CHAPTER 1INTRODUCTION AND OVERVIEW

BUSINESS FUNCTIONS TYPES OF BUSINESS TYPES OF CUSTOMERS WHAT IS MARKETING?

Monitoring the Environment (for opportunities & threats) (Chapter 2) Understanding the Customer (Chapter 3) Segmenting the Market (Chapter 4) Conducting Research (for analysis & decision making) (Appendix A) ‐ Developing the Marketing Mix (Chapters 5 – 11)

BASIC BUSINESS AND MARKETING CONCEPTS DEVELOPMENT OF THE MARKETING CONCEPT

Production Orientation ‐ Marketing Orientation ‐

A BETTER MOUSETRAP A Better Mousetrap is Not Enough A Better Mousetrap Needs Marketing

THE BUSINESS OF MARKETING

These goods & services have to be researched & developed (by the R&D department) to specifications that meet the customer’s needs & wants. These, then, have to be produced (by the production department) at a reasonable cost and at the highest quality before they are marketed (by the marketing department) to the buyers. Logic would then suggest that these three functions should be the forefront of any business.

In addition, because marketing is “closest” to the customer, it identifies business opportunities and the information is relayed back to the other functional departments to develop a marketing strategy to exploit those opportunities.Business Functions

Business functions are those tasks — usually specialized, technical and complex — that need to be performed effectively and efficiently in order for the business to succeed,

Core Functions- Research & Development: Before the goods can be produced, they have to be researched, developed and designed- Production (Manufacturing & Service Provision): This function involves the production of high and consistent quality goods & services- Product Sourcing: Only manufacturers produce their own goods, and service providers their own services.- Marketing: This is a core function because of its direct involvement with the marketplace (competitors, customers, etc.) and its overall sales responsibility. Sales and marketing must win, serve and maintain customers at a profit.

Support FunctionsThis is consist of accounting and finance, HR, Administration and IT.

WHAT IS MARKETING?

Marketing encompasses all the controllable activities that are directly involved in winning and keeping customers, i.e., the primary objectives of marketing. Marketing is the driving force of the business because of its direct involvement with, and link to, the customer (and the competition).

Marketing is about developing the right Product, at the right Price, at the right Place, and with the right Promotion for the Target Market in a given Environment. It is this last definition that becomes the basis of this book’s organization and thrust. Therefore, marketing is about:

Monitoring the Environment (for opportunities & threats) (Chapter 2)

These external forces, if beneficial or favourable to the business, are potential opportunities. Those that can harm the business are potential threats.

Understanding the Customer (Chapter 3)Long term customer satisfaction is difficult because existing customers change over time, new‐ types of customers emerge and competition is always ready to please. Businesses must not only know who their customers are, but also what makes them “tick”, and how they go about making purchasing decisions.

Segmenting the Market (Chapter 4) MarketSegmentation is division of customers into groups (segments) and the targeting of some (target markets). Segmentation can be a logical (a no collateral loan for university students) and/or‐ creative process (Pepsi divided the diet cola market into female and male with Diet Pepsi and‐ Pepsi Max, respectively).

Conducting Research (for analysis & decision making)‐The business environment, being dynamic and often unpredictable. The whole marketing research process provides the business with timely, accurate, and relevant information for management decision making. Marketing can also conduct more sophisticated research to‐ address specific problems or issues.

Developing the Marketing Mix (Chapters 5 – 11)The marketing mix (or the 4Ps) is a marketing strategy that incorporates the various controllable “tools” or variables used by the business to influence product demand, and profitability. Today, business or marketing strategy is focused on innovation and productivity. Productivity is about achieving performance goals (outputs) with the least possible costs (inputs) — being efficient. Cut costs but don’t cut corners!

Product Classification and Services Marketing (Chapter 5). Obviously, different types of products are marketed differently. Convenience, shopping, and unsought products; specialty brands and services, all represent the different types of products. The more important point is that they are marketed very differently. Would an experienced marketing manager of Ford motor vehicles (shopping goods) be equally at home selling toothpaste (convenience goods)?

Product Management (Chapter 6) Marketing contributes through its involvement in the management of the Product over its lifetime — from development, to test marketing, to decline. Two popular strategic models, the Product Life Cycle and the Growth Matrix, will provide enough scope for strategy development in the long term. Levi’s jeans, a 130 year old brand, has gone through good times and bad‐ ‐ times — inventing and reinventing itself.

Product Presentation (Chapter 7). Commodity is a term that refers to products that are undifferentiated physically or functionally. There are many — as competitors copy each other, have equal access to technology or manufacturing facilities. Branding or other forms of identifying marks (logos, colour schemes, sound, packaging, etc.) can effectively differentiate a product by association.

Distribution/Place (Chapter 8).

Marketing is also responsible for the timely, easy, and convenient access to the product — Coca Cola should know. Strangely, in some extreme cases, the untimely, difficult, and‐ inconvenient access is okay, or even expected. Some hard to find, exclusive products are more valuable for that very reason. What does the future hold for the traditional bookstore given the popularity of e books and Amazon.com?‐

The Promotion Mix (Chapter 9). Undoubtedly, promotion is marketing’s most well known activity. Communicating with the‐ customer is one of the most fundamental tasks of business. Yet, many small and medium sized businesses continue to promote without planning, often on an ad hoc basis. Some do so without a proper budget. Promotion is not about today. It’s about the next 12 months and beyond.

