Chapter 14 - Marketing Management PDF

Chapter 14 – Marketing Management Competencies 14.1 Core concepts of marketing 14.2 Marketing philosophies (Marketing concepts) 14.3 Process of target market 14.4 Marketing mix 14.5 Product 14.6 Brand 14.7 Package 14.8 Price 14.9 Place (Distribution) 14.10 Promotion...

Chapter 14 – Marketing Management Competencies 14.1 Core concepts of marketing 14.2 Marketing philosophies (Marketing concepts) 14.3 Process of target market 14.4 Marketing mix 14.5 Product 14.6 Brand 14.7 Package 14.8 Price 14.9 Place (Distribution) 14.10 Promotion 14.1 Core concepts of marketing Definitions on Marketing  Marketing is social process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others. - Phillip Kotler  Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals. - American Marketing Association  Marketing is a social and managerial process for the satisfaction of needs and wants of individuals and organizations. Core concepts of marketing  The core concepts of marketing are the basic factors that the marketing process is based. 1. Needs, Wants and demand. 2. Market, Target market, Positioning and Segmentation 3. Offerings and Brands 4. Marketing Channels 5. Paid, Owned and Earned media 6. Impression and Engagement 7. Value and Satisfaction 8. Supply chain 9. Competition 10. Exchange 11. Transaction 12. Relationships 13. Marketing Environment 1 1. Needs, Wants and Demand  Needs The state of felt deprivation of some basic satisfaction in man or an essential condition that must be fulfilled to ensure the survival of the man is known as needs.  Wants Desire or preference for a certain commodity or a service with regard to a particular need or else the various ways of fulfilling the needs are known as wants.  Demand The need to buy a particular commodity or a service with the desire and the ability to pay can be defined as the demand.  While the various ways of fulfilling needs and wants, a demand is created when need and ability to pay are combined. 2. Market, Target market, Positioning and Segmentation  Market Collection of all true and potential customers having the same needs and wants and with the willingness and the ability to satisfy them through a transaction process is known as the market. Collection of all true and potential customer for a product is the market. Classifications of the market (1) Based on the needs and preference of customers in the market; i. Consumer market The market where customers demand goods and services for personal or household consumption. ii. Industrial goods market (b 2 b market) The market where the exchange of capital goods, various resources and industrial services take place. (2) The basic market that is use in the modern exchange economy i. Resource market ii. Manufacturing market iii. Government market iv. Consumer market v. Intermediary market 2  Target Market Focusing on a specific consumer group from the total market by a producer to sell his products or introducing his product to the selected consumer group itself can be stated as target market.  Positioning Building up a favourable attitude in the consumer's mind regarding a specific product is referred to as positioning.  Market Segmentation Dividing the total market so as the similar consumer groups to be included into the same sub set is referred to as market segmentation. 3. Offering and Brands  Offering A bundle of values presented by businessmen to satisfy a customer's needs is referred to as offerings. These offerings are fulfilled through provision of products.  Brand Brand is a group of words, a logo or a combination of there to distinguish no’s product from competition products in the market. 4. Marketing Channels  The marketers use to reach the target market can be referred to as marketing channels. Communication channels, distribution channels and service channels are the three main marketing channels. 5. Paid, Owned and Earned Media  Paid media Advertising advertisements on media such as television, magazines, live shows and on display advertisements through paying money by a firm is referred to as paid media.  Owned media Advertising advertisements by a firm on such as its web pages and Facebook pages is referred to as owned media.  Earned media The communication voluntarily done with regard to the brand of the firm by consumers and outsiders of the firm through media such as verbal and viral marketing is referred to as earned media. 3 6. Impression and Engagement  Impression From the producer's perspective the number of times that the communication media used by him reach the customer among the other communication media is referred to as impression.  Engagement Engagement is the extent of a customer's attention and active involvement with a communication. 7. Value and Satisfaction  Value Value is the total evaluation done by the consumer regarding the ability of a product to satisfy consumer need. For this evaluation, three factors are considered. 1. Quality 2. Services 3. Price Though the quality and the provision of service assist in uplifting the value of a product, the price will be the factor that influence the reduction of the value.  Satisfaction The gratification gained by the consumer from a product which is produced as the wish of a consumer is referred to as satisfaction. Accordingly, the relationship between the value and satisfaction is apparent. Consumer becomes dissatisfied if the value expected from a product is not received, the consumer becomes satisfied if he receives the value expected from a product similarly and when the product provides a higher value than expected value the consumer is delighted. Perception about these concepts are bound according to individual base. 8. Supply Chain  All the flows from planning of infrastructure for creating a product to implementing it, from ordering of raw materials for producing products to handing over them to consumers and also the other flows thereafter that assist in providing customer's needs are known as supply chain. 