Principle of marketing MWU

Chapter One: Nature and Scope of Marketing

1.1. Basic concepts and definitions
1.2. Evolution and Philosophies of marketing
1.3. Importance of marketing
1.4. Marketing Tasks
1.4.1. Building Customer Relationship and
1.4.1. Demand Management
Introduction
What image comes to mind when you hear the word “marketing”? Some people think of advertisements or
brochures, while others think of public relations (for instance, arranging for clients to appear on TV talk shows).
The truth is all of these and many more things make up the field of marketing. Marketing is part of all of our
lives and touches us in some way every day. To be successful each company that deals with customers on a
daily basis must not only be customer-driven, but customer-obsessed.
Marketing is advertising to advertising agencies, events to event marketers, knocking on doors to
salespeople, direct mail to direct mailers. In other words, to a person with a hammer, everything looks
like a nail. ~n reality, marketing is a way of thinking about business, rather than a bundle of techniques.
It’s; much more than just selling stuff and collecting money. It's the connection between people and
products, customers and companies.
Marketing is everywhere. Formally or informally, people and organizations engage in a vast number of
activities that could be called marketing.
Good marketing is no accident, but a result of careful planning and execution. Marketing is both an “art”
and a “science”- there is constant tension between the formulated side of marketing and the creative side.
Definition of marketing
Marketing deals with identifying and meeting human and social needs. One of the shortest definitions of
marketing is “meeting needs profitably” (Kotler and Keller, 2012:27).
The American Marketing Association define: “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 goals” (Kotler and Keller, 2012:27).
“Marketing is the creation and delivery of standard of living to the society.” -Malcolm menair
Marketing is defined by the American Marketing Association as “the activity, set of institutions, and processes
for creating, communicating, delivering, and exchanging offerings that have value for customers, clients,

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partners, and society at large.” If you read the definition closely, you see that there are four activities, or
components, of marketing:
Creating; The process of collaborating with suppliers and customers to create offerings that have value
Communicating; broadly, describing those offerings, as well as learning from customers.
Delivering; getting those offerings to the consumer in a way that optimizes value.
Exchanging; trading value for those offerings.
The two fold goal of marketing is
To attract new customers by promising superior value and
To keep and grow current customers by delivering satisfaction.
Marketing management is the art and science of choosing target markets and getting, keeping, and growing
customers through creating, delivering, and communicating superior customer value. (Kotler and Keller,
2012:27).
We can distinguish between social and managerial definitions. A social definition shows the role marketing
plays in the society. A social definition that serves our purpose follows:
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
A managerial definition of marketing is that “Marketing is a process of planning and executing the
conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that
satisfy individual and organizational goals.
MARKETING CORE CONCEPT

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Figure 1.1 core concept of marketing

a) Needs, Wants and Demands.

The starting Point for the discipline of marketing lies in human needs and wants. People needs and wants many
varieties of things and marketing has to satisfy these needs and wants.
Needs and wants of people are unlimited and continuously changes and so the marketer’s task is to
meet these changing human needs and wants.
Needs:- The most basic concept underlying marketing is that of human needs.
Needs are states of felt deprivation.
It is a discrepancy between the actual state and desired state of a human being.
It is the deficiency of something useful.
Needs are not created by society or by marketers. They exist in the very nature of human biology and the
human condition.
Wants:- Wants are desires for specific satisfiers of these needs. A want for one person may not be a want for
another person.
 Human needs take as they are shaped by culture and individual personality. Ethiopian needs food but wants
enjera. Wants are shaped by one’s society and are described in terms of objects that will satisfy those
needs what is good for one person may be worse for another.
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 For example: When a person fell hungry, he wants to eat food, but the type of food wanted by different
persons may be different.
 Although people’s needs are few, their wants are many. Human wants are continually shaped and
reshaped by social forces and institutions, including churches, schools, families and business corporations.
Demands: Demands are wants for specific products that are backed by an ability and willingness to buy them.

 Wants become demand when they are backed up by purchasing power.

