PRINCIPLES OF MARKETING

CHAPTER ONE

FUNDAMENTAL CONCEPTS OF MARKETING

Chapter Objectives:
Upon completion of this chapter students will be able
to:
Define marketing
Discuss the core concepts of marketing
Identify the various demand states and explain the
respective marketing tasks needed for each state
of demand
Discuss marketing management philosophies
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Brain wash on:

What is Market?
What is marketing?
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1.1 What Is Marketing?
The simplest definition is :
Marketing is the delivery of
customer satisfaction at a profit. The
twofold goal of marketing is:
i. To attract new customers by
promising superior value and
ii. to keep current customers by
delivering satisfaction.
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Marketing is the process of
planning and executing the
conception, pricing, promotion,
and distribution of ideas, goods,
and services to create exchange
that satisfy individual and
organizational goals."
The American Marketing Association
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"Marketing is the anticipation, management, and
satisfaction of demand through the exchange
process"
Evans Joel R, and Berman Barry

According to Evans and Berman, marketing involves:

a. Anticipation of demand
b. Management of demand, involves:
i. Stimulation tasks
ii. Facilitation tasks and
iii. Regulation tasks
c. Satisfaction of demand
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"Marketing is a social and managerial
process whereby individuals and groups
obtain what they need and want through
creating and exchanging products and
value with others."
Philip Kotler
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Discuss:
What is the difference
between marketing
and selling?
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What are the major differences between Marketing and
Selling?

• Selling occurs only after a product is produced. By contrast,

marketing starts long before a company has a product.
Marketing is the homework that managers undertake to
assess needs, measure their extent and intensity, and
determine whether a profitable opportunity exists.
• Marketing continues throughout the product's life, trying to
find new customers and keep current customers by
improving product appeal and performance, learning from
product sales results, and managing repeat performance.
• If the marketer does a good job of understanding consumer
needs, develops products that provide superior value and
prices, distributes, and promotes them effectively, these
products will sell very easily.
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1.2 Core Concepts of Marketing
1) Needs, wants and Demands
a. Need:- Human need is a state of felt
deprivation of the basic human
requirements such as food, air, water,
clothing and shelter.
b. Wants:- are basically specific satisfiers of
human needs. A human want is the form that a
human need takes as shaped by culture and
individual personality
c. Demands:- are wants for specific products
backed by buying power.
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2) Product or offering
A product is any offering that can satisfy a need
or want. A product is also any thing that can be
offered to a market for attention, acquisition,
use, or consumption and that might satisfy a
need or want.
Marketing people are involved in marketing ten
types of product: goods, services, experiences,
events, persons, places, properties,
organizations, information, and ideas.
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3) Value and satisfaction
a. Value:- Value is the consumer's estimate
of the product's overall capacity to satisfy
his or her needs. It is a measure of the
usefulness of a product. It is a measure
of the quantitative worth of a product to
attract other product for exchange.
Value = Benefits = Functional benefits + Emotional benefits
Costs Monetary costs + time costs + energy costs + psychic costs
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An increase in the value of the customer
offering can be done by: -
1. Raising Benefits.
2. Reducing costs
3. Raising benefits and reducing costs
4. Raising benefits by more than the raise in costs, or

