CHAPTER ONE

AN OVER VIEW OF MARKETING MANAGEMENT

1.1 MARKETING AND ITS CORE CONCEPTS
Today’s successful companies have one thing in common. They are strongly customer focused and heavily
committed to marketing. These companies share a passion for understanding and satisfying customer needs
in well-defined target markets. They motivate everyone in the organization to help build lasting customer
relationships based on creating value. Customer relationships and value are especially important today. It is
more important than ever to build strong customer relationships based on real and enduring value.

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. The best way to
achieve this objective is to develop a sound marketing function within the organization.

Major reason to study marketing is:

 Marketing plays an important role in society.

 It is Vital to business.
 Marketing offers outstanding career opportunities.
 Marketing affects your life every day.
We encounter the word marketing in our everyday language. A layman views it more or less equivalent to the
term selling and advertising. In fact not only a layman that considers it this way but also there are some
companies that considers marketing as a business function whose responsibility area is to dispose of whatever
products the firm decided to produce. However, in today’s turbulent and competitive business environment, selling
and advertising are only part of marketing.

Marketing has been described by one scholar or another as a business activity; as a group of related business; as a
trade phenomenon; as a frame of mind; as an economic process; as a structure of institution; as a process of demand-
supply adjustment; and as many other things.

Marketing, more than any other business function, deals with customers. The simplest definition is this
one: Marketing is managing profitable customer relationships. The twofold goal of marketing is to
attract new customers by promising superior value and keep and grow current customers by
delivering satisfaction. American marketing association defined marketing as follows:

 Marketing is a social and managerial process by which individuals and organizations obtain what
they need and want through creating and exchanging value with others. In a narrower business
context, marketing involves building profitable, value laden exchange relationships with customers.

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Marketing is an organization function and a set of processes for creation, communication and delivering value
to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
Marketing can also be defined as a total system of business activities designed to plan, price, promote and
distribute want satisfying products to target markets in achieving organizational objectives. It is process of
planning and executing, consumption, pricing, promotion and distribution of ideas, goods and services to
create an exchange that can satisfy individual and organization needs.

We define marketing as the process by which companies create value for customers and build strong customer
relationships in order to capture value from customers in return.

1.1.2 Core Concepts of Marketing

Needs, Wants and Demand

 Need: Human needs are the basic reasons for the emergence and existence of marketing. The most
basic concept underlying marketing is that of human needs. Marketing starts with human needs and
wants. A human need is a state of deprivation of some basic satisfaction; people require food,
clothing, and shelter these needs are not created by society or by marketers. They exist in the very
texture of human biology and the human condition. Marketing Process starts when the individual
comes to know of a particular need. If this need is not satisfied it creates a state of tension within the
minds of the person
 Wants: Are the forms that human needs take as they are shaped by society, culture and individual
personality. For e.g. an Ethiopian needs food and wants "Injera", "wet", in another society these
needs might be satisfied differently. Needs are general and common to all human beings whereas
wants are specific which differ between and among people.
 Demands: People have almost unlimited wants but limited resources. Thus they want to choose
products that provide the most value and satisfaction for their money and hence they will spend their
resource (money) in such a way. So, when buying power backs want, it becomes demand. Simply
demand means wants for specific products that are backed by an ability and willingness to buy them.
Wants become demands when supported by purchasing power. Many people want to have personal
computer; only a few are able and willing to buy. Companies must therefore measure not only how
many would want a product but more importantly would actually be willing and able to buy it.
 Market Offer (Product): People satisfy their needs and wants with products. A product is anything
that can be offered to satisfy a need or want. The concept of product is not limited to physical
objects but also it includes intangible goods such as , service(s), and ideas(s) which may be
activities or benefits to customers Marketing people are involved in marketing ten types of product:

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 goods, services, experiences, events, persons, places, properties, organizations, information, and
ideas.
 Goods- constitute the bulk of most countries' production and marketing effort.
 Services- as economies advance, growing proportions of their activities are focused on the
production of services.
 Experiences- by orchestrating several services and goods, one can create, stage and market
experiences.
 Events- marketers promote time - based events such as Olympics, trade shows, sports events and
artistic performances.
 Persons- celebrity marketing has become a major business. Examples include artists, musicians,
CEOs (chief executive officers) physicians, high profile lawyers and financiers.
 Places- cities, states, regions and nations compete to attract tourists, factories, Company head
quarters, and new residents.
 Properties- intangible rights of ownership of either real property or real estate or financial property
(Stocks and bonds)
 Organizations- actively work to build a strong favorable image in the mind of their publics.
 Information- the production, packaging, and distribution of information is a major industry in a
given society. Marketers of Information may include school, and universities; publishers of
encyclopedias, nonfiction books, and specialized magazines; makers of CDs; and internet web sites.
 Ideas- every Market offering has a basic idea at its core. Products and Services are platforms for delivering
some idea or benefit to satisfy a core need.

