaries, customer markets, competitors and publics. Micro Environment includes the business itself, supplies, marketing channel firms, customer markets, competitors, U and publics. ing rket ity Ma ies custom ediar ers n t erm I co rs m lie pe p p t ito Su rs m y an Pu mp bl co ics )A The Marketing The micro-environment consists of stakeholder groups that a firm has regular dealings with. The way these relationships develop can affect the costs, quality and (c overall success of a business. The components of business’s micro-environment include: Amity Directorate of Distance & Online Education  6 Marketing Management 1. Business’s Internal Environment Notes e Areas inside the business such as the top management, finance department, Research and Development (R&D), and other departments such as in purchasing, operations, and accounting. What affects the marketing department’s planning strategies. Top management sets the business’s mission, objectives and other strategies. nl Marketing managers make decisions within the strategies and the plans formulated by top management. All departments must think about the consumer and work together towards O providing superior customer value and satisfaction. Finance is concerned with the funding and usage of funds to carry out the marketing plans, while the accounting department measures the revenues and costs and informs the marketing department, how well the objectives are achieved. R&D focuses on ity designing safe and attractive products, purchasing department works towards procuring supply and materials, whereas the operations department is responsible for the production and distribution of desired quality and quantity of products. s 1. Suppliers - Suppliers are important links of the value delivery system as they provide resources required to produce goods and services. Marketing managers must watch er Supplier’s availability-supply shortages or delays and the labour strikes that can damage customer satisfaction in the long run. Rising supply costs can force a price increase harming the business’s sales volume. Most marketers treat suppliers like partners in creating and delivering the customer value. v 2. Marketing Intermediaries - Firms which help the business to promote, sell, and ni distribute its goods to final buyers are the marketing intermediaries. They include-- a. Resellers are distribution channel firms helping the business to find its customers and make sales to them. These include wholesalers and retailers who buy and U resell merchandise. For example, Wal-Mart, Carrefour, Big Bazaar etc. b. Physical Distribution - Firms help the business to stock and move goods from their points of origin to the destinations. While, working with warehouse and transportation firms, a business should determine efficient ways to determine ity the store and ship goods considering the factors like cost, delivery, safety and speed. c. Marketing Services - Agencies are the marketing research firms which help the business achieve its target and promote its products in the right market. m d. Financial intermediaries – It includes the banks, credit and insurance Firms and other businesses that help the financial transactions or insure against the risks associated with the buying and selling goods. )A 3. Customers – Customers are the people or entities who purchase a business’s goods and services. They are of five types - a. Consumer - Consumer market consists of individuals and households that buy goods and services for their personal consumption. (c Amity Directorate of Distance & Online Education  Marketing Management 7 b. Business - Business markets buy goods and services for further processing or Notes e for use in their production process. c. Reseller - Reseller market the bought goods and services to resell them at a in profit. Resellers further include - a. Government - Government markets are made up of government agencies that buy goods and services to produce public services or transfer the nl goods and services to others who need them. b. International - International market consists of buyers in other countries including consumers, producers, resellers, and governments. O 4. Competitors - The marketing concept states that for a business to be successful, it must provide greater customer value and satisfaction than its competitors do. The competitors include all those individuals and Firms who serve a target market ity with products and services that are viewed by consumers as being reasonable substitutes. Business must gain strategic advantage against these organizations. No single competitive marketing strategy is best for all firms. Each firm should consider its own size industry position compared to its own competitors. s 5. Publics - A public is any group that has an interest in or impact on an organization’s ability to achieve its objectives. We can identify seven types of publics. er a. Financial Public - These influence the business’s ability to obtain funds. Banks, investment houses and stockholders are the major financial publics. b. Media Public - These carry news, features etc. They include newspapers, v magazines, and radio and television stations. c. Government Public - Management must take government developments into ni account. Management must always follow the government rules and regulations when doing businesses mainly on issues of product safety, truth in advertising and other matters. U d. Citizen-action Public - A business’s