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UNDERSTANDINGUNDERSTANDING

MODERNMODERN

MARKETINGMARKETING

The Marketing ConceptThe Marketing Concept

Marketing Mix ModelMarketing Mix Model

Broadening Scope of MarketingBroadening Scope of Marketing

Marketing’s Role in the OrganizationMarketing’s Role in the Organization

Creating Customer Value andCreating Customer Value and

SatisfactionSatisfaction

Marketing and the “Value Chain”Marketing and the “Value Chain”



““The underlying philosophyThe underlying philosophy

of modern marketingof modern marketingmanagement (since themanagement (since the

1960’s) is the outward focus1960’s) is the outward focus

on customers as the “Centeron customers as the “Centerof the Universe”of the Universe”



e ar e nge ar e ngConceptConceptCaptured in terms such asCaptured in terms such as

Customer orientationCustomer orientation

Customer focusedCustomer focused

Customer drivenCustomer driven

Customer centeredCustomer centered

Customer satisfactionCustomer satisfaction

Market drivenMarket driven Exceed customerExceed customer

expectationsexpectations



Marketing ConceptMarketing Concept

Key CharacteristicsKey Characteristics

Focus on profitsFocus on profits

Profits = f (customer satisfaction)Profits = f (customer satisfaction)

Supply adjusts to will of demandSupply adjusts to will of demand

Assumes intense competitive environmentAssumes intense competitive environment

Long-term time horizonLong-term time horizon

Normative not descriptive modelNormative not descriptive model



Selling and MarketingSelling and Marketing

Concepts ContrastedConcepts ContrastedSelling and MarketingSelling and Marketing

Concepts ContrastedConcepts Contrasted

Factory Existingproducts Selling andpromotion Profits throughsales volume

Targetmarket

Integratedmarketing

Profits throughcustomer

satisfaction

Customer needs

Startingpoint Focus Means Ends

(b) The marketing concept

(a) The selling concept



Implementing theImplementing the

Marketing ConceptMarketing Concept

Inertia, entrenchment (old ways die hard)Inertia, entrenchment (old ways die hard) Projection of own beliefs and valuesProjection of own beliefs and values

Confusion of MC with superficial PRConfusion of MC with superficial PR

Learning about customer needs difficult toLearning about customer needs difficult to

operationalizeoperationalize

Information lost in organizational mazeInformation lost in organizational maze

Calls for integrated organization to supportCalls for integrated organization to support

marketing effortmarketing effort

Requires continuous monitoringRequires continuous monitoring



ConclusionConclusion

Marketing conceptMarketing concept

is more relevantis more relevant

than ever as wethan ever as we

approach the nextapproach the next

milleniummillenium



Operational Model forOperational Model for

Implementing theImplementing thePhilosophy of thePhilosophy of the

Marketing Concept isMarketing Concept is

the:the:



of Four Basic Strategicof Four Basic Strategic

VariablesVariables

(the four “P’s”)(the four “P’s”)

Product StrategyProduct Strategy

Price StrategyPrice Strategy Promotional StrategyPromotional Strategy

Place Strategy (Channels of Place Strategy (Channels of

Distribution)Distribution)



The role of marketingThe role of marketingmanagement is to mixmanagement is to mix

or blend these fouror blend these fourstrategic variables instrategic variables in

such a way as to meetsuch a way as to meetthe needs of...the needs of...



THE TARGET

MARKET

Target Market

ProductProduct PricePricePromotionPromotion PlacePlace



This processThis process

does not takedoes not takeplace in aplace in a

vacuumvacuum



IllustrativeIllustrative

Representation of theRepresentation of the

Marketing MixMarketing Mix

Pla c e

Pla c e

InternalInternalControllableControllable

VariablesVariables

(endogenous)(endogenous)

