CHAPTER ONE

AN OVERVIEW OF MARKETING AND

MARKETING MANAGEMENT
1.1 What does the term marketing mean?
Many people think of marketing only as selling and
advertising.
• However, selling and advertising are the tip of the
marketing iceberg. Although they are important, they
are only two of many marketing functions, and often
not the most important ones.
• Marketing must be understood not in the old sense of
making a sale - 'selling' - but in the new sense of
satisfying customer needs.
1
Cont.…
If the marketer does a good job of understanding
customer needs, develop products that provide
superior value, and price, distributes and promotes
them effectively, these product will sell very easily.

• However, this does not mean that selling and

advertising are unimportant.
• Rather, it means that they are part of a larger
“marketing mix” - a set of marketing tools that
work together to affect the marketplace.
2
Cont...
Although marketing is defined by different scholars, the
definition of marketing can be divided into two categories:
classical (narrow) definition and modern (broad) definition.

Classical Definition:
In classical terms marketing can be defined as the
performance of business activities that direct the flow of
goods and services from producers to consumers. This
definition is too narrow to describe marketing. It emphasizes
the distribution aspect of marketing.

3
Cont...

Modern Definition:
In broader terms marketing is defined as a system of
business activities designed to plan, price, distribute
and promote want satisfying products (goods and
services) to present and potential customers.

In marketing, there are combinations of activities,

which start before the creation of a product and don’t
end until customers are satisfied. Therefore, product
planning, pricing, distribution and promotion are the
main activities performed in marketing
4
1.2 Core Concepts of Marketing
A. Needs, Wants and Demands
1.Needs
Need are fundamental requirements essential for human
survival and well-being. They are inherent and universal,
encompassing necessities such as food, water, shelter, and
safety. These needs are not influenced by external factors
and remain constant regardless of circumstances.
For instance , the need for food is a basic human
requirement necessary for sustaining life.
Needs cannot be totally eliminated but they can be
reduced or a person can look for another satisfying object.
5
Cont.….
Humans have many complex needs. These
includes:
 Basic Physical Needs : a need for food, clothing,
warmth and safety, which are innate need, primary
needs or biological in nature.
Social Needs : a need for belonging and affection.
 Individual Needs: a need for knowledge and self-
expression.
These needs are not invented by marketers but
they are a basic part of the human make-up. 6
2.Wants

It is the desire for specific satisfiers of the basic

needs shaped by culture and individual personality
Unlike constant needs, wants vary according to
individual preferences and societal influences. While
needs are universal, wants reflect individual tastes
and cultural background
People needs are few while their wants are many.
 For example, an Ethiopian needs food but wants
‘kitfo’, ‘tibis’, ‘keyiwet’, ‘bread’ etc.
7
3.Demands

It is a form of human wants that is backed by the people

purchasing power.
 Demands represent the ability and willingness to
purchase specific products.
 However, they also have limited resources.
 When backed by an ability to pay that is, buying power -
wants become demands.
• For example: Many people want a Mercedes; only a few
are able and willing to buy one. Thus, companies must
measure not only how many people want their product but
also how many would actually be willing and able to buy
8
it.
Cont..
• In general: Needs: The basic requirements for
human beings to survive.
• Wants: Need when shaped by culture and
individual personality becomes want.
• Demands: When backed by buying power,
want becomes a demand.