marketing actions may be questioned by consumer organizations, environmental groups and others. Public Relations Department can help to stay in touch with consumer and citizen groups. ity e. Local public - These include the neighbourhood residents and community organizations. f. General public - A business needs to be concerned about the general public’s attitudes towards its products and activities. The public image of the business m affects its buying. g. Internal public - These include workers, managers, volunteers, and the board of directors. Large Firms use newsletters and other means to inform and )A motivate their internal publics. When employees feel good about their business, this positive attitude spills over to the external publics. Macro Environment: The larger societal forces affecting the Micro Environment constitute the macro environment. These forces are considered to be beyond the control of the organization. Macro environment includes the demographic, natural, (c technological, economical political, and cultural forces Amity Directorate of Distance & Online Education  8 Marketing Management Notes e ral Technolog Natu ical s force forces in ic Po om s fo litic on e rc al rc Ec es fo nl force phic Cul es forc ogra s O tura Dem l Company ity 1. Demographic Environment - The demographic environment refers to the size, distribution, and growth rate of groups of people with different characteristics. The demographic characteristics of interest to marketers relate in some way to purchasing behaviour, because people from different countries, cultures, age groups, s or household arrangement often exhibit different purchasing behaviours. Marketers track changing age and family structures, geographic population shifts, educational er characteristics, and population diversity. Population Size and Growth - Population size and growth rates provide one indication of potential market opportunities. The world population is now close to 7 billion, and almost 100 million people are added each year. Thus, v the world population is expected to grow by 1 billion during the decade of the 2020s. Approximately 95 percent of the growth will occur in Asian, African ni and Latin American developing countries. Population size and growth rates across countries are tremendously disparate. Today, China has the largest population, led by India, and the US a distant sixth. The rapid growth of the U Indian population is predicted to become by the year 2100 the most populous country in the world. The marketers, however, cannot rely solely on population growth in developing countries for general market size increase. The largest growth opportunities are in the developing world, measured by population ity size. Still, lower rates of income in developing countries may limit the actual size of the market for many items. Demographic Characteristics and Trends - Statistics of the global population and country population are important but most advertisers target m subgroups of these large populations. Therefore patterns in population subgroups are usually the most valuable to marketers. In many countries a significant phenomenon is urban population growth. In general, the largest )A cities and the highest city growth rates are in developing countries such as Brazil, Mexico, and India. However, growth in urban population is evident in many developed countries. Another interesting trend is the aging of the population, especially evident in Japan, Italy, Britain, and the US. However, the relatively young populations exist in the developing countries, such as (c Nigeria, Mexico, China and Brazil. These trends have important implications for marketers; older consumers have different needs and purchasing habits than younger consumers. Amity Directorate of Distance & Online Education  Marketing Management 9 2. Economic Environment - Market requires both the buying power as well as people. Notes e The economic environment consists of factors that affect consumer purchasing power and their spending patterns. It includes factors and trends related to the in income levels and the production of goods and services. While the demographic and cultural trends generally affect the size and needs of various markets, the economic trends affect the purchasing power of these markets. It is not enough for a population to be large or fast growing, to offer good market opportunities; the economy must nl provide sufficient purchasing power for consumers to satisfy their wants and needs. Economic trends in different parts of the world can affect marketing activities in other parts of the world. Market opportunities are the function of both economic size O and growth. The Gross Domestic Product (GDP) represents the total size of a country’s economy measured in the amount of goods and services produced. Changes in GDP indicate trends in economic activity. Another important economic factor is the level of ity economic activity per person. Per capita data integrate population and economic data to provide an assessment of the purchasing power of individual consumers in a country. Many developing countries have large populations relative to their economic strength; i.e., individual consumers do not have much purchasing power. However, s subgroups within these countries may have substantial purchasing power, or economic growth may offer substantial opportunities in the future. er 3. Natural Environment - Natural environment involves natural resources