problem solving introduction to marketing concepts 1

Problem SolvingProblem SolvingIntroduction to marketing concepts

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MarketingMarketing

What you’ll learn...What you’ll learn...

What is marketing?

What is the marketing mix?

What does it involve?

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About Marketing

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Marketing in the 21 century

WHY

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What What isis marketing? marketing?

• Marketing…Marketing…– is not ADVERTISINGis not ADVERTISING– is not SELLINGis not SELLING– is not PROMOTIONis not PROMOTION

• ““The aim of marketing is to make The aim of marketing is to make selling unnecessary.” Peter selling unnecessary.” Peter Drucker (1973)Drucker (1973)

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What is marketing?What is marketing?

• Businesses need to sell Businesses need to sell products if they are to products if they are to achieve their objectives.achieve their objectives.

• Marketing is about Marketing is about ensuring that businesses ensuring that businesses can sell as many products can sell as many products as possible in order to as possible in order to make profits.make profits.

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What does it involve?What does it involve?

• Marketing is a very complex concept.Marketing is a very complex concept.

• It involves:It involves:

• ResearchResearch

• Product designProduct design

• Setting pricesSetting prices

• Making sure the customer knows about Making sure the customer knows about productsproducts

• Choosing how and where to sell Choosing how and where to sell productsproducts

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Why is it needed?Why is it needed?

• Each year millions of new products Each year millions of new products are launched:are launched:

Without careful marketing these products would

fail

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“Marketing is the science and art of exploring, creating and delivering value to satisfy the needs and wants of a target market maintaining loyalty at a profit.”

Professor Philip Kotler

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Needs Eat, Dress, Move

Wants Cheeseburger, Tuxedo, Car

Marketer

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This Is This Is DemandDemand

“Demand”

Wants Buying Power

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First Task: Detect NeedsFirst Task: Detect Needs

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Organization’smarketing focus

Discover consumer needs

Information about needs

Potential consumers: The market

Marketing’s first task: discovering consumer Marketing’s first task: discovering consumer needsneeds

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What is a Market?What is a Market?

Potential consumers make up a Potential consumers make up a market, which is:market, which is:

1.1. PeoplePeople

2.2. with the Desire andwith the Desire and

3.3. with the Ability to Buy a with the Ability to Buy a

specific product.specific product.

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Organization’s marketing focusConcepts

forproducts

Discover consumer needs

Information about needs

Potential consumers: The market

Satisfy consumer needsFind the right combination of:

• Product• Price• Promotion• Place

Goods, services, ideas

Marketing’s Second Task: Satisfying Consumer Marketing’s Second Task: Satisfying Consumer NeedsNeeds

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The Target MarketThe Target MarketBecause the organization obviously Because the organization obviously

can’t satisfy can’t satisfy all all consumer needs, it consumer needs, it must concentrate its efforts on must concentrate its efforts on certain needs of a certain needs of a specificspecific group of group of potential consumerspotential consumers

This is the This is the target markettarget market -- -- one or one or more specific groups of potential more specific groups of potential consumers toward which an consumers toward which an organization directs its marketing organization directs its marketing programmeprogramme

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Inactive orex-customers

Customer DevelopmentCustomer Development

PartnersAdvocatesClientsRepeat

customersFirst-timecustomers

Suspects

Prospects

Disqualifiedprospects

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Marketing Vs SalesMarketing Vs Sales

Is there a difference?

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The Marketing ConceptThe Marketing Concept

• Organizations must concentrate Organizations must concentrate on the customer and not the on the customer and not the product or the companyproduct or the company

• Organizations should revolve Organizations should revolve round the customer and not the round the customer and not the other way aroundother way around

• The purpose of a business is to The purpose of a business is to create and keep a customercreate and keep a customer

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The Selling ConceptThe Selling Concept

• Focuses on matching your product or Focuses on matching your product or service features and benefits in a way service features and benefits in a way that suits the prospect sales that suits the prospect sales

• process is any thing that you do to process is any thing that you do to close the sale and get signed close the sale and get signed agreement or contractagreement or contract

• It is any thing that engages you with It is any thing that engages you with the prospect or customer on a personal the prospect or customer on a personal level rather than at a distancelevel rather than at a distance

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The Major Role of The Major Role of Marketing and SellingMarketing and Selling

People DO NOT buy products people buy

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Marketing Management

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Building Customer Building Customer RelationshipsRelationships

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Relationship MarketingRelationship MarketingRelationship marketing isRelationship marketing is linking the linking the

organization to its individual customers, organization to its individual customers,

employees, suppliers, and other partners employees, suppliers, and other partners

for their mutual for their mutual long-termlong-term benefits.benefits.

