Principles of Marketing - Week 2 Introduction PDF

Principles of Marketing Week 2 Introduction 1 What is Marketing? What is Marketing?  The term marketing means different things to different people. What is the first definition that comes to mind when you hear the term marketing?...

Principles of Marketing Week 2 Introduction 1 What is Marketing? What is Marketing?  The term marketing means different things to different people. What is the first definition that comes to mind when you hear the term marketing? 3 3 What Is Marketing?  Marketing – 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  Marketing has two facets: 1. It is a philosophy, an attitude, a perspective, or a management orientation that stresses customer satisfaction. 2. It is an organizational function and a set of processes used to implement this philosophy. 4 What Is Marketing?  Marketing:  Entails processes that focus on delivering value and benefits to customers  Uses communication, distribution, and pricing strategies to provide customers and other stakeholders with the goods, services, ideas, values, and benefits they desire when and where they want them  Involves building long-term, mutually rewarding relationships when these benefit all parties concerned  Entails an understanding that organizations have many connected stakeholder “partners,” including employees, suppliers, stockholders, distributors, and others “Marketing is too important to be left only to the marketing department.” - David Packard, co-founder of HP 5 What Is Marketing?  Exchange – people giving up something in order to receive something else they would rather have  An exchange can take place only if the following five conditions exist: 1. There must be at least two parties. 2. Each party has something that might be of value to the other party. 3. Each party is capable of communication and delivery. 4. Each party is free to accept or reject the exchange offer. 5. Each party believes it is appropriate or desirable to deal with the other party. 6 Marketing Management Philosophies Marketing Management Philosophies  The following philosophies influence an organization’s marketing processes: 1. Production orientation 2. Sales orientation 3. Market orientation 4. Societal marketing orientation 8 Marketing Management Philosophies Production Orientation  Production orientation – a philosophy that focuses on the internal capabilities of the firm rather than on the desires and needs of the marketplace What is easy to What can we do What can our produce, given our best? engineers design? equipment? What services are Where do our most convenient for talents lie? the firm to offer? 9 Marketing Management Philosophies Sales Orientation  Sales orientation – the belief that people will buy more goods and services if aggressive sales techniques are used and that high sales result in high profits  The fundamental problem with a sales orientation is a lack of understanding of the needs and wants of the marketplace. 10 Marketing Management Philosophies Market Orientation  Marketing concept – the idea that the social and economic justification for an organization’s existence is the satisfaction of customer wants and needs while meeting organizational objectives  The marketing concept includes the following:  Focusing on customer wants and needs so that the organization can distinguish its product(s) from competitors’ offerings  Integrating all the organization’s activities, including production, to satisfy customer wants  Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly 11 Marketing Management Philosophies  Market orientation – a philosophy that assumes that a sale does not depend on an aggressive sales force but rather on a customer’s decision to purchase a product; it is synonymous with the marketing concept  Achieving a market orientation involves:  Obtaining information about customers, competitors, and markets  Examining the information from a total business perspective  Determining how to deliver superior customer value  Implementing actions to provide value to customers  Understanding your competitive arena and competitors’ strengths and weaknesses is a critical component of a market orientation. 12 Marketing Management Philosophies Societal Marketing Orientation  Societal marketing orientation – the idea that an organization exists not only to satisfy customer wants and needs and to meet organizational objectives but also to preserve or enhance individuals’ and society’s long- term best interests 13 Marketing Management Philosophies Who Is in Charge?  The Internet and the widespread use of social media have accelerated the shift in power from manufacturers and retailers to consumers and business users. “The customer is boss.” — Former Procter & Gamble CEO A. G. Lafley 14 Differences Between Sales and Market Orientations Differences Between Sales and Market Orientations  Sales and market orientations can be compared in terms of five characteristics: 1. The organization’s focus 2. The firm’s business 3. Those to whom the product is directed 4. The firm’s primary goal 16 Differences Between Sales and Market Orientations The Organization’s Focus  Many of the historic sources of competitive advantage—technology, innovation, and economies of scale—allowed sales-oriented companies to focus their efforts internally and prosper.  