Principles of Marketing

Quarter 1 - Module 1
Marketing Principles, Goals and
Approaches
What Is It

Marketing Defined
Marketing is a form of communicating or promoting the value of a product, service, or
brand to the consumers. The “by word of mouth” marketing may be the simplest, oldest, and
most natural way of marketing a service or a product for profit and non profit purposes.
Marketing for profit aims to increase sales of products or services while marketing for nonprofit
purposes. Marketing for profit aims to communicate messages for social purposes, such a
health and public safety information disseminated by the government.
The American Association (AMA) defines marketing as “the activity, set of instructions,
and process for creating, communicating, delivering, and exchanging offering that have
creation, communication, and the delivery of value to customers.
The key to this definition of marketing is the word “value.” Thus, marketing can be
summarized as the creation, communication, and the delivery of value to customers.
Alternately, the Philippines Marketing Association (PMA) defines marketing as a “science
and profession guided principally by the universal principles of ethics, corporate citizenship,
and corporate social responsibility.
This definition emphasizes an adherence to ethical principles, corporate citizenship,
harmful to one’s health and well-being or promote violence and immortality. Products or
services that serve no purpose or contribute nothing to individual and societal well-being
should not be marketed.

GOALS OF MARKETING
The goals of marketing can be summarized as follows:
1. Understand the market and its consumers, ans satisfy their changing needs and wants.
2. Introduce and innovate products and services that improve human condition and the
quality of life.
3. Design and implement effective customer-driven marketing strategies.
4. Develop marketing programs that deliver superior value to consumers.
5. Build and maintain mutually beneficial and profitable customer relationships.
6. Capture customer value to create profits.
7. Promote value transactions with full regard to the well-being of societies.
The Marketing Process
The marketing process can be illustrated in the following diagram:

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 Before marketing products and/or services, the organization must have a thorough
analysis of the external environment, the market, its competitors and customers and an incisive
(perceptive) audit of its internal operating characteristics. This is followed by the formulation of
relevant marketing strategies coupled with a calibrated response using the elements of
marketing (commonly known as the 4P’s). As soon as the marketing strategy is implemented,
regular monitoring takes place in order to identify deviation and, if necessary, make
adjustments to any or all elements of the marketing mix.

Products, Services, and Experiences

What do organizations market? As consumers, we are most familiar with the marketing of
goods and services. Order than these, however, marketing organizations also market
experiences, ideas, advocacies, and even personalities.

The Three Product Level

Consumers often think that a product is simply the physical item that he or she buys. In
order to actively explore the nature of a product further, let’s consider it as three different
products – the CORE product, the ACTUAL product, and finally the AUGMENTED product.
This concept is known as the Three Levels of a Product. Figure 2: Product Levels

The CORE product is NOT the tangible physical product. You can’t touch it. That’s
because the core product is the BENEFIT of the product that makes it valuable to you. So with
the car example, the benefit is convenience i.e. the ease at which you can go where you like,
when you want to. Another core benefit is speed since you can travel around relatively quickly.
The ACTUAL product is the tangible, physical product. You can get some use out of it. Again
with the car, it is the vehicle that you test drive, buy and then collect. You can touch it. The
actual product is what the average person would think of under the generic banner of product.
The AUGMENTED product is the non-physical part of the product. It usually consists of
lots of added value, for which you may or may not pay a premium. So when you buy a car, part
of the augmented product would be the warranty, the customer service support offered by the
car’s manufacturer and any after-sales service. The augmented product is an important way to
tailor the core or actual product to the needs of an individual customer. The features of
augmented products can be converted in to benefits for individuals.