Mutual long-term benefitsMutual long-term benefits between the between the

organization and its customers require organization and its customers require

links to other vital stakeholders-- including links to other vital stakeholders-- including

suppliers, employees, and “partners” such suppliers, employees, and “partners” such

as wholesalers or retailers in a as wholesalers or retailers in a

manufacturer’s channel of distribution.manufacturer’s channel of distribution.2424

How Marketing became so How Marketing became so important?important?

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Production era

Sales era

Marketing concept era

SocietalMarketing era

18601880190019201940196019802000

Four different orientations in the history of businessFour different orientations in the history of business

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The Marketing MixThe Marketing Mix

The marketing mix is the combination of The marketing mix is the combination of variables that a business uses to carry out variables that a business uses to carry out its marketing strategy and meet customer its marketing strategy and meet customer needs. needs.

The marketing mix is often called the 4Ps:The marketing mix is often called the 4Ps:

• ProductProduct

• PricePrice

• PlacePlace

• PromotionPromotion

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The Marketing MixThe Marketing Mix

• The tools available to a business to gain The tools available to a business to gain the reaction it is seeking from its target the reaction it is seeking from its target market in relation to its marketing market in relation to its marketing objectivesobjectives

• 7Ps – Price, Product, Promotion, Place, 7Ps – Price, Product, Promotion, Place, People, Process, Physical EnvironmentPeople, Process, Physical Environment

• Traditional 4Ps extended to cope with Traditional 4Ps extended to cope with today's changing environmenttoday's changing environment

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The Marketing MixThe Marketing Mix

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ProductProduct

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Product Product

• Product’ refers to the Product’ refers to the functionsfunctions and and featuresfeatures of a good or service of a good or service

• Should Should satisfy the needs satisfy the needs of the customerof the customer

• May have a Unique Selling Proposition (May have a Unique Selling Proposition (USPUSP))

• ‘‘Product’ also includes a range of factors Product’ also includes a range of factors such as such as packaging, quality, warranties, packaging, quality, warranties, after-sales serviceafter-sales service and and brandingbranding

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ProductProduct• The firm must come up with a The firm must come up with a

product or service that people will product or service that people will want to buywant to buy..

• It must fulfil some It must fulfil some needneed

or or wantwant..

• It must be (or at least seem) It must be (or at least seem) uniqueunique..

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ProductProduct• Methods used to Methods used to

improve/differentiate improve/differentiate the product and increase the product and increase sales or target sales more sales or target sales more effectively to gain effectively to gain a competitive advantage a competitive advantage e.g.e.g.– Extension strategiesExtension strategies– Specialised versionsSpecialised versions– New editionsNew editions– Improvements – real or Improvements – real or

otherwise!otherwise!– Changed packagingChanged packaging– Technology, etc.Technology, etc.

Image copyright: www.freeimages.co.uk

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The Product Life CycleThe Product Life Cycle

• The product lifecycle looks at the The product lifecycle looks at the sales of a product over timesales of a product over time

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Stages in the Product Stages in the Product LifecycleLifecycleDevelopmentDevelopment – high costs but no sales – high costs but no sales

LaunchLaunch – high expenditure on promotion and – high expenditure on promotion and product development, low salesproduct development, low sales

GrowthGrowth – sales increase and product should – sales increase and product should break-evenbreak-even

MaturityMaturity – sales stabilise, less expenditure on – sales stabilise, less expenditure on promotion needed, revenue & profit should be promotion needed, revenue & profit should be highhigh

