ELH 316 Marketing Management PDF

# ELH 316 MARKETING MANAGEMENT ## MODULE 1: MARKETING CONCEPTS AND CHALLENGES ### MARKETING **According to the American Marketing Association**, "Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer...

# ELH 316 MARKETING MANAGEMENT ## MODULE 1: MARKETING CONCEPTS AND CHALLENGES ### MARKETING **According to the American Marketing Association**, "Marketing is an 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." **The consumer's approach to marketing consists of four general activities:** - Identifying and selecting the type of customer, understanding their needs and desires. - Designing products or services that suit the customers' desires. - Persuading customers to buy at the firm's offerings. - Storing, moving, and displaying goods after they leave the production site. **Marketing can also be defined as the set of activities involved in identifying and anticipating customer needs and then attempting to satisfy those needs profitably. What does that mean?** - Identifying customer needs. - Anticipating customer needs. - Satisfying customer needs profitably. ### MANAGEMENT **According to Harold Koontz,** "Management is the art of getting things done through and with people in formally organized groups." **The interlocking functions of management are:** - Creating corporate policy and organizing. - Planning. - Controlling. - Directing an organization's resources in order to achieve the objectives of the policy. **Management is the coordination and administration of tasks to achieve a goal.** Such administration activities include: - Setting the organization's strategy - Coordinating the efforts of staff to accomplish objectives through the application of available resources. **Management can also refer to the seniority structure of staff members within an organization.** **A diagram depicting the key elements of management, organized in a table format:** | Men and Women | Markets | Machines | Management | Materials | Money | Methods | |:---:|:---:|:---:|:---:|:---:|:---:|:---:| | | | | Harmonizing them in order to achieve desired goals and objectives. | | | | ### MARKETING MANAGEMENT **According to Philip Kotler,** "Marketing Management is the analysis, planning, implementation, and control of programs designed to bring about desired exchanges with target audiences for the purpose of personal and of mutual gain. It relies heavily on the adoption and coordination of product, price, promotion and place for achieving responses." **A diagram depicting the components of Marketing Management, organized in a table format:** | Tactics | Strategies | Plan | Corporate Organization | Market | Products | Marketing Strategy | |:---:|:---:|:---:|:---:|:---:|:---:|:---:| | | | | | | | | ### Needs, Wants and Demands in Marketing **Marketing is all about identifying and fulfilling the needs of the customer.** The needs are basic human requirements. There are three important concepts in marketing: - Needs - Wants - Demands **Understanding your target markets’ needs, wants and demands will help you better market your products.** - Needs are things that satisfy the basic requirements. - Wants are things that the customer desires. - Demands are things that the customer both desires and is willing to pay for. **For example: consumer electronics, an item the customer wants to use but may not be able to afford.** ### Needs **“Needs” are the basic human requirements that are needed to survive.** These necessities include shelter, clothes, food and water. Examples of needs category products/sectors: - Agriculture sector. - Real Estate. - Healthcare. **Maslow’s hierarchy of needs categorizes needs into 5 levels:** - Physiological needs. - Safety needs. - Social needs. - Esteem needs. - Self-actualization needs. **How companies target different levels of needs:** 1. **Physiological Needs:** These are the most basic needs essential to survival. (Foods, clothes, shelter). 2. **Safety Needs:** Protection against deprivation, danger, and threat on or off the job. 3. **Social Needs:** Affection, a sense of belonging, acceptance. 4. **Esteem Needs:** Are psychological in nature and represent higher-level needs. (Feeling valued) 5. **Self-actualization needs:** Related to personal growth, self-fulfillment, (The desire to become what one is capable of becoming). ### Wants **The desire for products or services that are not necessary, but which consumers wish for.** Humans have unlimited needs, and to satisfy them, they desire different things. **As time passes, people change their wants accordingly.** The desire for different things varies from culture to social class and from personality to personality. ### Demands **When a customer is willing and able to buy what they need or want, it becomes a demand for the organization.** - Want becomes demand when supported by purchasing power. (Many people want a Mercedes, but only those who can afford it, will demand it.) **People can make demands because they have the ability, willingness and desire to buy what is necessary.** **Forecasting the demand is very important. It plays a significant role in managerial decision making. This helps to forecast the demand while doing strategic marketing planning.** **A diagram depicting Needs, Wants and Demands:** - Need is food. - Money to buy - Demand is Pizza. ### NATURE OF MARKETING MANAGEMENT **It combines the fields of marketing and management.