PRINCIPLES OF MARKETING (UNIT 1: Introduction to Marketing)

Concept of Marketing

▪ According to Philip Kotler, 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.
▪ According to Pride and Ferrell, marketing is the total system of business activities designed to plan,
price, promote and distribute want-satisfying products in target markets to achieve organizational
objectives.

Nature of Marketing

▪ Economic Process: The exchange of goods and services as well as the creation of different utilities
are the main objectives of marketing. It covers those activities related to the creation of time
(availability of goods and services when consumers want them), place (availability of goods and
services where consumers want them) and possession (ability to transfer title to goods or services from
marketer to buyer) utilities. It is the process by which an organization relates creatively, productively
and profitably to the marketplace.

▪ Satisfaction of Consumer Demand: With the creation of proper utility for goods and services,
marketing makes them suitable for satisfying consumer demand. It is usually called the art of creating
and satisfying customers while earning profits.

▪ Dynamic Process: Marketing is considered to be a dynamic process because it exhibits an

uninterrupted flow of activities concerning production and distribution of goods and services. From
the perspective of the systems approach, marketing is looked upon as a dynamic process in order to
create styles and standard of living of the consumers, which are known to continuously change over
time.

▪ Function of Search: Marketing is responsible for searching for new markets, new customers and their
demands, continuously and uninterruptedly. Through the observation of environmental factors,
marketing should look for opportunities, as the same product is not treated uniformly in the same
market for an indefinite period of time.

▪ Social Responsibility: The functions of marketing should not be executed in a manner that the social
responsibility is evaded, i.e., the customers are deceived or confusion is created in the society. Social
responsibility in promoting includes ensuring more endeavours on drawing in customers who need
to have a constructive outcome with their purchases.

Scope of Marketing

▪ Marketing Research: It is a tool used for decision making about the marketing mix’s elements (i.e. the
product, price, promotion and place). Research has to be carried out in order to identify the customer’s
needs, their tastes and preferences, their interests, economic position, their paying capacity and
effectiveness of certain advertisements. Market research aims at adapting products to the desires of
buyers.
▪ Pricing: Pricing is extremely important since it directly affects an organization’s sales and profits. While
deciding the price of the product a number of factors have to be kept in mind like the cost of
production, paying capacity of the customer, industry demand, competitor’s prices and the target
profit margin.
▪ Advertising and Sales Promotion: In this era of tough competition, sales promotion and
advertisements help to make the customer aware about the product, makes him curious about the
product and thus promote sales. Through advertising marketers are able to position their products in
the minds of the customer using various media like newspapers, magazines, television, radio,
hoardings, window display and internet etc.
▪ Channels of Distribution: Distribution channels are an integral part of a complex system that has
evolved from cultural and social patterns in order to facilitate exchange transactions. There are various
media of distribution like retailers, wholesalers, department stores, chain stores, super markets etc. A
number of factors have to be borne in mind while selecting the medium of distribution like
perishability, price of the product, size and weight, after sales service etc.
▪ After-Sales Service: The furnishing of after sales service is very critical for the satisfaction of the
customers. Free repairs, return or exchange of the product during the guarantee period if the product
proves defective or worthless, etc. are included in after-sales service.

Functions of Marketing

▪ Gathering and analysing market information: Gathering and analyzing market information is an
important function of marketing. Under it, an effort is made to understand the consumer thoroughly
by asking questions such as what the consumers want, in what quantities do they want them, what
price they are willing to pay for it, when they want it, where they want to buy it from etc.
▪ Product design and development: Product planning assumes a significant function when selling.
The organization whose item is better and alluringly planned sells more than the result of an
organization whose plan happens to be feeble and unalluring. Hence, it tends to be said that the
ownership of an uncommon plan manages an organization to an upper hand.
▪ Standardizing and grading: Standardisation as a concept, refers to the determination of standard
regarding size, quality, design, weight, colour, raw material to be used, etc., in respect of a particular
product. In this way, it is ascertained that the given product will have some peculiarities. Products
having the same characteristics (or standard) are placed in a given category or grade, and this placing
is called grading.
▪ Branding: All marketers want their products/ services to have a distinct and unique identity in the
market. In order to realise their desire, they have to provide a name to their product which has to be
distinct from other competitors. This process of adding a distinct name to a company’s product is
called branding. Thus, the objective of branding is to show that the products of a given company are
different from that of the competitors, so that it has its own identity.
▪ Customer support services: The customer is hailed as the king of market. Therefore, it is one of the
chief functions of marketer to offer every possible help to the customers. A marketer offers primarily
provides services to the customers, such as after-sales-services, handling customers complaints,
technical services, credit facilities, maintenance facilities etc.

