Lesson 01 – An Overview and the Nature of Marketing

1.1 The Nature Of Marketing

You are about to begin an exciting, important, and a necessary undertaking:

the exploration of MARKETING. Marketing is exciting because it
combines the science and the art of business with many other disciplines,
such as economics, psychology, anthropology, cultural studies, geography,
history, jurisprudence, statistics, and demographics. This combination will
stimulate your intellectual curiosity and enable you to absorb and
understand the phenomenon of market-based exchange. The study of
marketing has been compared to mountain climbing: challenging,
arduous, and exhilarating.

Marketing is important and necessary because it takes place all around us

every day, has a major effect on our lives, and is crucial to the survival and
success of firms and individuals. Successful marketing provides the promise
of an improved quality of life, a better society, and, as suggested in many
marketing research articles, even a more peaceful world. After your study of
marketing you will see what happens, understand how it happens, and, at
some time in your future, perhaps even make it happen. This is much better
than standing by and wondering what happened.

Marketing is both an overall business philosophy and an important functional

area of management, which recognizes that the identification, satisfaction
and retention of customers are the key to prosperity. This is important, as
much of the problem of definition and misunderstanding over the term
‘marketing’ stems from the confusion between the function of marketing
and its philosophy. Marketing is in fact a function and a business
philosophy.

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 The Key to Success of Marketing is adopting the Customer’s
Viewpoint.

1.2 Marketing as a Functional Area of Management.

Marketing consists of two interrelated phenomena.

 a basic concept that focuses on customers, and
 a set of management techniques.

Many organizations have a marketing department made up of marketing

generalists, i.e. the marketing manager, purchasing manager, sales
manager, marketing research manager, etc. Such a marketing department is
obviously based in a physical location within the organization and these
people are involved with day-do-day running of the marketing department
by using a set of management techniques often referred to as the
marketing mix. These techniques cover such areas as purchasing, sales,
production, pricing, distributing, advertising and promotion, marketing
research, planning and after sales services. Many of these functions of
marketing offer separate career opportunities and are often undertaken by
specialists with the marketing manager responsible for coordinating all the
separate but interrelated activities.

Marketing… goes beyond a single transaction. Rather, the aim is

to develop ties and relationships.

As a function, an important part of marketing‟s role is to identify correctly

both the current and future needs and wants of specifically defined target
markets. This information is then acted upon by the whole organization in
bringing into existence the products and services necessary to satisfy
customer requirements. In fact, basically the process of marketing
management is no different from any other functional area of management
in that it essentially comprises the following key tasks.

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Analysis: The starting point of marketing management decisions is analysis.
Customers, competitors, trends and changes in the environment, and
internal strengths and weaknesses must be fully understood by the marketer
before effective marketing plans can be established. Analysis, in turn,
requires information using systematic marketing research and marketing
information systems.

Planning: The task of marketing manager is the planning process. The

marketing manager must plan both long-term marketing directions for the
organization – strategic planning, including the selection of target markets,
and the marketing programs and tactics that will be used to support these
plans.

Implementation: Both strategic and tactical plans must be acted upon if

they are to have any effect. The implementation tasks of marketing
management involve such activities as staffing, allocating tasks and
responsibilities, budgeting and securing any financial and other resources
needed to translate plans into action.

Control: The final task of marketing manager is measuring and evaluating

progress against objectives and targets established in the plans.

Although marketing can be seen as a very important functional role within

the organization, the influence of marketing should not be restricted to the
marketing department. A marketing oriented business has implications for
the way people throughout the organization respond to the initiative that as
an overall business philosophy.

McCarthy’s Four Ps: Product, Price, Place and Promotion.

1.3 Marketing as an Overall Business Philosophy

Many firms do not see marketing as yet another functional area of

management but more as an overall business philosophy, a way of thinking
about business and a way of working which runs through every aspect of the
firm‟s activities. Therefore many successful companies see marketing as the
keystone of their business. They do not view it as a separate function, but
rather as a profit-oriented approach to business that permeates not just the
marketing department but the entire business. Looked at from this point of

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view, marketing is seen as an attitude of mind or an approach to
business rather than a specific discipline.

