Chapter 1 (Fundamentals of Marketing and it’s evolution)

Definitions of Marketing – Marketing is the economic process by which goods and

services are exchanged between the producer and the consumer and their values
determined in terms of money prices.

Marketing originates with the recognition of a need on the part of a consumer and
terminates with the satisfaction of that need by the delivery of a usable product at the
right time, at the right place and at an acceptable price. “Marketing is a societal process
by which individuals and groups obtain what they need and want through creating,
offering and freely exchanging products and services of value with others” - Philip
Kotler

The Chartered Institute of Marketing defines Marketing as -“Marketing is the

management process for identifying, anticipating & satisfying customer
requirements profitably.”
Peter Drucker -There will always, one can assume, be need for some selling. But
the aim of marketing is to make selling superfluous. The aim is to know and
understand the customers well that the product or service fits him and sells it. Ideally,
marketing should result in a customer who is ready to buy. All that should be needed
then is to make the product or service available.

Marketing In the New Economy

With the emergence of marketing, we also witness the emergence of new economy
characterised by the following:
• A substantial increase in purchasing power.
• A greater variety of available goods and services and information.
• A great ease in interacting and placing orders.
• An ability to compare notes on products and services.

Today companies are also having new qualities like:

• Ability to operate powerful information and sales channels.

• Ability to collect fuller and richer information about markets, customers,
prospects, and competitors.
 • Faster internal communication amongst employees.
• Two-way communication with customers and prospects.
• Send ads, coupons, samples, and information to customers.
• Customize offerings and services to individual customers
• Improved, purchasing, recruiting, training.
• Improved external communication. .
• Improved logistics and service quality.

Following areas of Marketing Focus:

40s Consumer (goods) marketing

60s Industrial Marketing
70s Nonprofit/Societal marketing
80s Services Marketing
90s Customer satisfaction, Global
Marketing, Direct marketing
Post On Line, One to one marketing,
90s MLM, MCM

Core marketing concepts

Needs Wants And Demands:
Marketing thinking starts with the fact of human needs and wants. We all have some
needs residing in ourselves. These needs exist.

Needs:
Needs are the basic human requirements. People need food, air, water, clothing &
shelter to survive. People also have needs for recreation, education and
entertainment. Eg: Hunger- food. According to Abraham Maslow’s need hierarchy,
the entire human needs can be categorized as shown in the diagram.
Human need is a state of felt deprivation of some basic satisfaction. Wants are
desires for specific satisfiers of these deeper needs .For example we are hungry
and will prefer Pizza /rolls.
Demands are wants for specific products that are backed by an ability and
willingness to buy them. Ex: someone wants to buy a car and it is Honda CIVIC.
Marketers do not create the needs. They can influence the demand by making the
product appropriate, attractive, affordable and easily available to target customers.

Scope of marketing

Goods: Physical goods constitute the bulk of the most countries’ production and
marketing effort. Each year Indian companies market cars, trucks, television sets,
machine tools, industrial chemicals, watches, computers etc. Even individuals can
effectively market goods on the Internet.

Services: Services includes the work of airlines, hotels car rental firms, barbers and
beauticians, maintenance and repair people, accountants, bankers, Management
Consultant etc. Many market offerings consist of a variable mix of products and
services

Places: Cities, states, regions and whole nation compete actively to attract tourists,
factories, company Headquarters, and new residents. Place marketers include
economic development specialists, real estate agents, commercial bank local
business associations, and ad and public relations agencies. As for example, in the
tourism market Kerala is being marketed as God’s own country. Incredible
India ad campaigns are other examples.

Activities /event: Marketers promote time based events such as major trade show
artistic performances, company performances. Global sporting events such as
Olympics or World Cup are promoted aggressively to both companies and fans.
Other examples include Miss Universe etc. Other includes a whole profession
of meeting planners who work out the details of an event and makes sure it
comes off perfectly.

Experiences: By orchestrating several services and goods, a firm can create, stage,
and market experiences. Examples include Walt Disney Park, Nicco Park, theme
restaurants that creates the ambience of a Rajasthan village etc.

Information: Information can be produced and marketed as a product. Examples

include what schools, colleges and Universities produce and distribute at a price to
parents, students, the placement agencies, marketing of Encyclopedia are other
examples.
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 requires marketing. Real estate agents work for property owners or sellers or
buy residential or commercial real estate. Investment companies and banks are
involved in marketing securities.

