What is Marketing

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What is MarketingWhat is Marketing Dr. Vesselin Blagoev

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Design a customer-driven

marketing strategy

Understand the marketplace andcustomer needs

and wants

Construct an Integrated

marketing programthat delivers superior value

A simple model of the mktg processA simple model of the mktg process

Build profitablerelationships andcreate customer

delight

Capture value from customers to create profits and

customer equity

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Needs

Markets Wants

Transactions Demand

Exchange Products

Core

Marketing

Terms

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NeedsNeedsNeed

A sense that something necessary is missing, a state of felt deprivation.

Basic physical needs for food, clothing, warmth, and safety;

Social needs for belonging and affection;

Individual needs for knowledge and self-expression.

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WantsWantsWants

The manner in which individuals seek to satisfy a need as consumer decision making is influenced by individual tastes and social factors

The form taken by human needs as they are shaped by culture and individual personality

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Market offeringMarket offering

Some combination of products, services, information, or experiences offered to a market to satisfy a need or want (Kotler, 2008)

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Marketing myopiaMarketing myopia

The mistake of paying more attention to the specific products a company offers than to the benefits and experiences produced by these products (Armstrong and Kotler, 2011, p.35)

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Customer perceived valueCustomer perceived value

The customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers (Armstrong and Kotler, 2011, p.41)

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Customer satisfactionCustomer satisfaction

The extent to which a product’s perceived performance and value matches a buyer’s expectations

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Customer equityCustomer equity

The total combined customer lifetime values of all the company’s customers (Armstrong and Kotler, 2011, p.50)

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Customer relationships Customer relationships managementmanagement

The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction (Armstrong and Kotler, 2011, p.41)

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Demand Demand and Supplyand SupplyDemand

The ability and willingness of consumers to purchase a product

Quantity demandedMaximum quantity of a good that buyers are willing and able to buy at a given price (over a fixed period of time)

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DemandDemand

The Law of Diminishing Demand:If the price of a product is raised, a smaller quantity will be demanded and if the price of a product is lowered, a greater quantity will be demanded

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Demand CurveDemand Curve

Quantity

Price

P1

P2

Q1 Q2

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Demand curveDemand curve

P1

P2

Q1 Q2

Price

Quantity

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Demand curveDemand curve

The general demand relationships are typical for all products

A particular demand curve has meaning only for a particular market

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Elastic demandElastic demand

Elastic demand means that if prices are dropped, the quantity demanded will increase enough to increase total revenue

Inelastic demand ?

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Elastic demandElastic demandPrice

Q=Units demanded

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Inelastic demandInelastic demandPrice

Q=Units demanded

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Demand curveDemand curve

The whole demand curve is almost never only elastic, or only inelastic.

The elasticity refers to the change in total revenue between two points on the curve – not along the whole curve

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Demand andDemand and Supply SupplySupply

The ability and willingness of producers to provide wanted goods and services

Quantity suppliedMaximum quantity of a good that sellers are willing and able to supply at a given price (over a fixed period of time)

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Demand & SupplyDemand & SupplyDemand

Supply

Equilibrium point

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Marketing functionsMarketing functions

Product / Service Mgmt Pricing

Mktg Communications

Selling

Financing

Marketing activities can be categorized within several functions

Distribution

Mktg- Information

Mgmt

Marketing Education Resource Center (2000), Columbus, Ohio

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The operational functions The operational functions of marketingof marketing

The operational functions

of marketing

AdvertisingSales promotion Public relations

Stockholding Personal selling

Servicing

Risk-taking

Financing

Buying

Transporting

Market research

Forecasting

Pricing

Merchandising Branding

Publicity

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ProductProduct

A product is anything that can be offered to a market for attention, acquisition, use, or consumption and might satisfy a need or want (Armstrong and Kotler, 2011, p.237)

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MarketMarketA group of potential buyers with common needs or

problems that can be met by specific products or services

Consumer marketIndustrial marketReseller marketInstitutional market

CustomerConsumer (user)

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MarketsMarkets

Consumer OrganizationalIndividuals who purchase to benefit from consumption and not for the main purpose of making a profit

Buyers who purchase for resale, direct use in producing the goods or in general daily use in a business

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MarketsMarkets

Open marketsRegulated marketsUnregulated marketsDe-regulated markets

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Open marketsOpen markets

Markets with all of the following characteristics:

Single standardized productMany buyersMany sellersBuyers and sellers have equal

access to all available information relevant to the market.

