Marketing in the 21st Century Week 1 - Chapter 1 Dr. Md. Parves Sultan Course Coordinator & Senior Lecturer Email: [email protected] LEARNING ISSUES • Why is marketing important? • What is Marketing? • What is the scope of marketing? • What are the tasks necessary for successful marketing management? • What are some fundamental marketing concepts? • How has marketing management changed? The Importance of Marketing • Marketing helps innovation and development of new products and services for the society. • Marketing eradicates income gap in various social classes, and enriches people’s lives. • Marketing builds strong brands, a loyal customer base and intangible assets that contribute heavily to the value (goodwill) of a firm. • Marketing helps building market share, international relationship, and financial and economic growth. • Marketing encourages competition and provides greater value to the society. • Marketing brings customer satisfaction and provides a better quality of life. • Marketing manages demand, and without marketing, many business functions including finance, accounting, logistics, management and human resource management will not exist. Definition and Importance of Marketing What is Marketing? As defined by the American Marketing Association (AMA): “Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.” Essentially this means that: Marketing deals with identifying and meeting human and social needs. It is essentially about “meeting needs profitably.” The Managerial definition of Marketing is: “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”. The Functional Definition of Marketing As defined by Sultan (2005)*: M = Market A = Analysis R = 5Rs (Right Product/Right Time/Right Place/Right Price/Right Communication) K = Kommunication (Communication) = Marketing Promotions E = Efficiency & Effectiveness T = Tactics <- Strategy I = Implement N = Network = Relationship = Stakeholder Management G = Goods = Products <=> Services *Sultan, P. (2005), “The insights of marketing”, Journal of Business Studies, Vol. 1, No. 1, pp. 35-43. The Social Definition of Marketing A social definition of marketing is that “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”. According to Peter Drucker, one of the famous theorists in Marketing, “there will always, one can assume, be need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself…. Ideally, marketing should result in a customer who is ready to buy. All that should be needed then is to make the product or service available”. What is Marketed? Goods Services Events & Experiences Persons Places & Properties Organizations Information Ideas Can you give examples? What are the merits and demerits of universitybranding? DEBATE Q&A Do you think that Australian universities should alsobe branded?Why or why not? The Eight Demand States 1. Negative demand — Consumers dislike the product and may even pay a price to avoid it. 2. Non-existent demand — Consumers may be unaware or uninterested in the product. 3. Latent demand — Consumers may share a strong need that cannot be satisfied by an existing product. 4. Declining demand — Consumers begin to buy the product less frequently or not at all. The Eight Demand States 5. Irregular demand — Consumer purchases vary on a seasonal, monthly, weekly, daily, or even hourly basis. 6. Full demand — Consumers are adequately buying all products put into the marketplace. 7. Overfull demand — More consumers would like to buy the product than can be satisfied. 8. Unwholesome demand — Consumers may be attracted to products that have undesirable social consequences. The Concept of a ‘Market’ • Economists describe a market as a collection of buyers and sellers who transact over a particular product or product class. • Marketers use the term “market” to cover various groups of customers. The five basic markets are: a. Resource Markets b. Government Markets c. Manufacturer Markets d. Intermediary Markets e. Consumer Markets Whatdo we getthroughthis transaction? a) Equilibriumprice b) Product/service c) Satisfaction d) All of these Core Concepts of Marketing • Needs, wants, and demands • Target markets, positioning, segmentation • Offerings and brands • Value and satisfaction • Marketing channels • Supply chain • Competition • Marketing environment Needs, Wants, and Demands • Needs (basic human requirements, needs become wants when they are directed to specific objects that may satisfy the need). • Marketers do not create needs, needs pre-exist marketers. • Marketers influence wants. Five Types of Needs 1.Stated needs (the customer wants an inexpensive car) 2.Real needs (the customer wants a car whose operating cost, not its initial price, is low) 3.Unstated needs (the customer expects good service from the dealer) 4.Delight needs (the customer would like the dealer to include an onboard navigation system) 5.Secret needs (the customer wants to be seen by friends as a savvy consumer) Target Markets, Positioning, and Segmentation A. Segmentation: Identify and profile distinct groups of buyers who might prefer or require varying products and services mixes by examining • Demographic information • Geographic information • Psychographic information • Behavioral information B. Targeting: Selecting one or more segments to market products and/or services. Market offering—what do we offer? What proposition to we make to customers? C. Positioning: What the target market perceive in their minds about a product and/or a brand in relation to competing products/brands. Positioning: Watch these two video clips and find what their positioning messages are for their target market. Who doyou think ismore successful and Why? Value proposition: – a set of benefits producers offer to customers to satisfy their needs. – The buyer chooses the offering he or she perceives to deliver the most value. – Value is the sum of the tangible and intangible benefits— minus—the costs to obtain these benefits. – Value is a central marketing concept. – Customer value triad is the combination of quality, service, and prices (QSP). Value perceptions increase with quality and service but decrease with price. – Greater perceived value leads to greater perceived customer satisfaction Value, brands, satisfaction, channels & supply chains Marketing Channels: To reach a target market, the marketer uses three kinds of marketing channels. a. Communication channels b. Distribution channels c. Service channels Examples of Creating New Channels—Coffee Vending in Japan Coca-Cola—Coca-Cola in Japan popularized the idea of canning coffee and making it available through vending machines. While Americans can enjoy a hot cup of coffee in most places, Japanese traditionally drink ocha or green tea. However, Coca-Cola found that the Japanese enjoy coffee but just cannot get it readily. Hence, in a country where vending machines are a common form of retailing, Coca-Cola’s Georgia-brand canned coffee can be bought from many of the thousands of vending machines to suit Japanese lifestyle needs. Supply Chain: The supply chain is a longer channel stretching from raw materials to components to finished products carried to final buyers. Brand: What is a brand? Aaker on Branding: 20 principles that drive success Major Societal Forces Shaping the Marketplace 1. Network information—The digital revolution promises to lead to more accurate levels of production, more targeted communications, and more relevant pricing. 