Peter F Drucker stated:

‘Marketing is not only much broader than selling; it is not a

specialized activity at all. It encompasses the entire business. It
cannot be considered a separate function. It is the whole
business seen from the point of view of its final result, i.e. from
the customer’s point of view. Concern and responsibility for
marketing must therefore permeate all areas of the enterprise.’

Therefore marketing cannot begin to be effective within a firm unless it has

the firm support of all managers in the every area of an organization.

Marketing … goes beyond a single transaction. Rather, the aim is

to develop ties and relationships.

1.4 Role of Marketing as both a Business Philosophy and a Business

Function

Marketing as a business philosophy is concerned with the achievement of

effectiveness – the ability to determine appropriate objectives, i.e. doing
the right thing. In other words, it is the ability to create and keep a
profitable customer. Profitable customers underline the need to ensure that
marketing does not degenerate into the pursuit of any customer at any
price, but remains dedicated to defined and profitable customer targets.

Functional management is concerned with the management of the marketing

mix. The management of the marketing mix, which involves using the
various tools and techniques available to managers in order to implement
the marketing philosophy, on the other hand, is dedicated to efficiency, i.e.
doing the thing right. Efficiency means the ability to minimize the use of
resources in achieving organizational objectives, input-output ratio. Figure
1.1 summarizes the principle of combinations of effectiveness and efficiency.

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 Figure 1.1: Principle of Combination of Effectiveness & Efficiency

EFFECTIVE INEFFECTIVE

EFFICIENT Thrive Die Slowly

INEFFICIENT Survive Die Quickly

Business organizations, which are operationally efficient and strategically

effective, will thrive, but even a relatively inefficient organization will at least
survive if it can create and keep customers. Companies which are effective,
are unable to adapt as their market changes, are designed to die, increasing
efficiency ultimately delay this. “In business, the followers are customers.
To produce these customers, the entire organization must be viewed as a
customer-creating and customer-satisfying organism. Management must
think of itself not as producing products but as providing customer creating
value satisfaction.” Marketing as a philosophy should be embraced by the
entire organization.

Knowing everything there is to know about the customer is not

enough.

1.5 Who is the customer?

Marketing is based on the concept of „customer.‟ A customer is therefore the

most important person to a company. In order to prosper or even survive,
every company must work hard to retain its existing customers and
continually strive to secure new and profitable customers. Simply, a
customer is a person who brings his or her needs and wants. The term
customer is often used to describe two different kinds of entities; the
individual customer and the organizational (industrial) customer. The
individual customer buys goods and services for his or her own use, e.g.
shaving cream or soap, for the household e.g. VCD or DVD, or as a gift for a
friend, e.g. book or tie. In each of these contexts, the individuals who are
referred to as „consumers‟ or end users, buy the good for final use.

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The organizational customer includes profit and not-for-profit businesses,
government agencies and institutions all of which buy products, equipments,
and services in order to run their organizations.

1.6 What is Market?

The concept of market brings us full circle to the concept of marketing.

Simply, marketing means working with markets to actualize potential
exchanges for the purpose of satisfying consumer needs and wants.
Therefore, a market consists of all the potential customers having a
particular need or want who might be able to engage in exchange to satisfy
the need or want.

In marketing, market is defined as a group of people with needs and wants,

with money to spend and willing to spend on goods and services. Marketers,
however, see the sellers as constituting the industry and the buyers as
constituting the market. Businesspeople often use the term „markets‟ to
cover various grouping of customer, such as:

 Consumer markets
 Industrial or manufacture markets
 Resource markets
 Government markets
 Intermediary markets
 Real estate markets

According to the customer base, we have five basic types:

1. Potential market – the set of consumers who have a sufficient level

of interest in a defined market offer.
2. Available market – the set of consumers who have interest, income,
and access to a particular market offer.
3. Qualified available market – the set of consumers who have
interest, income, access, and qualifications for the particular market
offer.
4. Target (Served) market – the part of qualified available market the
company decides to pursue.
5. Actual (Penetrated) market – the set of consumers who have
already bought the company‟s product.