that are required as inputs by marketers or that are affected by marketing activities. The factors include: v Shortages of Raw Materials - Air and water may seem to be infinite resources. However, water shortage is already a problem in most of the ni industrial nations Renewable resources such as forests and food must also be used wisely. The rapid usage of nonrenewable resources such as Oil, coal, various minerals also pose a serious problem. U Increased Pollution – The increased pollution is one of the primary sources of environment depletion. Industries almost damage the quality of the natural environment. Disposal of Chemicals and nuclear wastes, the dangerous mercury levels in the ocean, the quantity of chemical pollutants in the soil and ity food supply, littering the environment with non-bio degradable wastes such as plastics, bottles and other packaged materials are very big examples of increased pollution. Increased Government Intervention - The governments of different m countries vary in their concern and efforts to promote a clean environment. Some rich countries like Germany are very strict on environmental quality where some poor nations do little about pollution, largely because they lack the needed funds or political will. )A 4. Technological Environment - The Technological Environment is the most dramatic force shaping the destiny. It includes forces that create new technologies, new products and market opportunities. The technological environment: Changes rapidly - All of today’s common products were not available (c 100 years ago or even 30 years ago. Abraham Lincoln did not know about automobiles, radios or the electricity. Similarly, Jawahar Lal Nehru did not Amity Directorate of Distance & Online Education  10 Marketing Management know about personal computers, cell phones, DVD players or even the Notes e internet. Creates New Markets and Opportunities - New technology creates in new markets and opportunities, thereby replacing the older technologies. Marketers should watch the technological environment closely. Firms that do not keep up will soon find their products outdated. And they will miss new nl product and market opportunities. Develop practical and affordable products - Many Firms are adding marketing people to R&D teams to try to obtain a stronger marketing orientation. Scientists are speculating on fantasy products such as flying cars, O 3 D televisions, and living in space colonies. The challenge in each case is not only technical but also commercial- to make practical, affordable, versions of these products. ity Product safety - As products and technology become more complex, customers’ needs to know that they are safe. The government agencies must investigate and ban potentially unsafe products. Safety regulations result in higher research costs and longer time between conceptualization and product introduction. s 3. Political and Legal Environment - Political environment includes the laws, er government agencies, and pressure groups that influence or limit various organizations and individuals in a given society. The Political/Legal environment encompasses factors and trends related to governmental activities and specific laws and regulations affecting the marketing practice. It is closely tied to the social v and economic environments, i.e. the pressure from the social environment, such as ecological or health concerns, or the economic environment, such as slow economic ni growth or high unemployment, typically motivate legislation intended to improve the particular situation. Regulatory agencies implement legislation by developing and enforcing regulations. Therefore, it is important for marketers to understand specific U political processes, laws, and regulations, as well as important trends in each of these areas. The areas of concern are: a. Increasing legislation. ity b. Changing government agency enforcement. c. Increased emphasis on ethics and socially responsible behaviour. 4. Cultural Environment - The cultural environment is made up of institutions and other forces that affect a society’s basic values, perceptions, preference, and behaviours. m People grow up in a particular society that shapes their basic beliefs and values. Core beliefs and values are passed on from parents to children and are reinforced by schools, churches, business, and governments. Secondary beliefs and values are )A more open to change. Thus, marketers may be able to change secondary beliefs, but not core beliefs. Society’s major cultural views are expressed in people’s views of: a. Themselves b. Others (c c. Organizations Amity Directorate of Distance & Online Education  Marketing Management 11 d. Society Notes e e. Nature f. The universe in Cultural factors, including the values, ideas, attitudes, beliefs, and activities of specific population subgroups, greatly affect consumers’ purchasing behaviour. Thus, marketers must understand important cultural characteristics and trends in different nl markets. Cultural Diversity - Cultural differences are significant in both the domestic O and international markets. The characteristics of a cultural group affect the types of products they want, and how they buy and use those products. Various cultural groups on the international markets also allow marketers to establish different strategies for them. Successful marketers understand the ity delicate balance between important cultural differences and similarities that unite