Promotion Methods (Chapter 10). The combination of the different methods of promotion makes up the promotion mix. Insurance companies would invariably spend more on personal selling, rewarding their agents handsomely.

Pricing (Chapter 11). Nike shoes are so expensive despite being made very cheaply in China? Costing can be very precise — more a science than an art. But pricing is different. The product’s price is not just what the customer pays. Price is also an indicator of quality (real or perceived) and is the most variable of the 4Ps. Prices are changed because of the customer. Prices are changed because of competition.

BASIC BUSINESS AND MARKETING CONCEPTS

Needs & wants. Central to marketing is the concept of needs satisfaction. Needs can be defined as the state of deprivation in a person.

Basic needs are for survival and they include the need for air, food, water, sleep, and procreation (physiological needs); clothing, warmth, comfort, shelter, security, health, convenience, etc. (safety needs).

Higher order needs include the need for love, friendship, acceptance, affection, and belonging (social needs); status, power, influence, and recognition (esteem needs).

Wants are ways of satisfying these needs. Hence, there are many ways (or wants) to satisfy a given need. Businesses don’t sell or create needs. They identify needs but sell wants (goods & services) to the customers to meet those needs.

Product Market, Market Size and Market Share. ‐

A market consists of actual and potential buyers of a given product. Hence, the 4WD market consists of actual and potential buyers of such products. The term market refers to the aggregate (group) of buyers.

The size of the market refers to the volume (number) or value (money terms) of the product sold over the past 12 months (or expected to be sold over the next 12 months).‐ ‐

The proportion of the market that is “captured” by a brand is the brand’s market share. This measurement is very important because it indicates how competitive the brand is relative to other competing brands.

Consumer and Business to Business Marketing. ‐ ‐

A consumer is a customer who buys goods & services for personal consumption. Also known as the end user, a consumer is the final user. Such distinction is very important because the marketing to‐ consumers can be different from the marketing to other types of customers. Terms like consumer marketing, consumer markets or consumer goods refer to such marketing situations.

Other businesses and organizations are themselves buyers of goods & services. However, in most cases, they buy for the purpose of reselling, production, business administration and operations, etc. Hence, business to business marketing (or industrial marketing‐ ‐ ) involves the marketing of goods & services to other businesses or organizations as inputs.

DEVELOPMENT OF THE MARKETING CONCEPT

In the past, businesses have used various orientations in their approach to marketing. Marketing, as we know it today, should be in accordance with the marketing concept. It is a management philosophy that champions the needs of the customer and the organization’s commitment to customer satisfaction.

Production Orientation‐Consider this popular marketing saying: “Make what we can sell and not sell what we can make.” The difference is quite profound. Production orientation is concerned with making life‐ easier for the business. The business comes first and the customer is the means to profitability. The business is most reluctant to change because change is hard and costly — and unnecessary.Ex: (1900s), Henry Ford: Selling Black Cars

Marketing Orientation‐Today, increased competition, both local and foreign, leads to product parity and has resulted in customers having more choices and paying lower prices. Increased competition is brought‐ about when markets are deregulated and procompetitive laws strictly enforced. In today’s globalized economies, the impact on domestic competition is most affected by globalization.

A small fraction of the cost of your iPhone goes to the Chinese factory that made it, but a big chunk goes to Apple in the US – for its design, technology and brand. This can only happen if countries are allowed to more freely import and export (trade) with one another, i.e., liberalization of international trade.

Customers Are more sophisticated, discerning, choosy and knowledgeable – because of increased choices and the vast amount of information from the internet. Therefore, increased competition and the changing customer force businesses today must be marketing oriented. Marketing‐ ‐orientation (or customer orientation) is about the ability and willingness to change;‐ accommodating buyers’ changing needs & wants; and readiness to meet competition. In short, modern businesses are driven by changing customers’ needs and competition.

A BETTER MOUSETRAPIs success due to a better product or better marketing?So, is building a better mousetrap easy? Today, a business doesn’t even need its own R&D department or to have its own factory in order to design and manufacture products. Consider the following ways of getting products made to any specification, and at any quality level:

Copying of technologyMatured technology is seldom proprietary because the patent or the protected design may have expired. In this case, the technology is public domain — available to everyone.

Contract manufacturing. The manufacturing of goods, no matter how complex, is relatively easy considering the thousands of manufacturers all over the world both capable and willing to produce goods to any specification and at any quality level — for the right price. Ford doesn’t make all their motor vehicles. Some Ford car models are made under contract by other car makers.

Licensing of technology. Patented or proprietary technology is shared with others for a fee. Du Pont is more than happy to allow a cookware manufacturer access to its non stick technology and the Teflon® brand —‐ for a fee

Joint ventures. ‐Joint ventures (partnerships) are only too common in motor vehicle and home electronic‐ industries. JVs usually involve sharing of R&D and joint production of goods (popularly known as badge engineering). In other words, it’s a partnership of two competitors!‐

A Better Mousetrap Needs Marketing

Brand Name : Product should carry a brand name that is associated with some distinguishing attributes.

Trade Mark : A trademark protects the brand name indefinitely. Package : The product should be well packaged and presented to the buyers. Availability : A successful product is one that is made available at the right time and at the

right place. Price : The product should carry a price that suggests value. Even an expensive motor

vehicle represents value if it gives the owner a great sense of joy and pride of ownership Promotion : Of course buyers must know about the product and its associated benefits.

That’s where the various methods of promotion come in. Product knowledge gives consumer confidence — effectively reducing the risk of buying the wrong product