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 Marketing … goes beyond a single transaction. Rather, the aim is
to develop ties and relationships.

These market definitions are a useful tool for marketing planning. If the
company is not satisfied with its current sales, it can take a number of
actions, e.g. the company can try to attract a large percentage of buyers
from its target market. Further the company can try to expand the potential
market by advertising the product to less interested customers or ones not
previously targeted.

Activity - 01.

a) Explore a business organization each from Sri Lanka and

abroad to identify the similarities and dissimilarities of them
with respect to marketing.

b)Meet people buying a similar good/service and find out why

they buy it.

1.7 Marketing Defined

Marketing is a relevant discipline for all organizations, insofar as all

organizations can be said to have customers and products. The central idea
of marketing is of matching between a company‟s capabilities and need and
wants of customers in order to achieve the objectives of both parties.

Marketing (management) is the process of planning and

executing the conception, pricing, promotion, and
distribution of goods, services, and ideas to create
exchanges with target groups that satisfy customer and
organizational objectives.

(Approved in 1985 by the American Marketing Association).

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This definition recognizes that marketing is a process involving analysis,
planning, implementation, and control; that it covers goods, services, and
ideas; that it rests on the notion of exchange; and the goal is to produce
satisfaction for the parties involved.

Marketing is the management process responsible for

identifying, anticipating and satisfying customer
requirements profitably.

(CIM 2001)

“Marketing is a social and managerial process by

which individuals and groups obtain what they need
and want through creating, offering, and freely
exchanging products and services of values with
others”

PHILIP KOTLER (2000)

 Marketing is so basic that it cannot be considered a separate

function. It is the whole business seen from the point of
view of its final result, that is, from the customer’s point of
view…. Business success is not determined by the producer
but by the customer – PETER DRUCKER (1973).
 Marketing consists of all activities by which a company
adapts itself to its environment creatively and profitably –
RAY COREY.
 Marketing’s job is to convert societal needs into profitable
opportunities – ANONYMOUS.
 Marketing is the creation and delivery of a standard of living
– MARKETING SCHOLAR.

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 Marketing …. is an outward-looking function in which you try
to match the real requirements of the customer.

‘Customers don’t buy products; they seek to acquire benefits.

1.8 Core Concepts of Marketing

This definition of marketing rests on the following CORE CONCEPTS shown in

Figure 1.2.

Figure 1.2: The Core Concepts in Marketing

Needs, Value,
Wants, and Products Cost, and
Demands Satisfaction

Exchange, Marketing
Transactions, Markets &
and Marketers
Relationships

NEEDS: A human need is a state of felt deprivation of some basic

satisfaction. People require food, clothing, shelter, safety, belonging,
esteem, and a few other things for survival. These needs are not created by
their society or by marketers; they exist in the very texture of human
biology and the human condition.

WANTS: Wants are desires for specific satisfiers of these deeper needs.
Wants are the form taken by human needs as the needs are shaped by
culture and individual experience. How are different wants based upon
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geographical differences, gender, age, wealth? How is culture linked to
socio-economic standing, and education? That is, marketers apply
demographics to segment wants. An American needs food and wants a
hamburger, needs clothing and wants a Pierre Cardin suit, needs esteem and
buys a Mercedes. Australian aborigines satisfy their hunger with kiwis, their
clothing needs with a loincloth, their esteem with a shell necklace. A Sri
Lankan satisfies his/her requirement based on income, taste, education, and
many other socio-cultural factors. Human wants are continually shaped and
reshaped by social forces and institutions such as schools, families, business
institutes, etc.

DEMANDS: Demands are wants for specific products that are backed by an
ability and willingness to buy them. Wants become demands when
supported by „purchasing power.‟ Many people want a Mercedes; only a few
are able and willing to buy one. Companies must therefore measure not
only how many people want their product but, more important, how many
would actually be willing and able to buy it. Marketers influence demand by
making the product appropriate, attractive, affordable and easily available to
target consumers.