 Customer Value and satisfaction: Value is the consumer's estimate of the product's overall capacity to
satisfy his or her needs. According to De Rose, value is the satisfaction of customer's requirements at the
lowest possible cost of acquisition, ownership, and use. The concept of value is highly related with
utility, price, satisfaction, and profit. Value is a measure of the usefulness of a product. Value is also
defined as a ratio between what the customer gets and what he gives. It is the difference between the
"get" component and the "give" component.

An increase in the value of the customer offering can be done by:

 raising benefits
 reducing costs
 raising benefits and reducing costs
 raising benefits by more than the raise in costs, or
 lowering benefits by less than the reduction in costs
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  Customer Satisfaction depends on a product’s perceived performance in delivering value relative to
buyer expectations. If a product's performance falls short of the customer's expectations, the buyer is
dissatisfied. If performance exceeds expectations, the buyer is delighted. If performance matches
exceptions, the buyer is satisfied. Outstanding marketing companies do out of their way to keep their
customers satisfied because satisfied customers make repeat purchases, and they tell others about their
experience which obviously provides the firm with competitive advantage (good word of mouth
communication), otherwise, if they are not satisfied, customers will not only be refrained from buying a
company’s products but also they are likely to talk negatively about the firm to the very prospective
customers who may possibly purchase the company’s products (bad word of mouth communication).
Some companies even aim to delight customers by promising only what they can deliver, then delivering
more than they promised.

 Exchange, Transaction and Relationship Marketing

Exchange is the act of obtaining a desired product from someone by offering something in return. It is
only one of the ways that people can obtain what they need.

Conditions that must be fulfilled for an exchange to occur:

1. There are at least two parties.

2. Each party has something of value.
3. Each party is capable of communication and delivery.
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.
Transaction takes place when the two parties reached at an agreement. There are two types of transactions;
 Monetary Transaction – a transaction that transacts money with something of value: and
 Barter Transaction – which trades goods or services for goods or services.

Relationship marketing Relationship marketing has the aim of building satisfying long-term relationships with key
parties such as customers, suppliers and distributors in order to earn and retain their business. The ultimate outcome
of relationship marketing is marketing network.

 Markets: The concept of exchange leads to the concept of a market. A market consists of all the potential and
actual customers sharing a particular need or want who might be willing and able to engage in exchange to satisfy
that need or want. Thus the size of the market depends on the number of people who exhibit the need or want, have
resources that interest others, and are willing and able to offer these resources in exchange for what they want.

There are five types of customer markets.

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 1) Consumer markets consist of individuals and households that buy goods and services for
personal consumption.
2) Business/industrial markets buy goods and services for further processing or for use in their
production process.
3) Reseller markets buy goods and services to resell at a profit.
4) 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,
5) International markets consist of those buyers in other countries, including consumers,
producers, resellers, and governments. Each market type has special characteristics that call for
careful study by the seller.

1.2 Marketing Management

The American Marketing Association defined marketing management as the process of planning and
executing the conception, pricing, promotion, and distribution of ideas, goods and services to create
exchange that satisfies individual and organizational goals. This definition recognizes that marketing
management is a process involving analysis, planning, implementation, and control; that it covers goods,
services and ideas' that rests on the notion of exchange: and that the goal is to produce satisfaction for the
parties involved 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

1.2.1 Demand management

In light with this, marketing manager is the one who is responsible for all the activities related to the
aforementioned aspects and there by enhances the demand (acceptability) of the company’s products in the market.
That is why some times marketing management is considered as demand management. At any point in time,
there may be no demand, adequate demand, irregular demand or too much demand and marketing management
must find ways to deal with these different demand states. Hence, marketing management has the task of
influencing the level, timing, and composition of demand in a way that will help the organization achieve its
objectives by doing the activities involved in marketing properly.

Table 1-1 distinguishes eight different states of demand and the corresponding tasks facing marketing managers.

1. Negative A market is in a state of negative demand if a major part of the market dislikes
demand the product and may even pay a price to avoid it. The marketing task is to
analyze why the market dislikes the product and then try to change the attitude
of customers. This kind of marketing strategy is referred to as Conversion
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 marketing as it involve changing attitude.
2. No demand Target consumer may be unaware of or uninterested in the product. Thus,
Farmers may not be interested in a new farming method, and college students
may not be interested in foreign language courses. The marketing task is to find
ways to connect the benefits of the product with the person's natural needs and
interests. This kind of marketing is called Stimulative marketing
3. Latent demand Many consumers may share a strong need that cannot be satisfied by any
existing product. There is a strong latent demand for harmless cigarettes, safer
neighborhoods, and 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 and this strategy is
called developmental marketing
4. Declining Every organization, sooner or later, faces declining demand for one or more of
demand its products, Churches have seen their memberships decline, and private
colleges have seen their applications fall. The marketer must analyze the causes
of market decline and determine whether demand can be re stimulated by
finding new target markets, changing the products features, or developing
more effective communication. The marketing task is to reverse the declining
demand through creative remarking strategy of the product.
5. Irregular demand Many organizations face demand that varies on a seasonal, daily, or even
hourly basis, causing problems of idle or overworked capacity. In mass transit
much of the 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 syncro-marketing, is to find ways to
after the same pattern of demand through flexible pricing, promotion, and
other incentives.
6. Full demand Organizations face full demand when they are pleased with their volume of
business. The marketing task is to maintain the current 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 to make sure it is doing a good job through the so called
maintenance marketing
7. Over full Some organizations face a demand level that is higher than they can or want to
demand handle. The marketing task, called demarkating, requires finding ways to