Market Offerings—Products, Services, and Experiences
b) Products (Goods, Services and Ideas)
Consumers’ needs and wants are fulfilled through market offerings some combination of products, services,
information, or experiences offered to a market to satisfy a need or a want.
 Market offerings are not limited to physical products. They also include services— activities or benefits
offered for sale that are essentially intangible and do not result in the ownership of anything. Examples
include banking, airline, hotel, tax preparation, and home repair services.
More broadly, market offerings also include other entities, such as persons, places, organizations, information,
and ideas.
 Product is anything that can be offered to the market for acquisition, use and/or attention.
 Products may have three forms: physical goods (people, place, machinery, food, etc), services
(intangible products) and ideas (human conceptions).
For example: a computer manufacturer is supplying all three forms: physical goods (computer, monitor, printer,
etc), services (delivery, installation, training, maintenance, repair), ideas (computation power).

Many sellers make the mistake of paying more attention to the specific products they offer than to the
benefits and experiences produced by these products. These sellers suffer from marketing myopia.
Marketing myopia is The mistake of paying more attention to the specific products a company offers than to
the benefits and experiences produced by these products.

Customer Value and Satisfaction

c) Value, Cost and Satisfaction.
When we use the term value, we mean the benefits buyers receive that meet their needs. In other words,
 Value is what the customer gets by purchasing and consuming a company’s offering. So, although
the offering is created by the company, the value is determined by the customer.
 Value is the consumer’s estimate of the product’s overall capacity to satisfy his or her needs.

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Consumer, in order to maximize their satisfaction, they have to consider not only the value they can acquire
from owning and using a product, but also the cost they incurs to acquire the product.
The product with the highest value might cost substantially more than the other alternatives.
Therefore, consumers will consider the products value and cost before making a choice.
A rational consumer will choose the product that produces the most value per Birr.
Dissatisfied customers often switch to competitors and disparage the product to others. If they set expectations
too low, they may satisfy those who buy but fail to attract enough buyers. If they set expectations too high,
buyers will be disappointed.
Exchanges and Relationships
d) Exchange and Transactions

Exchange is the act of obtaining a desired product from someone by offering something in return. Exchange
is one of the four ways in which people can obtain products they want. They are:

1st. Self –production – Eg. Relieving hunger through hunting, fishing, or fruit gathering. Here there is no
market and no marketing.
2nd. Coercion – Hungry people can wrest or steel food from others. Here no benefit is offered to the others
except that of not being harmed. Therefore, there is no market and no marketing.
3rd. Begging – Hungry people can approach others and beg for good. They have nothing tangible to offer
except gratitude. Therefore there market and marketing.
4th. Exchange – Hungry people can offer a resource in return for food, such money, a good or a service.
Her, there is market and marketing. Marketing emerges when people decide to satisfy need wants through
exchange.
For exchange to take place, five conditions must be satisfied:
i. There are at least two parties (individuals or groups)
ii. Each party has something that might be of value to 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.
If these conditions exist, there is a potential for exchange. Exchange is frequently described as a value –
creating process because exchange normally leaves both parties better off.

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Transaction: Two parties are engaged in exchange if they are negotiating and moving toward an agreement.
When an agreement is reached, we say that a transaction takes place. Transactions are the basic unit of
exchange. A transaction consists of a trade of values between two or more parties. Transaction may be either
monetary or barter transaction.

Transaction involves several dimensions: at least two things of value, agreed up on conditions, a time of
agreement and a place of agreement. Transactions are supported and enforced through certain legal systems.

Marketers seek to elicit a behavioral response from another party. Hence, marketing consists of the actions
undertaken to elicit desired responses from a target audience.

Marketing occurs when people decide to satisfy needs and wants through exchange relationships.
Marketing consists of actions taken to build and maintain desirable exchange relationships with target
audiences involving a product, service, idea, or other object.
 Beyond simply attracting new customers and creating transactions, companies want to retain customers
and grow their businesses.
 Marketers want to build strong relationships by consistently delivering superior customer value.
e) Relationships and Networks.
Relationships: - Relationship marketing is the practice of building long-term satisfying relation with key
parties-customer, supplies and distributors – in order to retain their long-term preferences and business. Smart
marketers try to build up and “win-win” relationships with customers, distributors, dealers and suppliers. This
is accomplished by promising and delivering high quality goods services and fair prices to the other party over
time.
 Relationship marketing results in strong economic, technical, and social ties among the parties. It also
cuts down transaction costs and time.
The ultimate outcome of relationship marketing is the building of a unique company asset called marketing
network. A marketing network consists of the company and all its supporting stakeholders’ customers,
employees, suppliers, distributors, retailers, ad agencies and others with whom it has built mutually profitable
business relationships. The operating principle of relationship marketing is: Build a good network of
relationships with key stakeholders, and profits will follow.