9
B. Marketing offers- product, service and Experience

Product:
A product is a tangible item designed to meet customer
needs and wants.
It can be a physical object or an intangible asset that
provides value to the consumer. Products are often evaluated
based on their features, quality and ability to fulfill specific
requirements
Example: A smartphone is a product designed to meet the
need for communication and information access. It
includes various features like a camera and internet
connectivity, etc… catering to both functional and personal
preferences. 10
Service:
• Services are intangible offerings that fulfill specific needs
and cannot be physically touched.
• They involve performance or assistance provided to
customers such as consulting, healthcare or education.
• Services are characterized by their intangibility, meaning
they cannot be stored or owned but are experienced.
• Example a medical consultation with a doctor in a service.
It provides healthcare and advice fulfilling the need for
medical attention. Unlike products, the value derived from
the services is experienced rather than possessed.
• Examples are: banking, airline, hotel, repair services etc.
11
Experience
• Experience: refers to the overall perception and satisfaction
a customer derives from using a product or service. It
encompasses the emotional and functional interactions that
contribute to the customer's overall impression.
• A positive experience can significantly enhance customer
loyalty and satisfaction.
• Example: consider a visit to a luxury hotel. The experience
includes not only the comfort of the room(product) and the
quality of the concierge service (service) but also the
ambiance, hospitality and overall environment.
• A memorable experience can lead to repeat visits and
positive reviews.
12
C. Customer Value, Satisfaction and
Quality
Customer value is the perceived benefit a customer
receives from a product or services compared to its
cost.
It is a measure of how well a product or service meets
the customer's needs and expectation relative to the
price paid.
Example: a high-quality, affordable smartphone that
offers excellent features and performance represents high
customer value.
Customer perceive they are getting good value for their
money when the benefits outweigh the cost. 13
Customer satisfaction:
 Customer satisfaction: measures how well a product or
service meets or exceeds customer expectation. Satisfied
customers are more likely to become repeat buyers and
advocates for the brand, while dissatisfaction can lead to
negative feedback and lost sales.
 If the product's performance falls short of the customer's
expectations, the buyer is dissatisfied.
 If performance matches expectations, the buyer is
satisfied.
 If performance exceeds expectations, the buyer is
14
delighted.
Cont.…
Outstanding marketing companies go out of their way to
keep their customers satisfied.
Satisfied customers make repeat purchases, and they tell
others about their good experiences with the product.
The key is to match customer expectations with
company performance.

 Smart companies aim to delight customers by

promising only what they can deliver, then delivering
more than they promise.
15
Cont.…
 Customer satisfaction is closely linked to quality.
Quality has a direct impact on product performance, and hence on
customer satisfaction.
• In the narrowest sense, quality can be defined as 'free from
defects'.
• But most customer-centered companies go beyond this narrow
definition of quality.
 Our definition of a defect is "if the customer doesn't like it. It’s
a defect".'
• Customer-focused definitions of quality suggest that a company
has achieved total quality only when its products or services
meet or exceed customer expectations.
• Quality begins with customer needs and ends with customer
16
satisfaction.
D. Exchange, Transaction, and
Relationship Marketing
 There are four ways for people to obtain a product. Exchange is
one of the four ways in which a person can obtain a product.
1.Self-production: One way of obtaining a product or service is
producing it by oneself. For instance, people can possibly relieve
hunger through hunting, fishing, or fruit gathering.
2.Coercion/force: It is the use of force to get something from
someone, where no benefit is offered to the other. For instance, a
hungry person can snatch food from another person.
 Here, the former gets the food, whereas, the latter obviously gets
no benefit.
3. Begging: This is another way of obtaining a product. Hungry
people can approach others and beg for food. They have nothing
tangible to offer to others, except appreciation and thankfulness.17
Cont.…
 4. Exchange: refers to the process of giving some thing
of value to obtain something else of value. It involves
two parties who provide mutual benefits.
An exchange can occur in various forms, not limited
to monetary transaction, and can involve goods,
services, or information.
 Example: A classic example of exchange is
bartering, where two individuals trade items they
have for items they need.
For instance, exchanging a book for a bottle of wine
involves both parties giving up something of value to
receive something they desire. 18
Cont.….
Transaction:
A transaction is a formalized exchange that involves
monetary payment. It is a specific instance where
goods, services, or money are traded based on agreed
terms. Transaction are often documented and involve
legal and financial considerations.
Example: purchasing a laptop from an electronics store
is a transaction. The buyer pays a specified amount of
money to the seller in exchange for the laptop.
This transaction is recorded through a receipt or invoice,
indicating the completion of the exchange process.
19
Cont.…
Relationship marketing is the process of creating,
maintaining and enhancing strong, value-laden
relationships with customers and other stakeholders.
• Beyond creating short-term transactions, smart
marketers work at building long-term relationships
with valued customers, distributors, dealers and
suppliers.
• They build strong economic and social connections by
promising and consistently delivering high-quality
products, good service and fair prices.

• 20
Cont.…
• Increasingly, marketing is shifting from trying to
maximize the profit on each individual
transaction to maximizing mutually beneficial
relationships with consumers and other
parties.

