Marketing Concepts 2.ppt

CONCEPTS IN MARKETING

Sea Change in Indian Marketing environment

• Takes on the world : no longer manufactures only Nano but also a Jaguar /Land rover

• India’s outbound FDI crosses $10 billion• From waiting for a connection to 100 million mobile connection

• From HM’s Ambassador to Mahindra’s XUV5OO.• From B&W TV to DTH and Chitrahar to MTV• Indian Airlines to Air Deccan to Indigo• E Commerce as a major channel• Embracing IT (CRM sibel)• Banking revolution• The world sees India as an elephant that has started to dance.

• Market Darwinism has taken over : survival of the fittest : marketing fitness alone takes over

• All cocoons of protection have disappeared. (WTO)

• Brand dominance and take overs• Tackling the changing profile • Rising Income• Change to lifestyle living• Rising consumer expectations• Communication revolution• BOP/ Below poverty line (BPL)• Challenge in distribution through Modern Retailing

• Compulsion to go global and the difficulties thereof

• Value delivery becomes crucial

Evolving Views of Marketing’s Role

Evolving Views of Marketing’s Role

e. The customer as the controlling function and marketing as the integrative function

Customer

Marketing

Production

Hum

an

resources

Finance

Needs, Wants, and Demands

Needs: • The most basic concept underlying marketing is that

of human needs.• Human needs are states of felt deprivation.• Human have many complex needs:

– Physical needs for food, clothing, warmth, and safety

– Social needs or belonging and affection – Individual needs for knowledge and self –

expression

Wants:• Want are the form taken by human needs as they are shaped by culture and individual personality.

• People have almost unlimited wants but limited resources.

• They want to choose products that provide the most value and satisfaction for their money.

Demands: • When backed by buying power, wants become demands.

• Consumers view products as bundles of benefits and choose products that give them the best bundle for their money.

Elements of Exchange

Desire to Deal With Other PartyDesire to Deal

With Other Party

Freedom to Accept or Reject

Freedom to Accept or Reject

Something of Value

Something of Value

Ability to Communicate

Offer

Ability to Communicate

Offer

At Least Two Parties

At Least Two Parties

Necessary Conditions

for Exchange

Necessary Conditions

for Exchange

What do we market?•Goods : Physical goods: cars, trucks, tv sets, machines, industrial chemicals, pharmaceuticals (missionary selling), watches, cosmetics, •Services: Airlines, hotels, cars, barbers (Habibs), gyms (Talwalkars), spa, bankers, lawyers, fast food , KFC, McDonald,CCD•Events : Olympics, world cups, Goa Carnival, Femina •Experience: Water park, CCD, Theme based restaurants etc.•Persons: Celebrities……•Places: Kerala “God’s own country”, Incredible India “If you have not shown your wife… then you haven’t loved her.

• Properties: stocks, shares, derivatives, mutual funds

• Organisations: Corporate brands / Tatas: Microsoft: Infosys : Hero

• Information: It is what books, schools, and universities produce.

• Ideas : Zuckerberg.

• Consumer market : FMCG,FMCD• Business markets: Informed Buyers….• Global Markets:• Non profit and Government Markets: Bids, low price

Market Place : physical when you store in the shop, digital when you buy on the internet

Meta Markets: Mohan Sawhney of North western University: cluster of complementary products & services closely related

Rural Markets : 1.5 billion people in South East Asia live in villages.

McKinsay Global Institute states that by 2017 the size of rural market will reach the size of urban market of 2008. The real Tiger

Estimated Rs6500billion for FMCG products, Rs500 billion for FMCD, Rs 800 billion for automobiles

The consumption pattern and hence the Consumer Behaviour will be totally different.

Values, Satisfaction, and Quality

Values:

• Customer value is the difference between the values the customer gains from owning and using a product and the costs of obtaining the products.

• Customers often do not judge product value and costs accurately or objectively. They act on perceived value.

Satisfaction:

• If the product’s performance falls short of the customer’s expectations, the buyer is dissatisfied.

Quality:

• Customer satisfaction is closely linked to quality.

• Quality has a direct impact on product performance.

• Quality can be defined as “freedom from defects”.

• TQM programs designed to constantly improve the quality of products, services, and marketing processes.

