Principles of Marketing

An Overview of Marketing and

Marketing Management

Chapter One
Marketing and Its Core Concepts
Marketing is meeting customers’ needs and wants profitably.

Marketing is the economic process by which goods and services are

exchanged between the producer and the consumer and their values are
determined in terms of money (prices). All of us engage in marketing in one
or another way.

E.g. Searching a job & trying to convince customers

• Many people think that marketing and selling mean the same thing.
Others think that marketing is the same as selling and advertising.
• Still others have a notion that marketing has got something to do
with making products available in the stores, arranging, displays
and maintaining inventories of products for future sales.
• Marketing is a key function of management. It brings success to
business organization.
• A business organization performs two key functions (i.e.
producing goods and services and making them available to
potential customers for use.)
Definition of Marketing
Marketing can be defined as “the performance of business activities that
directs the flow of goods and services from producer to consumers/final users.
It is a process of transacting goods and services form the producer to
consumers”.

According to William J. Stanton, Marketing is a system of business activities

designed to plan, price, promote and distribute want satisfying goods and
services to present and potential customers.

The Chartered Institute of Marketing defines Marketing as: “Marketing is

the management process for identifying, anticipating & satisfying customer
requirements profitably.”
Core concepts of Marketing
Marketing has been defined in various ways. The definition that serves our
purpose best is that, According to Philip Kotler, “Marketing is a Social and
Managerial process by which individuals and groups obtain what they need
and want through creating, offering, and exchanging products of value with
others”.
This definition of marketing rests on the following core concepts: needs, wants,
and demands; products (goods, services, and ideas); value, cost and
satisfaction, exchange and transactions; markets, and marketers.
Needs –Marketing starts with human needs and wants. A human need is a
state of felt deprivation of some basic satisfaction; people require food, clothing,
shelter, safety, belonging, and esteem.
Wants – Wants are desires for specific satisfiers of needs. Wants are shaped by
society, culture and individual personality. In different society, wants can be
satisfied in different ways. For e.g. an Ethiopian needs food and wants "Injera" &
"wet", and an American needs food and wants “hamburger”.
Demands – are human wants for specific products that are backed by an ability
and willingness to buy them. Wants become demands when supported by
purchasing power.
Product (Goods, Services, and Ideas): People satisfy their needs and
wants with products. A product is anything that can be offered to satisfy a need or
want. It can be physical goods, services, ideas or a combination of physical product
along with services.
For example, a computer manufacturer is supplying goods (computer, monitor, and
printer), services (delivery, installation, training, maintenance and repair) and an
Value and satisfaction:
Consumers usually face a broad array of products and services that might satisfy
a given need.
Customer value is the difference between the value customer gains from owning
& using a product and the cost of obtaining the product.
Customer Satisfaction depends on a product’s perceived performance in
delivering value relative to buyers’ expectation.
CUSTOMER SATISFACTION (3 Types)
Dissatisfied (Bad word of mouth communication)- P<E
Satisfied (Good word of mouth communication)- P=E
Delighted- P>E
Outstanding marketing companies do out of their way to keep their customers
satisfied
Exchange:
Marketing occurs when people decide to satisfy needs and wants through
exchange.
is the act of obtaining a desired product from someone by offering something
in return. It is only one of the ways that people can obtain what they need. A
person may get what he needs by begging others, hunting, robbing etc.
Exchange must be seen as a process rather than as an event. Two parties are
engaged in exchange if they are negotiating and moving toward an
agreement. When an agreement is reached, we say that a transaction takes
place.
A transaction consists of a trade off values between two parties.
Market:
A market consists of all the potential and actual customers sharing a
particular need or want who might be willing and able to engage in exchange
to satisfy that need or want.
Thus the size of the market depends on:
 the number of people who exhibit the need or want,
 have resources that interest others, and
 are willing and able to offer these resources in exchange for what they want.

