University of the Cordilleras

College of Business Administration

Module 3 in Management and Marketing (FUND BUS 200)

Prepared by Gabriel R. De Guzman, MBA

Unit 3: Marketing Concept

1. Marketing concepts
2. The Business Environment
• External Environment
• Internal Environment
• Analysis of the factors affecting business
• Scanning the Business Environment
3.Analyzing Consumer Demand and understanding buyer behaviour

Learning Outcomes
• define the meaning of Marketing Management, discuss marketing management
philosophies; and discuss how firm may adopt the marketing concept.
• define macro-environment and explain its components;
• enumerate and define the six major components of the microenvironment; and
• examine the internal and external environment with which organizations make
their marketing decisions and undertake marketing activities.
• enumerate and explain the factors that influence consumer behaviour.

WHY STUDY MARKETING?

• Important to Society
• Important to Business
• Good Career Opportunities

DEFINITION
Marketing: The process of creating consumer value in the form of goods, services, or
ideas that can improve the consumer’s life.

SOCIAL DEFINITION
A societal process by which individuals & groups obtain what they need & want
through creating offering & freely exchanging products & services of value with others.

MANAGERIAL DEFINITION
An organizational function and a set of processes for creating, communicating &
delivering value to customers and for managing customer relationships in ways that
benefit the organization and the stakeholders.

THE A.M.A. MANAGERIAL DEFINITION

“Marketing is the process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to create exchanges that
satisfy individual and organizational objectives.”

FUNCTIONS OF MARKETING
1. SELLING
It is core of marketing. It can be as convincing people or persuading customers to see
products the way the seller sees them (worth buying).
2. BUYING
The buying function involves answering the questions: what resources to buy, what
quality, how much, from whom, when and at what price. The aim is to increase
company efficiency, and improve profits
3. TRANSPORTING
Transport is the physical means whereby goods are moved from the places where they
are produced to the places where consumers can buy or get access to them.
4. STORING
It involves the holding of goods in proper condition from the time they are produced
until they are needed by customers.
5. STANDARDIZATION AND GRADING
For this function, it is imperative that standards are formulated and products are
classified in accordance to their adherence to the standards.
6. FINANCING
It involves the use of capital to meet financial needs of the different areas of concern
of marketing.
This function also includes the services of providing credit to customers in order for them
to avail of the product quicker.
7. RISK TAKING
The marketing department works despite possibilities of losses.
It has to be noted though that marketing takes not just any risk, but calculated risks.
8. GATHERING MARKET INFORMATION
This function aims to collect, analyze and interpret facts and information from internal
and external sources.

COMPANY/MARKETING ORIENTATIONS
1. Production Concept
Firms long ago believe that as long as their products are low-priced and readily
available everywhere, then customers will buy it. This is the oldest concept in business.
2. Product Concept
This proposes that customers favor products that have high quality, good performance,
and have innovative features.
It believes that because a product is made beautiful, customers will love it.
3. Selling Concept
This concept claims that even if products are affordable, widely available, innovative,
performs well, and have high quality, if there are no promotional activities, the products
won’t sell.
4. Marketing Concept
It is the concept of being customer-centered.
This concept tells us that the needs and wants of the customers must first be identified
before making or introducing any product or service.
5. Holistic/Societal Concept
This concept is born as a response to the changing needs and demands of the
marketing environment.
It gives emphasis and importance to the welfare of the society and how marketing
takes part in its well-being. Firms believe in giving back to the society by producing
better products targeted towards society welfare.

STAGES OF DEVELOPMENT
1. PRODUCTION ERA (industrial revolution-1938)-produce for others
2. SALES ERA ( 1938-1950) - emphasized selling due to competition
3. MARKETING DEPARTMENT ERA ( 1950-1960) - all mktg activities must be in a single
department
4. MARKETING COMPANY ERA (1960-1975) - development of long range plans
5. MKTG COMPANY W/ SOCIAL CONCERN ERA - consider social issues in forming
strategies