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Open marketsOpen markets

The products are rarely homogeneous. Apples vary by variety and packaging making comparison by the buyer difficult. It affects Condition 1.

The numbers of potential buyers and the demand for products is constantly changing. It affects Condition 2.

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Open marketsOpen markets

The individual purchaser usually has a limited choice of supplier. What about Condition 3 ?

The buyers usually do not have as much information about the market as does the supplier. It affects Condition 4.

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Regulated marketsRegulated marketsThe regulations governing an

open market are designed to ensure that it is able to operate with none of the participants having an unfair advantage over the others.

Regulated markets recognize that there is a lack of balance between the parties and therefore this type of market has rules that are intended to ensure a degree of fair trading.

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Unregulated and Unregulated and Deregulated marketsDeregulated markets

Unregulated markets :

street market The buyer is ‘on their own’. Caveat emptor!

De-regulated markets : Removal of artificial monopoly restrictions in order to encourage free competition and increase customers’ choice.

telecommunications; e-commerce

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Exchange is :Exchange is :

A marketing transaction, in which the buyer gives something of value to the seller in return for goods or services

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A simple exchange processA simple exchange process

Supplier Customer

Something of value

Goods, services, benefits

Something of value

Money, exchange goods

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10 exchanges10 exchanges

Pots

Fruits Meat

Baskets Knives

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A market – 5 exchangesA market – 5 exchanges

Pots

Fruits Meat

Baskets Knives

CentralMarket

Middleman

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Exchanges Involving Exchanges Involving IntermediariesIntermediaries

Producer Wholesaler Retailer Consumer

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Definition 1Definition 1Marketing 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 (AMA,2005)

http://www.marketingpower.com/mg-dictionary-view1862.php

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Definition 2Definition 2

Marketing is the process by which the companies create value for customers and build strong customer relationships in order to capture value from customers in return Armstrong and Kotler (2011)

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Definition 3Definition 3

Marketing is the management process responsible for identifying, anticipating and satisfying customers’ requirements profitably

British Chartered Institute of Marketing, UK

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Definitions 4 and 5Definitions 4 and 5Marketing is a social and managerial

process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others (Kotler et al, 2005)

Marketing is the study of exchange processes especially those associated with the provision of goods and services (Adcock et al, 2001)

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Definitions 6 and 7Definitions 6 and 7Marketing is the process of planning and

executing the various activities, which are involved in selling goods, services, or ideas and which lead to an exchange between a seller and a buyer (Keegan et al, 1992)

Marketing is a human activity directed at satisfying needs and wants through exchange processes (Kotler, 2001)

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Definitions 8Definitions 8

Marketing is the management process that seeks to maximise returns to shareholders by developing relationships with valued customers and creating a competitive advantage (Doyle, 2004)

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Three major goalsThree major goals

Satisfaction of customer needs

Attainment of a competitive advantage over the rivals

Increasing the value of the company for the shareholders

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Selling vs. Marketing Concepts Selling vs. Marketing Concepts

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Marketing mixMarketing mix

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Influences on Decisions Influences on Decisions of Companiesof Companies

Uncontrollable market influences

Controllable company decisions

Product

Price

Place

Promotion

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Marketing mixMarketing mix

Target market

Marketingmix

Product

Promotion

Price

Place

Quality, Features, Options, Style, Brand name, Packaging, Sizes, Warranties

List price, Discounts,Allowances, Payment Terms, Credit terms

Channels, Locations,Inventory, Transport

Advertising, Personal selling, Sales Promotion, PR

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PROMOTION

PLACE

PRICE

Fact Finding& Analysis

PhysicalHandling

Servicing

Display

Packaging

Promotions

Advertising

PersonalSelling

Channels ofDistribution

Branding

Pricing

ProductPlanning PRODUCT

Borden 1964 McCarthy 1978

Source: Based on Borden, N. (1964) ‘The concept of the marketing mix’, Journal of Advertising Research, June, 2–7; McCarthy, E.J. (1978) Basic Marketing: A Managerial Approach, 6th edn. Homewood, IL: Richard D. Irwin