Today, many successful firms derive their competitive advantage from an external, market-oriented focus. 17 Differences Between Sales and Market Orientations CUSTOMER VALUE Functional  Customer value – the relationship between benefits and the sacrifice necessary to obtain those benefits  Customers value goods and services that are of The Social the quality they expect and that are sold at Impact Elements Emotional prices they are willing to pay. of Value Life- Changing 18 Differences Between Sales and Market Orientations CUSTOMER SATISFACTION  Customer satisfaction – customers’ evaluation of a good or service in terms of whether it has met their needs and expectations 19 Differences Between Sales and Market Orientations BUILDING RELATIONSHIPS  Relationship marketing – a strategy that focuses on keeping and improving relationships with current customers  Most successful relationship marketing strategies depend on:  Customer-oriented personnel  Effective training programs  Employees with the authority to make decisions and solve problems  Teamwork 20 Differences Between Sales and Market Orientations The Firm’s Business  A sales-oriented firm defines its business (or mission) in terms of goods and services.  A market-oriented firm defines its business in terms of the benefits its customers seek.  People who spend their money, time, and energy expect to receive benefits, not just goods and services. 21 Differences Between Sales and Market Orientations Those to Whom the Product Is Directed  A sales-oriented organization targets its products at “everybody” or “the average customer.”  The fallacy of developing products directed at the average user is that relatively few average users actually exist.  A market-oriented organization aims at specific groups of people.  A market-oriented organization recognizes that different customer groups want different features or benefits. 22 Differences Between Sales and Market Orientations The Firm’s Primary Goal  A sales-oriented organization seeks to achieve profitability through sales volume and tries to convince potential customers to buy, even if the seller knows that the customer and product are mismatched.  The ultimate goal of most market-oriented organizations is to make a profit by:  Creating customer value  Providing customer satisfaction  Building long-term relationships with customers 23 Why Study Marketing? Why Study Marketing?  There are several important reasons to study marketing.  Marketing plays an important role in society.  Marketing is important to businesses.  Marketing offers outstanding career opportunities.  Marketing affects your life every day. 25 Strategic Planning for Competitive Advantage The Nature of Strategic Planning  Strategic planning – the managerial process of creating and maintaining a fit between the organization’s objectives and resources and the evolving market opportunities  The goal of strategic planning is long-run profitability and growth. 27 Strategic Alternatives Ansoff’s Strategic Opportunity Matrix  Ansoff’s strategic opportunity matrix matches products with markets.  Firms can explore the following four options: 1. Market penetration – a marketing strategy that tries to increase market share among existing customers 2. Market development – a marketing strategy that entails attracting new customers to existing products 3. Product development – a marketing strategy that entails the creation of new products for present markets 4. Diversification – a strategy of increasing sales by introducing new products into new markets 28  Exhibit 2.1 Ansoff’s Opportunity Matrix Present Product New Product Present Market Market Penetration Product Development Starbucks sells more coffee to Starbucks develops powdered instant customers who register their coffee called Via. reloadable Starbucks cards. New Market Market Development Diversification Starbucks opens stores in Brazil and Starbucks launches Hear Music and Chile. buys Ethos Water. 29 Strategic Alternatives The Marketing Plan  Planning – the process of anticipating future events and determining strategies to achieve organizational objectives in the future  Marketing planning – designing activities relating to marketing objectives and the changing marketing environment  Marketing plan – a written document that acts as a guidebook of marketing activities for the marketing manager 30 Exhibit 2.5 Elements of a Marketing Plan 31  Defining the Business Mission  Mission statement – a statement of the firm’s business based on a careful analysis of benefits sought by present and potential customers and an analysis of What business existing and anticipated environmental conditions are we in?  