ProductProduct

P r i c e

P r i c e

PromotionPromotionTargetTarget

MarketMarket

EnvironmentEnvironment•EconomicEconomic

•CompetitiveCompetitive•Socio-Cultural-Socio-Cultural-

DemographicDemographic•Legal-Political-Legal-Political-

GovtGovt•TechnologyTechnology

h k i i d l



InternalInternal

ControllableControllableVariablesVariables

(endogenous)(endogenous)Pro d u

c t

Pro d u

c t

PricePrice

Pro mo tio n

Pro mo tio n

TargetTarget

MarketMarket

EnvironmentEnvironment•EconomicEconomic•CompetitiveCompetitive•Socio-Cultural-Socio-Cultural-

DemographicDemographic•Legal-Political-Legal-Political-

GovernmentGovernment•TechnologyTechnology

PlacePlace

The Marketing Mix ModelThe Marketing Mix Model

PortraysPortrays

Marketing Management as:Marketing Management as:•Based on the marketingBased on the marketing

conceptconcept•Having a supply sideHaving a supply side

and demand sideand demand side•Supply adapting toSupply adapting to

demanddemand•Highly interactiveHighly interactive•An open systemAn open system

•Requiring humanRequiring humandirectiondirection•Highly dynamic processHighly dynamic process•An extremelyAn extremely

challenging managerialchallenging managerialtask task



Marketing’sMarketing’s

Broadened ScopeBroadened Scope

ManufacturersManufacturers RetailersRetailers AccountingAccounting

LawLaw

Non-profitsNon-profits UniversitiesUniversities GovernmentGovernment People (politicalPeople (political

candidates)candidates) Etc.Etc.

YesYes

-- even applies to banks !-- even applies to banks !



Component of theComponent of the

OrganizationOrganization

Marketing is elevated to aMarketing is elevated to a

level of level of strategicstrategic position in theposition in the

organizationorganization



Marketing-ManagementMarketing-Management

Inextricably Tied toInextricably Tied to

Decisions Involving:Decisions Involving:

Future direction of the organizationFuture direction of the organization

Markets to be servedMarkets to be served

Creation of competitive advantageCreation of competitive advantage

Long term organizationalLong term organizational

performanceperformance



Therefore Strategic MarketingTherefore Strategic Marketing

Management Consists of atManagement Consists of at

Least Six Major AreasLeast Six Major Areas

1)1) Defining the organization’s businessDefining the organization’s business

2)2) Specifying the purpose of the organizationSpecifying the purpose of the organization

3)3) Identifying opportunitiesIdentifying opportunities4)4) Formulating product/market strategiesFormulating product/market strategies

5)5) Budgeting: financial, production, humanBudgeting: financial, production, human

resourcesresources

66 Monitorin evaluatin and ada tinMonitorin evaluatin and ada tin



Defining theDefining the

Organization’s BusinessOrganization’s Business

Type of customers (markets) to be servedType of customers (markets) to be served

Needs of those customersNeeds of those customers Means by which organization will meet theMeans by which organization will meet the

needsneeds

Competitive advantage (attainment andCompetitive advantage (attainment andsustainedsustained



Production

Output andefficiency

measures, e.g.output per

Man hour

Finance

ROIROS

Profit

Cash Flow

Marketing

Sales VolumeMargin

Market ShareCustomerSatisfaction

Specifying the Purpose of Specifying the Purpose of

the Organizationthe Organization

Aspirations of the organizationAspirations of the organization

and what it wishes to achieveand what it wishes to achieve

ie., objectives and goalsie., objectives and goals

d if iId if i



IdentifyingIdentifying

OrganizationalOrganizational

OpportunitiesOpportunitiesExternal (environmental)External (environmental)

opportunities matched with internalopportunities matched with internal

(organizational) capabilities(organizational) capabilities

What do we do best? (distinctive competency)What do we do best? (distinctive competency)

What must we do? (success requirements)What must we do? (success requirements)

What might we do? (environmental opportunity)What might we do? (environmental opportunity)