** **Marketing consists of:** - Discovering consumer needs and wants - Creating the goods and services that meet those needs and wants. - Pricing - Promoting and delivering those goods and services. **Doing so requires attention to six major areas:** - Markets - Products - Prices - Places - Promotion - People. ### MAJOR FUNCTIONS OF MARKETING MANAGEMENT **The major functions of marketing management include:** - **Selling:** Is the crux of marketing. It involves convincing the prospective buyers to actually complete the purchase of an article. It includes transfer of ownership of products to the buyer. - **Buying and Assembling:** Buying is It deals with what to buy, of what quality, how much from whom, when and at what price. Assembling means buying necessary component parts and to fit them together to make a product. - **Transportation:** Is the physical means through which products are moved from the places where they are produced to those places where they are needed for consumption. - **Storage:** Includes holding of products in proper, i.e., usable or saleable, condition from the time they are produced until they are required by customers in case of finished products or by the production department in case of raw materials and stores. - **Standardization and Grading:** Standardization means setting up of certain standards or specifications for products based on the intrinsic physical qualities of any item. Grading means classification of standardized items into certain well - defined classes or groups. - **Financing:** Involves the application of the capital to meet the financial requirements of agencies dealing with various activities of marketing. - **Risk Taking:** Means loss due to some unforeseen situations. - **Market Information:** The only sound foundation on which marketing decisions depend is timely and correct market information. ### MARKETING MANAGEMENT IS A BUSINESS PROCESS **Marketing management is a business process, to manage marketing activities in profit-seeking and non-profit organizations at different levels of management:** - Supervisory - Middle-management. - Executive - Marketing management decisions are based on strong knowledge of marketing functions and a clear understanding and application of supervisory and managerial techniques. - Marketing managers and product managers are there to execute the processes of marketing management. We, as customers, see the results of such a process in the form of products, prices, advertisements, promotions, etc. ### MARKETING MANAGEMENT IS BOTH SCIENCE AND ART **"Marketing management is art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value."** (Kotler, 2006). - Marketing management is a science because it follows general principles that guide marketing managers in decision-making. - The Art of Marketing management consists of tackling every situation in a creative and effective manner. ### NATURE AND SCOPE OF MARKETING MANAGEMENT **Marketing is an Economic Function** Marketing embraces all the business activities involved in getting goods and services, from the hands of producers into the hands of final consumers. **Marketing is a Legal Process by which Ownership Transfers** In the process of marketing the ownership of goods transfers from the seller to the purchaser or from producer to the end-user. **Marketing is a System of Interacting Business Activities** Marketing is that process through which a business enterprise, institution, or organization interacts with the customers and stakeholders with the objective to earn a profit, satisfy customers, and manage relationships. It is the performance of business activities that direct the flow of goods and services from producer to consumer or user. **Marketing is a Managerial Function** According to the managerial or systems approach -"Marketing is the combination of activities designed to produce profit through ascertaining, creating, stimulating, and satisfying the needs and/or wants of a selected segment of the market." According to this approach, the emphasis is on how the individual organization processes marketing and develops the strategic dimensions of marketing activities. **Marketing is a Social Process** Marketing is the delivery of a standard of living to society. According to Cunningham and Cunningham (1981) societal marketing performs three essential functions: - Knowing and understanding the consumer's changing needs and wants; - Efficiently and effectively managing the supply and demand of products and services; and - Efficient provision of distribution and payment processing systems. **Marketing is a philosophy based on consumer orientation and satisfaction** **Marketing had dual objectives - profit-making and consumer satisfaction** ### Scope of Marketing 1. **Study of Consumer Wants and Needs:** Goods are produced to satisfy consumer wants. Therefore, the study is done to identify consumer needs and wants. These needs and wants motivate the consumer to purchase. 2. **Study of Consumer Behavior:** Marketers perform a study of consumer behavior. Analysis of buyer behavior helps marketers in market segmentation and targeting. 3. **Production Planning and Development:** Product planning and development starts with the generation of product ideas and ends with product development and commercialization. Product planning includes everything from branding and packaging to product line expansion and contraction. 