9. Competition  The influence creates from potential and existing identical (similar) products; and substitute products is referred to as competition. 4  The competitions are of few levels. (1) Brand Competition (2) Industry Competition (3) Form Competition (4) Generic Competition 10. Exchange  Transferring the ownership of something with value between two parties, on the agreement of both parties is known as the exchange. There are few features that necessarily should be for the completion of an exchange.  There should be minimum of two parties.  Each party should possess something valuable.  Each party should be capable of communication and delivery of views among each and every party.  Each party should have a freedom to accept or reject the exchange offer.  Each party should believe it is appropriate to deal with the other party. 11. Transactions  Transaction can take place between two or more parties with an exchange. Trading of a value between two or more parties can be interpreted as a transaction. Transaction is an evidence for an exchange. 12. Relationships  If the exchange and transaction are to take place, formation of better relationships among each and every party (customers, suppliers, distributors) is necessary. In modern-days, this is referred to as relationship marketing. Building up of satisfactory and profitable long term mutual relationship among the main parties such as customers, suppliers, distributors and other parties that associate with the business organization is known as relationship marketing. 13. Marketing Environment  Functional and wide environmental factors and forces that influence the strategies and marketing abilities of a business is referred to as marketing environment.  The marketing environment can to categorized into two as; (1) Functional environment - consists of parties related to the business such as suppliers, distributors, marketers and target customers. (2) Wide environment - consists of democratic, economic, natural, technological, political, legal, social and cultural environment 5 Importance of Marketing  To the Businessman  To attract and retain the customers  To maintain the success of the institution  To earn profits continuously  To promote the satisfaction of proprietors and employees  To face the competition successfully  To expand the market share  To the Consumers.  To get maximum satisfaction for the amount of money spent.  To be informed by getting information about the market.  To make the goods and services abundant in the market.  To purchase goods and services easily (with less effort).  To uplift the living condition through consumption of various goods and services  To the Economy.  Diversification of products  Expansion of production  Increasing the employment  Eradicating inequalities in distribution of income  Developing the entire economy of the country 6  14.2 – Marketing Philosophies  The views on changes happened timely with regard to marketing is known as marketing philosophy.  Marketing concepts, technological improvement, the growth of consumers’ income have mainly influenced for the expansion of marketing philosophy. The evolution of marketing philosophy 1. Production concept 2. Product concept 3. Selling concept 4. Marketing concept 5. Customer concept 6. Social marketing concept 7. Holistic marketing concept Production Concept  This is the oldest concept that guided marketers.  This is a seller oriented concept.  Meaning of this concept:  By making the products of producers’ preference abundant in the market under low cost, there is an ability of selling their products successfully.  It did not give much concentration towards the consumer needs.  The businessman focused only on increasing the volume of the production.  The marketers focused on the following functions.  Increasing the production as much as possible/ making the production efficient.  Low cost (Minimizing the unit cost)  Making a wider and more efficient delivery Product Concept  This is also a seller oriented concept.  Meaning of this concept:  The consumer would come forward to buy the product of high quality and performance as well as with modern and attractive features in it.  The marketers focused on the following functions.  Focusing on the quality of the products of the firm as they wish.  Conducting research and development activities by dedicating their time and energy  Continuously try to make their products superb 7 Selling Concept  This is also a seller oriented concept.  Meaning of this concept:  The products cannot be sold, unless the consumer is motivated.  The profit and market share can be increased through increasing sales by following competitive selling policies and selling (promotional) tools. Marketing Concept  This is a consumer oriented concept.  Meaning of this concept:  Producing products that can be sold, instead of producing products that can be produced.  The goods and services should be produced having identified the needs and wants of the target market, through which consumer satisfaction should be given.  The priority is given to consumer needs and wants rather than the product.  This concept is called as two-factor marketing concept. Customer Concept  This is a consumer oriented concept.  Meaning of this concept:  The presentation of goods and services that suits each customer and conducting of all marketing strategies prioritizing each of those customers.  It is expected to obtain customer loyalty having given them a lifetime value. Social Concept  Meaning of this concept:  Satisfying the needs and wants of the target market so as to protect or improve the consumer and social wellbeing  The concentration is given here for social responsibility, trade profit and consumer needs when deciding marketing policies.  This concept is called as three factor marketing concept. Holistic Marketing Concept  It is emphasized here that if the firm is to obtain higher results, all the components of the marketing needs to be executed with a single aim. That is to say, a complete integrated approach suits well for the competitive business environment. 