Elements of Marketing Mix – 4PElements of Marketing Mix – 4P

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PROMOTION

PLACE

PRICE

PRODUCT

New product developmentBrand management

Features, BenefitsPackaging & After-sales

Channel managementRetail locationRetail imageLogistics

Costs, Profit,Liquidity

CompetitivenessValue, Incentives

Marketingcommunications mix,Integratedcommunications

Marketing Mix – 4PMarketing Mix – 4P

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5S5S of e-marketing objectives of e-marketing objectives

Sizzle

Save Speak

Serve

Sell

Wider distribution, promotion and sales

Adding value by extra benefits online

Asking quest, dialog, use web

Save by using the online services

Extent the brand online

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6C of Online Value Proposition6C of Online Value PropositionThe Chartered Institute of MarketingThe Chartered Institute of Marketing

Costreduction

Choice Convenience

Community

ContentCusto-

misation

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CustomerService

Price

Promotion

PhysicalEvidence

Processes

People

PlaceProduct

Source: Adapted from Christopher, M., Payne, A. and Ballantyne, D. (1991) Relationship Marketing. Oxford: Butterworth Heinemann

7P of Customer Service & Mktg Mix7P of Customer Service & Mktg Mix

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COMMUNICATION

CONVENIENCE

COST TOCUSTOMER

CUSTOMERNEEDS/WANTS

PROMOTION

PLACE

PRICE

PRODUCT/SERVICE

Source: Based on Kotler, P., Armstrong, G., Saunders, J. and Wing, V. (1999) Principles of Marketing, 2nd European Edition. New York: Prentice Hall

From ‘4Ps’ to ‘4Cs’From ‘4Ps’ to ‘4Cs’

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Value & Types of UtilityValue & Types of Utility

UtilityValue that comes

from satisfying human needs

Form

Time

Place

Possession

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Form Utility: results from changes in the tangible parts of the product or service, i.e. made of more durable material

Time Utility: available when the customer needs it

Place Utility: Location, location, locationPossession Utility: affordability or lack of

resources. Using credit options, payment in installments

Value & Types of UtilityValue & Types of Utility

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Customer value is formed byCustomer value is formed by

Product benefits

Service benefits

Imagebenefits

Relationalbenefits

Monetary costs

Time costs

Energycosts

Psycholo-gical costs

Other costs

Perceived benefits

Perceived sacrifice

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Income and purchasing Income and purchasing powerpower

Disposable incomeMoney that consumers have left after paying taxes

Purchasing power (PP)The potential ability of consumers to buy goods and services

PP=Disposable income + Available credit

Discretionary incomeMoney that consumers have left after paying taxes and making

essential personal and household expenditures

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Marketing ConceptMarketing Concept

Because the purpose of business is to create and keep customers, it has only two central functions – marketing and innovation. The basic function of marketing is to attract and retain customers at a profit

Peter Drucker

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The Marketing ConceptThe Marketing Concept

The marketing concept, also referred to as marketing orientation, can be expressed as:

The achievement of corporate goals through meeting and exceeding customer needs better than the competition

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Value-Based MarketingValue-Based Marketing

Marketing is the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage

(Doyle, 2009)

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The Changing Role of MktgThe Changing Role of Mktg

Past Future

Objective of Mktg Create customer value

Create shareholder value

Marketing strategy

Increase market share

Develop and manage marketing assets

Assumptions Positive market performance leads to positive fin. results

Marketing strategies need to be tested in value terms

Contribution Knowledge of buyers,

competitors, channels

Knowledge how to lever mktg to increase shareholder value

Focus of marketing

Marketing orientation General management

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The Changing Role of MktgThe Changing Role of Mktg