4. **Pricing Policies:** The marketer has to determine pricing policies for their products. Pricing policies differ from product to product. It depends on the level of competition, product life cycle, marketing goals, and objectives, etc. 5. **Distribution:** The study of distribution channels is important in marketing. For maximum sales and profit, goods are required to be distributed to the maximum consumers at minimum cost. 6. **Promotion:** Promotion includes personal selling, sales promotion, and advertising. The right promotion mix is crucial in the accomplishment of marketing goals. 7. **Consumer Satisfaction:** The product or service offered must satisfy the consumer. Consumer satisfaction is the major objective of marketing. 8. **Marketing Control:** The marketing audit is done to control the marketing activities. ### MARKETING PROCESS **Meaning of Marketing Process** The Marketing Process of a company typically involves identifying the viable and potential marketing opportunities in the environment, developing strategies to effectively utilize the opportunities, evolving suitable marketing strategies, and supervising the implementation of these marketing efforts. **Steps in Marketing Process** - **Situation Analysis:** Analysis of the situation in which the organization finds itself serves as the basis for identifying opportunities to satisfy unfulfilled customer needs. - **Marketing Strategy:** After identifying the marketing opportunities, a strategic plan is developed to pursue the identified opportunities. - **Marketing Mix Decisions:** At this step detailed tactical decisions are made for the controllable parameters of the marketing mix. - **Implementation and Control:** Finally, the marketing plan is implemented and the results of marketing efforts are monitored to adjust the marketing mix according to the market changes. ### MARKETING ENVIRONMENT **Marketing Environment** The term Marketing Environment refers to the forces and factors that affect the organization’s ability to build and maintain good relationships with its customers. Marketers have to interact with internal and external people at micro and macro level and builds internal and external relationships. **The key elements of marketing environment are as follows:** - **Internal Environment:** Internal factors like men, machine, money, material, etc., on which marketing decision depends consists internal marketing environment. - **External Marketing environment:** The external marketing environment consists of all the external marketing factors that exist outside the organization. **The external marketing environment can be divided into two categories:** - **Micro Environment** - **Macro Environment** ### MARKETING ORGANIZATIONS - **Organization:** An organization is a group of people that is structured and managed to achieve a common goal. Every organization has a defined structure that determines the relationship between its members, and assigns their roles, responsibilities, and authority. - **Marketing Organization:** A group of marketing persons brought together to make decisions on marketing areas like product, price, place, and promotion. **Marketing organization can be defined as a formal or informal group of individuals working together to reach quantitative and qualitative marketing objectives by making decisions on product, price, place, and promotion.** ### TYPES OF MARKETING ORGANIZATIONS Marketers must have knowledge of what type of marketing organization they have in place; and what type of marketing organization the company actually needs. **The different types of marketing organization that commonly exists today are:** - **Functional type of marketing organization:** The different marketing activities are grouped on the basis of functions to be performed like product planning, market research, advertising, sales, or promotion. - **Product oriented marketing organization:** A product oriented marketing organization is common where the organization is producing or marketing a wide variety of products. - **Market oriented marketing organization:** Common in big organizations serving a large number of customers spreading over large territories. - **Customer oriented marketing organization:** Common in organizations engaged in providing specialized services to different classes of customer. ### MARKETING CHALLENGES In such a rapidly changing marketing environment, it is really difficult for business organizations to make quick and sound decisions, and facing various marketing challenges. **Here are some of the major marketing challenges that business organizations are facing today:** - **Rapidly Changing Customer Needs, Wants, and Expectations:** Today, the needs, wants, and expectations of the customer are changing rapidly. - **Increasing Global and Domestic Competition:** Competition today is global rather than just domestic. **Ways to overcome marketing challenges:** - **Create a Learning Organization:** Business organizations must include learning as a key to improvement in their organizational values. - **Market Research:** Marketing organizations must invest in market research and they are required to make extensive of it. - **Reevaluate the Old Mix - Four Ps to Four Cs:** With the increasing globalization, competition, and