8  Accordingly, Holistic marketing concept was generated. This concept consists of the following four main parts. 1. Relationship Marketing 2. Integrated Marketing 3. Internal Marketing 4. Social Responsibility Marketing/Performance Marketing 1. Relationship Marketing The goal of this concept is the long term relationship in which all the stakeholders of business are satisfied. The result of that is the creation of a marketing network with a profitable relationship among the business and all the stakeholders of it. 2. Integrated Marketing The meaning of this concept is that all the variables of the marketing mix (4Ps) should be implemented aiming the satisfaction of the target market. In other words, the functions of all the managers and all the employees of the business organization should be coordinated with the functions of marketing. 3. Internal Marketing The integration of all the employees from the top manager to the lowest employee of the business, to provide a better service to the customer is referred to as internal marketing Accordingly, everyone in the firm assures that they use appropriate principles. 4. Performance Marketing This says that when preparing and implementing marketing programs and actions, attention should be paid for social responsibilities, ethics as well as for the environment. That is, while business goals and consumer satisfaction are being attended, the attention for Society as well as for ethics should be paid uniformly. 9  14.3 - Process of Target Market Market Segmentation  Segmenting the entire market which has dissimilar features into groups of similar features is known as market segmentation. Bases of market segmentation  There are four bases of market segmentation. 1. Geographical basis 2. Demographical basis 3. Psychological basis 4. Behavioural basis Requirements to be fulfilled for an effective market segmentation      10 Benefits of market segmentation  To gain a greater awareness regarding the market  To recognize the appropriate and timely market  To utilizing the limited resources of the firm efficiently and effectively  To minimize the market risk  To launch marketing programs more successfully Target Market  The target market is the market segment with similar characterized customers that a firm can serve more attractively and profitably.  The duty of marketers is to develop the product or the offering that best suits the chosen target market. Market Positioning  Market positioning is creating a favourable attitude in consumers’ mind regarding a product  The victory of the marketing is the positioning of a certain good or a service well in the market. Ways of market positioning 11  14.4 - Marketing Mix What is marketing mix?  Marketing mix is the marketing strategies that are implemented to attain the expected aims of the business organization. Different Perspectives of the Marketing Mix Marketer’s Point of View (4 P’s) Customer’s Point of View (4 C’s) Variables and sub variables in the marketing mix 12 Services Marketing Mix (7 P’s)  Product Anything presented to the market for sale to satisfy consumer needs and wants.  Price The amount of money paid by the consumer to obtain a good or service.  Place Distributing the product in the market in order to get them marketed successfully.  Promotion The process used to communicate about the product to the interested, target and to potential customers.  People The salesmen who are friendly, polite and specialized are important here  Process Operational system required to provide the service and the after sale service.  Physical environment Creating the surrounding and the environment of the business outlet in order to give a higher value to the customers. Importance of marketing mix  The turnover can be increased by being able to present the product to the market in a way that satisfies consumer needs in optimum level.  Consumers can be attracted by pricing the product in a way that it can face competition.  Distributing products in a way which makes consumer buy the product very easily from the closest place.  By using various promotional strategies, consumers can be induced to purchase the product.  As a whole, all the variables in the marketing mix helps to fulfil the aims of the organization. 13  14.5 Product What is a product? A product is anything presented to the market with the purpose of fulfilling the human needs and wants. Classification of Products: 01  Goods Goods can be categorized based on durability and use. Based on durability 1. Durable goods - Goods that can be consumed many times for a longer period of time. E.g. furniture, vehicles, clothes 2. Non-durable goods - Goods that can be consumed once or a few times. E.g. soap, food items, masks Based on use 1. Consumer goods  Consumer goods are the goods used for day to day consumption.  Most of the consumer goods end with use. (E.g. food items) So they should be replaced with new goods.  Consumer goods can be categorized into 4 types. i. Convenience goods  Convenience goods are the goods that are frequently bought by the consumers. E.g. bread, milk, soap, toothpaste 14 Features  Less effort and time to buy  Easily available  Relatively low price  Non-durable ii. Shopping goods  Shopping goods are the goods that are bought after being compared to other similar goods. E.g. smartphones, furniture, clothing  Consumer expects to buy goods that give maximum satisfaction for the price he pays. Features  More effort and time to buy  Infrequently purchased  Relatively high price  Durable Attributes used for comparison of shopping goods o Brand o Price o Quality o Durability o Design o Warranty o After-sale services iii. Specialty goods  Specialty goods are the goods that takes a special purchase effort by the consumers. E.g. jewellery, motor vehicles, computers  Consumer is satisfied only when he consumes the good he prefers. Features  Infrequently purchased  Rare (No substitutes)  