PRODUCTS: Products are anything offered for sale to satisfy a need or

want, including services and ideas. People satisfy their needs and wants with
goods and services. We use the term products to cover both. The physical
products are really vehicles that deliver services to us. Example: a car for
transportation, a microwave for cooking, a book for reading, a film for
watching at leisure. In fact, services are also supplied by other vehicles,
such as persons, places, activities, organizations, and ideas, for example:
watching a comedian (person), spend in holiday bungalow (place), engage in
physical exercise (activity), join a social club (organization), or adopt a
different philosophy about life (idea).

PRODUCT CHOICE SET: A number of products could satisfy needs.

Example: For Traveling: a bicycle, motorcycle, a car, rail, a bus, a taxi.

NEED SET: Example: Satisfy additional needs – speed, safety, ease, and
economy.

CUSTOMER VALUE: Value is the consumer's estimate of the product‟s

overall capacity to satisfy his or her needs.

COST: Since each product involves a cost, customer has to give up more of
other things to obtain the choice he or she has made.

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EXCHANGE: Marketing emerges when people decide to satisfy needs and
wants through exchange. Exchange is one of four ways people can obtain
products:

• Self-production – People can relieve hungry through hunting, fishing,

and fruit gathering from the forest.
• Coercion – Hungry people can wrest or steal food from others.
• Begging - Hungry people can approach others and beg for food.
• Exchange – Hungry people can approach others and offer a resource
in exchange, such as money, another good, or a service.

An exchange is the act of obtaining desired objects by offering something in

return, including barter and promises to pay (credit, checks). Exchange is
the act of obtaining a desired product from someone by offering something
in return. Exchange is the defining concept underlying marketing. For
exchange to take place, five conditions must be satisfied:

• There are at least two parties.

• Each party has something that might be of value to the other party.
• Each party is capable of communication and delivery.
• Each party is free to accept or reject the offer.
• Each party believes it is appropriate or desirable to deal with the other
party.

Whether exchange actually takes place depends upon whether the two
parties can agree on terms of exchange that will leave them both better off
(at least not worse off) than before the exchange. This is the sense in which
exchange is described as a value-creating process; that is, exchange
normally leaves both parties better off than before the exchange.

TRANSACTIONS: A transaction consists of trade of values between two

parties. If an agreement is reached, we say that a transaction takes place.
A transaction is an actual trade of value between at least two parties.
Transaction marketing is part of the concept of relationship marketing,
where parties build long-term ties to enhance quality and customer-
delivered value.

Example of transactions: Barter transaction: „A‟ gave refrigerator to „B‟ and

received a television in return; Money transaction: Jones gave Rs. 35,000 to
James and obtained a television set.

Without a „law of contracts,‟ people would approach transactions with some

distrust and every one would lose. Marketers have recently broadened the

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concept of marketing to include the study of transfer behavior as well as
transaction behavior.

RELATIONSHIP MARKETING: Smart marketers try to build up long-term,

trusting, „WIN-WIN‟ relationships with valued customers, distributors,
dealers, and suppliers. Ultimate outcome of relationship marketing is the
building of a unique company asset called a marketing network with which it
has built solid, dependable business relationships.

MARKET: A market is the set of actual and potential buyers of a product

whether decentralized or centralized. A market exists wherever something of
value is desired, e.g. labor market, money market, donor market. The
concept of exchange leads to the concept of market.

A market consists of all the potential customers sharing a particular need or want
who might be willing and able to engage in exchange to satisfy that need or want.

Economist: Product base e.g. housing market, grain market, Marketers: Customer base e.g.
need markets, demographic markets, geographic markets, Manufacturers: Resource
markets such as labor markets, raw material markets, money markets, etc. The economy
consists of complex interacting sets of markets that are linked through exchange processes.

MARKETING AND MARKETERS: A marketer is someone seeking a

resource from someone else and willing to offer something of value in
exchange. The marketer, in other words, can be a seller or a buyer. In the
event that both parties actively seek an exchange, we say that both of them
are marketers and call the situation one of reciprocal marketing.