Features and benefits of products

Features and benefits of a product are also relevant to the three levels of the product.
Products tend to have a whole series of features but only a small number of benefits to the
actual consumer.
Let’s look at this another way, if you buy a Nintendo console it has many features; for
example you can play games alone or you can play against another opponent or two or three
opponents. You can also have access to the Internet. Avatars are adaptable so you can create
yourself and your friends. These are all examples of features to the consumer. However a
consumer may buy it because he or she wants to stay fit and will use software and peripherals
to become healthier. Becoming healthier is the benefit to the consumer.
 The consistent marketer will aim to discover the consumer’s preference for benefits and
will match individual features to the preference. That is why professional salespeople for
example, often ask many questions whereas a novice salesperson will just tell you the features
of the product

Classifications of Products/Goods
Products that are marked can be generally classified according to use, differentiation,
types, and durability. Figure 3. Classification of Products/Goods

According to Use:
Consumer goods
Industrial goods

According to Differentiation:
Undifferentiated goods
Differentiated goods
Products/Goods
According to Durability:
Consumables
Semi-Durables
Durables

According to Types:
Convenience goods
Shopping goods
Specially goods
Unsought goods

According to Use: Consumer and Industrial Goods

When classified according to use, products/goods can either be consumer goods or
industrial goods.
Consumer goods are goods that are purchased for personal consumption and/or for
household use. Examples of these are instant noodles, biscuits, milk, detergent soap,
shampoo, and other similar items.
On the other hand, industrial goods are purchased in order to make other goods, to
serve as a raw material or input in the production of other goods. Typical examples are
aluminum (used to manufacture kitchen equipment and cans) and electronic cables and wires
(serve as electrical conduits for home appliances) among others.
It would not be possible to say, however, that a product is always a consumer good or an
industrial good. A good that is ordinarily a consumer good can also be used as an industrial
good, and vice-versa. For example, when a consumer buys sugar from the supermarket and
uses this sugar to sweeten his/her coffee, the sugar in this particular case is a consumer good.
However, if the sugar is added to flour, chocolate syrup, eggs, and walnuts to make brownies
and eventually sold, the sugar in this case is an industrial good.
In other words, physical characteristics alone cannot determine whether a product is a
consumer good or an industrial good. One should also consider how the product is ultimately
used.

According to Differentiation: Undifferentiated and Differentiated Goods Undifferentiated

goods are products whose physical characteristics are so identical,
that it would be difficult, it not impossible, to distinguished one purchased from one vendor or
another. Most undifferentiated goods are products that sourced from nature.
A typical example of an undifferentiated good is rock salt. When a housewife goes to the
wet market to purchase rock salt from two different vendors, determining which one came from
one vendor or the other is a challenge. Salt bought from the two different vendors looks, feels,
and tastes identical.
On the other hand, differentiated goods are varied in their characteristics and features
that make them distinguishable from one another. If there are white-colored vehicles of each
model from all local car manufacturers parked side by side, the Toyota Fortuner would still be
readily distinguishable from the Mazda 3, the Nissan Sentra, the Honda Civic, and from the
other vehicles in the parking area. This is because each manufacturer and car model has
varying appearances and features. The appearance of the Toyota Fortuner is different from
mitsubishi’s Montero Sport. They have different grill designs, headlights, body heights, hoods,
ground clearance etc. The ability of manufacturers to successfully distinguish their products
from other competitors is called branding.
Branding provides a product or service a unique distinguishing name, logo, symbol, or
image which is used to differentiate it from other similar products and services.

Why do some manufacturers brand their products, while others do not? The major reason
is cost. When a company decides to brand its products, it must recognize that there are two
responsibilities that accompany branding:
 All products carrying the brand must have quality consistency
 The brand must be advertised and promoted
The underlying reason why manufacturers decide to engage in branding despite the cost
is that they want the brand to be known and to be preferred by customers, eventually creating
and building brand loyalty. No customer will patronize a brand whose quality is inconsistent.
For a brand to be known, it must be extensively advertised and promoted.
Once a brand acquires customer recognition, a positive market reputation and goodwill,
higher selling prices can be charged, larger sales revenues are generated, and higher profit
margins are realized. This is because customers begin to attach value to the brand than to the
product itself. This appreciation in a brand’s value from the point of view of customers is called
brand equity.

 Branding
Product
provides a
product or
service a unique
distinguishing
name, logo,
symbol, or
image which is
used to
differentiate it
from other
similar products
and services

According to Durability: Consumable, Semi-Durable, and Durable Goods

Based on Durability, Products are either consumables, semi-durables, or durables.