Product/MarketProduct/Market

StrategiesStrategies

MarketPenetratio

n

MarketDevelopmen

t

NewOffering Diversificati

on

EXISTING NEW

EXISTING

NEW

MARKETSOf f

ering

s

B d ti Fi i lB d ti Fi i l



Budgeting, Financial,Budgeting, Financial,

Production, and HumanProduction, and Human

ResourcesResources

Financial implications and allocationsFinancial implications and allocations

relevant to the marketing planrelevant to the marketing plan

Revenue, expense, and profitRevenue, expense, and profit

projectionsprojections



,,and Adapting Marketingand Adapting Marketing

StrategyStrategy

Marketing audit --comprehensive,Marketing audit --comprehensive,

systematic, independent, and periodicsystematic, independent, and periodic

examination of the organization’sexamination of the organization’s

marketing objectives and strategies tomarketing objectives and strategies to

identify problems and opportunities asidentify problems and opportunities as

well as to recommend ways of well as to recommend ways of

improving marketing performanceimproving marketing performance



Customer Value andCustomer Value and

SatisfactionSatisfaction

InputInput Customer CostsCustomer Costs

OutputOutput Customer BenefitsCustomer Benefits= = CV

Note:Note: Costs defined broadlyCosts defined broadly

Benefits (customer’s viewpoint)Benefits (customer’s viewpoint)



Customer SatisfactionCustomer Satisfaction

Customer’s perception of perceived

performance of offering relative to experience

Perceived performance below expectations = dissatisfied custome

Perceived performance meets expectations = satisfied customer

Perceived performance exceeds expectations = delighted custome

ar e ng an e a ue a nar e ng an e a ue a n



ar e ng an e a ue a nar e ng an e a ue a nMichael PorterMichael Porter CompetitiveCompetitive

AdvantageAdvantage

Every firm is a collection of activitiesEvery firm is a collection of activities

Primary ActivitiesPrimary Activities Inbound logisticsInbound logistics

OperationsOperations Outbound logisticsOutbound logistics

Marketing andMarketing and

salessales

Support ActivitiesSupport Activities

Firm infrastructureFirm infrastructure

Human resource mgt.Human resource mgt.

TechnologyTechnology

ProcurementProcurement

Th G i V lTh G i V lTh G i V lTh G i V l



The Generic ValueThe Generic Value

ChainChainThe Generic ValueThe Generic Value

ChainChain

Primary Activities

S u p p o rt

Ac t ivit ie s

Firm infrastructure

Human resource management

Technology developmentProcurement

Inboundlogistics Outboundlogistics

Marketingand

salesServiceOpera-tions

Marg in

M a

r g i n



Marketing can be viewedMarketing can be viewed

as the “heart” of the valueas the “heart” of the valuechain because it ties all of chain because it ties all of

the activities together fromthe activities together from

thethe customer’scustomer’s point of point of

viewview



MarketingMarketing

The development and maintenanceThe development and maintenance

of long-term, cost effectiveof long-term, cost effective

relationships with customers in orderrelationships with customers in orderto retain their preferenceto retain their preference



Relationship MarketingRelationship Marketing

Compared to TransactionCompared to Transaction(Traditional) Marketing(Traditional) Marketing

Factor Transaction

Time orientation Short-term

Organizational goal Make sale

Customer service priority Relatively low Very Customer contact Low to moderate

Customer commitment Low

Seller-customer interaction Conflict manipulation Cooperation

Source of quality Mainly from production Company wide

Tools for ImplementingTools for Implementing



Tools for ImplementingTools for Implementing

Relationship MarketingRelationship Marketing

Affinity programsAffinity programs

Frequent-buyer/user programsFrequent-buyer/user programs

Database marketingDatabase marketing

Partnerships (strategic alliancesPartnerships (strategic alliances

Co-marketing and co-brandingCo-marketing and co-branding

EDI (electronic data interchange)EDI (electronic data interchange)VMI (vender-managed inventory)VMI (vender-managed inventory)

QR (quick response)QR (quick response)

Life-time value of customer analysisLife-time value of customer analysis

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