5. Lowering benefits by less than the reduction in costs.

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b. Satisfaction:- Is the level of contentment
that the customer obtain by consuming the
product. The level of satisfaction is
measured by using utility, which is of four
type:
i. Form utility
ii. Place utility
iii. Possession utility
iv. Time utility
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4) Exchange and Transactions
a. Exchange:- is the act of obtaining a desired product
from someone by offering something of value in
return. Exchange is only one of many ways to obtain a
desired object.
The following are the major conditions to be met for existence
exchange.
i. There are at least two parties.
ii. Each party has something that might be of value to the
other party.
iii. Each party is capable of communication and delivery
iv. Each party is free to accept or reject the exchange offer.
v. Each party believes it is appropriate or desirable to deal
with the other party.
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b. Transaction:
It takes place when the two parties reach into
an agreement. A transaction (a trade of values
between two parties) is marketing’s unit of
measurement. Most transactions involve
money, response and action. A transaction
also involves:
i. At least two things of value,
ii. Agreed upon condition,
iii. A time of agreement, and
iv. A place of agreement.
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5) Relationships and Networks.
a. Relationship Marketing:- aims to build long-
term mutually satisfying relations with key
parties-customers, suppliers, distributors - in
order to earn and retain their long-term
preference and Business.
b. A marketing Network:- consists of the
company and its supporting stakeholders -
customers, employees, suppliers, distributors,
university Scientists and others with whom it
has built mutually profitable business
relationships.
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6) Markets:- A market is the set of actual
and potential buyers of a product.
7) Marketing:- Marketing means
managing markets to bring about
exchanges and relationships for the
purpose of creating value and
satisfying needs and wants
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1.3 Marketing Management:- Marketing
management is defined as the analysis,
planning, implementation, and control of
programs designed to cerate, build, and
maintain beneficial exchanges with target buyers
for the purpose of achieving organizational
objectives.
It is the art and science of choosing target
markets and getting, keeping and growing
superior value. Thus, marketing management
involves managing demand, which in turn
involves managing customer relationships.
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1.3.1 Demand management
In order to effectively manage demand there is a need to know
the products demand states so that appropriate marketing tasks
can be initiated.
1.3.1.1 Demand States and Marketing Tasks
a. Negative Demand - Majority of the market dislikes the product
and avoids it.
Marketing task:
 To analyze why the market dislikes the product
 To develop marketing programs that can change consumers
beliefs and attitudes consisting of:
product redesign,
lower prices, and
more positive promotion.
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b. No Demand - Lack of awareness or Interest in a product.
Marketing task: To find ways to connect the benefits of the
product with the person’s natural needs and interests.
c. Latent Demand – There exists a strong need that can't be satisfied
by existing products.
Marketing task: To measure the size of the potential market and
develop goods and services to satisfy the demand.
d. Declining Demand – The product has a lower demand in the
market.
Marketing tasks: To reverse declining demand through creative
remarketing.
e. Irregular Demand – The product has a varying demand by season,
day or hour.
Marketing task: To find ways to alter the pattern of demand
through flexible pricing, promotion and other incentives (Syncro-
Marketing).
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f. Full demand – The product has a satisfying level of demand in the
market.
Marketing task: To maintain the current level of demand in the
face of changing consumer preferences and increasing
competition. To maintain or improve product quality and
continually measure consumer satisfaction.
g. Overfull Demand – the product has more demand than can be
handled or delivered in the market.
Marketing task: To find ways to reduce demand temporarily or
permanently (Demarketing) via raising prices and reducing
promotion and services.
h. Unwholesome demand – The demand for unhealthy or dangerous
products.
Marketing task: To get people who like something to give it up,
using fear message, price hikes, and reduced availability.
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1.3.1.2 Building Profitable Customer
Relationships
Managing demand means managing
customers. A company's demand comes
from two groups: new customers and
repeat customers.
1.4 Marketing Management Philosophies
The five marketing philosophies that guide
marketers’ behavior are:
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a. The production concept:
It is one of the oldest concepts in business. It holds that
consumers prefer products that are widely available and
inexpensive. Managers of production - oriented businesses
concentrate on achieving high production efficiency, low
costs, and mass distribution.
The production concept is useful:
• When demand for a product exceeds the supply
• When the product’s cost is too high and improved productivity
is needed to bring it down
• In developing countries, where consumers are more
interested in obtaining the product than its features.
• When a company wants to expand its market.
• The risk with this concept is in focusing too narrowly on
company operations. Do not ignore the desires of the market.
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b. The product Concept:
It holds that consumers will favor
products that offer the most quality,
performance, and innovative features.
The product concept can lead to marketing
myopia (a shortsighted view of marketing,
which focuses on the product itself rather
than the customers’ benefits and the
challenges presented by other products).
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c. Selling concept:
• Many organizations follow the selling concept, which holds
that consumers will not buy enough of the organization’s
products unless it undertakes a large- scale selling and
promotion effort. The following are the common features of
the selling concept.
• This concept it typically practiced with unsought goods
(goods that buyers do not normally think of buying such as
encyclopedias or insurance).
• To be successful with this concept, the organization must
be good at tracking down prospects and selling them on
product benefits.
• Most firms practice the selling concept when they have over
capacity. Their aim is to sell what they make rather than
make what the market wants.
• Such marketing carries high risks. It focuses on creating
sales transaction rather than on building long-term
relationships. There are not only high risks with this
approach but low satisfaction by customers.
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d. The Marketing Concept:
The marketing concept holds that achieving
organizational goals depends on determining the
needs and wants of target markets and delivering
the desired satisfaction more effectively and
efficiently than competitors do.
• The marketing concept has been expressed in
many colorful ways:
"Meeting needs profitably."
"Find wants and fill them."
"Love the customer, not the product.“
• The Marketing concept rests on four pillars: target
market, customer needs (Responsive Marketing,
Anticipative marketing, Creative Marketing ,
Integrated marketing, and profitability.
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Discussion:
Differentiate the selling
and marketing
philosophies.
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The distinction basic distinction between
the selling and marketing concepts is
presented below:

Concept Starting Focus Means Ends

point
selling Factory Product Selling & Profit through
promoting sales volume

Marketing Target Custome Integrated Profit through

r needs Marketing customer
Market satisfaction
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e. The Societal Marketing Concept:
The societal marketing concept holds that the
organization should determine the needs, wants,
and interests, of target markets. It should then
deliver superior value to customers in a way that
maintains or improves the consumer's and the
society's well being. The societal marketing
concept is the newest of the five marketing
management philosophies.
• The societal concept calls upon marketers to
balance three considerations in setting their
marketing policies.
 Company profits
 Customers wants
 Society’s interest
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1.4 Types of Customers: There are five types of customer
markets.
a. Consumer markets:- consist of individuals and
households that buy goods and services for personal
consumption.
b. Business/industrial markets:- buy goods and services
for further processing or for use in their production
process.
c. Reseller markets:- buy goods and services to resell at a
profit.
d. Government markets:- are made up of government
agencies that buy goods and services to produce public
services or transfer the goods and services to others who
need them. Finally,
e. International markets:- consist of these buyers in other
countries, including consumers, producers, resellers, and
governments.
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• N.B. Don’t mix up the five types of consumer markets with the various
stages that customers pass through in their relationship with a
marketer. The various stages that a customer may pass through in
his/her relationship with a marketer are presented below.

Suspects - every one who might conceivably buy the product or service
Prospects- people who have a strong potential interest in the product
and the ability to pay for it
First time Customers -qualified prospects who are converted in to trying
the product for the first time
Repeat Customers- satisfied first time customers converted in to repeat
purchase
Clients-people whom the company treats very specially and
knowledgeably
Members-clients who join the membership program that offers a whole
set of benefits
Advocates-customers who enthusiastically recommend the company
and its products and services to others
Partners-the customer and the company work together actively.
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1.5 Marketing Mix elements (4 p’s):
1. product
2. Price
3. promotion
4. place (Distribution)
• Robert Lauterborn suggested that the 4P's are seller
oriented. The customer oriented marketing mix includes
the 4Cs.
Product - Customer Solution
Price - Customer Cost
Place - Convenience
Promotion - Communication
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CHAPTER ONE