Principles of Marketing

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1 Principles of Marketing Part1 1 Lesson 1& 2 Understanding Marketing Management Lesson1 & 2 Understanding Marketing Management defining marketing the marketing concept orientations toward the marketplace marketingmanagement 3 1

Defining marketing Marketing is societal process by which individuals and groups (target market) obtain what they need and want through understanding, creating and delivering and freely exchanging

2 Defining marketing Marketing is societal process by which individuals and groups (target market) obtain what they need and want through understanding, creating and delivering and freely exchanging products and services of value with others Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p Activities in the company Financing Human Resource Management Research & Development Marketing Understanding of customer value Creating of customer value Delivering of customer value Marketing 6 2

3 Customer needs and value Needs are the basic human / organizational requirements Wants needs become wants when they are directed to specific objects that might satisfy the need Customer value ratio between what the customer gets and what he gives Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p Customer needs and value Human needs Selfactualization needs Esteem needs Social needs Safety needs Physiological needs Source: A.H. Maslow (1970). Motivation and Personality, 2nd ed., Prentice Hall, Upper Saddle River., 8 Customer needs and value Organizational needs Direct Indirect Understanding of customer value Capital items Creating of customer value Supplies Delivering of customer value Services Source: own preparation. 9 3

4 Customer needs and value Customer value Product benefits Service benefits Personnel benefits Customer benefits Image benefits Customer value Price Purchasing cost Using cost Customer cost Source:own preparation based on: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p Understanding of customer value Marketing intelligence system Managers experience Marketing Research Market information Managers Intuition Source: own preparation. 11 Creating and delivering customer value marketing mix Marketing mix Creating value Delivering value Product Price Personnel Physical evidence Promotion Distribution Procedures Target market Source: own preparation. 12 4

5 Creating and delivering customer value +3P Personnel Physical Evidence Procedures Source: own preparation based on: R. Lauterborn(1990). New Marketing Litany: Four P s Passe: C-Words Take Over, Advertising Age, 1 October p Marketing Mix 7P s or 7C s? Organizational perspective product price place promotion physical evidence people process Customer perspective customer value cost convenience communication confirmation consideration co-ordination and concern Customer satisfaction 5

Orientations toward the marketplace- 1 Production concept Product concept Selling concept Marketing concept Customer concept Societal marketing concept Source: P. Kotler (2003).

16 Orientationstoward the marketplace 2 Concepts Starting point Focus Means Ends Production Factory Widely available and High production efficiency Profits through inexpensive products Low cost

6 Orientations toward the marketplace- 1 Production concept Product concept Selling concept Marketing concept Customer concept Societal marketing concept Source: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p Orientationstoward the marketplace 2 Concepts Starting point Focus Means Ends Production Factory Widely available and High production efficiency Profits through inexpensive products Low cost volume and low cost Mass distribution Product Factory Superior products Making superior products Profits through high and improving them over quality product time Selling Factory Products Aggressive selling and Profits through sales promotions volume Marketing Target market Customer needs Integrated marketing Profits through customer satisfaction Customer Individual customer Customer needs One-to-one marketing Profits through and value Integration and value chain capturing customer share,loyalty, and lifetime value Societal marketing Best long-run Customer needs, Integrated marketing and Profits through interests customer customer interests, and education customer customer and society long-run societal welfare satisfaction and society s well-being Source: own preparation based on: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p

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9 Marketing Management-1 Marketing management is art and science of choosing target markets and getting, keeping, and growing customers through understanding, creating and delivering superior customer value Source: own preparation based on: P. Kotler (2003). Marketing Management, 11th, Prentice Hall, Upper Saddle River, p Marketing Management-2 The marketing management -is a delicate balance of creativity and structure/formal procedures. Marketing Management- 3 The marketing management - consists of: analyzing market situation designing marketing strategies implementing and organizing the marketing effort controlling marketing performance 9

10 Analysis Analysis External Internal Macroenvironment Microenvironment SWOT The Organisation s Marketing Environment The economy Cultural forces Suppliers Demography Social factors Market demands The organisation Distributors & dealers Customers Competitors Legal Political structures structures Technology Lesson3&4 Analyzing Marketing Opportunities Customer Analysis Competitors and SWOT Analysis 10

11 Lesson 3&4 Analyzing Marketing Opportunities - Customer Analysis Outline Analyzing Marketing Opportunities - Customer Analysis types of customers the business market versus the consumer market decision -making unit types of buying behavior stages of the buying decision process factors Influencing buying behaviour Lesson 3 & 4 Competitors and SWOT Analysis Outline 5 forces framework product/market battlefield Macro environment analysis SWOT analysis Customer Analysis Basic Questions to Answer Who is our customer? What factors influence their behaviour? Does behaviour vary according to the type of product or service purchased? What process of decision making do they go through? 11

12 Types of Customer Markets consumer markets industrial markets reseller markets government and non-profit markets international markets Characteristics of Organisational Markets Producer markets purchase to make profit from using operationally or to produce other goods Reseller markets purchase to make profit from reselling with no or minor alteration Government markets buy to support operations -normally purchase through bids or negotiation Institutional markets seek to achieve charitable, community, educational or nonbusiness goals What Influences the Buyer? Cultural factors values, beliefs, ideas, artefacts and symbols Social factors primary membership groups (family..) secondary member groups (union, cim..) aspirational groups (MBA!) dissociative groups (hell s angels??) Personal factors age, life cycle, occupation, lifestyle, personality... Psychological factors motivation, perception, attitude 12