Importance of Marketing

▪ Promotes awareness among the public: Marketing enables the customers to become aware about
various products/ services that are available in the market. A company must capitalize on marketing
activities so as not to miss the opportunity of being discovered.
▪ Helps in boosting sales: Once the prospects become aware about the company’s products or
services it boosts up the chances that customers will make a purchase. New customers also start to
spread the word, informing their friends and family about the company’s product and consequently
company’s sales start to increase rapidly.
▪ Builds the firm’s reputation: Marketing helps to build brand name recognition or product recall and
hence enables the customers to relate the brand name with the images, logos and captions that they
 see or hear in advertisements. When the company is able to satisfy the expectation of its customers,
its reputation stands on a concrete ground.
▪ Aids in fostering healthy competition: Marketing promotes a climate of healthy competitive
environment in the marketplace. It helps to position the company as being superior to its rivals so that
the customers will prefer its products rather than buying from other firms that sell similar products and
services. Competition drives the firms to invest in research and development in order to produce
better quality and innovative products and services.
▪ Improves the standard of living of the society: The primary objective of the marketing is to satisfy
human wants. Marketing creates demand & increases demand for new products and services, which
ultimately improves the standard of living of the people.

Evolution of Marketing Concepts

▪ The Production Concept: It aims at achieving the highest output possible through production
efficiency, low costs and mass distribution. Consumers prefer products that are widely available and
inexpensive.
▪ The Product Concept: Consumers favour those products that offer the most quality performance or
innovative features. Marketers sometimes become too focussed on improving product quality to lure
customers. They must not forget that a product may not be successful unless it is priced, promoted
and distributed properly.
o Marketing Myopia: Developed by Theodore Levitt (1960), marketing myopia suggests that
businesses will do better in the end if they focus on meeting customer needs rather than on
simply selling products. Marketing myopia arises from (i) single-minded focus on selling while
ignoring consumers, (ii) overly narrow definition of consumers and their needs, and (iii) failure
to recognize the changed societal context.
▪ The Selling Concept: Consumers will not buy the product in sufficient quantities unless aggressively
pressurized (customers and businesses, if left alone, will not buy enough of the company’s products).
It is practiced most aggressively with unsought goods (such as insurance, smoke detectors,
encyclopaedias etc.) or when the company is burdened with overcapacity.
▪ The Marketing Concept: It focussed on a customer-centric ‘sense-and-respond’ philosophy, where
the goal is not to find the right customers for our products, but to find the right products for our
customers. Marketing concept can be understood from two perspectives: (a) Reactive market
orientation (understanding and fulfilling customers’ expressed needs), and (b) Proactive market
orientation (understanding and fulfilling customers’ latent needs). The marketing concept emphasizes
three main principles: (a) Customer-centric planning and implementation, (b) coordination of all
organizational activities, and (c) coordinated marketing to achieve organizational goals.
▪ The Holistic Marketing Concept: It is based on the development, design and implementation of
marketing, programs, processes and activities that recognizes their scope and interdependencies. It
recognizes that ‘everything matters’ in marketing and that a broad, integrated perspective is often
necessary. Thus, holistic marketing attempts to recognize and reconcile the scope and complexities
of marketing activities. Holistic marketing includes the following components: (i) Internal Marketing
(marketing department, senior management, other departments); (ii) Integrated Marketing
(communications, channels, products and services); (iii) Performance Marketing (sales revenue,
community, brand and customer equity, legal, ethics), and (iv) Relationship Marketing (customers,
partners, employees, financial community).
o Internal Marketing: It is the task of hiring, training and motivating able employees who want
to serve customers well. It ensures that everyone in the organization (marketing functions such
as salesforce, advertising, customer service, marketing research, product management etc. as
well as all other departments such as finance, production, operations, HR etc.) embraces apt
marketing principles, especially the senior management.
 o Integrated Marketing: The marketer’s task is to devise marketing activities (4 Ps) and assemble
fully integrated marketing programs to create, communicate and deliver value for consumers.
The two key themes of integrated marketing are:
▪ Many different marketing activities communicate and deliver value
▪ When coordinated, marketing activities maximize their joint effects
Leading companies satisfy customer needs and surpass their expectations economically,
conveniently and with effective communication.
o Performance Marketing: It involves understanding the returns to the business from marketing
activities and programs, as well as addressing broader concerns and their legal, social, ethical
and environmental effects. The top management goes beyond sales revenue to examine the
marketing scorecard and interpret the impact on market share, customer loss rate, customer
satisfaction, product quality, and other measures. It includes
▪ Financial accountability: Marketers are increasingly being asked to justify their
investments to senior management in financial and profitability terms as well as in terms
of brand-building and growth of customer base.
▪ Societal Marketing Concept (Social Responsibility Marketing): It holds that the
organization’s task is to determine the needs, wants and interests of target markets and
to deliver the desired satisfaction more effectively and efficiently than competitors in a
way that preserves or enhances the consumers’ and society’s long-term well-being. The
societal marketing concept calls upon marketers to build social and ethical
considerations into their marketing practices.