different cultures. This cultural complexity provides marketers with a continual challenge. Changing Roles - As more women enter the workforce and household s compositions change, typical household roles are altered. No longer are financially supporting the household and developing a career solely the er responsibility of men and no longer are the household chores, child care, or grocery shopping solely the responsibility of women. Roles have shifted in many households and distinctions have become floured. More men spend time on household and shopping tasks and many women participate in career v growth and provide a family with most or most of the financial capital. There are tremendous market opportunities for Firms that can develop effective ni strategies to appeal to these changing roles. Emphasis on Health and Fitness – Another cultural trend is an increased emphasis on health and fitness. The pursuit of a healthier lifestyle includes U eating more nutritious foods, exercising regularly, participating in various sports activities, and focusing on an overall wellness. This translates into potential market opportunities for firms that provide products and services geared toward improving health and fitness. ity Desire for Convenience - Changes in household composition, increases in the number of working women, and a general shortage of time underlie an increased desire for convenience. Two-paycheck households often have more money than time and they are willing to spend this money to avoid m spending time doing undesirable chores, such as cooking, cleaning, or auto maintenance. Thus, many consumers buy products and services to minimize time devoted to such chores, opening new market opportunities for Firms able )A to meet these needs. Consumerism - Consumerism is the movement to establish and protect the rights of buyers. Consumerism movement can intensify as we move through the 21st century. Consumers are more educated, knowledgeable, and organized and demand better consumer information, service, quality, (c dependability, and fair prices. The consumerism movement is one reason marketers need to adopt an ethical perspective. Giving consumers Amity Directorate of Distance & Online Education  12 Marketing Management products that work, charging fair prices, being honest, and practicing social Notes e responsibility are the best ways to respond to consumerism 1.3.1 Marketing and Customer Value in The concept of customer value is important for the marketers because the primary goal of marketing is to deliver and enhance the customer value. Customer value can nl be defined as the difference between the values a customer gains from owning and using a product and the costs of obtaining the product. It may also be defined as the sum of tangible and intangible benefits vis-à-vis cost to the customer. In an organization all departments must “think consumer” and work together to provide superior customer O value and satisfaction. The concept of customer value helps marketers to achieve the basic goal of marketing, which is to deliver and enhance customer value. Marketing mix represents ity classification of marketing activities under four broad heads – Product, Price, Place and Promotion. The variables under each category can be influenced by a marketer to promote a product or service and these essentially are the marketing tools. Finally, the five marketing philosophies representing the focus of the organisations are – production s concept, selling concept, product concept, marketing concept and holistic marketing concept. After understanding the basic marketing terminology it is important for us to er determine the environmental variables that impact the performance of organizations. 1.3.2 The Value Delivery Process v The term value delivery process expands on the limited nature of the “supply chain.” It consists of the business, suppliers, distributors, and ultimately the consumers ni who “partner” with each other to improve the performance of the entire system. Channel decisions taken by an organization directly affect any other marketing decision and the decisions affecting the distribution networks also require long-term commitments to other firms. U The supply chain consists of “Upstream” and “Downstream” partners, including suppliers, intermediaries, and even intermediary customers. Upstream from the supplier or service provider is the collection of Firms that supply the necessary raw materials, ity components, parts, software, finances and expertise to produce a product or service. Traditionally, marketers have focused on the downstream side of the supply chain, the marketing channels or distribution channels that look forward toward the customer. It is the unique design of each organization’s supply chain that enables it to m deliver superior value to customers. The term supply chain may be too limited as it takes a make and sell view of the business. A better term would be a demand chain as it suggests a sense-and-respond view of the market. Under this view, planning )A begins with the needs of the target customers, to which the organization responds by coordinating resources with the goal of generating value for the customers. Yet even that could be too restricting. A value distribution network consists of the client, manufacturers, distributors and ultimately customers who collaborate to enhance the efficiency of the whole system. (c Amity Directorate of Distance & Online Education  