Durability refers to the length of time a consumer can derive benefit from the product or good
purchased.
A consumable is a product whose benefit can only be used by a consumer for a
consumer for a short period of time, sometimes only a few minutes. For this reason, many
mis-interpret consumables to exclusively include food, drinks, and edible items. Although these
are consumables, non-edible items such as detergents and toiletris are also considered
consumables. The benefit one can derive from soap, for example(for cleaning oneself) may
only last few days.
On the other hand, semi-durables provide benefits to the consumer for a longer period of
time, usually spanning several months. Semi-durables are manufactured for longer-term use
by consumers. Examples of semi-durables are clothes, shoes, belts, jackets, etc.
Durables are products that are manufactured to last a long time. They are capable of
providing consumers with years of beneficial use. Durables are casually expensive, and many,
therefore, require an augmented product to market them effectively. Examples of durable
goods are automobiles, houses home appliances, customer electronics, furniture, sports
equipment, and toys.
According to Type: Convenience, Shopping, Specialty, and Unsought Goods

Convenience goods are products that are purchased frequently, are usually inexpensive,
and do not require much purchase effort and evaluation. Examples are newspapers, gum, and
candy.
The key to the successful marketing of convenience goods is its availability in as many
retail outlets as possible, catering to consumer need where and when it arises.
Shopping goods, on the other hand, are purchased less frequently than convenience
goods, are relatively more expensive, and require some amount of information search and
evaluation prior to purchase. Consumers of shopping goods consider features, evaluate
attributes, and compare prices. Examples of shopping goods are shoes, clothes, and
handbags. The successful marketing of shopping goods depends on intensive advertising,
well-trained salespersons, and positioning company products as superior alternatives to
competitors’ products.
Specialty goods are goods that require an unusually large effort on the part of
consumers to acquire. Consumers are usually willing to travel great distances to where these
goods can be purchased. Examples are branded luxury merchandise, works of art,
automobiles, and homes. The successful marketing of specialty goods require the promotion of
strong brand image and identities.
Unsought goods are goods that consumers seldom actively look for, and are usually
purchased for extraordinary reasons, such as fear or diversity, rather than desire. Examples
are investments, memorial plans, and life insurance. These goods require advertising and
aggressive selling and are usually marketed using highly-trained and persuasive salespersons.

What’s More
Activity 1: Classifying Goods

Direction: Classify the products or goods by checking the column that corresponds to their
answer.

Examples Consumer Industrial Specially Unsought Shopping Convenience

Goods Goods Goods Goods Goods Goods
1. Clothes
2. Detergent
powder
3. Aluminum
4. Newspaper
5. Memorial
plans
6. Investment
7. Automobiles
8. Bags
9. Candy/Gum
10. Luxury
items

Activity 2: Reflection

Direction: Answer the following questions.

1. Marketing involves, among others, the delivery of value to consumers. However, the value a
consumer places on a particular products or service is subjective. If you are a
marketer, how can you increase customer’s assessment of your product/service?
Use a product/service of your choice as an example.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
____________________________________________________________________.

2. This is a common saying “All products sold involve the sale of service to a greater or
lesser extent. “Cite an example where product was sold because of an accompanying
service.
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
__________________________________________________________________.
 Lesson 1.2
Marketing Approaches and Services

What Is It

Market Services
The characteristics of the services differentiate the services from the tangible goods.

The following are the characteristics of services:

1. Intangibility:
A Services are intangible and therefore cannot be touched, handled, smelt or tasted
(physical senses). This is because service itself is an activity. A service however, can be
experienced. A service also gives a certain amount of satisfaction to the consumers. On
account of the intangibility, there is no ownership created in case of services. A service
can only be generated and used and can never be owned.
2. Perishability:
A service has to be consumed simultaneously with its production. A service cannot
be stored like a tangible commodity. Services are perishable in terms of delivery and time.
An empty seat on a plane never can be utilized and charged after departure. Revenue
once lost is lost forever.
When the service has been completely rendered to the requesting service consumer, this
particular service irreversibly vanishes as it has been consumed by the service consumer.
Example – after the passenger has been transported to the destination, he cannot be
transported again to the previous location at the previous point of time.
3. Inseparability:
Commodities once produced can be sold at a later point of time but in case of
services it is not possible. Examples – In the cases of services of a doctor to his patient,
teacher to his student, the simultaneous presence of both-the producer of the service and
the consumer of the service at that point of time is absolutely necessary.
The service provider is indispensable for service delivery as he must promptly
generate and render the service to the requesting service consumer. Therefore the
service provider, the service itself and the service consumer are inseparable.
4. Simultaneity:
Services are generated and consumed during the same period of time. As soon as
the service consumer has requested the service (delivery), the particular service must be
generated from scratch without any delay. The service consumer instantaneously
consumes the rendered benefits to satisfy his wants. Therefore the production and
consumption of services are always simultaneous.
5. Variability:
Each service is unique. Services lack homogeneity. Example – a doctor treats two
patients with similar ailments on the same day. The level of satisfaction in the minds of
these patients after the treatment will never be the same. The difference is caused by
 factors such as the mood of the doctor, the fatigue level of the doctor, the way the service
is perceived by the individual patient etc. There will a difference in the service even if the
same doctor treats the same patient on two different occasions.
This is because the moods of the doctor and the patient do not remain the same on both
the occasions. No two units of service are identical even if they are generated by the same
person. Factors like quality control, standardization etc. which can be very successfully
implemented in case of production of tangible goods cannot be applied in case of services.
Services always vary with each other.
No ownership is created in case of services. At the time of creating a service or delivering
a service, the service provider does not own the service. He only owns the physical
infrastructure necessary to create the service. Similarly at the time of consumption or after the
consumption, the service consumer does not own the service. He only consumes the service.

After the consumption, the consumer has only the experience but the service itself would
have become non-existent. A service cannot be owned by anybody because it is basically an
intangible product.

Needs, Wants, and Demands

Consumer needs are defined as physiological necessities required for human survival.
These universal needs include food, shelter, and clothing.
Wants, on the other hand, are more psychological, indicating preferences that can
improve the consumer’s life condition. For example, at noon, a consumer may have a sudden
and uncontrollable need to eat. This can be satisfied with food because eating is a need.
However, the consumer will not satisfy this need with just any type of food but will consider
what kind of food he wants. He will decide whether to have a pizza, a doughnut, a sandwich, or
a rice meal.

Market and Market Demand

Market is defined as the group of individual or organizational customers who have both
the willingness and financial capability to purchase a particular product or service. Capability to
purchase a product/service can be variable as it can expand or contract depending on certain
factors, e.g. selling price. When a product’s or service’s selling price is reduced, even if the
number of individuals willing to purchase remain constant, the reduced price may increase the
number of individuals who can now afford to buy the product or service.
Market demand is the total demand of all potential customers for a specific
product/service over a specific period in a specific market area.

Measuring Market Demand

Market demand can either be primary or selective. Primary demand refers to the total
demand for all brands of a particular product or service. It is sometimes referred to as total
industry demand. Selective demand, on the other hand, is the demand for a specific brand of
product or service.
Potential, Latent, and Current Demand
Potential demand emerges when there is no demand yet for a particular product/service,
but there exists a market with sufficient financial capability to purchase.
An example of this is an example of potential demand can be education courses where
there is very low demand or no demand at all. Such cases are very hard to counter.
Latent demand results when customers in a market are unable to satisfy specific desires
because no products/services exist in the market that can satisfy them. It can also result when
the product/service is available, but is priced beyond their reach.
a smartphone brand’s success due to the company’s ability to close the gap between the
current product bought and the ideal product the customer would like to use.
In order to satisfy latent demand, marketing organizations must:
 Introduce goods currently unavailable that are desired by customers;
 Influence and persuade customers to reallocate their expenditures towards the
company’s product; or
  Offer credit, installment, or similar terms to make the product affordable to
customers.
Current demand is defined as the number of people of a particular market at present that
would actually purchase the product or service offered. This can be measured in several ways,
the most popular of which is through “intent to buy” survey.