DeclineDecline – sales decline, – sales decline, extension strategies extension strategies cancan be adopted or the product withdrawnbe adopted or the product withdrawn

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Extension StrategiesExtension Strategies

Extension strategies should maintain or Extension strategies should maintain or increase sales. They include:increase sales. They include:

• Modifying the productModifying the product

• Reducing the priceReducing the price

• Adding a featureAdding a feature

• Promoting to a Promoting to a

different market different market

sectorsector

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Product or service or brand Core Product Actual Product Augmented

Product

BMW Freedom to travel A motor car  

Sheraton  Rooms Room service

Egypt Air  Flight An airline journey

Zamalek Football ClubExcitement and

leisure T-shirts – photos

with players

ALICO Insurance policy Finance

UNIONAIR  Cooling Warranty3737

PricePrice

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Price Price

The price of a product will depend on:The price of a product will depend on:

• The cost to make itThe cost to make it

• The amount of profit desiredThe amount of profit desired

• Other objectives of the businessOther objectives of the business

• The price competitors chargeThe price competitors charge

• The price customers are willing to payThe price customers are willing to pay– Is there a high demand?Is there a high demand?– Is demand sensitive to changes in price?Is demand sensitive to changes in price?

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PricePrice

• Pricing StrategyPricing Strategy

- International- International– ComparativeComparative– Cost plusCost plus

• The price must be one The price must be one that the customer thinks that the customer thinks is good is good value for moneyvalue for money..

• This is not the same as This is not the same as

being being cheap!cheap!

• Prices have a great Prices have a great psychological effect on psychological effect on customers.customers.

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Price Leader/TakerPrice Leader/Taker

Price leader Price leader – businesses that dominate – businesses that dominate the market can often dictate the price the market can often dictate the price charged for a product. Other businesses charged for a product. Other businesses follow this leadfollow this lead

Price taker Price taker – businesses have to charge – businesses have to charge the market price. This is often the case the market price. This is often the case where there are many small firms where there are many small firms competing against each othercompeting against each other

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Pricing Strategies & TacticsPricing Strategies & Tactics

•Skimming

•Launching with a high price when there is little competition, then reducing the price later. Often used with technology.

•Penetration

•Low price charged initially to penetrate the market and build brand loyalty; prrice is then increased e.g. introductory offers on magazines.

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Pricing Strategies & TacticsPricing Strategies & Tactics

•Competitive

•A similar price is charged to that of competitors’ products.

•Loss leader

•Products may be sold at a price lower than the cost to produce it. Often used by supermarkets to encourage people into the store where it is hoped they will buy other products.

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Pricing Strategies & TacticsPricing Strategies & Tactics

•Psychological

•A price is set which customers perceive as lower than it is e.g. €39.99 instead of €40

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PricePrice

• Pricing StrategyPricing Strategy

• Importance of:Importance of:– knowing the marketknowing the market– elasticityelasticity– keeping an eye keeping an eye

on rivalson rivals

Image copyright: www.freeimages.co.uk

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PromotionPromotion

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PromotionPromotion

• Strategies Strategies to make the to make the consumer aware consumer aware of the existence of the existence of a product of a product or serviceor service

• NOT just NOT just advertisingadvertising

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Promotion Promotion

The aims of promotion are to:The aims of promotion are to:

• Raise awarenessRaise awareness

• Encourage salesEncourage sales

• Create or change a brand imageCreate or change a brand image

• Maintain market shareMaintain market share

• Increase market shareIncrease market share

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Promotion Promotion

Above-the-line promotionAbove-the-line promotion

This uses advertising media over which This uses advertising media over which a firm has no direct control e.g. a firm has no direct control e.g. television, radio and newspaperstelevision, radio and newspapers

Below-the-line promotionBelow-the-line promotion

This uses promotional media which the This uses promotional media which the firm can control e.g. direct mail, sales firm can control e.g. direct mail, sales promotions and sponsorshippromotions and sponsorship

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The promotional message should

Grab Attention

Stimulate Interest

Create Desire

Promote Action

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Promotional ActivitiesPromotional Activities

• AdvertisingAdvertising e.g. TV, billboards and e.g. TV, billboards and internet.internet.