popularity of the Internet the old marketing mix is facing many new challenges; and to tackle these challenges marketing management must reevaluate the old marketing mix to new mix by converting four Ps to four Cs. ### SOCAIL MARKETING CONCEPTS **Social Media Marketing** **According to Philip Kotler**, Social Marketing is “the design, implementation, and control of programs seeking to increase the acceptability of a social idea or practice in a target group”. **According to W. Smith, Academy for Educational Development** - “Social Marketing is a process for influencing human behavior on a large scale, using marketing principles for the purpose of societal benefit rather than commercial profit.” **Social marketing is based on the tools and techniques of commercial marketing, it uses principles of commercial marketing for the purpose of societal benefit.** In social marketing, advertising campaigns are designed, implemented, and controlled by using the principles of commercial marketing. **The key features of social marketing are taken directly from commercial marketing, but the purpose of social marketing differs from the purpose of commercial marketing.** The purpose of commercial marketing is to increase sales and revenue, but it is not so in the case of social marketing. **It includes concept development, pricing, information exchange, delivery, and market analysis.** Social marketing is developing, putting into action, and managing programs intended to influence the degree to increase acceptance of social ideas. It is a type of marketing that is expanding quickly and has a significant potential to lead to decreased consumption. ### MARKETING CONTROL PROCESS It is true to say that planning gives direction to an organization, planning enables an organization to achieve its objectives, but without control measures planning is of no mean, it’s just an empty exercise without control. **Business organizations do marketing planning to incorporate overall marketing objectives, strategies, and programs of actions designed to achieve marketing objectives.** Marketing Planning involves setting objectives and targets, and communicating these targets to people responsible to achieve them. ### DEFINTION OF MARKETING CONTROL **Marketing Control can be defined as "the process of measuring and evaluating the results of marketing strategies and plans, and taking corrective action to ensure that marketing objectives are achieved."** **Marketing Control can also be defined as "the set of practices and procedures employed by firms to monitor and regulate their marketing activities in achieving their marketing objectives."** **The four-step marketing control process:** - **Define Marketing Objectives** - **Set Performance Standards** - **Compare Results Against Standards** - **Corrections and Alterations** ## MODULE 2: MARKETING ENVIRONMENT **Industry competition, legal constraints, the impact of technology on product design and social concerns are some of the many important conditions that shape the business environment.** This lesson examines the forces that define marketing’s extemal environment. **Every organization needs to think seriously about the environments in which it operates.** All firms must identify, analyze and monitor external forces and assess their potential impacts on the firm’s goods and services. **Although external forces frequently operate outside the marketing manager’s control, decision makers still must consider those “uncontrollable’ influences together with the variables of the marketing mix in developing the firm’s marketing plan and strategies.** **MARKETING ENVIRONMENT** A marketing environment encompasses all the internal and external factors that drive and influence an organization’s marketing activities. **When a company adjusts to market conditions, it often considers a variety of factors.** Understanding a company’s marketing environments can help you identify trends and manage potential risks. Learning about these environments can also help the company adapt and grow during market fluctuations. **Benefits of understanding your marketing environment include:** - Assisting you in understanding the company’s competitors and the market - Supporting you in identifying your current and potential customers - Helping you determine future marketing plans - Aiding you in assessing current trends ### ENVIRONMENTAL SCANNING AND ENVIRONMENTAL MANAGEMENT **Marketers must carefully and continually monitor crucial trends and developments in the business environment.** Environmental scanning is the process of collecting information about the extemal marketing environment to identify and interpret potential trends. **This activity then seeks to analyze the collected information and determine whether identified trends represent opportunities or threats to the company.** This judgment, in turn, allows a firm to determine the best response to a particular environmental change. **Environmental scanning is a vital component of effective environmental management.** Environmental management is the effort to attain organizational objectives by predicting and influencing the firm’s competitive, political-legal, economic, technological and social-cultural environments. **The development of a global marketplace has complicated environmental scanning and environmental management.