CORE MARKETING CONCEPTS

1. NEEDS, WANTS AND DEMANDS
Needs - state of felt deprivation for basic items such as food and clothing and complex
needs such as for belonging.
Wants - form that a human need takes as shaped by culture and individual personality.
Demands - human wants backed by buying power.
2. PRODUCTS & SERVICES
Products - anything that can be offered to a market for attention, acquisition, use or
consumption and that might satisfy a need or want.
Services - activities or benefits offered for sale that are essentially intangible and don't
result in the ownership of anything.
3. VALUE AND SATISFACTION
Customer Value - benefit that the customer gains from owning and using a product
compared to the cost of obtaining it.
Customer Satisfaction - depends on the product's perceived performance in delivering
value relative to a buyer's expectations.
4. EXCHANGES, TRANSACTIONS & RELATIONSHIPS
Exchanges - act of obtaining a desired object from someone by offering something in
return.
Transactions - trade of values between parties. Usually involves money and a response.
Relationships - building long-term relationships with consumers, distributors, dealers and
suppliers.
5. MARKET
Market - buyers who share a particular need or want that can be satisfied by a
company’s products or services.
(Actual Buyers and Potential Buyers)

STRATEGIC 3C’S
The strategic 3Cs represent the 3 major stakeholders that the marketing department is
concerned about.
These are the: Customers, Competition (competitors), and the Company.
CUSTOMERS
The main concern about the customers will be their level of satisfaction. Aside from the
marketing department wanting to know them & their needs and wants, the customers
will have to end up satisfied.

COMPETITION
It is not enough that the company satisfies their customers, it has to be done better than
the competitors.
COMPANY
Satisfying the customers and beating the competition must be done without
compromising the health of the company. Of course, the company needs sufficient
profits.

STRATEGIC MARKETING MANAGEMENT

Under strategic marketing management, the focus is given to those factors that have
biggest impact on the long term sustainability and success of a product, service, or the
firm as a whole.
These Key Factors are:
1. Vision and Mission - These are statements that the company holds on as its guide
in decision making. Vision- is how the company sees itself or its products and
services in the future. Whether it’s in term of market share, growth, influence, or
success. Mission – is the purpose why the company exist. This is may influence the
choice of products and services offered, the choice of market segments to be
satisfied, and other key marketing decisions.
2. Industry and Competition Analysis - It is imperative to determine where then
company stands when it comes to being at par with the others. Market share is
one good indicator of how the company is doing in terms of beating its
competition. Market Share- pertains to the percentage of total industry sales that
the company holds.
3. Key Factors for Success - There must be a “checklist-like” document that carries
the different indicators that the company is doing well. This checklist helps the
company diagnose their progress when it comes to achieving their success.
 4. Strengths and Weaknesses - These are internal factors which means that they are
within the control of the company. The strengths and weaknesses of the
products and services must be identified.
5. Opportunities and Threats - These are on the other hand, external factors that are
difficult to control. Opportunities and threats may be brought by competition,
changes in customer preferences, or environmental factors.

MARKETING STRATEGY & MARKETING TACTICS

Marketing strategies and tactics are all goal oriented.
Tactics are those actions that are done in daily or short-term basis. They are much more
specific in nature compared to strategies. Under marketing tactics, the focus in on
developing the best marketing mix which is comprised of:
Product , Price , Place, and Promotion
Marketing strategies and tactics are all goal oriented.
Strategies on the other hand, are those activities that make sure the tactics would
contribute in the monthly, yearly, or longer term plans of the company. Under
marketing strategies, the focus is on:Marketing Segmentation; and
Target Market Positioning

Additional Notes
THE MARKETING MANAGEMENT PROCESS
The process starts with the identification of opportunities which may come either in
the form of a new or existing product or market.
1. Develop the Strategic Goals for the Company
2. Formulate marketing strategies for the company
3. Plan & map out the company’s marketing mix
4. Implement & control

MARKET SEGMENTATION
It is the process of subdividing a large group of customers into smaller groups
possessing common needs, wants, expectations, and demand.
BASES FOR SEGMENTAION
1. NEEDS & WANTS
- segmenting the market is done through identifying the needs and of the
customer and
creating products or services that respond specifically to each one.
2. SOCIO-DEMOGRAPHICS
- the market is segmented according their identity such as: age, gender,
religion, civil
status, income level, family size, generation, race, etc.
3. PSYCHOGRAPHICS
- It entails subdividing the market according to customer’s lifestyles and
personalities. This way, their way of spending, their interests, and their views on
social issues are identified. Products and services may also be customized
according to these lifestyles and personalities.
4. BEHAVIOUR
This may be reflected based on the buying behavior of customers.
Brand loyalty - reflects the customer’s level of attachment to a particular
brand primarily because of past experiences and values. (Absolute, moderate,
switchers)
Product usage - answers the question: “How much of the product do they
use?” (Heavy-users, medium, light, non-users, ex-users).
Purchase frequency
Purchase behavior (Innovator, early adopter, early majority, late majority,
laggards)
5. INTERNET SEGMENTATION
dividing the market based on their online behavior..
 6. PRICE SEGMENTATION
dividing the market based on how sensitive they are to price changes or their
over-all
purchasing power.
7. INDUSTRIAL SEGMENTATION
- this is applied when the customers are businesses. Business clients may be
classified
according to their type of customers, requirements, geographical location,
volume of orders, specifications, etc.