Organizations: Organisations actively work to build a strong, favourable and

unique image in the minds of the target public. Philips has built up a corporate
identity with the famous tag line ‘Lets make things better’. Universities, museums,
performing arts organizations, and all non-profit organizations use marketing to
boost their public images.

Ideas: Every market offering includes a basic idea. Charles Revson of Revlon
observed “In the factory we make cosmetics; in the store we sell hope”. Products
and services are platforms for delivering some idea or benefit. Promoting awareness
about AIDS, encouraging family planning and discouraging smoking are ideas that
fall in the realm of societal marketing.

Persons: Celebrity marketing is a major business. Today. Many film stars have
agents & personal managers and use the services of the public relations agencies.
Examples of celebrity marketing are Amitabh Bachhan, Shah Rukh Khan etc.

Other terms can be: Offerings, satisfiers or resources.

E.g: A woman is not buying ‘lipstick’; she is buying ‘. Hope’.
She is confident that she will definitely look good after using that lipstick. And this
hope brings her to the shop.
The needs become wants they are directed to specific objects that might satisfy the
needs. Eg: Mercedes “Needs Pre-exists” (can’t be created).

Demands:
Demands are wants for specific products that are bagged by an ability and
willingness to buy them.

Examining Concepts of Marketing

Management -
Exchange – It is one of the core concepts of marketing. It is the process of obtaining
a desired product from someone by offering something in return. There are five
conditions that need to 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 & delivery
􀂄 Each party is free to accept or reject the exchange offer
􀂄 Each party believes it is appropriate or desirable to deal with the other party

A transaction is a trade of values between two or more parties. It involves two things:
􀂄 A time of agreement
􀂄 A place of agreement

As you have seen in the above diagram, Sun Microsystems which develops &
markets Sun one, Solaris, Java, etc, is a marketer where they are selling top end
equipments to a call centre / ITES company. The ITES Company wants to buy top
end equipments with a good price, friendly customer service with a faster
implementation.

Sun wants a good price for the same and also the future business requirements. Smart
marketers look beyond the attributes of the products & services they sell. E.g: Coke
– Means much more to consumers than just something to drink, it has become an
American icon with a rich tradition and meaning.

Value & Satisfaction: Customer value – Difference between the values the customer
gains from owning & using a product & the costs of obtaining the product.

Customer satisfaction – With a purchase, how well the product’s performance lives
up to the customer’s expectations.

Customers’ expectations must be set at the right level of expectations, neither too
low nor too high. Customer Value & Satisfaction are key building blocks for
developing & managing customer relationships.
Markets - “Set of all actual & potential buyers of a product or service”. They share
a particular need or want that can be satisfied through exchange relationships.
Marketing – “Managing markets to bring about profitable exchange relationships by
creating value & satisfying needs & wants”.

Core Marketing Activities: Product development, research, communication,

distribution, pricing & service.
Marketing Management – “Art & science of choosing target markets & building
profitable relationships with them”. Involves getting, keeping & growing customers
through creating, delivering and communicating superior customer value.

Demand states and marketing tasks:

Marketing management has the task of influencing the level, timings and
composition of demand in a way that will help the organization to achieve its
objectives.

1] Negative Demand:
The market is in a state of negative demand if; a major part of the market dislikes
the product and may even paying a price to avoid it. E.g: People have a negative
demand for
􀂄 Vaccination
􀂄 Dental work
􀂄 Gall bladder operation
Employers feel a negative demand for
􀂄 Ex-convicts
􀂄 Alcoholics

The marketing task is to analyse, why the market dislikes the products?
Whether
2] No Demands:
Target consumers may be uninterested in the product. E.g: *Farmers may not be
interested in new farming methods
*College students may not be interested in a foreign language course.
The marketing task is to find ways to connect the benefits of the products to the
person’s natural needs and interests.
3] Latent Demand:
Many consumers may share a strong need that cannot be satisfied by any existing
products.
Eg: *Latent demand for harmless cigarettes.
*Safer neighborhood.
*More fuel efficient cars.
The marketing task is to measure the size of the potential market and develop
effective goods and services that would satisfy the demand.
3] Declining Demand:
A substantial drop in the demand for products. E.g: *Boy Scout enrolment among
Singapore students. The marketing task is to:
i. Analyse the cause of market decline.
ii. Determine whether the demand can be re-stimulated by changing target markets,
changing product features and developing more effective goods.
iii. To reverse the declining demand through creative remarketing of the product.