• Customisation vs customerisation• Dizitisation and connectivity : A new set of intermediaries

• E commerce domains: B2B,B2C, C2C, C2B

• The Micro marketing environment : The Co., The Suppliers, marketing intermediaries, Customers, Competitors

• The Macro Marketing Environment: • Demographic, Economic, Technological, Political, Cultural environment.

Porter Competitive Model

Intra-Industry Rivalry

Strategic Business Unit

BargainingPower

of Buyers

Bargaining Power

of Suppliers

Substitute Products

and Services

PotentialNew Entrants

Source: Michael E. Porter“Forces Governing Competition in IndustryHarvard Business Review, Mar.-Apr. 1979

Generic Value ChainGeneric Value Chain

INBOUNDLOGISTICS

OPERATIONS OUTBOUNDLOGISTICS

MARKETING AND SALES

SERVICE

PRIMARY ACTIVITIES

PROCUREMENT

TECHNOLOGY DEVELOPMENT

HUMAN RESOURCE MANAGEMENT

FIRM INFRASTRUCTURE

SU

PP

OR

T A

CT

IVIT

IES

Figure 3-6Adapted with the permission of the Free Press, an imprint of Simon & Schuster Inc.. from COMPETITIVE ADVANTAGE: Creating and Sustaining Superior Performance by Michael Porter. Copyright © 1985 by Michael E. Porter.

Value Chain and Information SystemValue Chain and Information System

The Value Chain can be used to determine where IS can strengthen the flow of primary and support activities within an organization.

Every segment of an organization needs IT and IS to be competitive. So this model is essential to visualizing the flow of activities within segments through the use of IS and IT.

Awareness of competitive forces can

help a company stake out a position

in its industry that is less vulnerable

to attack.

Michael E. Porter

Competitive Strategy

Basic Objectives of the SBUBasic Objectives of the SBU

1. To create effective links with buyers and suppliers.

2. To build barriers to new entrants and substitute products.

Possible Barriers to EntryPossible Barriers to Entry

• Economies of scale.

• Strong, established cost advantages.

• Strong, established brands.

• Proprietary product differences.

• Major switching costs.

• Limited or restrained access to distribution.

• Large capital expenditure requirements.

• Government policy.

• Definite strong competitor retaliation.

Substitute ThreatsSubstitute Threats

• Buyer propensity to substitute.

• Relative price/performance of substitutes.

• Switching costs.

Competitive StrategiesCompetitive Strategies

• What is driving competition in my current or future industry?

• What are my current or future competitors likely to do and how will we respond?

• How can we best posture ourselves to achieve and sustain a competitive advantage?

Strategy OptionsStrategy OptionsAccording to Michael PorterAccording to Michael Porter

Primary Strategies

1. Differentiation

2. Least Cost

Supporting Strategies

1. Innovation

2. Growth

3. Alliance

Porter Competitive ModelHeavyweight Motorcycle Manufacturing Industry

North American Market

Bargaining Power of Buyers

• Recreational Cyclist• Young Adults• Law Enforcement• Military Use• Racers

Potential New Entrant

Substitute Product or

Service

Intra-Industry RivalrySBU: Harley-Davidson

Rivals: Honda, BMW, Suzuki, Yamaha

• Foreign Manufacturer

• Established Company Entering a New Market Segment• New Startup

• Parts Manufacturers• Electronic Components• Specialty Metal Suppliers• Machine Tool Vendors• Labor Unions• IT Vendors

Bargaining Power of Suppliers

• Automobiles• Public Transportation• Mopeds• Bicycles

Product StrategyLimited

Specialized Products

Broad Range of Specialized

Products

Wide Range of Non-specialized

Products

Health Conscious Products

Parents with Kids

Ethnic FocusTeenagers

Young Adults with Social Focus

Time Conscious

Adults

Leisure Adults

Senior Citizens

Customer Strategy

Store Format Strategy

Dine InWait Service

Dine In Counter Service

or BuffetTake Out

Drive Through

Vendor StrategyCompetitive

BidsVertically Integrated

Long Term Contracts

Alliances

Market Strategy

Local Regional National International

Business Strategy Model – Food Service Industry

Company Structure Strategy

Independent Alliances Franchises Subsidiary

Information Systems Strategy

Customer Systems

Store Logistical Systems

Business Systems

Product Analysis System

Porter Competitive Model Tips

1. To incorrectly define the industry can cause major

problems in doing the analysis.