Expensive  Durable iv. Unsought goods  Unsought goods are the goods which are unknown to consumer even though they are available in the market. E.g. new life insurance policies, new books, pre-paid funeral service 15 Features  Undesirable until known  Lack of product awareness  Infrequently purchased 2. Industrial goods (Business goods)  Industrial goods are the goods used by the businessmen for producing other goods. E.g. Car manufacturer - buys tyres, batteries Hospital – buys medicine  Industrial goods can be categorized into 3 types. i. Materials and parts  Materials and parts are things used as input in the production process. E.g. Materials – iron, lead, cement Parts – Tools, tires, spare parts ii. Capital items  Capital items are finished goods with long term existence which are used for producing other goods in the production process. E.g. Factory buildings, machinery iii. Supplies & Business Services  Supplies & business services are goods and services that are used to produce finished goods but are of relatively short-term existence. E.g. Office supplies – stationery, pins Maintenance – cleaning services, repairing services Business services – financial services, advisory services Services  Services can be categorized into 2 types. 1. Business support services – banking, insurance, transportation, communication 2. Direct services - legal, health, security, education Classification of Products: 02  Products can be classified broadly as follows. 16  Goods Tangible things with physical existence which satisfy human wants. E.g.  Services Actions or activities that satisfy human wants. These are intangible and can be presented from one party to another. E.g.  Ideas “Thoughts that can be sold”. These are generated within the producer about the products that are presented to the market. E.g.  Events Various instances related to satisfying human wants. E.g.  People People with significant abilities who come forward to satisfy human wants. E.g.  Experiences Experience is selling a person’s specialized knowledge for a certain task to another customer. E.g.  Places Places that can satisfy human wants. E.g.  Organizations Entities that are created by humans themselves to satisfy human wants. E.g.  Properties Documents related to assets exchanged by declaring ownership. E.g.  Information Information is processed data. Correct information is essential to make successful business decisions. 17  E.g. Product Mix  The bundle of products presented by a certain seller for sale is known as product mix.  While some organizations present only one item to the market, some organizations present a bundle of products.  The product mix of a firm comprises of a width, a length, a depth and consistency. o Width - o Length - o Depth - o Consistency - Activity – Find the product mix. Milk packets Ice cream Drinks  Vanilla  Vanilla  Mango  Chocolate  Chocolate  Orange  Strawberry  Mixed fruits  Fruits The Five Product Levels (Consumer Value Hierarchy) 18  Core benefit o This is the first level of a product. o It is the core or main benefit provided by the product. E.g.  Generic product o This is the second level of a product. o Here the core benefit is transformed to the generic product. E.g.  Expected product o This is the third level of a product. o Presentation of the product with the features that the buyer expects. E.g.  Augmented product o This is the fourth level of a product. o The product is presented to the market in a level which exceeds the customers’ expectation.  Potential product o This is the fifth level of a product. o Entering to the potential market through augmentation features at the planning of the product after considering the fact that the customer would demand these features in the future. E.g. Product Life Cycle There are five stages of a product life cycle. 19  Product Development Stage  The product development stage starts with the conception of the idea about the new product.  While there are no sales in this stage research and development expenses have to be incurred.  Introduction Stage  The products are presented in the introduction stage.  The sales and profit gradually increase.  Growth Stage  Since the sales increases in the growth stage, a profit margin can be seen here.  Maturity Stage  The product has already been finished accepting by the market in the maturity stage.  The profit and sales are fixed while the growth of the profit and sales occurs slowly.  The reduction of sales and profit will take place in the last period because of the increased competition.  Decline Stage  Sales fall in the decline stage.  Profit will be decreased. Assumptions of the Product Life Cycle  Product has a specific life time  A product passes few various stages that bring by different challenges to the marketer.  The sales and profit change at the various stages of the product life cycle.  The marketer follows marketing goals and strategies in accordance with the nature of each stage that the product passes. 20  14.6 - Brand What is a brand?  A brand is a name, term, sign, symbol, design or a combination of them, intended to differentiate the goods or services of one marketer or group of marketers from those of competitors.  Brand name Brand name is the pronounceable part of a brand.  Brand mark Brand mark is the inherent logo of the brand.  Trade mark When the brand mark is registered it is referred to as trade mark.  Sri Lankan business firms should register their brands in the Institute of Patent and Trade Marks under the Intellectual Property Act No.36 of 2003. Characteristics of a good brand       Types of brands  There are four types of brands that are used in branding. 1. Private Brand 2. Family Brand 3. National Brand 4. Individual Brand Private Brand After selling the product to traders by producers, the brand that has been created by those traders E.g. Family Brand Presenting a series of goods under the same brand by certain production firm E.g. 21 National Brand A particular manufacturer presenting his products under his own brand to the market Eg Individual Brand Using separate brands for various products by a firm. E.g. Benefits received by a businessman (producer) from a brand  To protect their identity by differentiating their own brand from other competitive brands.  