Here, unlike the Economics approach that considers market as a collection of

buyers and sellers, we shall consider market as a collection of buyers only and the
sellers are considered as industry.
Marketer:
• is a party that seeks a resource from the other party and in return
willing to offer something valuable to the other party and the party
with whom the marketer needs to make exchange is known as
prospect.
• In the event that both the parties actively seek an exchange, we say
that both of them are marketers and call the situation as reciprocal
marketing.
Marketing Management
According to American Marketing Association, marketing management is defined as
the process of planning and executing the conception, pricing, promotion, and
distribution of ideas, goods and services to create exchange that satisfies individual and
organizational goals.
In light with this, marketing manager is the one who is responsible for all the activities
related to the aforementioned aspects and there by enhances the demand (acceptability)
of the company’s products in the market. That is why some times marketing management
is considered as demand management.

At any point in time, there may be no demand, adequate demand, irregular demand
or too much demand and marketing management must find ways to deal with these
different demand states. Hence, marketing management has the task of influencing
the level, timing, and composition of demand in a way that will help the organization
achieve its objectives by doing the activities involved in marketing properly.
Marketing Management Philosophies
1. The Production Concept
The production concept, one of the oldest in business, holds that consumers prefer
products that are widely available and inexpensive.
Managers of production-oriented businesses concentrate on achieving high production
efficiency, low costs, and mass distribution.
This orientation makes sense in two types of situations, where consumers are more
interested in obtaining the product than in its features(demand is greater than supply)
taking this advantage the company concentrates on building production volume .
It is also used when a company wants to expand the market(production cost is
high). The company upgrading technology in order to bring costs down, leading to lower
prices and expansion of the market.
Texas Instruments is a leading exponent of this concept with philosophy of “GET-
OUT-PRODUCTION, CUT THE PRICE”.
2. The Product Concept:
The product concept holds that the consumers will favor those products that
offer the most quality, performance or innovative features.
Managers in these organizations focus their energy on making superior
products and improving them over time.
They assume that buyers admire well-made products and can appraise product
quality and performance. However, these managers are sometimes caught up
in a love affair with their product and do not realize what the market needs.
Product-oriented companies often design their products with little or no
customer input, trusting that their engineers can design exceptional products.
3. The Selling Concept
The selling concept holds that consumers and businesses will not buy
enough of the firm’s products unless it undertakes an aggressive selling
and promotion effort.
The selling concept is practiced most aggressively with unsought goods—
goods that buyers normally do not think of buying, such as insurance,
blood donations and funeral plots.
Most firms practice the selling concept when whom they have
overcapacity. Their aim is to sell what they make rather than make what
the market wants.
Moreover, prospects are bombarded with TV commercials, newspaper
advertisements, direct mail and sales calls.
 Marketing based on hard selling carries high risks.
It assumes that customers who are coaxed(persuaded) into
buying a product will like it, and even if they do not like it,
they will not bad-mouth it or complain to consumer
organizations and will forget their disappointment and buy it
again.
These are indefensible assumptions because one study showed
that dissatisfied customers may bad-mouth the product to 10 or
more acquaintances; bad news travels fast.
4. The marketing concept
The marketing concept holds that achieving organizational goals
depends on knowing the needs and wants of target markets and
delivering the desired satisfactions better than competitors do.
Under the marketing concept, customer focus and value are the paths to
sales and profits.
Instead of a product-centered “make and sell” philosophy, the
marketing concept is a customer-centered “sense and respond”
philosophy.
It views marketing not as “hunting,” but as “gardening,” The job is not
to find the right customers for your product, but to find the right
products for your customers.
Cont’d
• The selling concept takes an inside-out perspective. It starts with
the factory, focuses on the company’s existing products, and calls for
heavy selling and promotion to obtain profitable sales.
• It focuses primarily on customer conquest – getting short-term sales
with little concern about who buys or why.
• In contrast, the marketing concept takes an outside-in perspective.
The marketing concept starts with a well-defined market, focuses on
customer needs, and integrates all the marketing activities that affect
customers. In turn, it yields profits by creating lasting relationships
with the right customers based on customer value and satisfaction.
Table: Marketing concept compared with the selling concept