5] Irregular Demand:
Organizations face demand that varies on a seasonal, daily or even hourly basis,
causing problems of idle capacity or overcrowded capacity.
E.g: *Markets: - visited on weekends, not on weekdays.
* Hospitals: - OT’s booked for early week

6] Full Demand:
Organizations face full demand when they are pleased with there volume of
business. The marketing is to:
i. Maintain the current level of demand in the face of changing consumer preferences
and increasing competition.
ii. Quality should be improved.
iii. Continuously measure consumer satisfaction.
Eg: Maruti at the time of bookings made open.

7] Overfull Demands:
Some organizations face a demand level that is higher then they can or want to
handle. Marketing task is De-marketing which requires finding ways to reduce the
demand temporarily or permanently.

Steps involved in de-marketing:

i. Raising prices.
ii. Reducing promotion and service.
iii. Selective de-marketing (less profitable markets)
E.g: Quota system for new car registration by a fixed percentage annually.

8] Unwholesome Demand:
Unwholesome products will attract organized effort to discourage their
consumption.
Un-selling campaigns have been conducted against cigarettes, alcohols, hard drugs,
handguns and pirated movies.

The marketing task is to:

i. Use fear communication.
ii. Price hike.
iii. Reduced availability.

Rule of Marketing in the Non-Profit Centres

Marketing is increasingly attracting the interested the interest of non-profit
organizations,
Eg: Colleges, Hospitals, and Churches
􀂄 Even government and statutory boards rely increasingly on marketing on several
fronts.
Marketing techniques have been employed to promote national and social issues.
Eg: Social marketing campaigns, aids prevention ads, discourage cigarette smoking.
Marketing has also been used to promote tourism in various countries.
Eg: India, Indonesia, and Hong Kong etc.
Various concepts of Marketing
The philosophy of marketing that has evolved as marketing management has passed
through distinct stages. The orientation of the companies has been changing from
production to societal through product, sales, marketing.

Societal Marketing focuses on needs/ wants of target Concept markets &

delivering value better than competitors that preserves the consumer’s and
society’s well-being

Production Concept

• A production orientation dominated business thought from the beginning of

Capitalism in the mid 1950’s.
 • This viewpoint was encapsulated in Says Law which states Supply creates its
own demand (from the French economist Jean – Baptiste Say.)
• The basic proposition is that customers will choose products and services that
are widely available and are of low cost.
• For example, production of staple goods like paddy, wheat etc, and again in
developing countries such as China, where the largest PC manufacturer,
Legend and domestic appliances giant Haier take advantage of the country’s
huge inexpensive labour pool to dominate the market.
• In a production-orientated business, the needs of customers are secondary
compared with the need to increase output.
• Such an approach is probably most effective when a business operates in very
high growth markets or where the potential for economies of scale is
significant. Product Concept.

The Product Concept

• The Product Concept has the proposition that consumers will favor those
products that offer the most attributes like quality, performance and other
innovative features.
• The managers focus on developing superior products and improving the existing
product lines over a period of time.
• The Golden Eye Technology was brought to the Indian Market by the television
major Videocon but the market could not perceive the benefit of this advantage.
On subsequent period at an advance stage of the market LG brought the
technology and made its Unique Selling Proposition for marketing success.

The Selling Concept

• The Selling Concept proposes that customers, be individual or organizations

will not buy enough of the organization’s products unless they are persuaded
to do so through selling effort.
• So organizations should undertake selling and promotion of their products for
marketing success. This approach is applicable in the cases unsought goods
like life insurance (LIC), vacuum cleaner (Eureka Forbes) fire fighting
equipments including fire extinguishers (Cease Fire, Fire Pro).
• The selling concept is epitomized in the thinking of Sergio Zyman, Coca
Cola’s former Vice President of marketing: The purpose of marketing is to
sell more stuff to more people more often for more money in order to make
more profit.