o Relationship Marketing: It aims to build mutually satisfying long-term relationships with key
constituents in order to earn and retain their businesses. The goals of relationship marketing
are:
▪ Creation of a marketing network
▪ Customer retention

Marketing Mix (Basic Concept)

First coined by Neil H. Borden in 1949, the marketing mix was first classified in terms of the 4 Ps by Jerome
E. McCarthy, which is the most popular one in marketing circles globally. It is a major concept in modern
marketing and involves practically everything that a marketing company can use to influence consumer
perceptions favourably towards its products or services so that consumers and organizational objectives
are attained. It is a model of creating and implementing marketing strategy. According to William J.
Stanton, marketing mix is the term used to describe the combination of the four inputs that constitute the
core of a company’s marketing system—the product, the price structure, the promotional activities and the
distribution system.

▪ Product: According to Philip Kotler, a product is anything that can be offered to a market for attention,
acquisition, use or consumption that might satisfy a need or a want.
▪ Price: According to William J. Stanton, price is the amount of money or goods needed to acquire
some combination of other goods and its accompanying services.
▪ Place: Kotler defines place as the various means undertaken by the company to make the product
accessible and available to the target customer.
▪ Promotion: Stanton defines promotion as the combination of operational selling, salespeople and
public relations. These promotional tools aid an organization to achieve its marketing objective.
o 4 Ps vs 4 Cs: According to Bob Lauterborn, 80 percent of new products fail each year,
because of an incorrect mind-set. He has hence offered a replacement to the traditional 4 Ps
with his 4 Cs, from a buyer’s perspective. They are customer, cost, convenience and
communication.

Customer Cost Communication Convenience

Product Need and Desire

Price Cost to Buyer

Information and
Promotion
Communication

Distribution and transfer

Place
of ownership of goods

Indian Marketing Environment

The marketing environment comprises of the various actors and forces outside the marketing activities
that directly or indirectly affects its ability to build and maintain successful relationships with its target
customers. It offers a combination of strengths, weaknesses, opportunities and threats to the marketers.
The marketing environment can be classified under two heads (i) Micro environment (these comprise of
variables that the organization deals with day in and day out. Here, the elements are largely controllable
by the marketer), and (ii) Macro environment (this includes all factors that can influence the entire industry,
such as political, socio-cultural, economic, technological, natural etc. These factors are largely
uncontrollable by the marketer.)

The micro marketing environment encompasses certain forces that are part of an organisations marketing
process, but remain external to the organisation. Although the micro marketing environment can be
complex by nature, the company has an element of control over how it operates within this environment.