21
1.3 Marketing Management
 Marketing management as the analysis, planning,
implementation and control of marketing programs that
designed to create, build and maintain beneficial exchanges
with target buyers for the purpose of achieving organizational
objectives.
 Thus, marketing management involves managing demand,
which in turn involves managing customer relationships.
1.3.1 Demand Management
 Marketing management is concerned not only with finding
and increasing demand, but also with changing or even
22
reducing it.
1.3.1.1 Demand states and their
respective marketing tasks
1. Negative demand: This is a type of demand in which a
major part of the market dislikes the product and may
even pay a price to avoid it. Example: vaccinations,
dental work, and operations etc.
 Marketing Task: is Conversational Marketing- to
analyze why the market dislikes the product and whether
a marketing program consisting of product redesign,
lower prices, and more positive promotion can change
beliefs and attitudes of customers in the target market.

23
Cont.…
2. No Demand: This is a demand situation when the target consumers
may be unaware or uninterested in the product. Example:
Farmers may not be interested in new farming methods, and college
students may not be interested in foreign language courses.
 Marketing Task: The marketing task is to find ways to connect the
benefits of the product with people’s natural needs and interests.
When they are convinced, they will develop a reasonable level of
interest towards the specific product.
3. Latent (Hidden) Demand: when consumer is a potential need for a
product not currently satisfied by any existing product. Example,
There is a strong demand for harmless cigarettes, medicine for HIV
Aids , more fuel-efficient cars etc.
 Marketing Task: The appropriate marketing task is to measure the
size of the market and develop goods and services to satisfy the
24
demand.
Cont.…
4.Flatering Demand: When demand for a product is
declining. Example, Private Colleges have seen
applications fall in Ethiopian.
 Marketing Task: The marketer must analyze the causes
of the decline and determine whether demand can be re-
stimulated by new target markets, and by changing
product features, or by more effective communication
styles.
• The marketing task is then generally to reverse declining
demand through creative remarketing.

25
Cont.…
5. Irregular Demand: when demand fluctuates
significantly depending on seasons or
timeframes.

 A very high demand or very low demands are

both not favorable for firms.
Marketing Task: the marketing task is, called
Synchro-marketing, to find ways to alter the
pattern of demand through flexible pricing,
promotion, and other incentives. 26
Cont.…
6. Full Demand: when demand perfectly matches
the available supply.

• Marketing Task: The marketing task is to

maintain the current level of demand in the face
of changing consumer preferences and increasing
competition.

27
Cont.…
7.Overfull Demand: when demand exceeds the
available supply.
Marketing Task: The marketing task, called de-
marketing, requires finding ways to reduce
demand temporarily or permanently.
• De-marketing seeks to discourage overall demand
and includes such steps as raising prices and
reducing promotion and service.

28
Cont.…
8.Unwholesome Demand: when demand for a product
is considered socially undesirable. Eg.Campaigns
have been conducted against cigarettes, alcohol,
hard drugs, handguns, X-rated movies, etc.

Marketing Task: The marketing task is to get

people who like something to give it up, obey the
rules of some established agencies, using fear
messages (e.g., Cigarettes are dangerous for health,
Cigarettes are dangerous for pregnant women etc.)
and reduce availability. 29
1.4 Marketing management philosophies

Marketing activities should be carried out under a well

thought-out philosophy of efficient, effective, and
socially responsible marketing.
 The organization's marketing management philosophy
influences the way it approaches its buyers.
• There are five competing concepts under which
organizations conduct marketing activities: production
concept, product concept, selling concept, marketing
concept, and societal marketing concept.