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TYPES OF DEMAND:

• Negative demand – vaccinations, dental work, demand for alcoholics

• No demand – uninterested or indifferent to the product
• Latent demand – fuel efficient cars, safer neighborhoods
• Declining demand – Creative remarketing of the product
• Irregular demand – a seasonal, daily or even hourly basis
• Full demand – make sure to maintain customer satisfaction
• Overfull demand – De-marketing is needed to reduce the demand
• Unwholesome demand – alcohol, large families, cigarettes.

MARKETING MIX: Marketing mix is the set of marketing tools that the firm
uses to pursue its marketing objectives in the target market. PRODUCT –
product variety, quality, design, features, brand name, packaging, sizes,
warranties, returns. PLACE – channels, coverage, assortments, locations,
inventory, transport. PRICE – list price, discounts, allowances, payment
period, credit terms. PROMOTION – sales promotion, advertising, sales
force, public relations, direct marketing (see Figure 1.3).

Figure 1.3: Elements of marketing mix

Marketing mix

Product mix Distribution mix Communication Pricing mix

mix
Product line range Physical distribution Price structure
Design concept Supplies Advertising Payment terms
Color appeal Inventory Sales catalog Costs
Style Storage Field sales force
Package Transportation Telephone sales
Brand name Warehousing Public relations
Service function Distribution Direct mail
Warranties channels Sales promotion
Retailers Premiums and
Distributors discounts
Wholesalers Merchandising
Export Research
Import Electronic interaction

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THE EXTENDED MARKETING MIX: Concept of marketing mix evolved
around the product. But people were not buying and consuming only
products, they were using several services. The banks provided services;
the hotels provided services as much as another service oriented
organization does. The proliferation of many service providers resulted in
competition amongst them. Naturally competitors wanted to create
competitive advantage for themselves. Thus the traditional 4Ps was not
adequate and required more attention and that resulted in the extension of
the traditional marketing mix. The three new elements were: PEOPLE –
technical competence, continuous professional development, innovative.
PROCESS – access to new technology, technical collaboration. PHYSICAL
EVIDENCE - speed with the site, appropriate color combinations.

Presently, e-marketing mix is also very important aspect of marketing field.

It is also referred to as the Cyber Marketing Mix which concerns the
marketing of goods and services in the internet with respect to all elements
of marketing mix.

Having reviewed these concepts, we are ready to define marketing:

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.

Please do the Self Assessments Lesson 01

Activity – 02

a) Visit a company close by and identify the major

products/services they produce.

b) List, in priority order, 25 attractive commercials you

notice in mass media with your reasons.

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 Summery

Marketing is a particularly practical business discipline. There may be

many definitions of marketing, but all of them consider the customer to
be the focus of decision making, and all of them describe the dialogue
between the producer and the customer – increasingly as it takes place
in a global context. Marketing efforts vary, depending on the different
circumstances within which they are practiced. However, it is
important to see marketing‟s role in an overarching context, reaching
beyond the organization to encompass the entire client and supplier
system in an outward-looking way that matches corporate capabilities
with the requirements of customers and permits them to acquire
desired benefits most efficiently.

The lesson 01 of this course provides you a sound introduction to

marketing with core concepts developed in understanding. The various
elements of marketing that are employed in marketing campaigns are
known as the marketing mix and often described in terms of the four
Ps: product, price, place, and promotion. This mix can be applied not
just to the goods sector but also to services and the nonprofit arena.
The implementation of the marketing mix, however, is complex due to
multiple decision makers, the interaction of multiple decision factors on
the part of buyers, and global demand and supply linkages.

In light of the need to exercise growing responsiveness to changing

societal demands and expectations in areas such as the environment
and ethics and the expanding ability of marketers to use technology in
order to understand customers and respond to them, a new marketing
paradigm is emerging where marketers are poised to become the
strategic leaders of the corporate supply system. The next lesson will,
Now please go to lesson review questions & try to answer them
therefore, explore the marketing orientations and basic marketing
byconcepts
yourselfin to complete
achieving this lesson.
the corporate main objectives set forth.

Additional Reading

www.apple.com www.mcdonalds.com
www.ibm.com www.dell.com
www.exxon.com

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