▪ Company/ Organization: One of the most important aspects of the micro environment of an
organization is the self-analysis of the organization itself. It must understand its own strengths and
weaknesses, objectives and goals of the business, and resource availability, and must remain
customer-centric in a very holistic manner. It includes the top management, finance team, research
and development team, purchase, operations and all other departments in an organization.
▪ Suppliers: It provides raw material to produce goods and services. Suppliers can influence the profit
of an organization because the price of raw material determines the final price of the product.
Organizations need to monitor suppliers on a regular basis to know the supply shortages and change
in the price of inputs.
▪ Marketing Intermediaries: It helps organizations in establishing a link with customers. They help in
promoting, selling, and distributing products. Marketing intermediaries include the following:
o Resellers: It purchases the products from the organizations and sell to the customers.
Examples of resellers are wholesalers and retailers.
o Physical Distribution System: It includes warehousing, transportation agencies, shipping
companies, purchase agents etc.
 o Marketing Agencies: It promotes the organization’s products by making the customers aware
about benefits of products. An advertising agency is an example of marketing agency.
o Financial Intermediaries: It provides finance for the business transactions. Examples of
financial intermediaries are banks, credit organizations, and insurance organizations.
▪ Customer Markets: Customers buy the product of the organization for final consumption. Customer
markets comprise of individuals and households that buy goods and services for personal
consumption. These goods and services may include FMCGs, perishable food items (such as packed
meals, fruits and vegetables), consumer durables/ white goods and electronic items (PCs, gaming
consoles etc.). The main goal of an organization is customer satisfaction. The organization undertakes
the research and development activities to analyse the needs of customers and manufacture products
according to those needs.
▪ Competitors: It helps an organization to differentiate its product to maintain position in the market.
Competition refers to a situation where various organizations offer similar products and try to gain
market share by adopting different marketing strategies. The key to ensuring success in market
competition is to either follow or pre-empt the competitors.
▪ Public: A public is any group that has an actual or potential interest in or impact on a company’s ability
to achieve its objectives. It comprises of environmentalists, financial institutions, citizen action groups,
media persons, social activists, employees etc. Companies must put their primary energy into
effectively managing their relationships with their customers, distributors and suppliers. Their overall
success will be affected by how other publics in the society view their activity.

India is the second most populated country in the world, with approximately one billion people. It has a
reasonably favorable pro-business environment that aims to attract multinational companies (MNCs).
Because of this enormous market size and positive business climate, scores of global firms--including
General Electric, General Motors, McDonald's, Kellogg's, and Microsoft, have recently entered the Indian
market. However, any company that desires to enter the Indian market must realize the serious challenges
of doing business there: segmenting the marketplace properly, understanding the country's economic
and political situations, getting through the government bureaucracy, and understanding deep-seated
cultural biases and attitudes. It is hoped that a discussion of the Indian marketplace in terms of market
potential, culture, consumer behavior, and selling aspects can add to the challenges.

▪ Political/ Legal environment: Political and legal environment consists of legal bodies and
government agencies that influence and limit the organizations and individuals. Every organization
should take care of the fact that marketing activities should not harm the political and legal
environment prevailing in a country. The political and legal environment has a serious impact on the
economic environment of a country. The legal factors influence trade agreements between different
governments and states.
▪ Socio-cultural environment: Socio-cultural environment comprises forces, such as society’s basic
values, attitudes, perception, and behavior. This includes institutions and other forces that affect the
basic values, behaviours and preferences of the society, which in turn has an effect on consumer
marketing decisions. These forces help in determining that what type of products customers prefer,
what influences the purchase attitude or decision, which brand they prefer, and at what time they buy
the products. The socio-cultural environment explains the characteristics of the society in which the
organization exists.
▪ Technological environment: It consists of those forces, which affect the technology and which can
create new products, new markets and new marketing opportunities. It is vital for competitive
advantage as it is a major driver for product differentiation. Technology contributes to the economic
growth of a country. Organizations that fail to track ongoing technological changes find it difficult to
survive in today’s competitive environment. Technology acts as a rapidly changing force, which creates
new opportunities for the marketers to acquire the market share.
▪ Demographic Environment: Demographic environment is the scientific study of human population
in terms of elements, such as age, gender, education, occupation, income, and location. It also
includes the increasing role of women and technology. These elements are also called as
demographic variables. Before marketing a product, a marketer collects the information to find a
suitable market for the product.
▪ Economic environment: Economic environment affects the organization’s cost structure and
customers’ purchasing power. The purchasing power of a customer depends on the current income,
prices of the product, savings, and credit availability. Economic factors such as employment, income,
inflation, interest rates, productivity and wealth influence the buying behaviour of consumers.
▪ Natural environment: Natural environment consists of natural resources, which are needed as raw
materials to manufacture products by the organization. The marketing activities affect these natural
resources, such as depletion of ozone layer due to the use of chemicals. The corrosion of the natural
environment is increasing day-by-day and is becoming a global problem. Further, the geographic/
natural/ national boundaries protect the rights of products from which it originates (country-of-origin).