• Sales promotions Sales promotions e.g. Loyalty e.g. Loyalty cards, BOGOF, discounts & free giftscards, BOGOF, discounts & free gifts

• SponsorshipSponsorship – a business pays to – a business pays to be associated with another firm, be associated with another firm, event or causeevent or cause

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Promotional ActivitiesPromotional Activities

• Direct mailing Direct mailing – promotional – promotional material is sent to potential material is sent to potential customers by post/emailcustomers by post/email

• Public relations Public relations – building the – building the relationship between the firm and relationship between the firm and the public by enhancing its the public by enhancing its reputationreputation

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Promotional MixPromotional Mix

Most businesses use a combination of Most businesses use a combination of different promotional activities.different promotional activities.

The chosen promotional mix will depend The chosen promotional mix will depend on:on:

• CostCost

• Target marketTarget market

• ProductProduct

• CompetitorsCompetitors

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PlacePlace

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PlacePlace

• The means by which products and The means by which products and services get from producer services get from producer to consumer and where they can be to consumer and where they can be accessed by the consumeraccessed by the consumer

• The more places to buy the product The more places to buy the product and the easier it is made to buy it, and the easier it is made to buy it, the better for the business (and the the better for the business (and the consumer?)consumer?)

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Place Place

• Products should be conveniently Products should be conveniently available for customers to buyavailable for customers to buy

• ‘‘Places’ include:Places’ include:

• StoresStores

• Mail orderMail order

• TelesalesTelesales• Internet - Internet - The use of The use of e-commerce e-commerce (promoting and (promoting and

selling on the internet) has grown massively over recent selling on the internet) has grown massively over recent yearsyears

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Jobber Jobber

•One that buys merchandise from manufacturers and sells it to retailers

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PeoplePeople

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PeoplePeople

• People represent the businessPeople represent the business• The image they present can be importantThe image they present can be important

• First contact often human – what is the lasting First contact often human – what is the lasting image they provide to the customer?image they provide to the customer?

• Extent of training and knowledge of the Extent of training and knowledge of the product/service concernedproduct/service concerned

• Do staff represent the desired culture Do staff represent the desired culture of the business?of the business?

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PeoplePeople

• People represent the businessPeople represent the business– The image they present can be importantThe image they present can be important– First contact often human – what is the lasting First contact often human – what is the lasting

image they provide to the customer?image they provide to the customer?– Extent of training and knowledge Extent of training and knowledge

of the product/service concernedof the product/service concerned– Mission statement – how relevant?Mission statement – how relevant?– Do staff represent the desired culture Do staff represent the desired culture

of the business?of the business?

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PeoplePeople

• People represent the businessPeople represent the business– The image they present can be importantThe image they present can be important– First contact often human – what is the lasting First contact often human – what is the lasting

image they provide to the customer?image they provide to the customer?– Extent of training and knowledge Extent of training and knowledge

of the product/service concernedof the product/service concerned– Mission statement – how relevant?Mission statement – how relevant?– Do staff represent the desired culture Do staff represent the desired culture

of the business?of the business?

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ProcessProcess

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ProcessProcess• How do people consume services?How do people consume services?• What processes do they have to go What processes do they have to go

through to acquire the services?through to acquire the services?• Where do they find the availability Where do they find the availability

of the service?of the service?– ContactContact– RemindersReminders– RegistrationRegistration– SubscriptionSubscription– Form fillingForm filling– Degree of technologyDegree of technology

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Physical EnvironmentPhysical Environment

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Physical EnvironmentPhysical Environment

• The ambience, mood or physical presentation of the The ambience, mood or physical presentation of the environmentenvironment

• Packaging. Packaging. • Internet/web pages. Internet/web pages. • Paperwork (such as invoices, tickets,…..). Paperwork (such as invoices, tickets,…..). • Brochures. Brochures. • Furnishings. Furnishings. • Uniforms. Uniforms. • Business cards. Business cards. • The building itself (such as prestigious offices or scenic The building itself (such as prestigious offices or scenic

headquarters). headquarters). • Mailboxes and many others . . . . . . Mailboxes and many others . . . . . .