** These processes may now need to track political developments, economic trends and cultural influences anywhere in the world. **A diagram depicting the key elements of Environmental Scanning:** - Internal and extemal environment - Opportunities, threats, trends, - Lessons, - Weaknesses - Current and future strategies. ### IMPORTANCE OF ENVIRONMENTAL SCANNING Environmental scanning plays an important role in the business process of an organization. **The benefits of performing environmental analysis include:** - Determining whether the resources, such as human resource, capital resource, etc. are being used properly or not. - Learning about the business strategies of your competitors. - Goal accomplishment. - Threats and Weakness Identification - Future Forecast. - Market Knowledge. - Focus on the Customer - Strength and Opportunities Identification. ### THE COMPETITIVE ENVIRONMENT The interactive exchange in the marketplace as organizations vie with one another to satisfy customers creates the competitive environment. Marketing decisions by each individual firm influence consumer responses in the marketplace. They also affect the marketing strategies of competitors. **As a consequence, decision makers must continually monitor competitors’ marketing activities - their products, channels, prices and promotions.** **Structurally, competition can be viewed in the following way:** - **Monopoly:** Few organizations enjoy monopoly positions in the marketplace. (Indian Railways) - **Oligopoly:** When competitors are few and each one exercises some influence on market dynamics, it is called oligopoly. - **Monopolistic Competition:** When competitors are many and each one has a unique product to offer same needs the competition is termed as monopolistic competition. ### PESTLE ANALYSIS **What is PESTLE Analysis?** PESTLE analysis, which is sometimes referred to as PEST analysis, is a concept in marketing principles. Moreover, this concept is used as a tool by companies to track the environment they're operating in or are planning to launch a new project/product/service, etc. These extemal factors impact the success of a business, so it's important to keep track of them. **For example, a change in tax laws or technological advancements in your industry will prompt your organization to make policy changes to meet federal regulations and possibly upgrade equipment to produce materials more efficiently to keep up with competitors.** **A diagram depicting the key elements of PESTLE analysis:** * | Political Factors | Economic Factors | Social Factors | Technological Factors | Environment Factors | Legal Factors | |---|---|---|---|---|---| ### Political Factors: These factors are all about how and to what degree a government intervenes in the economy or a certain industry. **This can include government policy, political stability or instability, corruption, taxation, trade restrictions and labor laws.** ### Economic Factors: Economic factors are determinants of a certain economy’s performance. **Factors include economic growth, exchange rates, inflation rates, interest rates, disposable income of consumers and unemployment rates.** ### Social Factors: This dimension of the general environment represents the demographic characteristics, norms, customs and values of the population within which the organization operates. This includes population trends such as the population growth rate, age distribution, income distribution, career attitudes, safety emphasis, health consciousness, lifestyle attitudes and cultural barriers. These factors are especially important for marketeers when targeting certain customers. ### Technological Factors: These factors pertain to innovations in technology that may affect the operations of the industry and the market favorably or unfavorably. This refers to technology incentives, the level of innovation, automation, research and development (R&D) activity, technological change and the amount of technological awareness that a market possesses. ### Environmental Factors: Environmental factors have come to the forefront only relatively recently. They have become important due to the increasing scarcity of raw materials, pollution targets and carbon footprint targets set by governments. These factors include ecological and environmental aspects such as weather, climate, environmental offsets and climate change which may especially affect industries such as tourism, farming, agriculture and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. This has led to many companies getting more and more involved in practices such as corporate social responsibility (CSR) and sustainability. ## MODULE 3: BUYER BEHAVIOR **Consumer behavior is the process through which the ultimate buyer makes purchase decisions.** **Here is a sample of popular definitions for consumer behavior:** - “The study of the buying units and the exchange processes involved in acquiring, consuming, and disposing of goods, services, experiences, and ideas’ (Mowen) **Consumer behavior is the study of consumers and the processes they use to choose, use (consume), and dispose of products and services, including consumers’ emotional, mental, and behavioral responses.** Understanding consumer behavior is crucial for businesses to create effective marketing strategies that can influence consumers’ decision-making processes. **Consumer buying behavior refers to the study of customers and how they behave while deciding to buy a product that satisfies their needs.