The Marketing Concept

 • It proposes that the reason for success lies in the company’s ability to create,
deliver and communicate a better value proposition through its marketing
offer in comparison to the competitors for its chosen target market.
• A marketing oriented firm is one that allows the wants and needs of
customers and potential customers to drive all the firm’s strategic decisions.
The firm’s corporate culture is systematically committed to creating customer
value. In order to determine customer wants, the company usually needs to
conduct marketing research. The marketer expects that this process, if done
correctly, will provide the company with a sustainable competitive advantage.
For ex, companies like HP, and Motorola have made a practice of researching
or imagining latent needs through a probe and learn process.

The marketing concept is an elaborative attempt to explain the phenomenon that

rests on four key issues –
􀂄 Target market,
􀂄 Customer need,
􀂄 Integrated marketing and
􀂄 Profitability.

Characteristics of Marketing Orientation

1. Customer needs is first priority and understanding these needs is a constant
concern.
2. Marketing research is an on-going activity assigned a very high priority.
3. Frequent reviews are made of strengths and weaknesses relative to competitors.
4. The value of long-term planning is fully appreciated.
5. The scope of business activities is broadly set and change is seen as inevitable.

The Holistic Marketing concept: The holistic marketing concept is based on the
development, design, and implementation of marketing programmes, processes and
activities that recognizes their breadth and interdependencies. Holistic marketing
recognizes that “everything matters’’ with marketing.
4 components of holistic marketing are relationship marketing, integrated marketing,
internal marketing, and social responsibility marketing.

Social responsibility marketing: it incorporates the ethical, environmental, legal, and

social context of marketing activities and programmes. The cause and effects of
marketing clearly extend beyond the company and the consumer as a whole. Ex:
trying to check pollution by installing special devices, arranging anti-aids campaign,
anti malaria campaign, giving donations to social welfare funds etc.
Internal Marketing: It is the task of hiring, training and motivating able employees
who want to serve the customers well. It makes no sense to promise excellent service
unless the employees are motivated to give so. It takes place at two levels:
1.The various marketing functions must be coordinated from customer’s pt of view.
2.Marketing must be embraced by other departments.
Xerox goes upto an extent to include in every job description an explanation of how
job affects customer. Xerox factory managers know that visit to the factory can help
sell a potential customer if the factory can be kept clean and efficient. Xerox
accountants know that customer attitudes are affected billing accuracy and
promptness in callbacks.
Relationship marketing: Relationship marketing has the aim of building mutually
satisfying long term relationship with key parties-customers, suppliers, distributors
and other marketing parties.

Integrated marketing: The marketer’s task is to device marketing activity and

assemble fully integrated marketing programme to create, communicate and deliver
value for customer. One method to determine marketing activity is to determine in
terms of marketing mix.
Marketing mix: a set of marketing tools the farm uses to persue its marketing
objectives.

The four Ps are:

• Product: The Product management and Product marketing aspects of

marketing deal with the specifications of the actual good or service,
and how it relates to the end-user’s needs and wants.
• Pricing: This refers to the process of setting a price for a product,
including discounts.
• Promotion: This includes advertising, sales promotion, publicity, and
personal selling, and refers to the various methods of promoting the
product, brand or company.
• Placement or distribution refers to how the product gets to the
customer; for example, point of sale placement or retailing. This fourth
P has also sometimes been called place referring to the channel by
which a product or service is sold (e.g. online vs. retail), which
geographic region or industry, to which segment (young adults,
families, business people), etc.

Marketing
management
 Product
Price promotion place
Variety
Quality
Design List price Sales promo Channels
Feature Discounts Ad Coverage
Brandname Allowances Sales force promo Assortment
Packaging Payment period Public relation Locations
Sizes Credit terms Direct marktg. Inventory
Services Personal selling Transport
warranties
warranties

Name
Seven Ps
As well as the standard four Ps (Product, Pricing, Promotion and Place),
services marketing calls upon an extra three, totalling seven and known
together as the extended marketing mix. These are:

• People: Any person coming into contact with customers can have an
impact on overall satisfaction. Whether as part of a supporting service
to a product or involved in a total service, people are particularly
important because, in the customer's eyes, they are generally
inseparable from the total service. As a result of this, they must be
appropriately trained, well motivated and the right type of person.
Fellow customers are also sometimes referred to under 'people', as
they too can affect the customer's service experience, (e.g., at a
sporting event).
• Process: This is the process(es) involved in providing a service and
the behaviour of people, which can be crucial to customer satisfaction.
• Physical evidence: Unlike a product, a service cannot be experienced
before it is delivered, which makes it intangible. This, therefore, means
that potential customers could perceive greater risk when deciding
whether or not to use a service. To reduce the feeling of risk, thus
improving the chance for success, it is often vital to offer potential
customers the chance to see what a service would be like. This is done
by providing physical evidence, such as case studies or testimonials.