13 The Buyer DMU Source:Webster and Wind, 1972 Initiator first suggests buying product or service User Influencer whose comments affect the decision Help define spec, help in evaluation of alternatives Decider Ultimately make all or part of buying decision Buyer Physically makes purchase User Consumes product or service Product requirements and suppliers Formal authority to select supplier - negotiate terms Initiate process / define specs Does Behaviour Change in Relation to What is Purchased? Source:Assael, 1987 Degree of involvement low high Significant difference between brands few many HABITUAL VARIET (seeking) DISSONANCE (differing of views) COMPLEX Levels of involvement High involvement by level of importance rational, benefit based factual information sought Low involvement by level of importance minimal care, faster decision emotional choice 13

14 It Also Revolves Around... Perceived Risk Source: Fill, 1999 Risk-the possibility that the outcome of a decision will not have the desired effect or may make the situation worse. Performance Will it function properly? Financial Can I afford it / is it good value? Physical Will it harm me / others? Ego Will it satisfy self-esteem / image? Social Will significant others approve? Time Have I got the time to go and purchase? Consumer Decision Making Process Need recognition stimuli can be internal or external Information search personal, commercial, public, experiential Evaluation of alternatives forms judgement - conscious & rational Purchase decision commit Post-purchase evaluation re-evaluate and re-assure The Organisational Buyer fewer highly concentrated close relationship between buyer and seller geographically concentrated buyers demand for industrial goods is ultimately derived from the demand for consumer goods inelastic and fluctuating demand professional purchasing 14

15 The Industrial Buyer DMU Source: Webster and Wind, 1972 Initiator first suggests buying product or service User Influencer whose comments affect the decision Decider Ultimately make all or part of buying decision Buyer Physically makes purchase User Help define spec, help in evaluation of alternatives Product requirements and suppliers Formal authority to select supplier - negotiate terms Approvers Authorise decider and buyer proposals Gatekeepers Control random contact from sellers / flow of information Consumes product or service Initiate process / define specs Types of Purchase New Task First time purchase, full buying process Modified re-buy E.g. faster delivery, lower price, specification Straight re-buy Routine re-purchase, same terms Truncated buying process Organisational Buying Process recognise the problem develop product specification to solve problem search for products / suppliers evaluate products to specification select and order most appropriate product evaluate product and supplier performance 15

16 Source:Robinson et al, 1967 Types of Purchase Buy classes Phases of the buying process Straight Re-buy Modified Re-buy New Task Recognition of problem N Possibly Determining general need N Possibly Specific description of product required Search for potential suppliers N Possibly Detailed evaluation of suppliers N Possibly Selection of supplier N Possibly Establish order routine N Possibly Performance review and feedback Lesson 3& 4 Analyzing Marketing Opportunities Competitors and SWOT Analysis The Organisation s Marketing Environment The economy Cultural forces Suppliers Demography Social factors Market demands The organisation Distributors & dealers Customers Competitors Legal Political structures structures Technology 16

17 Porter s Industry Analysis: The 5 Forces Model Source: Porter, 1985 POTENTIAL ENTRANTS SUPPLIERS Bargaining power Threat of rivalry Bargaining power INDUSTR Competitive rivalry BUERS Threat of substitution SUBSTITUTES Bargaining Power of Suppliers the strength of the supplier brand the source of supply spans only a small number of suppliers switching supplier substitute products of suppliers forward integration Bargaining Power of Buyers where few buyers control a large volume of the market where there isa large number of smaller suppliers fighting for a share of the market the cost of switching supplier is low the supplier s product is a mass-market product and not necessarily differentiated strong customer power threat of backward vertical integration 17

18 The Threat of Potential Entrants economies of scale access to new distribution channels brand loyalty capital investment competitor retaliation regulatory influence Threat of Substitutes a new product or service equivalent a new product replacing an existing product consumer substitution Key Factors Influencing Competitive Rivalry stage of product life cycle of competing product use of specialized production techniques liquidity of competitor ability to achieve differentiation and brand loyalty competitor intentions the relative size of the competitor barrier of exit from the industry number of sellers & degree of products differentiation 18

19 Industry s Competitive Structure One seller Few sellers Many sellers Undifferentiated product Pure monopoly Pure oligopoly Pure competitive Differentiated product Differentiated oligopoly Monopolistic competitive...how does it matter? Roles in the Target Market market leader market challenger market follower market nicher... and main implications... Product/Market Battlefield Does competitors offers differ? -type od product...? -type of customer (market)...? Product/market battlefield map and main findings... 19

20 Analysis of the Macro Environment Macro Analysis Frameworks PEST PESTEL SLEPT The PEST Framework Political / Legal Legislative structures Monopoly restrictions Political / gov. stability Political orientation Taxation policies Employment legislation Foreign trade regulations Economic Business cycles Money supply Inflation rates Investment levels Unemployment Energy costs Organisation Socio-Cultural Demographics Lifestyles Social mobility Education levels Attitudes Consumerism Religion Technological Speed of change Rate of technological transfer Product life-cycles Availability Cost Levels of industrial and gov. R&D expenditure 20

21 SWOT Analysis SWOT analysis draws together key strengths, weaknesses, opportunities and threats that have been derived as a result of the marketing audit, i.e. the macro and micro analysis and assessment SWOT Analysis Strengths Weaknesses convert Internal Financial resources, product portfolio, economies of scale, technical capability,management ability, innovative design, profitability, R&D, marketing intelligence Lack of skilled labour, high workforce turnover, lack of financial investment, poor internal communications, lack of management commitment, supplier relationships, management weaknesses, over-capacity External Global markets, investment opportunities, diversification, technology innovation, internet, high quality products Global markets, competitive activity, competitive investment, supplier desertion, substitute products, market saturation, resistance to change Opportunities Threats convert 21

International Marketing Management. Part4

International Marketing Management Part4 Deciding Which Markets to Enter Macro environmental analysis 1 Sources: Preliminary screening - desk research - personal knowledge&experience Macro Environmental