Starting Focus Means Ends

point

Selling Factory Existing Selling and Profit through sales

concept products promoting volume

Marketing Target Customer Integrated Profit through Sales

concept Market Needs marketing volume & customer
satisfaction
5. The Societal Marketing Concept
The Societal marketing concept questions whether the pure marketing
concept overlooks possible conflicts between consumer short-run wants and
consumer long-run welfare.
Is a firm that satisfies the immediate needs and wants of target markets
always doing what’s best for consumers in the long run?
A socially responsible company must take into account the long-run
consumer and societal welfare.
The drawback of marketing concept is that it ignores the long-run societal
welfare and focuses only on the short-run benefits. For example, a product,
which gives short-run consumer satisfaction, may have adverse effects in the
long- run. Cigarette factories and automobile companies which causes
environmental problem are good examples for this.
Cont’d
• It has, therefore, been felt that the marketing concept be revised
incorporating the long-run societal welfare.
• The societal marketing concept holds that marketing strategy should
deliver value to customers in a way that maintains or improves both
the consumer’s and the society’s well-being.
Importance of Marketing

• It enables the customers purchasing the item at all

• It has incredible benefits and our economy would collapse without it.
• It employs many people directly or indirectly
Not only does it employ the people who make advertisements and
get the word out there, but it employs many people indirectly.
• It increases competition, and it leads to better products.
Without marketing, only the company that is well known will get
business, while the other companies don't stand a chance.
• It is an essential part of the capitalist society.
Scope of Marketing:
Marketing people are involved in marketing 10 types of entities;
 Goods
 Services
 Experiences
 Events
 Persons
 Places
 Properties
 Organizations
 Information
 Ideas
Goods.
• Physical goods constitute the bulk of most countries’ production and
marketing effort. They produces and markets billions of physical goods.
• In developing nations, goods—particularly food, commodities, clothing,
and housing—are the mainstay of the economy.
Services.
• As economies advance, a growing proportion of their activities are focused
on the production of services. The U.S. economy today consists of a 70–30
services-to-goods mix.
• Services include airlines, hotels, and maintenance and repair people, as well
as professionals such as accountants, lawyers, engineers, and doctors.
• Many market offerings consist of a variable mix of goods and services.
Experiences.
• By coordinating several services and goods, one can create, stage, and
market experiences.
Events.
• Marketers promote time-based events, such as the Olympics, trade
shows, sports events, and artistic performances.
Persons.
• Famous person in marketing has become a major business. Artists,
musicians, physicians, high-profile lawyers and financiers, and other
professionals draw help from celebrity marketers.
Places.
 Cities, states, regions, and nations compete to attract tourists,
factories, company headquarters, and new residents.
 Place marketers include economic development specialists, real
estate agents, commercial banks, local business associations, and
advertising and public relations agencies.
Properties.
 Properties are intangible rights of ownership of either real property
(real estate) or financial property (stocks and bonds).
 Properties are bought and sold, and this occasions a marketing effort
by real estate agents (for real estate) and investment companies and
banks (for securities).
Organizations.
• Organizations actively work to build a strong, favorable image in the mind of
their publics.
Information.
• The production, packaging, and distribution of information is one of society’s
major industries.
• Among the marketers of information are schools and universities; publishers,
nonfiction books, and specialized magazines; and Internet Web sites.
Ideas.
• Every market offering has a basic idea at its core. In essence, products and
services are platforms for delivering some idea or benefit to satisfy a core
need.
The goals of marketing System
The marketing system generally has four goals.
Maximizing consumption- marketing stimulates maximum demand. Maximum
consumption inter maximize production, employment and wealth.
Maximizing Satisfaction- owning one product gives sense when it maximized
satisfaction to customers.
Marketing systems maximize satisfaction by creating and providing –quality
products --variety products etc.
Maximizing choices— marketing system provides varieties. As a result the
consumer will find products that fit to their exact test.
Maximizing life quality— the participation of marketing system in
environmental protection maximize the quality of life of consumer. As a result
of this the life style consumers leads to quality of life achieved.
THANK YOU!!!

END OF THE 1 CHAPTER!!

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