Past Future

Concept of Assets Tangible Intangible

Rationale Improves profits Increases shareholder value

Performance measures

Market share, customer satisfaction, return on sales and investment

Shareholder value: discounted cash flows

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Marketing orientationsMarketing orientationsProduction orientationProduct orientationSales (selling) orientationClassical marketing orientationSocietal marketing orientationRelationship marketingValue-Based Marketing

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Production orientationProduction orientation

Production capabilities

Manufacture product

Aggressive sales effort

Customers

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Product orientationProduct orientation

New productdevelopment

Manufactureproduct

Aggressive sales efforts

Customers

Develop a better mousetrap and the world will beat a path to your door

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Sales orientationSales orientation

Manufacture product

Aggressive sales effort

CustomersAggressive advertising

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Marketing orientationMarketing orientation

Customer needs

Potential Market

opportunities

Marketing products and

servicesCustomers

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Marketing orientationMarketing orientation

Product orientation

Customer orientation

Competitor orientation

Marketing orientation

Customer oriented

Competition oriented

No Yes

No

Yes

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Societal marketing conceptSocietal marketing concept

It is based on the understanding that the customers’ needs must be satisfied only if they correspond to the long-term interests of the society

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Marketing orientationsMarketing orientations

Orientation Profit driver

Time

frame

Characteristics

Production Production methods

Until 1960

Improve production and distribution to reduce costs

Product Quality of product

Until 1970

Quality is paramount. Focus on product, not on needs

Selling Selling methods

1950- 1970

Effective selling and promotion are the major drivers to success

Marketing Needs & Wants

1970+ Focus of satisfying the needs and wants

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Marketing orientationsMarketing orientationsOrientation Profit

driverTime

frame

Characteristics

Societal marketing

Benefit to society

1990+ Same as marketing with the proviso that no harm will be done to society or nature

Relationship

marketing

Building and retaining good relations with the customers

1980+ Best possible attention, customer services and therefore build customers’ loyalty

Value-Based marketing

Value of the shares

2000+ Do everything to increase the value of the shares

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Ethics and social responsibilityEthics and social responsibility

Ethics: Moral principles and values that govern the actions and decisions of an individual or group. They serve as guidelines on how to act rightly and justify when faced with moral dilemmas

Laws: Society’s values and standards that are enforceable in the courts

Can make marketing decisions that are legal but unethical Can make marketing decisions that are illegal but ethical

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Consumer Bill of Rights (1962)Consumer Bill of Rights (1962)

Right to safetyRight to be informed Right to chooseRight to be heard

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Laws reduce confusionLaws reduce confusion

Socially responsible packaging:

Federal Fair Packaging and Labeling Act (USA, 1966) – the consumer goods must be clearly labeled in easy to understand terms.

Do you know the main points of the law in Bulgaria?

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ConsumerismConsumerism

A social movement that seeks to increase the rights and powers of consumers

Nader R.(1966) Unsafe at any speed, Pocket Books, NY

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Ethical exchange relationshipsEthical exchange relationships

Both buyer and seller should be better off after a transaction

Ethical choices are based on personal moral philosophy

Moral idealism Utilitarianism “Justice” perspectiveSocial responsibility

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LATE MARKETING ERA

• Supply >> Demand• Demand management

SOCIETAL MARKETING• Balance the interests

of the company and the society

EARLY MARKETING ERA

• Supply > Demand• Stiff competition

SELLING ERA•Demand = Supply •Weak competition

PRODUCTION ERA• Demand > Supply• Producers run the

show

BARTER ERA• Self-supply

•Markets do not exist

History of Marketing

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LATE MARKETING ERA

• Supply >> Demand• Demand management

SOCIETAL MARKETING• Balance the interests

of the company and the society

EARLY MARKETING ERA

• Supply > Demand• Stiff competition

SELLING ERA•Demand = Supply •Weak competition History of Marketing

MARKETING RELATIONSHIPS• Supply >> Demand• Know thy customer

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Why the marketing is Why the marketing is important?important?