An example of current demand are seasonal products like umbrella, air conditioners or
resorts. These products sell irregularly and sell more during season whereas their demand is
very low during non-seasons.

Utility, Value, and Satisfaction

Utility refers to the total satisfaction consumers can receive from the consumption of a
product or service.
Value, on the other hand, refers to the value customers place on a product or service.
Since consumers have different needs and buying capacities, consumers assign varying
values on the same product or service. The product with the highest quality does not always
provide the highest value for customers. The perception of value is affected by the cost
required to acquire the product or service.
Satisfaction is the measure of how well customer expectations from a purchased product
or service have been met.
To ensure maximum customer value and satisfaction, marketers must:
 Balance product or service quality and price.
 Establish consistency among product availability, level of customer service, and
efficiency.
 Create a buying atmosphere and deliver purchase convenience.

Customer-Perceived Value

Customer-perceived value is the quantitative difference between the expected benefits

and costs of a particular product or service in comparison to a similar product or service.
Customers rarely have an accurate assessment of the value and cost of a product or service,
and make purchases based on their perception of its ability to satisfy his/her needs and
requirements.
To enhance their customers’ perceived value of products or services, marketers advertise
aggressively and invest heavily in highlighting products features. In the case of cosmetics and
personal care products, companies invest heavily in packaging and labeling.
Some marketing organizations conduct marketing research to identify the perceived
values consumers attach to specific products/services.

Customer Value Proposition

A customer value proposition is a comparison of the benefits offered by a company’s

products to its customers in relation to the amount it is asking customers to pay. Customers
always ask question: “What’s in it for me?”
Marketing strategies enhance a product’s customer value proposition by emphasizing key
attributes of the brand in relation to competitors’ brands and communicating to
customers: ”Why us?”

Competition
A competitor is any company in n industry or similar industry that offers a similar product
or service

Levels of Competition
A firm’s competition can be classified either as a desire, generic, form, or brand
competitor.

Figure 4: Levels of Competition

 1. Desire Competitors 2. Generic Competitors

“What desire do I want to satisfy?” ‘What do I want to eat?”

 Eat  Sandwich
 Text  Dimsum
 Read  Pasta
 Drink  Chicken

3. Form Competitors 4. Brand Competitors

“What kind of sandwich?” “What brand of hamburger sandwich?”

 Chicken  Wendy’s
 Cheese  McDonald’s
 Hotdog  Jollibee
 Hamburger  Burger KIng
 Army Navy

The most basic type of competition is desire competitors. For example, eating is a
“desire” or “need” that a customer wants to satisfy at a particular time or occasion. This is
identified and established first before the customer starts thinking of a possible destination to
satisfy his “desire” or “need”.
The customer then considers a number of available options. These are the generic and
form competitors (sometimes called “indirect” competitors). Although these two levels a
customer selects a chicken sandwich instead of a hamburger, the hamburger fast food chain
can no longer generate revenue from the customer because:
1. The “desire” or “need” of the customer has already been satisfied and he is no longer
(for the moment) interested in food.
2. If the customer is on a limited budget, he/she may have already spent his/her monetary
allocation for food.
On the other hand, brand competitors are the most “direct” competitors because they
offer the same form of product the customer has finally decided to consume.

The Concept of Market Share

The effectiveness of marketing strategies in an industry can be measured using what is

referred to as market share. Market share, expressed in percentage, is the share of a
company’s revenues divided by the total revenues of its industry in a particular year.
Market share is calculated using the following formula:
Company A’s annual revenue
Company A’ Market Share - x 100
Total annual revenue of Company A’s Industry

Since sales revenue is the basis for determining market share, companies often boost
sales through product introduction and innovation, price reduction, intensive advertising, and
aggressive promotional efforts, among other activities.
The company with the largest market share in an industry is the industry’s market leader.
Market leadership is aspired after by many industry is the industry’s participants. Aside from
the prestige, market leaders usually lead the industry in price changes, advertising and
promotional intensity, and new product introductions. More often than not, market leaders
manufacture and market the largest number of product units in an industry. They are likewise
often the most profitable due to production scale and distribution efficiency.