FACTORS TO CONSIDER IN CHOOSING A TARGET MARKET

1. SIZE - The segment must be substantial or large enough to generate the
targeted level of sales.
2. POTENTIAL GROWTH - It is advisable to choose a segment that has a potential
to expand in the future.
3. COMPETITION - The segment might be large as of the moment but the market
might also be saturated by potential competitors. In that case, there will less
market share for each player.
4. COST OF REACHING THE MARKET
5. FIRM’S VMOs - It is vital that serving the chosen target market leads to the
fulfillment of the firm’s VMO’s.
Decisions such as these must not deviate from
the firm’s reason for existence.
6. FIRM’S RESOURCES - There should be enough financial resources, manpower,
materials, machinery or equipment, methods and information.
7. ACCESIBILITY OF THE SEGMENT - Is it economically possible to reach the
segment? Are they concentrated in certain geographical areas or exposed
to certain media? If not, it might be too difficult for the firm to reach them.
MARKETING INFORMATION SYSTEM
- A system that analyzes and assesses marketing information, gathered continuously
from sources inside and outside an organization
MAJOR SOURCES OF INFORMATION
1. COMPANY’S INTERNAL RECORDS - Reports generated by the company which
reflects current or past performances and future projections (sales, costs,
inventories, receivables, payables, etc.).
2. MARKETING RESEARCHES - Thorough studies conducted by collecting,
analyzing, and interpreting data to come up with recommendations and have
a better understanding of its market and its competitors.
3. MARKET INTELLIGENCE ACTIVITIES - keeps the company updated with its
environment. These can vary from watching news, reading books, to
interviewing customers, suppliers, and even sending spies.
WHAT ARE THE COMMON INFORMATION SOUGHT BY MARKETERS?
1. CUSTOMER PROFILE
What are their needs and wants?
What are their lifestyles?
What are their perceptions about the company’s products?
What are their beliefs, values, and cultures?
Who are their reference groups?
What are their demographic characteristics (age, gender, etc)?
Where can I find them?

2. COMPETITOR PROFILE
Learning about the competitor’s strengths, weaknesses, and strategies enables the
company to either identify their competitive advantage or learn from the
competitive advantage of the opponent.

3. FADS & TRENDS

 A fad can be defined as something that is popular only for a short time. For fads, it is
best to start early (when the fad is not yet on its peak) and stop before it’s too late
(when customers already lost their interest).
On the other hand, a trend is something that will stay for a longer period of time.
Companies that market such products must be quick in innovating and developing
what they have to offer to stay ahead of competition.

4. PUBLIC NEWS & CURRENT AFFAIRS

What currently happens in the environment may affect people’s perception, values,
beliefs, preferences, and other important factors that affect their buying decisions.

5. GOVERNMENT REGULATION
Changes and developments in government regulation may require changes in the
way companies do business. These, most of the time if not always, have a great
impact on what products would sell and how they should be sold.

6. S.W.O.T
Strengths, weaknesses, opportunities, and threats are information that can define the
marketing strategies of a company.

The Business Environment

All business organizations that exist in the economy have external and internal factors
that affect their operations, functions, and overall performance. This can be defined as
the business environment. The business environment can be divided into two
categories; macroenvironment and microenvironment.

The Elements of Microenvironment

There are six elements or factors that make up a business organizations
microenvironment. These factors are each made up of self contained
microenvironment that stands alone but interacts with one another. Employees,
stakeholders, and suppliers are three factors with a direct effect on businesses. The
other three, media and public, competitors, and the customers who keep businesses
running have an impact that's not as direct but just as great.