Marketing is the science of exchange

Exchange is the foundation of organization activities Unless the organizations can encourage exchange,

their resource bases disappear Move to marketing in many sectors. Marketing

concepts can be used for Business, Services, Financial services, Non-for-profit, Politics, Schools, Public opinion

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Marketing must be POISEMarketing must be POISE

Hugh Davidson argues that successful marketing is marked with POISE. It must be:

P Profitable

O Offensive (rather than defensive)

I Integrated

S Strategic (future-oriented)

E Effective (it gets results)

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1950s 1960s 1970s 1980s 1990s 2000s

Consumermarketing

Industrialmarketing

Non-profitmarketing

Servicesmarketing

Relationshipmarketing

?

Source: Adapted from Christopher, M., Payne, A. and Ballantyne, D. (1991) Relationship Marketing. London: Butterworth Heinemann

Developments in MarketingDevelopments in Marketing

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Consumer GdsRelationshipMarketing

ServicesMarketing

Industr

ial (B

2B)

Marke

ting

NordicSchool

NetworkApproach

Anglo-AustralianApproach

Strategic Alliances& Partnership

Research

(Egan, 2001)

Influences on RMInfluences on RM

86Source: Based on Brodie, R.J., Coviello, N.E., Brookes, R.W. and Little, V. (1997) ‘Towards a paradigm shift in marketing; an examination of current marketing practices’, Journal of Marketing Management, 13(5), 383–406

RM DefinitionsRM Definitions

DatabaseMarketing

Business/CustomerPartnering

Customer Partnering(Company Relationships)

Catch-all Category

Breadth of relationship definition

Most generallyaccepted definitions of relationship marketing

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Relationship MarketingRelationship Marketing

direct marketing customer relationship

management (CRM) micromarketing loyalty-based marketing wraparound marketing symbiotic marketing relevance marketing frequency marketing dialogue marketing

database marketing data-driven marketing one-to-one marketing ‘segment-of-one’ marketing customer partnering individual marketing bonding integrated marketing interactive marketing

Terms used either as substitute for or to describesimilar concepts to Relationship Marketing

Source: Based on Vavra, T.G. (1992) Aftermarketing. Homewood, IL: Richard D. Irwin; Buttle, F.B. (1996) Relationship Marketing Theory and Practice. London: Paul Chapman; Tapp, A. (1998) Principles of Direct and Database Marketing. London: Financial Times Management/Pitman Publishing

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RM DefinitionsRM Definitions

Christopher et al (1991):RM is where

customer service quality management marketing

come togetherOther definitions stress time frame and

commitment

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Grönroos (1994)

“identify and establish, maintain and enhance and, when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties involved are met; and this is done by mutual exchange and fulfilment of promises”

Source: Grönroos, C. (1994) ‘From marketing mix to relationship marketing: towards a paradigm shift in marketing’, Management Decisions, 32(2), 4–20

RM DefinitionsRM Definitions

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Source: Adapted from Gordon, I.H. (1998) Relationship Marketing. Etobicoke, Ontario: John Wiley & Sons

Relationship MarketingRelationship Marketing Seeks to create new value for customers and share it Recognises the key role that customers have both as purchasers

and in defining the value they wish to achieve. Businesses are seen to design and align processes,

communication, technology and people to achieve customer value.

Represents continuous cooperative effort between buyers and sellers.

Recognises the value of customer’s purchasing lifetimes (i.e. lifetime value)

Seeks to build a chain of relationships within the organisation (to create customer value) and between the organisation and its main stakeholders including suppliers, distr.channels, intermediaries,shareholders.

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TM versus RMTM versus RM

TRANSACTIONS Single sale focus Discontinuous

customer contact Features orientation Short time scale Little service emphasis Low commitment Quality a production

issue

RELATIONSHIPS Retention focus Continuous customer

contact Benefits orientation Long time scale High service emphasis High commitment Quality everyone’s

concernSource: Adapted from Payne, A., Christopher, M. and Peck, H. (eds) (1995) Relationship Marketing for Competitive Advantage: Winning and Keeping Customers. Oxford: Butterworth Heinemann

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TM/RM Continuum

Importance ofCore Product

Importance ofCustomer Service

TM/RM ContinuumTM/RM Continuum