2. Globalization—innovation and development communication, logistics including transportation, warehousing, banking and shipping have made the markets closer, broader, easier and opener than ever before. 3. Deregulation—Many countries have deregulated industries to create greater competition and growth opportunities. Companies in the telecommunications, domestic air travel, and electrical utilities industries may face foreign competition and may enter other local markets. Such as Australia’s Queensland Rail was privatized and rebranded as Aurizon. 4. Privatization—Many countries, such as China, have converted state-owned enterprises to private ownership and management to increase their efficiency. 5. Heightened competition—Due to globalization competition has increased and this has resulted in increased promotional costs and decreased profit margins. They are further buffeted by powerful retailers who command limited shelf space and are putting out their own store brands in competition with national brands as a result SMEs are affected. 6. Industry convergence—Industry boundaries are blurring at an incredible rate as companies are recognizing that new opportunities lie at the intersection of two or more industries. The computing and vehicle electronics industries are converging, for example, Apple, Sony, and Samsung release a stream of entertainment devices in partnership with Ford, Toyota etc. 7. Retail transformation—Store-based retailers are facing growing competition from catalog houses, direct-mail firms, television promo direct-to-customer ads, and e-commerce on the Internet. 8. Disintermediation—The amazing success of early online dot-coms such as Amazon, Yahoo!, eBay, E*Trade, and dozens of others who created disintermediation in the delivery of products and services “struck terror” in the hearts of many established manufacturers and retailers. Major Societal Forces Shaping the Marketplace 9. Consumer buying power—Buyers today are only a click away from comparing competitor prices and product attributes on the Internet. They can even name the price they want to pay for a hotel room, airline ticket, or mortgage, and see if there are any willing suppliers. Further, buyers now can ask for a matching discount/price. 10. Consumer information—Information revolution through the Internet, personal connections and social media platforms, such as, Facebook, Flickr (photos), Wikipedia (encyclopedia articles), and YouTube (videos) provides more and updated information about a product/service. 11. Consumer participation—Consumers now provide reviews, comments via the Internet. Companies often engage consumers (often paid) to review their product and to outsource ideas for the new and improved products. 12. Consumer resistance—Information revolution also helps spreading W-O-M very quickly. Value driven consumers are price and quality sensitive, and they are not loyal. As a result, companies should be aware of this cohort and address any shortcoming efficiently and effectively. Major Societal Forces Shaping the Marketplace Major Societal Forces Contributing to New Company Capabilities Use Internet as an information & Sales channel Deeper and richer information about micro and macro environmental forces Use of social media to spread product and brand messages, and speed up the communications among the target markets Building relationships through two-way communications Marketers can Communicate with consumers on-the-go Marketers can offer differentiated and customised products/services Corporate blogging and Public Relations activities Increased efficiency and effectiveness Company Capabilities Concepts/Philosophies of Marketing TheProductionConcept—holdsthat consumers will prefer products that are widely available and inexpensive. The Product Concept—holds that consumers will favor those products that offer the most quality, performance, or innovative features. The Selling Concept—holds that consumers and businesses, will ordinarily not buy enough of the organization’s products,therefore, the organization must undertake aggressive selling and promotion effort. The Marketing Concept—holds that the key to achieving organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to your chosen target markets and establishing their satisfaction. Marketing is NOT just selling! The Holistic Marketing Concept—The holistic marketing concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognize the breadth and interdependencies of internal marketing, socially responsible marketing, integrated marketing and relationship marketing. So, what philosophy(ies) should guide your company’s marketing efforts? The Societal Marketing Concept—holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and society’s long-term well-being. Holistic Marketing Dimensions The Four P’s The Evolution of the Marketing Mix • People reflect internal marketing and the fact that employees are critical to marketing success. • Processes reflect all the creativity, discipline, and structure brought to marketing management. • Programs reflect all of the firm’s consumer-directed activities. • Performance is holistic marketing to capture the range of possible outcomes/measures that have financial and non-financial implications, and implications beyond the company itself. Marketing Management & Tasks of a Marketing Manager • 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. 1. Develop market strategies and plans 2. Capture marketing insights 3. Connect with customers 4. Build strong brands 5. Shape market offerings 6. Deliver value 7. Communicate value 8. Create long-term growth Checklist of questions that marketing managers need to ask Marketing: Right and Wrong The End