Marketing Management 13 1.3.3 The Value Chain Notes e The way to generate high customer loyalty is to deliver high customer value by designing a competitively superior value proposition aimed at a specific market in segment backed by a superior value-delivery system. The value proposition consists of the whole cluster of benefits the business promises to deliver and is basically a statement about the resulting experience customers will gain from the business’s nl market offering. The brand must present a promise which can only be kept depending on how the business can manage its value-delivery system. The value-delivery system includes all the experiences the customer will have O on the way to obtaining and using the offering. In a hyper-competitive economy, a business’s success depends on how it can create and deliver superior value. In order to do so, the business must develop the following five capabilities: ity 1. Understanding customer value 2. Creating customer value 3. Delivering customer value 4. Capturing customer value s 5. Sustaining customer value In order to succeed, therefore, the business needs er to use the concept of value and a value-delivery network. The value chain is a tool developed by Michael Porter for the identification of ways to create more customer value. The value chain considers nine strategically important v activities among the various activities of a firm, which create a value and cost in a specific business. ni Firm Infrastructure support activities U human resource management m ar gi technology development n procurement ity inbound operations outbound marketing service logistics logistics & sales m ar gi n m )A primary activities The primary value activities represent the sequence of bringing materials into the business, converting them into final products, shipping out the final products, marketing them and servicing them, apart from support activities such as procurement, technology (c development, human resource management and firm infrastructure, that are required for supporting the primary activities. Amity Directorate of Distance & Online Education  14 Marketing Management Primary Value Activities Notes e Inbound logistics: material handling and warehousing. Operations: transforming inputs into the final product. in Outbound logistics: order processing and distribution. Marketing and sales: communication, pricing and channel management. nl Service: installation, repair and parts supply. Support Activities - The support activities are handled in certain specialized departments. O Procurement: procedures and information systems. Technology development: improving the product and process or system. Human resource management: hiring, training and compensation. ity Firm infrastructure: general management, finance, accounting, government relations and quality management. 1.3.4 Core Competencies s Superior success does not come exclusively from capital since it can be imitated or exchanged. Superior success comes from the allocation of capital to build competences er in the activities of the company. For example, an individual’s knowledge will not improve the performance of an organization unless they are allowed to work on specific tasks that leverage that knowledge. Although an organisation will need to achieve a threshold level of competence in all of the activities and processes, only some will become core v competences. ni Core competence refers to that collection of distinctive skills that provide a business with a sustainable competitive advantage source. Over time, core competencies evolve and demonstrate the capacity of the company to apply various U resources and skills to achieve and maintain competitive advantage in a number of contexts. Core competencies are activities or processes which an enterprise urgently requires in order to gain competitive advantage. They build and maintain the ity opportunity to achieve the essential success criteria of specific consumer groups in ways that are impossible to replicate, better than their competitors. It must be: 1. An activity or process that provides customer value in the product or service features. m 2. An activity or process that is significantly better than competitors. 3. An activity or process that is difficult for competitors to imitate. )A 1.4.1 Philosophies of Marketing Management The organization’s business approaches focus on identifying and meeting the customers stated or hidden needs and wishes are described as marketing orientations. These are also known as philosophies of marketing. The five alternative concepts under which organizations carry out their marketing activities are the concepts of production, (c Amity Directorate of Distance & Online Education  Marketing Management 15 product, selling, marketing and holistic marketing. They describe the orientations of the Notes e organization towards marketplace. a. The Production Concept – This philosophy suggests that the consumers in will favour the products that are readily available as well as affordable. The management should therefore focus on improving the efficiency in production and distribution. This concept describes one of the oldest philosophies sellers nl were guided by. This principle is also true in circumstances where the demand for a product exceeds the supply and the cost of the product is too high, and there is a need for improved productivity to reduce it. O b. The Selling Concept – Many Firms believe that consumers