30
1.The Production Concept
 Some organizations believe that they can sell products easily if
they are inexpensive and easily available to consumer. Hence
this organizations follow the production concept.
 It holds that consumers will favor products that are available
and highly affordable, and that management should therefore
focus on improving production and distribution efficiency.
 It is the oldest philosophy that guides sellers.
 It is a useful philosophy in two types of situation.
1. It occurs when the demand for a product exceeds the supply. D
Here, management should look for ways to increase production.
2. It occurs when the product's cost is too high and improved
productivity is needed to bring it down. 31
Cont.…
Managers of production oriented businesses
concentrate on achieving high production efficiency,
low costs, and mass distribution.
 This orientation makes sense in developing countries,
where consumers are more interested in obtaining
the product than in its features.
o It is also used when a company wants to expand the
market.
o It concentrates on building production volume and
upgrading technology in order to bring costs down,
leading to lower prices and expansion of the market.
32
2.The Product Concept
 Some organization believe that they can sell products easily and can
attain business goals if they manufacture products of high quality.
Hence these organizations manufacture products of superior quality.
 It holds that consumers will favor products that offer the most
quality, performance and innovative features, and that an
organization devotes energy to make continuous product
improvements.
 Managers in these organizations focus on making superior products
and improving them over time, assuming that buyers can appraise
quality and performance.
 Product oriented companies often design their products with little or
no customer input, trusting that their engineers can design
exceptional products.
33
 The product concept can lead to marketing myopia.
3.The Selling Concept
 Some organizations believe that they can sell more products by
convincing them through aggressive selling and other
promotional efforts.
 The concept relies on strong persuasion or even aggressive selling
to convince as many customers as possible to buy it.
There is less emphasis on the needs of the purchaser and more
emphasis on making the sale.
 The selling concept is practiced most aggressively with unsought
goods—goods that buyers normally do not think of buying, such as
insurance, encyclopedia book, funeral plots, blood donation etc.
 The selling concept is also practiced in the nonprofit area by fund-
raisers, college admissions offices, and political parties.
 Most firms practice the selling concept when they have
overcapacity 34
Cont.…
Prospects are bombarded with sales messages &
identified as marketing with hard selling & advertising.
But marketing based on hard selling carries high risks.
1. It focuses on creating sales transaction rather than on
building long-term profitable customer relationships.
2. It assumes that customers who are coaxed/persuaded
into buying a product will like it.
 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 35
4.The Marketing concept
 The organizations using the marketing concept believe that
they should always fulfil the needs of the customers and
produce goods according to their requirements and wants.
 It holds that achieving organizational goals depends on
determining the needs and wants of target markets and
delivering the desired satisfactions more effectively and
efficiently than competitors do.
 But, the marketing concept takes an outside-in perspective.
 It starts with a well-defined market, focuses on customer
needs, co-ordinates all the marketing activities affecting
customers and makes profits by creating long-term customer
relationships based on customer value and satisfaction. 36
5.The Societal Marketing Concept
 Organization they use societal concept believe that companies should
not blindly follow their goals of customers satisfaction and should also
look for social and environmental factors.
 It holds that the organization should determine the needs, wants and
interests of target markets and it should then deliver the desired
satisfactions more effectively and efficiently than competitors in a way
that maintains or improves the consumer's and the society's well-being.
This concept focused on the satisfaction of consumer needs without
harming the society or the environment in the process
 Consider the Coca-Cola Company. Most people see it as a highly
responsible corporation producing fine soft drinks that satisfy
consumer tastes. Yet certain consumer and environmental groups have
voiced concerns that Coke has little nutritional value, can harm
people's teeth, contains caffeine and adds to the litter problem with
disposable bottles and cans. 37
Cont.…

 The societal marketing concept is the newest of the five

marketing management philosophies.
 According to the societal marketing concept, the pure
marketing concept overlooks possible conflicts between
short-run consumer wants and long-run consumer welfare
 It calls upon marketers to build social and ethical
considerations into their marketing practices. They must
balance company profits, consumer want satisfaction, and
public interest.
• Eventually, they began to recognize the long-run importance
of satisfying consumer wants, and the marketing concept
emerged. Now many companies are beginning to think of
society's interests when making their marketing decisions.
38
1.5 Importance of Marketing
Marketing is important not only for organizations but for
individuals, society and economy as a whole.
Marketing is generally a value creating and value
delivering process.