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

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Originally a market was a place where buyers and sellers gathered to exchange goods (such as a village square).
2). Economists use the term to designate a collection of buyers and sellers who transact in a particular product
class (as in the housing market).

Figure 1.2 simple marketing system

1.3 Importance of Marketing

Marketing is an important social activity that offers benefits to all the parties concerned. As such importance of
marketing can be summarized as follows.
a) As a producer and businessman we usually make such marketing related decisions such as finding out who are
our customers? What are their need and want and what good and service to offer and at what price.
b) As a consumer we make such marketing related decision where to shop, which salesperson to contact, what
price to pay, what to buy.
c) As an employee we are concerned with the employment opportunity that can be created by marketing
activities.
d) To the society, marketing contributes to the economic growth of the society through making profit and make
people at a better off.
e) Marketing creates utility such as:
Place utility: -Marketing makes products readily available at a place where customers want them.
Time utility: -Marketing makes products available at the time when they are wanted by customers.
Possession utility: -Marketing makes possession by selling the product to customer.
Form utility: - Form entails the physical or chemical change that takes place through production which
is based on the marketing effort in identifying what customers need and want.

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1.4. MARKETING MANAGEMENT PHILOSOPHIES/CONCEPTS

Marketing management wants to design strategies that will build profitable relationships with target consumers.
There are five alternative concepts under which organizations design and carry out their marketing strategies:
the production, product, selling, marketing, and societal marketing concepts.

Figure 1.3 key marketing philosophies

1.4.1 The Production Concept

 The production concept holds that consumers will favor products that are available and highly affordable.
 The concept holds that consumers will favor those products that are widely available and low in cost.
The management’s focus, therefore, should be in increasing production efficiency and wide distribution
This philosophy is a useful concept in the situations when
i. The demand for the product exceeds its supply. Here consumers are more interested in obtaining the
product than in its fine points.
ii. The products cost is high and has to be decreased to expand the market.
Some service organizations also operate on the production concept while this management orientation can
handle many cases per hour, it is open to charges of impersonality and poor service quality.

1.4.2. The Product Concept

 The product concept holds that consumers will favor products that offer the most in quality, performance,
and innovative features.
 Under this concept, marketing strategy focuses on making continuous product improvements.

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 The product concept states that consumers will favor products that offer the most quality, performance,
and features, and that the organization should, therefore, devote its energy to making continuous product
improvements.
 The product concept can also lead to “marketing myopia,” the failure to see the challenges being
presented by other products.

1.4.3. The Selling Concept

Many companies follow the selling concept, which holds that consumers will not buy enough of the firm’s
products unless it undertakes a large-scale selling and promotion effort.
The selling concept is typically practiced with unsought goods—those that buyers do not normally think of
buying, such as insurance or blood donations.
These industries must be good at tracking down prospects and selling them on a product’s benefits.

Figure 1.4 selling and

marketing concept
contrasted

Such aggressive selling, however, carries high risks. It focuses on creating sales transactions rather than on
building long-term, profitable customer relationships.
The aim often is to sell what the company makes rather than making what the market wants.
1.4.4. The Marketing Concept
The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of
target markets and delivering the desired satisfactions better than competitors do.
 Instead of a product-centered “make and sell” philosophy, the marketing concept is a customer-centered
“sense and respond” philosophy.
 The job is not to find the right customers for your product but to find the right products for your
customers.

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1.4.5 The Societal Marketing Concept

The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts
between consumer short-run wants and consumer long-run welfare. Is a firm that satisfies the immediate needs
and wants of target markets always doing what’s best for its consumers in the long run? The societal marketing
concept holds that marketing strategy should deliver value to customers in a way that maintains or improves
both the consumer’s and society’s well-being. It calls for sustainable marketing, socially and environmentally
responsible marketing that meets the present needs of consumers and businesses while also preserving or
enhancing the ability of future generations to meet their needs. Consider today’s bottled water industry. You
may view bottled water companies as offering a convenient, tasty, and healthy product. Its packaging suggests
“green” images of pristine lakes and snow-capped mountains. Yet making, filling, and shipping billions of
plastic bottles generates huge amounts of carbon dioxide emissions that contribute substantially to global
warming. Further, the plastic bottles pose a substantial recycling and solid waste disposal problem. Thus, in
satisfying short-term consumer wants, the bottled water industry may be causing environmental problems that
run against society’s long-run interests.
Building Profitable Customer Relationships

Managing demand means managing customers. A company's demand comes from Two groups: new customers
and repeat customers. Traditional marketing theory and practice have focused on attracting new customers and
making the sale.