Easy to get orders.  Getting the legal protection.  To ascertain the trust of the consumers on the special features of the product.  Ability of creating a brand loyalty among the consumers.  By receiving a value for a high brand in the market, A value is created to the business as well.  By doing small changes for the brand, various consumer groups can be targeted. 22  14.7 - Package Packaging What is packaging?  Packaging is designing and producing a wrapper, outer covering or container for a particular product What is a package?  Package is the wrapper used to give protection to product.  Though the major function of a package is to give protection for a product, it is used as a marketing tool at present. Levels of a package 1. Primary Package The first package of the product. 2. Secondary Package Another package outside the primary package 3. Transportation Package Another package outside the primary and secondary package Facts to be considered in planning a package Fact Example  Whether is breakable  Whether it is solid or liquid  Whether it is perishable  Receiving a protection for the product  Easy to identify the product  Providing information about the product  Providing an attractive look  Whether it is healthy and safety.  Whether chemicals are included. 23   Length, width, weight  The design of the product  Easiness to store  Easiness to showcase  Easiness to transport  To select  To take away  Ability to use for other uses  Ability to recycle  Disposable  Low cost Labeling What is labeling?  Labeling is creating a label to show the information needed to use the product What is a label?  Label is the one that is used as a part of the package to mention details about the product. Factors included in a label 24  14.8 - Price What is Price?  Price is the amount of money charged from a customer for a particular good or a service.  Price is the value agreed to exchange for the benefits and satisfaction enjoyed by the consumer through consuming or receiving of a good or a service.  The main factor considered by the consumer in purchasing is the “price”.  The marketing variables other than the price represent the cost of the firm and the price is the only variable generating revenue to the firm. Objectives of pricing      Factors to be considered in pricing  Cost  Competition  Consumer demand Pricing methods (Pricing Policies) 1. Cost-based pricing Setting the price by adding a certain percentage to the cost 2. Demand-based pricing Setting the price according to the demand for the product 3. Competition-based pricing Setting the price according to the price of competing goods 4. Premium pricing Setting a higher price to reflect the uniqueness and the image of the product 5. Psychological pricing Setting the price to imply that there is a relationship between the price and the quality of the product 25  14.9 - Place (Distribution) What is Place (Distribution)?  The process of getting the products reached for producer to consumer is called distribution. Importance of Distribution  Consumer gets the opportunity to consume various products.  Ability to distribute based on the factors such as the nature of production, the nature of the market, and the demand.  It assists for the expansion of the market.  Ability of providing the product at the right time to right location Product distribution channels Distribution channels of consumer goods Distribution channels of goods Distribution channels Distribution Channels of industrial goods Distribution channels of services Distribution channels of consumer goods 26 Distribution channels of industrial goods Distribution channels of services 27 Factors to be considered in selecting an appropriate distribution channel Factor Examples  Is it a consumer good?  Is it an industrial good?  Is it a durable good?  Is it a perishable good?  Is the market size large?  Is it regional, national or international?  Is it a continuous demand?  Is it a seasonal demand?  Examining the distribution channels used by competitions for distributing each product.  How much is the financial strength?  Is there storage facilities?  Are there enough employees?  Are there transportation facilities? 28  14.10 - Promotion What is Promotion?  Communicating customers who are interested about the products with the purpose of motivating them to purchase is meant by “Promotion”. Importance of Promotion  To introduce new products to consumers.  To increase the sale of existing products.  To inform the target customers by communicating various information about the products.  To face the competition successfully with other competitive products.  The success of other variables of the marketing mix depends on the success of promotion.  To enhance the image of the firm.  To increase the potential demand. Promotion Mix (Promotional Tools) Advertising Sales Promotion Personal Selling Direct Marketing Public Relations Events and Experience 29 Advertising  Any paid form of non-personal presentation of information by a certain sponsor on a certain product with the intention of improving future demand. Sales Promotion  The short term incentive strategies that influence consumers to purchase the product. Personal Selling  The selling of goods and services by building up a better relationship with customers through face to face talks. Direct Marketing  Inducing target consumers to purchase products through direct communication with them. Public Relations  Taking necessary actions to build up a relationship with various parties that connect with the organization to protect, continue and improve the product image or organization’s image. Events and Experience  The interactive activities, programs organized by the business daily or on special occasions. 30