1.Value Providing Process

• Four distinctive steps in the value providing process:
o value selection,
o value delivery/creation,
o value communication, and
o value enhancement.
39
Cont.…
Step 1. Value Selection
 Selecting the value to be offered is the firs step in the value delivering
process
 Try to understand the mindsets and needs of your customers/clients
before launching the whole program. Only after selecting the value to
be offered, can the firm proceed with production, sales and promotion.
• For instance, marketing planning, buyer (consumer) analysis, market
segmentation, and targeting important at this particular time.
Step 2. Value Creation/Value Delivery
 Value creation is the process of adding value to something. What the
firm has promised to provide the customer has to be actually
provided in the most pleasant and satisfying manner.
• Example, Product development, manufacturing, service planning,
pricing, distribution and servicing in this context. 40
Cont.….
Step 3. Value Communication
• The firm tries to communicate the value to the customers.
Example, Personal selling, advertising, publicity and sales
promotion.
Step 4. Value Enhancement
• The firm also continuously and proactively enhances the
value. The company collects feedback from the customers
about their level of satisfaction with the product and upgrades
the value. It actually is a non-stop job for the firm to search
for the customers satisfaction level and augment the offer.
Example, Market research and market control are also applied
to evaluate level of customers’ satisfaction.
41
Cont.….
2. Values Added by Marketing Function
Let us see these major merits of marketing one by one:
2.1. To The Individual’s Personal Life
 Providing access to information about products and services that can
improve their quality of life, allowing them to make informed choice
based on their needs and wants.
 Marketing affects our life in several ways and all individuals require
the knowledge of marketing for their marketing related decisions.
 Marketing influences us daily in our role as producers of goods and
services, as consumers, as employees, as well as, the member of the
society.
2.2. To Socio-economic Benefit of Marketing: Employment and
Utility Creation
 Marketing stimulates economic growth by creating new jobs,
fostering innovation, and enhancing consumer choice. 42
Cont.…
• Utility in marketing refers to the benefit or
value a customer can receive from a product
or service. Utility marketing is an important
tool for businesses as it allows them to
communicate the value of their product or
services to potential buyers.
• Marketing is typically a function responsible
for creation of various types of utilities: Place
utility, Time utility, Possession utility, Form
utility, & Information utility 43
Cont.…
• Form Utility: Form entails the physical or chemical changes that
take place through production. Forms as a type of utility marketing
allows the consumer to see the value of a product when it is in its
finished form. For example consumers of bread will not see the
value of bread it is presented as wheat flour.
• Place Utility: Proper marketing requires that finished goods be
made available at place where customers can easily and
comfortably access them. It refers to in a way related to a
distributional channel.
• Time Utility: It is created when products are available to customers,
as they want them. This kind of utility is related to the difference in
time between the creation of a product and its final consumption by
the consumer. As a marketer, you must know and be able to
manage this difference if at all success is one of your objectives.
44
Cont.…
Possession Utility: As selling, is one major activity in marketing, it
creates possession utility by selling the products to the customers.
Information Utility: is the value customers receive form accessing the
information associated with a particular product or service.
• The marketing function adds a tremendous value by providing the
bulk of information about a firms offering to the target market.
Image Utility: It involves the emotional and psychological values
that a person attaches to the product or a brand, because of the
reputation; prestige or high social standing that the product creates.

• In general these type of utility marketing is crucial to meet

consumer’s expectations. As a marketer you need knowledge about
the product you are advertising, you need to know if it will be
available for your customers and how they will get it and you must
also find out when the best time to offer the product to consumers.
45
Cont.…
2.3. Marketing to the Individual Firm
 Marketing helps to build brand awareness, customer loyalty,
and drive sales, leading to increased profitability.
 Marketing is still the sole revenue-generating department.
• It is the only function through which a firm collects money
from customers.
2.4.Marketing to the Global Economy
• Marketing facilitates trade between nations, promotes
international competition and contributes to the spread of new
ideas and technologies across borders.
• Global marketing facilitates the movement of goods and services
and factors of production from one part of the world to the other.
46
1.6 Scope of Marketing
Group assignment
1. What is marketed?
2. Marketers market 10 main types of entities; list and clearly
describe those entities.
3. Write at least two examples for each of the ten types of entities
that marketers promote.

47
1.7 Goals of marketing system
• The marketing system affects every one-buyer, sellers, and may
public groups with common characteristics. What a society seeks
from its marketing system? Four goals have been suggested:
 Maximizing consumption: Many business executive believe that
marketing’s job should be stimulate maximize consumption, in
which in turn will create maximum production, employment and
wealth
 Maximizing Consumer satisfaction: by delivering what is
valuable to your customer so that they continue to come back to
buy more of the products and services that meet their needs.

48
Cont.….
 Maximizing choice: Some marketers believe that the goal of
marketing system should be to maximize Product variety and
consumer choice.
 Maximizing life Quality: many people believe that the goal of
marketing system should be to improve the quality of life. This
includes not only the quality, quantity, availability and cost of
goods but also the quality of the physical and cultural
environment.

49