1. Customers - Customers are one of the most vital elements to a business

organization, without paying customers; a business would cease to exist. They
are the final receivers of products and services. Customers are central to any
business organization as they are the primary element of generating revenue.
When marketing is defined, customer needs are always considered-how we
identify needs, satisfy them, and anticipate them in the future
2. Shareholders - Shareholders are elements that have a direct influence on a
business organization. These are those who invest into a business and therefore
own shares of it. By doing so, they attain ownership of the company
3. Competitors - Competitors impact a business organization’s actions, strategies,
profits, and overall performance. This microenvironmental element affects
businesses by competing for one’s customers through competitive advantage.
To gain advantage over competitors or rivals, a business organization must
identify their USP or their unique selling points of goods and services provided
and achieve competitive advantage. T
4. Suppliers - Suppliers are those that supply a business with raw materials,
machinery or equipment, etc., wherein value is added by transforming said
goods and services into finished goods, the medium in which revenue is
generated. Their actions can create an impact on the organization’s strategy as
they provide necessary inputs for production.
5. Employees - This area refers to the internal process in a company such as the
marketing, sales, purchasing, administrative, accounting, and finance
 department, which all function together in harmony. Employees are those
employed under an organization, they are essential because they drive value
through customer satisfaction and embody the marketing concept. Their
performance is one of the primary drivers of organizational performance and
productivity as they are the force that helps an organization meet their goals
and objectives.
6. Media or Public - Companies must be open to the public in general. The
collection of publics relies on different subgroups which include: media,
government, citizen action, local, and general attitude from society.
Organizations must form healthy relationships with these factors so that its
business flows smoothly in the market. A company’s image decides it financial
success in the market, therefore, every company must build strong brand image,
which is why companies take interest in social environmental concerns to create
a responsible social image. Brands with good and healthy brand image attract
customers as the public supports companies with an ethical image.

The Elements of Macroenvironment

Macro environment is the external factors that affects the decision making process of
an organization. These factors are the PESTEL analysis or DESTEP model. Organizations
conduct macro environment analysis to identify the opportunities and threats that are
uncontrollable in the industry. Understanding how macro environment factors influence
companies are necessary when building or expanding a business.
1. Political Factor - Political factors relate to how a government can influence or
intervene in a specific industry or even into an entire economy. (Lewin, 2019).
When companies analyze political factors, they must think about the potential
for political change, tax laws, trade policy, political stability or instability,
corruption, foreign trade policy, tax policy, and labor law. This means that every
business needs to be up to date with such factors worldwide in order to make
the right decisions.
2. Economic Factor - The Economic factors are those that affect consumer
purchasing power and spending patterns. These factors include economic
growth, exchange rates, inflation rates, interest rates, disposable income of
consumers and unemployment rates. These factors may have a direct or indirect
long term impact on a company, since it affects the purchasing power of
consumers and could possibly change demand/supply models in the economy.
3. Social Factor - The social aspect focuses on the forces within the society. Family,
friends, colleagues, neighbors and the media are social factors. These factors
can affect our attitudes, opinions and interests. So, it can impact sales of product
and revenues earned. Social factors consist of consumers. They buy products
based on many different factors. This includes their demographic location,
ethnic background, social status, immediate needs, lifestyle changes and trends.
For example, societies that have a positive attitude toward the formation of
families, high birth rates, are those that would be attractive for producers of
baby products.
4. Technological Factor - Technological factors are often referred to as
advancements in technology. Not only technology used to develop and deliver
products to consumers, but also the technology used to run businesses efficiently.
This factor refers to technology incentives, the level of innovation, automation,
research and development activity, technological change and the amount of
technological awareness that a market possesses.
5. Environmental Factor - Environmental factors became important due to the
increasing scarcity of raw materials, pollution, and carbon footprints. These
factors include weather, climate, environmental offsets and climate change
which may especially affect industries such as tourism, farming, and agriculture.
Because of all the environmental concerns and the increased involvement of
society in ecological issues, companies need to consider and implement
environmental sustainability. This means that they should contribute to supporting
the environment. Thereby, businesses do not only support the maintenance of a
 green planet, but also respond to consumer demands for environmentally
friendly and responsible products. This has led to many companies getting more
and more involved in practices such as corporate social responsibility (CSR).
6. Legal Factor - Legal Factors pertain to any legal forces that define what a
business can or cannot do. Although legal factors may have some overlap with
political factors, they include more specific laws such as discrimination laws,
antitrust laws, employment laws, consumer protection laws, copyright and
patent laws, and health and safety laws. Political Factors involve the relationship
between business and the government. A

In conclusion, PESTEL Analysis is used to identify external factors that might affect the
efficiency and effectiveness of a business. By examining how outside influences are
connected to a business, it’ll reflect how to keep ahead of the competition.