Today, however, the emphasis is shifting. Beyond designing strategic to attract new customers and create
transactions with them, companies are now going all Out to retain current customers and build lasting customer
relationships.

Why the new emphasis on keeping customers? In the past, companies facing an expanding economy and rapidly
growing markets could practice the leaky bucket' approach to marketing. Growing markets meant a plentiful
supply of new customers. Companies could attract new customers without worrying about losing old customers.
However, companies today are facing some new marketing realities. Changing demographics, as low-growth
economy, more sophisticated competitors and over capacity in many industries-all of these factors mean that
there are fewer new customers to go around. Many companies are now fighting for shares of flat or fading
markets. Thus, the costs of attracting new customers are rising. In fact, it costs five times as much to attract a
new customer as it does to keep a current customer satisfied.

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Companies are also realizing that losing a customer means more than losing a single sale it means losing the
entire stream of purchases that the customer would make over a life time of patronage. Attracting new
customers remains an important marketing management task. However, the focus today is shifting towards
retaining current customers and building profitable, long- term relationships with them. The key to customer
Retention is superior customer value and satisfaction.

Marketing demand

There are eight different states of demands and the corresponding tasks facing marketing managers. They are:

 Negative demand- A market is said in a state of negative demand if a major part of the market dislikes
the product and even pays a price to avoid it. E.g. Christian meat in Muslim countries or meat
generally among the vegetarians as in India.
The marketing task is to analyze why the market dislikes the product and whether a marketing
program consisting of product redesign, lower prices and more positive promotion can change beliefs
and attitudes.

 No demand - When there is no demand, the target consumers may be unaware of, or uninterested in
the product. The marketing task is to find ways to connect benefits of the product with the person's
natural needs and interest. E.g., Farmers may not be interested in new way of farming or in the
package of extension.
The marketing task is to demonstrate benefits that will be driven by the members who have been
encompassed in the package.

 Latent demand - Many consumers may share a strong need that cannot be satisfied by an existing
product. There might be a strong latent demand for completely a new product, which was not
available in the market until then. For example, harmless cigarettes, or fuel-efficient cars, or cars that
use water for their fuel. The marketing task is to measure the size of the potential market and then
develop goods and services to satisfy the latent demand.
 Declining demand-, every organization eventually faces declining demand for one or more of its
products. For example, churches have seen membership decline, private colleges have seen
application fall. When such is the case, the marketer must analyze the causes of decline and
determine whether the demand can be restimualated by new target markets, by changing product
features, or by more communication that is effective. The marketing task is to reverse declining
demand through creative remarketing.
 Irregular demand- Many organizations may face demand that varies on a seasonal, daily, or even
hourly basis, causing problems of idle or overworked capacity. For example, much mass transit
equipment is idle during off peak hours and insufficient during peak travel hours. Museums are
under visited on weekdays and overcrowded on weekends.The marketing task, called
synchromarketing, is to find ways to alter the pattern of demand through flexible pricing,
promotion and incentives.
 Full Demand - organizations face full demand when they are pleased with their volume of business.
The marketing task is to maintain the existing level of demand in the face of changing consumer
preferences and increasing competition. The organization must maintain or improve its quality and
continually measure consumer satisfaction.
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 Over-full demand- Some organizations face a demand level that is higher than they can handle. When
demand level is higher and overcrowded, the marketing task called demarketing requires finding
ways to reduce demand temporarily or permanently to the level it can be handled. Demarketing can
be classified into two: 1) general demarketing and 2) selective demarketing.
General Demarketing - seeks to discourage overall demand and takes such steps as raising prices and
reducing promotion and service.

Selective demarketing consists of trying to reduce demand from those parts of the market that are less
profitable or less in need of the product.
 Unwholesome demand- some products are dangerous to society as a whole. Such products will
attract organized effort to discourage their consumption. Unselling campaigns have been conducted
against cigarettes, alcohol, hard drugs, handguns, X-rated moves, large families and environmental
pollution.
The marketing task is to get people who like something to give it up, using such tools as fear message, pri
hikes and reduced availability.

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