Traditional Approaches to Marketing

Evident up to the late 1960’s traditional approaches in marketing focused on production
methods, product quality, and effective selling methods as profit drivers in marketing.
1. The Production concept
 The Production concept assumes that customers prefer products that are
inexpensive, affordable, and widely available. Efforts are concentrated toward expanding
distribution, and improving production efficiency. The objective is to lower production
costs resulting in lower process. However, this concept is relevant only if customer tastes
and preferences are stable and product demand is high.
2. The Product Concept
The product concept assumes that customers will always prefer and patronize
products of high quality. Resources are focused on product improvement and innovation.
Product attributes and features are continuously enhanced. While this may be important,
too much preoccupation on product quality may neglect the customer’s changing needs.
3. The Selling Concept
The selling concept emphasizes aggressive selling and promotional efforts. It
assumes that customers are generally timid and must be persuaded into buying. The
objective is to sell what is manufactures rather than manufacture what the market wants.

Contemporary Approaches to Marketing

Marketing is all about understanding the needs and preferences of your audience rather
than serving them what the company has to offer. The contemporary approach of marketing
focuses on the customer and their needs towards the product and the services. This theory is
based on the importance of traditional marketing orientation versus customer orientation. They
use different tactics and strategies to build a relationship with their clients and targeted
audiences.
Contemporary approaches to Marketing includes the following;
 Relationship marketing
 Industrial marketing
 Social marketing
Relationship marketing is a strategy that helps the brand develops a strong connection
with their customers. It helps the brands in forming long-term bonds with their loyal customers.
It is essential to maintain and establish relationships with customers and other brands these
days. It is beneficial for brands as it helps them understand their audience in the long-run.
Industrial marketing, also known as B2B or business-to-business marketing is a branch
of marketing which involves one business dealing or marketing their goods and services to
another business. Rather than the customer base, the brands are targeting industrial
customers in this type of marketing. Long-term relations can be built if the industrial buyers are
adequately satisfied. However, the total number of business buyers will be less in comparison
to the number of customer buyers.
Social marketing is an approach of marketing which seeks to bring any social change. It
integrates marketing theories and tactics with other plans to achieve social change. Social
marketing is aimed at benefiting individuals and different communities of society. Social
marketing should not be mistaken with social media marketing in any way. This approach
focuses on changing human behavior. This branch of marketing works for the welfare of the
people which helps the brands creates their positive image in the eyes of the customer.
Thereby, helping the brands create long-term relations with their customers. Contemporary
approaches followed by organizations:
Cause Marketing – It is the type of marketing in which a company and charity team up
together and spread awareness for a good cause. If the campaign is successful, it can
help in increasing the business value for the company.
Event marketing – It is the type of marketing in which marketers conduct promotional
events and promote their products and services in those events. This involves face to
face contact and helps in increasing the credibility of the brand.
Green marketing – It is the practice of marketing in which the services and goods are
marketed from their environmental benefits. Research has shown that the customers
are willing to pay extra for products from companies which are concerned about the
environment and committed to sustainable development
Activity 1: Market share
Complete the table below by computation.

Company Market Share Company’s Annual Total revenue of

Revenue Company’s Industry
1. A P 600,500,000.00 P 950,000,000.00
2. B P 350,000,000.00 P 765,000,000.00
3. C P 156,000,000.00 P 845,000,000.00
4. D P 65,000,000.00 P 487,000,000.00
5. E P 120,000,000.00 P 355,000,000.00

What I Have Learne

Activity 2: Reflection
Direction: Write your own answer. (Shorts Explanation only).

1. A company makes a pair of shoes (a semi-durable) that can last for more than 10 years, Is this art
advantage or a disadvantage for its customers? Explain

2. People “need” to eat. Some “want” to eat pizza or a sandwich. Is it possible for a “want” not to emanate
from a “need”? Explain by relating your experience.

What I Can Do