** It is a study of the actions of the consumers that drive them to buy and use certain products. ### Determinants of Consumer Behavior or Buyer Behavior **Consumers don’t make purchase decisions in a vacuum; rather, they respond to a number of external, interpersonal influences and internal, personal factors.** - *Consumer often decide to buy goods and services based on what they believe others expect of them*. They may want to project positive images to peers or satisfy the unspoken desires of family members. **The three broad categories of interpersonal influences on consumer behavior are:** 1. **Cultural Influences:** This is the broadest environmental determinant of consumer behavior. Therefore, marketers need to understand its role in customer decision making. 2. **Group (Social) influences:** Every consumer belongs to a number of social groups. 3. **Family influences:** The family group is perhaps the most important determinant of consumer behavior. ### Importance of Consumer Behavior **Understanding consumer behavior is essential for a company to succeed in its current products and new product launches.** If a company fails to understand the reaction of a consumer towards a product, there are high chances of product failure. **Due to the changing fashion, technology, trends, living style, disposable income, and similar other factors, consumer behavior also changes.** A marketer has to understand the factors that are changing so that marketing efforts can be aligned accordingly. **The importance of consumer behavior can be broken down into the following:** 1. **Consumer Differentiation:** A way to distinguish a consumer from several other consumers. 2. **Retention of Consumers:** To retain existing customers. 3. **Design Relevant Marketing Program:** Creating effective marketing strategies. 4. **Predicting Market Trend:** Analyzing what consumers buy and why they do. 5. **Competition:** Helps to find out answers to questions like “Is the customer buying from your competitor?” 6. **Innovate New Products:** Companies need to stay relevant in the market and innovate. 7. **Stay Relevant in the Market:** The world is changing and it's imperative to stay relevant. 8. **Improve Customer Service:** Different levels of customer service cater to different consumer needs. ### TYPES OF CONSUMER BEHAVIOR 1. **Habitual buying behavior:** Purchases made with low conscious or emotional involvement and without significant thought about differences between product types. 2. **Variety-seeking buying behavior:** Prevalent when the differences between products are noticeable, motivating consumers to make frequent switches between brands. 3. **Extended decision-making:** Involves great conscious and emotional involvement. 4. **Limited decision-making:** Applies to people looking to buy goods among which there is limited variety. ### FACTORS THAT CAN AFFECT CONSUMER BEHAVIOR **Following are some of the common factors that can affect consumer behavior:** 1. **Marketing campaigns:** Can influence purchasing decisions a lot. 2. **Economic conditions:** Play a big part for expensive products like houses or cars. 3. **Personal preferences:** Include likes, dislikes, priorities, morals, and values. 4. **Group influence:** What our family members, classmates, immediate relatives, neighbors, and acquaintances think or do. 5. **Purchasing power:** A significant factor in influencing our behavior. 6. **Needs and motives:** Purchase behavior is driven by the motivation to fill a need. 7. **Perceptions:** The meaning that a person attributes to incoming stimuli gathered through the five senses. 8. **Attitudes:** Strongly based on currently held attitudes about the product, brand, store or salesperson. 9. **Learning:** Immediate or expected changes in consumer behavior as a result of experience. 10. **Self-concept:** Important role in consumer behavior. ### HOW TO USE CONSUMER BEHAVIOR IN MARKETING 1. **Develop Trust:** Knowing what consumers consider trustworthy characteristics. 2. **Be repetitive:** Analyzing consumer behavior data, you can gather information about the ideal number of ad repetitions for different channels. 3. **Reconsider packaging:** Packaging plays a vital role in a consumer’s decision. ### HOW TO COLLECT DATA ON CONSUMER BEHAVIOR To understand consumer buying behavior, you need to know how consumers think and feel about the different alternatives available in the market, how they reason, and how they choose between different options. **The motivations that influence consumer behavior are so broad that the most effective way to study them is to use different market research methods.** These methods should collect both qualitative and quantitative data. **The methods for collecting data about customer behavior include:** - **Surveys:** Online, phone or in-person surveys. - **Focus groups:** Small, moderated consumer discussions about a specific good or service. - **Interviews:** Conducted in person or over the phone. - **Observations:** Watching and recording consumers in their natural surroundings. - **Experiments:** Involve changing one or more variables to see what effect it has on customer behavior. - **Data analysis:** Data from sources such as sales data, web analytics, and social media can be analyzed.