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Physical EnvironmentPhysical Environment

• The ambience, mood or physical The ambience, mood or physical presentation of the environmentpresentation of the environment– Smart/shabby?Smart/shabby?– Trendy/retro/modern/old fashioned?Trendy/retro/modern/old fashioned?– Light/dark/bright/subdued?Light/dark/bright/subdued?– Romantic/chic/loud?Romantic/chic/loud?– Clean/dirty/unkempt/neat?Clean/dirty/unkempt/neat?– Music?Music?– Smell?Smell?

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Stages in Consumer Stages in Consumer Decision ProcessDecision Process

Awareness

Interest

Decision

Satisfaction

Action

Advertising

Channel

Product /Service

Price

Word-of- Mouth

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The Marketing MixThe Marketing Mix

• Blend of the mix depends upon:Blend of the mix depends upon:• Marketing objectivesMarketing objectives• Type of productType of product• Target marketTarget market• Market structureMarket structure• Rivals’ behaviourRivals’ behaviour• Global issues – culture/religion, etc.Global issues – culture/religion, etc.• Marketing positionMarketing position• Product portfolioProduct portfolio

– Product lifecycleProduct lifecycle– Boston MatrixBoston Matrix

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MarketingMarketing ModelModelTarget Market

Aware

Understand

Believe

Want

Find

Buy

Use

Prefer

Cost

Revenue

Value

Experience

Point of Purchase

Above the Line

Loyal

Below the Line

Intention to Purchase

Behavior

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Marketing Management Marketing Management PhilosophiesPhilosophiesMarketing Management Marketing Management PhilosophiesPhilosophies

CompetingCompetingPhilosophiesPhilosophiesCompetingCompeting

PhilosophiesPhilosophies

ProductionProduction

SalesSales

MarketMarket

Societal MarketingSocietal Marketing7373

Marketing Management Marketing Management PhilosophiesPhilosophiesMarketing Management Marketing Management PhilosophiesPhilosophies

•

PhilosophyPhilosophy Key Ideas

ProductionProduction

SalesSales

MarketMarket

SocietalSocietal

Focus on efficiency of internal operations

Focus on satisfying customer needs and wants

Focus on satisfying customer needs and wants while enhancing individual and societal well-being

Focus on aggressive techniques for overcoming customer resistance

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The Marketing ConceptThe Marketing ConceptThe Marketing ConceptThe Marketing ConceptFocus on Focus on

Customer Wants Customer Wants and Needsand Needs

Integrate Organization’s Integrate Organization’s Activities to Satisfy Activities to Satisfy Customer Needs and Customer Needs and

WantsWants

Achieve Organization’s Achieve Organization’s Long Term Goals by Long Term Goals by Satisfying Customer Satisfying Customer

Wants and NeedsWants and Needs

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Comparing Sales and Market Comparing Sales and Market OrientationsOrientations

Market Orientation

Outward Coordinated use of all marketing activities

Customer satisfaction

Specific groups

of people

Satisfying wants and

needs

Organization’sFocus

Firm’sBusiness

ForWhom?

Primary Profit Goal?

Tools to Achieve

Selling goods and services

Everybody Maximum sales

volume

Primarily promotion

InwardSales Orientation

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Developing Competitive Developing Competitive AdvantageAdvantage

Competitive Advantage

Customer Value

Customer Relationships

Customer Satisfaction

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Evolving Marketing MixEvolving Marketing Mix

• The marketing mix will evolve over timeThe marketing mix will evolve over time

• The product portfolio may grow as a The product portfolio may grow as a business becomes more establishedbusiness becomes more established

• More expensive promotional activities may More expensive promotional activities may be adopted as a firm’s revenue increasesbe adopted as a firm’s revenue increases

• More outlets may be opened, or products More outlets may be opened, or products sold via the internetsold via the internet

• Price may change as demand changesPrice may change as demand changes

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Value and SatisfactionValue and Satisfaction

Expectation

Performance810

If performance is lower than expectations, satisfaction is low.

If performance is higher than expectations, satisfaction is high.

Expectation

Performance

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Why Do So Many Products Fail?

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