Marketing myopia – defining a business in terms of goods and services rather than in terms of the benefits customers seek 32 Conducting a Situation Analysis  SWOT analysis – identifying internal strengths (S) and weaknesses (W) and also examining external opportunities (O) and threats (T)  Environmental scanning – collection and interpretation of information about forces, events, and relationships in the external environment that may affect the future of the organization or the implementation of the marketing plan 33 Competitive Advantage  Competitive advantage – a set of unique features of a company and its products that are perceived by the target market as significant and superior to those of the competition  There are three types of competitive advantage: 1. Cost 2. Product/service differentiation 3. Niche 34 Competitive Advantage Cost Competitive Advantage  Cost competitive advantage – being the low-cost competitor in an industry while maintaining satisfactory profit margins 35 Competitive Advantage Product/Service Differentiation Competitive Advantage  Product/service differentiation competitive advantage – the provision of something that is unique and valuable to buyers beyond simply offering a lower price than that of the competition Niche Competitive Advantage  Niche competitive advantage – the advantage achieved when a firm seeks to target and effectively serve a small segment of the market 36 Competitive Advantage Building Sustainable Competitive Advantage  The key to having a competitive advantage is the ability to sustain that advantage.  Sustainable competitive advantage – an advantage that cannot be copied by the competition  The sources of tomorrow’s competitive advantages are the skills and assets of the organization.  Assets include patents, copyrights, locations, and equipment that are superior to those of the competition.  Skills are functions, such as customer service and promotion, that the firm performs better than its competitors. 37 Setting Marketing Plan Objectives  Marketing objective – a statement of what is to be accomplished through marketing activities  Carefully specified objectives serve several functions.  They communicate marketing management philosophies and provide direction for lower-level marketing managers so that marketing efforts are integrated and pointed in a consistent direction.  Objectives serve as motivators by creating something for employees to strive for.  When objectives are attainable and challenging, they motivate those charged with achieving the objectives.  Objectives form a basis for control: the effectiveness of a plan can be gauged in light of the stated objectives. 38  Setting Marketing Plan Objectives  Marketing objectives should be: Compared Time Realistic Measurable to a specific benchmark 39 Describing the Target Market  Marketing strategy – the activities of selecting and describing one or more target markets and developing and maintaining a marketing mix that will produce mutually satisfying exchanges with target markets Target Market Strategy  A market segment is a group of individuals or organizations who share one or more characteristics.  They therefore may have relatively similar product needs.  The target market strategy identifies the market segment or segments on which to focus.  This process begins with a market opportunity analysis (MOA).  Market opportunity analysis (MOA) – the description and estimation of the size and sales potential of market segments that are of interest to the firm and the assessment of key competitors in these market segments 40 The Marketing Mix  Marketing mix (four Ps) – a unique blend of product, place (distribution), promotion, and pricing strategies designed to produce mutually satisfying exchanges with a target market 41 The Marketing Mix Product Strategies  The heart of the marketing mix, the starting point, is the product offering and product strategy.  The product includes not only the physical unit but also its:  Package and warranty  After-sale service  Brand name  Company image  Value 42 The Marketing Mix Place (Distribution) Strategies  Place, or distribution, strategies are concerned with making products available when and where customers want them.  Physical distribution involves all the business activities concerned with storing and transporting raw materials or finished products. 43 The Marketing Mix Promotion Strategies  Promotion includes:  Advertising  Public relations  Sales promotion  Personal selling  Promotion’s role in the marketing mix is to bring about mutually satisfying exchanges with target markets by informing, educating, persuading, and reminding them of the benefits of an organization or a product. 44 The Marketing Mix Pricing Strategies  Price is what a buyer must give up in order to obtain a product.  Price is often the most flexible of the four Ps.  Marketers can raise or lower prices more frequently and easily than they can change other marketing mix variables. 45 Following Up on the Marketing Plan Implementation  Implementation – the process that turns a marketing plan into action assignments and ensures that these assignments are executed in a way that accomplishes the plan’s objectives  Implementation requires:  Delegating authority and responsibility  Determining a time frame for completing tasks  Allocating resources 46 Following Up on the Marketing Plan Evaluation and Control  Evaluation – gauging the extent to which the marketing objectives have been achieved during the specified time period  Four common reasons for failing to achieve a marketing objective are: 1. Unrealistic marketing objectives 2. Inappropriate marketing strategies in the plan 3. Poor implementation 4. Changes in the environment after the objective was specified and the strategy was implemented 47 Following Up on the Marketing Plan  Control – provides the mechanisms for evaluating marketing results in light of the plan’s objectives and for correcting actions that do not help the organization reach those objectives within budget guidelines 48