will not buy enough of the organization’s products unless it undertakes a large-scale selling and a promotional effort. This concept is popular among Firms marketing unsought goods such as insurance products, encyclopedias, etc. The organizations may ity practice the selling concept when they have overcapacity. The primary aim of such Firms is to sell what they make rather than make what the market wants. The focus is on creating a sales transaction, rather than building a long-term, profitable relationship with consumers. s c. The Product Concept - The product concept suggests that consumers will favour the products offering the best quality, good performance, and innovative er features. Hence, a business should focus on making continuous product improvements. The selling concept takes an inside-out perspective. It starts with the factory, focuses on the business’s existing products, and calls for heavy selling and promotion to obtain profitable sales. It focuses heavily on customer v conquest—getting short-term sales with little concern about who buys or why they buy. ni d. The Marketing Concept – Marketing concept promotes the achievement of organizational objectives by determining the needs and wants of customers and delivering the products and services more effectively and efficiently than U their competitors. It also takes an outside-in perspective. It starts with a well- defined market, focuses on customer needs, coordinates all the marketing activities affecting customers, and makes profits by creating long-term customer ity relationships based on customer value and satisfaction. Under the marketing concept, Firms produce what consumers want, thereby satisfying consumers and making profits. e. Holistic Marketing Concept - The holistic marketing concept is a relatively new m marketing perspective taking into account an entire organization, in addition to its counterparts when determining or executing its overall marketing strategy. It recognizes involvement of many stakeholders in each transaction— from suppliers, to employees, customers, shareholders, the community at large, )A and also the environment. The business must take the interdependencies into account in order to achieve success, since Firms operate within a multi- dimensional, global and interconnected countryside. The concept of holistic marketing is based on the development, design and implementation of marketing programs, processes and activities recognizing their scope and (c interdependencies Amity Directorate of Distance & Online Education  16 Marketing Management Notes Internal Marketing Integrated Marketing e Marketing Dept. Channels Other Departments Products and Services Senior Management in Communications Holistic Marketing Socially Responsible Marketing nl Relationship Marketing Ethics Environment Customers Legal Channel Community Partners O 1. Relationship Marketing – Relationship Marketing is a marketing strategy whose objective is to establish and maintain a profitable, long-term relationship with a customer, which goes beyond the initial contact. Relationship marketing is a form of ity marketing that evolved from direct response marketing; it places emphasis on building longer-term relationships with customers rather than on individual transactions. Relationship marketing involves an understanding of customers’ needs and wants through their lifecycle and providing a range of products or services accordingly. The overall goals are to find, attract and win new clients, nurture and retain those the s business already has, entice former clients back into the fold, and reduce the costs of marketing and client service. er 2. Integrated Marketing – It involves synchronizing the marketing efforts for designing and implementing an overall unified marketing strategy. Each component of the marketing initiative is not treated as a separate task but an integrated approach is v followed which involves a cohesive strategy using different marketing tactics (such as web and email marketing, print advertising, social media, sales collateral and ni websites, direct marketing, event marketing, etc.) All marketing efforts have to be planned and coordinated to achieve synergy. Hence this concept involves unifying different marketing methods such as mass marketing, one-to-one marketing, and U direct marketing. 3. Internal Marketing - Holistic marketing incorporates internal marketing, ensuring that everyone in the organization embraces appropriate marketing principles. ity Internal marketing is the task of hiring, training, and motivating the employees of the organization who want to serve customers well. The marketers recognize that marketing activities within the business can be as important as, or even more so than, marketing activities directed outside the business. Internal marketing must take place on two levels. At one level, the various marketing functions-sales force, m advertising, customer service, product management, marketing research-must work together, and at the second level the partners of the organization should be motivated 4. Socially Responsible Marketing - Socially responsible marketing is a marketing )A philosophy that states a business should take into consideration what is in the best interest of society in the present and long term. Socially responsible Firms should aspire to produce desirable products. Desirable products provide immediate satisfaction and long term benefits. These products are