2. You must identify the specific market being evaluated.

3. Your analysis company is the Strategic Business Unit.

4. Identify rivals by name for majors, by category for minor

rivals if needed to present the best possible profile of

rivals.

Porter Competitive ModelPorter Competitive Model

5. Be sure to address the power implications of both

customers and suppliers. Power buys them what?

6. Identify buyers and suppliers by categories versus

companies.

A Philosophy

An Attitude

A Perspective

A Management Orientation

A Set of Activities, including:

Products

Pricing

Promotion

Distribution

WHAT IS MARKETING?

Attempts to Define Marketing• Many people think of marketing only as selling and

advertising.• Selling and advertising are only the tip of the marketing

ice-berg.• Marketing is one of three key core functions that are

central to all organizations.• Marketers act as the customers’ voice within the firm and

marketers are responsible for many more decisions than just advertising or sales: – Analyse industries to identify emerging trends.– Determine which national and international markets to

enter or exit.– Conduct research to understand consumer behavior.– Design integrated marketing mixes – products, prices,

channels of distribution, and promotion programs. Marketing 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.

WHAT IS MARKETING?

Marketing = Using Exchanges to Satisfy Needs

American Marketing Association Definition

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.

Market – All people with both the desire and ability to buy a specific product

Target Market – One or more subgroups I can satisfy

WHO DO I AIM AT?

McCarthy’s 4Ps

Price: List price, Discounts, Allowances, Payment periods, Credit terms

Product: Variety, Quality, Design, Features, Brand name, Packaging, Sizes, Services, Warranties, Returns.

Place: Channels, Coverage, Assortments, Locations, Inventory, transport, logistics

Promotion: Sales promotion,Advertising, sales force, PR, Direct marketing

THE CONTROLLABLE MARKETING FORCES

PricePrice

PromotionPromotion

PlacePlace

ProductProduct

The Four P’s-the “arrow”

SocialSocial

NaturalNatural

EconomicEconomic

TechnologicTechnologic

Political and LegalPolitical and Legal

CompetitiveCompetitive

External Environmental

Factors

External Environmental

Factors

THE UNCONTROLLABLE MARKETING FORCES

Helps identify market opportunities

Modern Marketing 4Ps

• People: People reflects internal Marketing and that they are critical to marketing success. Ex: Fedex

• Processes: institute the right set of processes

• Programmes: Regardless of whether they are off line or online, traditional or non traditional , they must be integrated so as to sum total customer’s expectations.

• Performance: range of possible outcomes that have financial and non-financial implications (profitability as well as brand and customer equity.

Factors affecting organization’s marketing program

Marketing’s task: satisfying consumer needs

HOW MARKETING BECAMESO IMPORTANT

• Evolution of the Market Orientation

Production Era

Societal Era

Sales Era

Marketing Concept Era

Four different orientations in the history of business

Societal

OrientationOrientation Key Ideas

ProductionProduction

SalesSales

MarketMarket

SocietalSocietal

Focus on efficiency of internal operations – if we make it, they will buy it

Focus on satisfying customer needs and wants

while meeting objectives - if they will buy it, we will make itFocus on satisfying customer needs and wants while enhancing individual and societal well-being. I.e.-mfg using recyclables

Focus on aggressive sales techniques and believe that high sales result in high profits

MARKETING MANAGEMENT PHILISOPHIES

THE DIFFERENCE BETWEEN SELLING VS. MARKETING•Mktg is a much broader concept and more dynamic

•Selling revolves around the needs and interest of the seller where as marketing around the needs and interest of the customer.

•Selling starts with the product whereas marketing begins with customer both existing as well as prospective

•Marketing calls upon to choose the product, price and methods of distribution and promotion

Selling Marketing1.Starts with seller, preoccupied Mktg. starts with the buyer his existing products focuses constantly on needs

2.Seller is the center of universe Buyer is the center 3.Emphasis on saleable surplus Identification/conversion of need4.Tricks the cash out for product Fulfill customer needs5.Business- a production process A customer satisfying process.6.Overemphasis on exchange Value satisfaction7.Seller dominates the Mktg Mix Buyer determines the Mix8.Firm makes the product to sell Determined by the buyer.9.Emphasis on existing technology Innovation to better value add10.Distribution as a production extn Vital keeping customer’s convenience in mind11.Selling motive dominates commn. Aims at satisfaction of the customer’s needs12.Cost determines price Consumer decides price leading to cost13.Emphasis on somehow selling Integrated mktg covering 4Ps14.Selling views customer as the Mktg. views customer as the very purpose last link in business All departments& people are organised around the marketing function.