Analyzing Consumer Demand and understanding buyer behaviour

Consumer buying behavior refers to the study of customers and how they behave while
deciding to buy a product that satisfies their needs. It is a study of the actions of the
consumers that drive them to buy and use certain products.

4 Types of Consumer Behavior

A consumer’s buying decision depends on the type of products that they need to buy.
The behavior of a consumer while buying a coffee is a lot different while buying a car.
Based on observations, it is clear that purchases that are more complex and expensive
involve higher deliberation and many more participants. Consumer buying behavior is
determined by the level of involvement that a consumer shows towards a purchase
decision. The amount of risk involved in a purchase also determines the buying
behavior. Higher priced goods tend to high higher risk, thereby seeking higher
involvement in buying decisions.

1. Complex buying behavior - Complex buying behavior is encountered particularly

when consumers are buying an expensive product. In this infrequent transaction,
consumers are highly involved in the purchase decision. Consumers will research
thoroughly before committing to invest. Consumer behaves very different when buying
an expensive product or a product that is unfamiliar to him. When the risk of buying a
product is very high, a consumer consults friends, family and experts before making the
decision. For example, when a consumer is buying a car for the first time, it’s a big
decision as it involves high economic risk. There is a lot of thought on how it looks, how
his friends and family will react, how his social status will change after buying the car,
and so on. In complex buying behavior, the buyer will pass through a learning process.
He will first develop beliefs about the product, then attitudes, and then making a
thoughtful purchase choice.

2. Dissonance-reducing buying behavior - In dissonance-reducing buying behavior

consumer involvement is very high. This might be due to high price and infrequent
purchase. In addition, there is a low availability of choices with less significance
differences among brands. In this type, a consumer buys a product that is easily
available. Consumers will be forced to buy goods that do not have too many choices
and therefore consumers will be left with limited decision making. Based on the
products available, time limitation or the budget limitation, consumers buy certain
products without a lot of research. For example, a consumer who is looking for a new
collapsible table that can be taken for a camping, quickly decides on the product
based on few brands available. The main criteria here will be the use and the feature of
the collapsible table and the budget available with him.

3. Habitual buying behavior - Habitual Buying Behavior is depicted when a consumer

has low involvement in a purchase decision. In this case the consumer is perceiving only
a few significant differences between brands. When consumers are buying products
that they use for their daily routine, they do not put a lot of thought. They either buy
their favourite brand or the one that they use regularly – or the one available in the
store or the one that costs the least. For example, while a consumer buys a loaf of
bread, he tends to buy the brand that he is familiar with without actually putting a lot of
research and time. Many products fit into this category. Everyday use products, such as
salt, sugar, biscuits, toilet paper, and black pepper all fit into this product category.
Consumer just go for it and buy it – there is no brand loyalty. Consumers do not research
or need information regarding purchase of such products. Habitual buying behavior is
influenced by radio, television and print media. Moreover, consumers are buying based
on brand familiarity. Hence marketers must use repetitive advertisements to build brand
familiarity. Further to initiate product trial, marketers should use tactics like price drop
promotions and sales promotions.

4. Variety seeking buying behavior - In variety seeking consumer behavior, consumer

involvement is low. There are significant differences between brands. Here consumers
often do a lot of brand switching. The cost of switching products is low, and hence
consumers might want to try out new products just out of curiosity or boredom.
Consumers here, generally buy different products not because of dissatisfaction but
mainly with an urge to seek variety. For example, a consumer likes to buy a cookie and
choose a brand without putting much thought to it. Next time, the same consumer
might may choose a different brand out of a wish for a different taste. Brand switching
occurs often and without intention. Brands have to adopt different strategies for such
type of consumer behavior. The market leader will persuade habitual buying behavior
by influencing the shelf space. The shelf will display a large number of related but
different product versions. Marketers avoid out-of-stock conditions, sponsor frequent
advertising, offer lower prices, discounts, deals, coupons and free samples to attract
consumers.