sought by consumers for immediate gratification and also benefit society and consumers in the long term. (c Amity Directorate of Distance & Online Education  Marketing Management 17 1.5.1 Difference between Marketing and Selling Notes e Marketing begins with clients, and ends with clients. Creating superior value for customers and achieving high levels of customer satisfaction is at the heart of today’s in marketing. It is a societal process that takes place in a dynamic environment. The concept of sales is geared to converting existing concepts, such as products in cash instead of finding first, and then satisfying customer needs. The definition of sales nl is often seen in practice when enterprises rely heavily on their promotional capabilities. It is based on approach “hard sell.” O Difference between Marketing and Selling Basis Marketing Selling Meaning Marketing concept is a business Selling concept is a business ity orientation which talks about notion, which states that if accomplishing organizational goals consumers and businesses by becoming better than others in remain unattended, then providing customer satisfaction. there will not be ample sale of s organization’s product. Associated with Directing goods and services Compelling consumer’s mind towards consumer’s mind. er towards goods and services. Focuses on Customer needs Product Perspective Outside-in Inside-out v Business Marketing constitutes a long term The planning for sales function ni Planning business planning is often short term Price Market determined Cost of Production Orientation Profit oriented Volume oriented U 1.5.2 Why Selling is Important? ity The sales department plays a crucial role in the business’ performance of every organisation. Sales’ specific and essential task is to bridge the gap between the needs of potential customers and the products and services offered by the business that can meet their needs and wants. Selling is important as it influences the success of the organization in following ways - m 1. Organizational growth - Sales play a key role in building the customer and also business loyalty and trust. Trust and loyalty are the main reasons a customer chooses to recommend your business to a friend or family member or to write a great online )A review of your product or service. Through increased brand recognition and sales, encouraging the customer to recommend a friend or to provide positive feedback will impact business development. 2. Demand creation - Once the right product is produced it will only result in profit if (c requested. Thus a significant aspect of selling is demand creation. The seller shall notify the buyer of the availability of its goods. Usually he does this by resorting Amity Directorate of Distance & Online Education  18 Marketing Management to activities such as promotion of advertising and sales. As demand creation, all Notes e activities conducted by a seller to keep its customers aware and updated about its goods through the various means available to him can be identified. in 3. Customer Retention - Selling is a personal, powerful thing, interaction between one human and another. Always underestimate the personal relationship between two individuals, and the possible effect that can have on the credibility of your brand. One nl of the keys to customer satisfaction across purchases is following up on purchases. Establishing after-sales calls or meetings is a perfect way to sustain and develop a good relationship, which provides the consumer with an opportunity to comment on their product or service experience. O 4. Ingredient of marketing programme – The scope of marketing is wide, and includes pricing, development of product, distribution channels and promotional activities. Sales promotion is the basis for formulating marketing politics and programme. ity 5. Perpetual and Productive function - Sales is a continuous function. This is the cornerstone of all other business functions. Therefore the success of selling is the basis for all other business functions. It is by selling the source of income and making available money. It is an activity which produces wealth. A business’s operational s and other expenses are met from the revenue generated through selling. er 1.6.1 Difference between Marketing and Relationship Marketing, While, marketing is a societal process, by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and v services of value with others. Relationship Marketing is a marketing strategy whose objective is to establish and ni maintain a profitable, long-term relationship with a customer, which goes beyond the initial contact. Relationship marketing is all about building trust between the business and its customers and keeping promises and is based on the principle that current U customers are the key to long-term business success. Relationship marketing is a marketing type that developed from direct response marketing; it focuses on building long-term customer relationships rather than individual ity purchases. Relationship marketing requires knowing the needs of consumers, and able to offer a variety of goods or services tailored across their lifecycle. Basis Traditional Marketing Relationship Marketing Meaning Managing a Business’s product Managing a business’s customer m portfolio, setting and modifying portfolio, building long-term marketing mix parameters to achieve business relationship optimal 4 Ps. )A Marketing focus Product and service Product / Service and Customer. Assessment Short duration Long duration Period (c Marketing One-way communication Interactive communication. interaction Amity Directorate of Distance & Online Education  Marketing Management 19 Orientation Towards single sales. Towards customer retention. Notes e Focus On product features On customer value. in Contact Intermittent customer contact. Continuous customer contact. Marketing goal Customer acquisition Customer acquisition, customer retention and customer recovery nl Quality It is the concern of the production staff. Quality is the concern of all. O 1.7.1 Difference between Social Marketing and Traditional Marketing Traditional marketing and social marketing diverge in the nature of their marketing message from one another. All traditional business definitions are true for a Corporate Marketer. A social marketing strategy takes traditional marketing and expands it to ity incorporate the client’s social issues. While marketing deals with the customers more than any other business functions. Creating value and satisfaction for customers is at the very heart of modern marketing thinking and practice. Social marketing is the strategy that is used to create practices s that tend to alter or sustain the actions of individuals for the benefit of individuals and society as a whole. er 1.8.1 Strategic Planning The process of developing and maintaining a strategic fit between the v organization’s goals and capabilities and its changing marketing opportunities is ni called Strategic planning. Strategic planning offers a systematic means of coping with uncertainty and adapting to change. It enables managers to consider how to grasp opportunities and avoid problems, to establish and coordinate appropriate courses of action and to set targets for achievement. U 1.8.2 Define Various Levels of Strategic Planning There are three aspects or levels of strategy formulation, each with a different ity focus, need which are to be dealt with in the formulation phase of strategic management. The three sets of recommendations must be internally consistent and fit together in a mutually supportive manner which form an integrated hierarchy of strategy, in the order mentioned. m 1. Corporate Level Strategy 2. Competitive Strategy )A 3. Functional Strategy 1. Corporate Level Strategy the business is concerned with specific decisions in that dimension of the strategy, regarding the nature and purpose of the overall organisation. In general, it is discussed (c as to what improvements can be made to our growth target and plan, the business Amity Directorate of Distance & Online Education  20 Marketing Management lines we are in and how these business lines work together. It is useful to think of three Notes e components of corporate level strategy: (a) Growth or directional strategy - It refers to what should be our growth in objective, ranging from retrenchment through stability to varying degrees of growth and how a business can accomplish this (b) Portfolio strategy - It refers to as to what should be the portfolio of lines of nl business, which implicitly requires reconsidering how much concentration or diversification a firm must have (c) Parenting strategy - It refers to as how the business should allocate resources O and manage capabilities and activities across the portfolio, where a firm must put special emphasis, and how much do they integrate their various lines of business. ity 2. Competitive Strategy This is often called as the business level strategy. This includes determining how each Line of Business (LOB) or Strategic Business Unit (SBU) should perform within the business. In this second dimension of a company’s strategy, the emphasis is on s how to efficiently succeed in each of the business lines that the organization has chosen to participate in. The main thrust is how to build and strengthen the competitive er position of the company for each of its business lines. A business has competitive advantage if it can draw customers and defend itself better than its competitors against external powers. v Successful strategic approaches tend to require developing incredibly strong skills in one or more fields critical to success and their using them to retain a competitive ni advantage over rivals. Few examples include the superior technology or the product features, better manufacturing technology and skills, superior sales and distribution capabilities, and better customer service. U 3. Functional Strategy These are more focused and shorter-term approaches tackle how to be efficient and optimize the resource efficiency, increasing functional area and unit must carry ity out its functional activities. Functional strategies are fairly short-term initiatives that would be carried out by each functional region of an organization to execute larger organizational and business-level strategies at the longer term. Each functional area has a number of strategy choices that interact with and must be consistent with the m overall company strategies. )A (c Amity Directorate of Distance & Online Education  Marketing Management 21 1.8.3 Steps in Strategic Planning Process Notes e The strategic planning process consists of a series of steps. These steps include – in Step in the Strategic Planning Business unit, product, and nl Corporate Level market level Setting Planning, Defining the company Designing marketing, and O company objectives the business other functional mission and goals