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Factory Existing products

Selling and

promoting

Profits through sales volume

Starting point

Focus Means Ends

The selling concept

Market Customer needs

Integrated marketing

Profits through customer

satisfaction

The marketing concept

 The selling and Marketing Concepts Contrasted

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Three Considerations Underlying The Societal Marketing

Societal marketing

concept

Society(Human welfare)

Company(Profits)

Consumers(Want satisfaction)

• Offer products that perform• Give consumers more than they expect

• Avoid unrealistic pricing• Give the buyer facts• Offer organization-wide commitment in service and after-sales support

Customer value-benefits received by targeted buyers that include quality, price, convenience, on-time delivery, and both before-sale and after-sale service.

HOW TO DELIVER VALUE

Meet or exceed customer’s expectations

Provide solutions to customer’s problems

Cultivate relationships, NOT one-time transactions

Meet or exceed customer’s expectations

Provide solutions to customer’s problems

Cultivate relationships, NOT one-time transactions

KEEPING THE CUSTOMER SATISFIED

1. What is marketing?

A: 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.

1. An organization can’t satisfy the needs of all consumers, so it must focus on one or more subgroups, which are its ____________.

target markets

2. What are the four marketing mix elements that make up the organization’s marketing program?

A: product, price, promotion, place

3. What are environmental forces?

A: Environmental forces are those that the organization’s marketing department can’t control. These include social, economic, technological, competitive, and regulatory forces.

1. What are the two key characteristics of the marketing concept?

A: (1) strive to satisfy the needs of consumers (2) while also trying to achieve the organization’s goals.

2. What is the difference between goods and services?

A: Goods are physical objects whereas services are complex intangible items, such as legal advice, a college education, or airline travel.

Customer value is the unique combination of benefits received (including perceived value)by targeted buyers that includes quality, price, convenience, on-time delivery, and both before-sale and after-sale service.

Ex: Revlon

Customer value is the unique combination of benefits received (including perceived value)by targeted buyers that includes quality, price, convenience, on-time delivery, and both before-sale and after-sale service.

Ex: Revlon

Customer Value

Customer Value

• The ratio of benefits to sacrifice necessary to obtain benefits.– Offer products that perform– Give consumers more than they expect– Avoid unrealistic pricing– Give the buyer facts– Offer organization – wide commitment

in service and after sales support

What is Perceived Customer Value?

Product valueProduct value

Services valueServices value

Personnel valuePersonnel value

Image valueImage value

Totalcustomer

benefit

Totalcustomer

benefit

Monetary costMonetary cost

Time costTime cost

Energy costEnergy cost

Psychic costPsychic cost

Totalcustomer

cost

Totalcustomer

cost

Customerdelivered

value

Customerdelivered

value

The marketing concept is the idea that an organization should (1) strive to satisfy the needs of consumers (2) while also trying to achieve the organization’s goals.

The marketing concept is the idea that an organization should (1) strive to satisfy the needs of consumers (2) while also trying to achieve the organization’s goals.

Marketing Concept

An organization that has a market orientation focuses its efforts on(1) continuously collecting information about customers’ needs, (2) sharing this information across departments, and(3) using it to create customer value.

An organization that has a market orientation focuses its efforts on(1) continuously collecting information about customers’ needs, (2) sharing this information across departments, and(3) using it to create customer value.

Market Orientation

• Marketing Myopia : Coined by Prof. Theodore Levitt :

• While emphasising heavily on the product Co.s often forget that product after all is only a means to satisfy a particular customer need. This results in Marketing Myopia.

• Co.s suffering from the same by excessive attention to production, or product or selling at the cost of the customer and his actual needs.

Avoiding Marketing Myopia

• Marketing Myopia is management’s failure to recognize the scope of its business.– To avoid marketing myopia, companies must

broadly define organizational goals toward consumer needs.

The societal marketing concept is the view that an organization should satisfy the needs of consumers in a way that provides for society’s well-being.

The purpose of an enterprise lies outside the organisation.

Customer Lifetime Value.

The societal marketing concept is the view that an organization should satisfy the needs of consumers in a way that provides for society’s well-being.

The purpose of an enterprise lies outside the organisation.

Customer Lifetime Value.

Societal Marketing Concept