Eight P's
As well as the other 7, Packaging has been added to this list by some people.
The rationale is that it is very important how the product is presented to the
customer, and the packaging is often the first contact that a customer has
with a product. Although some disagree because packaging is seen as a
subfield of promotion or product.
"PHILOSOPHY" is the potential 8th P of marketing. Products (or services)
should reflect the underlying philosophy or ethos of the organization. It
should also be clear what the philosophy behind the introduction of the
particular product is, as well. In his book, "Meeting Need", Ian Bruce explains
this concept as it relates to marketing for charities. It also applies to other
products and services.
Beyond the 4 Ps
Resources, Relationships, Offerings and Business Models

Resources
Companies with a greater amount of resources than their competitors will
have an easier time competing in the marketplace. Resources include:
financial (cash and cash reserves), physical (plant and equipment), human
(knowledge and skill), legal (trademarks and patents), organizational
(structure, competencies, policies), and informational (knowledge of
consumers and competitors). Small companies usually have a harder time
competing with larger corporations because of their disadvantage in
resource allocation.

Relationships
Success in business, as in life, is based on the relationships you have with
people. Marketers must aggressively build relationships with consumers,
customers, distributors, partners and even competitors if they want to have
success in today's competitive marketplace.There are four type of
relationships 1)win-win 2)win-lose 3)lose-lose 4)lose-win.(customer-vendor).

Offerings
Most companies sell a mix of products and/or services. Today's marketplace
is often too competitive for "one-trick ponies". Companies that sell the right
mix products and services can have a competitive advantage over
companies that sell just one product or service.

Business Models
The concept of product vs. product in competitive marketing is dying. It's
slowly becoming business model vs. business model. Business model
innovation can make the competition's product superiority irrelevant.
Business model innovation allows a marketer to change the game instead of
competing on a level playing field.
Customer focus
Many companies today have a customer orientation (also called customer
focus). This implies that the company focuses its activities and products on
consumer demands. Generally there are three ways of doing this: the
customer-driven approach, the sense of identifying market changes and the
product innovation approach. In the consumer-driven approach, consumer
wants are the drivers of all strategic marketing decisions. No strategy is
pursued until it passes the test of consumer research. Every aspect of a
market offering, including the nature of the product itself, is driven by the
needs of potential consumers. The starting point is always the consumer.
The next big thing is a concept in marketing that refers to a product or idea
that will allow for a high amount of sales for that product and related products.
Marketers believe that by finding or creating the next big thing they will spark
a cultural revolution that results in this sales increase.

Product focus
In a product innovation approach, the company pursues product innovation,
then tries to develop a market for the product. Product innovation drives the
process and marketing research is conducted primarily to ensure that a
profitable market segment(s) exists for the innovation. The rationale is that
customers may not know what options will be available to them in the future
so we should not expect them to tell us what they will buy in the future.
However, marketers can aggressively over-pursue product innovation and
try to overcapitalize on a niche. When pursuing a product innovation
approach, marketers must ensure that they have a varied and multi-tiered
approach to product innovation.
Other aspects

• An emerging area of study and practice concerns internal marketing,

or how employees are trained and managed to deliver the brand in a
way that positively impacts the acquisition and retention of customers
(employer branding).

• Diffusion of innovations research explores how and why people adopt

new products, services and ideas.

• A relatively new form of marketing uses the Internet and is called

internet marketing or more generally e-marketing, affiliate marketing
or online marketing. It typically tries to perfect the segmentation
strategy used in traditional marketing. It targets its audience more
precisely, and is sometimes called personalized marketing or one-to-
one marketing.
• With consumers' eroding attention span and willingness to give time to
advertising messages, marketers are turning to forms of Permission
marketing such as Branded content and Reality marketing.