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 reduce the demand temporarily or permanently. General demarketing seeks to
discourage overall demand and consists of such steps as raising prices and
reducing promotion and service.
[Link] Unwholesome products will attract organize effects to discourage their
demand consumption. The marketing task is to find out ways by which the company can
cope up with such actions. The marketing strategy is called counter marketing

1.2.2 Building Profitable Customer Relationships

Managing demand means managing customers. A company's demand comes from two groups: new
customers and repeat customers. Traditionally, marketers have focused on attracting new customers
and creating transactions with them. In today’s marketing environment, however, changing
demographics, economic, and competitive factors mean that there are fewer new customers to go
around. The costs of attracting new customers are rising. Thus, although finding new customers
remains very important, the emphasis is shifting toward retaining profitable customers and building
lasting relations with them.

Companies have also discovered that losing a customer means losing not just a single sale but also
lifetime’s worth of purchases and referrals. Thus, working to keep profitable customer makes good
economic sense. The key to customer retention is superior customer value and satisfaction. With this
in mind, many companies are going to extremes to keep their customers satisfied.

1.3 Marketing Philosophy towards the market place

We have defined marketing management as the conscious effort to achieve desired exchange outcomes with target
markets. Like any other business functions, marketing activities should be carried out under a well thought out
philosophy of efficiency, effectiveness and social responsibility. But what philosophy should guide marketing
efforts? What relative weight should be given to the interest of the organization, the customers, and society? Very
often these interest conflict. In tracing the development of marketing philosophies under which organizations can
choose to conduct their marketing activities, there are five competing concepts under which organization conduct
marketing activities.

1. 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. Production oriented marketers assume that consumers
are primarily interested in product availability and low prices. The production concept is useful:

a) When demand for a product exceeds the supply

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 b) When the product’s cost is too high and improved productivity is needed to bring it down
b) In developing countries, where consumers are more interested in obtaining the product than
its features.
c) When a company wants to expand its market.

2. Product concept: companies need to compete to each other in order to attract customers by offering benefits
in terms of quality, additional performance and innovative feature. Thus, the situation compelled
companies to make their products offer the most quality, performance and innovative features so as to attract
customers. This eventually paved the way for product concept to appear in the business scene. This approach
can be described as orientation towards making continuous product improvement. The problem of this
philosophy is that the company concentrates on the product rather than the needs of customer. The company
sees itself as selling a product rather than providing a solution to a need.
3. Sales 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.

a) This concept it typically practiced with unsought goods (goods that buyers do not normally
think of buying such as encyclopedias or insurance).
b) To be successful with this concept, the organization must be good at tracking down prospects
and selling them on product benefits.
c) 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 As competition
began to be tough, companies found it difficult to make sell to customers by basing upon only the attributes
(performance) of the product. Rather, they should come up with the so called selling approach that calls for
convincing customers by any means to make purchase. This, in due course, lined the way for this concept to come
into being.
4. 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 company should be more effective than its
competitors in creating, delivering, and communicating customer value to its chosen target markets.

The marketing concept has been expressed in many colorful ways: "Meeting needs profitably;" "Find wants
and fills them;" and "Love the customer, not the product."
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The Marketing concept rests on four pillars: target market, customer needs, integrated marketing, and
profitability.

a) Target Market: Companies do best when they choose their target market (s) carefully and
prepare tailored marketing programs.
b) Customer Needs: clearly, understanding customer needs and wants is not always simple. Some
customers have needs of which they are not fully conscious; some can't articulate these needs or
use words that require some interpretation.
c) Integrated marketing: results when all of the company's department's work together to serve
the customers interests.
d) Profitability: The ultimate purpose of the marketing concept is to help organizations achieve
their objectives.
5. 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 marketing concept questions whether the pure marketing concept is adequate in an age of
environmental problems, resource shortages, rapid population growth, worldwide economic problems, and
neglected social services. It asks if the firm that senses, serves, and satisfies individual wants is always
doing what's best for consumers and society in the long run. According to the societal marketing concept,
the pure marketing concept overlooks possible conflicts between consumer short-run wants and consumer
long-run welfare. The societal concept calls upon marketers to balance three considerations in setting their
marketing policies.
a) Company profits
b) Customers wants
c) Society’s interest
It has become good business to consider and think of society’s interests when the organization makes
marketing decisions.