Principles of Marketing REVIEWER
Principles of Marketing REVIEWER
Principles of Marketing REVIEWER
1 MARKETING AND THE MARKETING PROCESS other words, when you hear “utility” in marketing, think
“usefulness to customers.”
Marketing is made up of every process involved in
Marketing creates several different types of utility:
moving a product or service from the organization to
the consumer. It includes discerning the needs of • Form utility. Form utility refers to how well an
customers, developing products or services to meet organization can increase the value of its product in the
those needs, identifying who is likely to purchase the customer’s eyes by making changes and altering its
products or services, promoting them, and moving them physical appearance.
through the appropriate distribution channels to reach
• Time utility. Marketing creates time utility when it
those customers.
makes products and services available to customers so
Marketing can also be defined as the set of activities that they can buy it when it is most convenient for
involved in identifying and anticipating customer needs them.
and then attempting to satisfy those needs profitably.
• Place utility. Marketing creates place utility when it
• Identifying customer needs. makes goods or services physically available,
convenient, and accessible to customers.
• Anticipating customer needs.
• Possession utility. Marketers facilitate possession
• Satisfying customer needs.
utility by ensuring that a product is relatively easy to
• Profitably. acquire.
How Marketing Benefits the Organization, Its Interested Marketing’s primary benefit to society is that it drives
Parties, and Society the consumer economy. Marketing leads to increased
sales and revenue for a business which enables them to
Interested parties are those persons or entities that expand operations, create more internal jobs and
have an interest in the success or failure of a external jobs for partners like suppliers. Marketing also
company. These parties can be categorized into contributes tax revenue to local, state, and federal
two types: internal and external. governments, ultimately leading to overall economic
Internal interested parties are entities that reside growth.
within the organization and that affect or are
affected by the actions of the company. These The marketing process refers to the series of steps that
entities include employees, owners, managers, and assist businesses in planning, analyzing, implementing,
investors (shareholders). and adjusting their marketing strategy.
External interested parties include those outside
the company, such as customers, creditors,
suppliers, distributors, and even society at large.
External groups don’t have a direct say in the
company’s decision-making process.
By definition, customer value is the ratio between the The goal of successful customer relationship
perceived benefits and costs incurred by the customer management (CRM) is creating high customer equity—
in acquiring your products or services. Value is the potential profits a company earns from its current
increased by boosting the benefits (in the form of and potential customers. It’s a relatively simple
product, place, or promotion) or minimizing the price. concept: increasing customer loyalty results in higher
customer equity.
But “value” from the customer’s perspective is a
complex term, because we’re really considering four Increasing customer equity is the goal of marketers
different values types: because it’s a bellwether for financial success. Think
about it in simple terms: the higher a company’s
• Functional value: what the product “does” for the
customer equity, the more profit the company
customer in terms of solving a particular want or need
generates, and the more valuable that company (and its
• Monetary value: what the product actually costs
products or services) becomes on the market.
relative to its perceived worth
• Social value: how much owning the product allows the
customer to connect with others
experience, not acquisition. For many of the Gen Xers
who are parents, family comes first — both children and
their aging parents — and career second.
Sigmund Freud assumed that people are largely People can form different perceptions of the same
unconscious about the real psycho logical forces stimulus because of three perceptual processes:
shaping their behavior. His theory suggests that a selective attention, selective distortion, and selective
person’s buying decisions are affected by subconscious retention. People are exposed to a great amount of
motives that even the buyer may not fully understand. stimuli every day. Selective distortion describes the
tendency of people to interpret information in a way
Consumers often don’t know or can’t describe why they
that will support what they already believe. People also
act as they do. Thus, many companies employ teams of
will forget much of what they learn. They tend to retain
psychologists, anthropologists, and other social
information that supports their attitudes and beliefs.
scientists to carry out motivation research that probes
Selective retention means that consumers are likely to
the subconscious motivations underlying consumers’
remember good points made about a brand they favor
emotions and behaviors toward brands.
and forget good points made about competing brands.
Such projective techniques might seem pretty goofy, Because of selective attention, distortion, and
and some marketers dismiss such motivation research retention, marketers must work hard just to get their
as mumbo jumbo. But many marketers use such touchy- messages through.
feely approaches, now sometimes called interpretive
Learning
consumer research, to dig deeper into consumer
psyches and develop better marketing strategies. When people act, they learn. Learning describes
changes in an individual’s behavior arising from
Abraham Maslow sought to explain why people are
experience. Learning theorists say that most human
driven by particular needs at particular times. Why does
behavior is learned. Learning occurs through the
one person spend a lot of time and energy on personal
interplay of drives, stimuli, cues, responses, and
safety and another on gaining the esteem of others?
reinforcement. A drive is a strong internal stimulus that
Maslow’s answer is that human needs are arranged in a
calls for action. A drive becomes a motive when it is
hierarchy. They include physiological needs, safety
directed toward a particular stimulus object.
needs, social needs, esteem needs, and self-
actualization needs. A person tries to satisfy the most Beliefs and Attitude
important need first. When that need is satisfied, it will
Through doing and learning, people acquire beliefs and
stop being a motivator, and the person will then try to
attitudes. These, in turn, influence their buying
satisfy the next most important need. For example,
behavior. A belief is a descriptive thought that a person
starving people (physiological need) will not take an
holds about something. Beliefs may be based on real
interest in the latest happenings in the art world (self-
knowledge, opinion, or faith and may or may not carry
actualization needs) nor in how they are seen or
an emotional charge. Marketers are interested in the
esteemed by others (social or esteem needs) nor even
beliefs that people formulate about specific products
in whether they are breathing clean air (safety needs).
and services because these beliefs make up product
But as each important need is satisfied, the next most
and brand images that affect buying behavior. If some
important need will come into play.
of the beliefs are wrong and prevent purchase, the
Perception marketer will want to launch a campaign to correct
them.
A motivated person is ready to act. How the person acts
is influenced by his or her own perception of the People have attitudes regarding religion, politics,
situation. All of us learn by the flow of information clothes, music, food, and almost everything else.
through our five senses: sight, hearing, smell, touch, Attitude describes a person’s relatively consistent
and taste. However, each of us receives, organizes, and evaluations, feelings, and tendencies toward an object
interprets this sensory information in an individual way. or idea. Attitudes put people into a frame of mind of
Perception is the process by which people select, liking or disliking things, of moving toward or away from
them. Attitudes are difficult to change. A person’s
attitudes fit into a pattern; changing one attitude may infrequent, or risky purchase but see little difference
require difficult adjustments in many others. among brands. For example, consumers buying
carpeting may face a high-involvement decision because
Module 4.2 BUYING DECISION BEHAVIOR carpeting is expensive and self-expressive. Yet buyers
may consider most carpet brands in a given price range
to be the same. In this case, because perceived brand
Types of Consumer Buying Behavior
differences are not large, buyers may shop around to
Buying behavior is not influenced solely by the external learn what is available but buy relatively quickly. They
environment. It’s also determined by your level of may respond primarily to a good price or purchase
involvement in a purchase and the amount of risk convenience. After the purchase, consumers might
involved in the purchase. There are four types of experience post purchase dissonance (after-sale
consumer buying behavior. discomfort) when they notice certain disadvantages of
the purchased carpet brand or hear favorable things
about brands not purchased. To counter such
dissonance, the marketer’s after-sale communications
should provide evidence and support to help consumers
feel good about their brand choices.
Dissonance-reducing buying behavior occurs when Consumers undertake variety-seeking buying behavior
consumers are highly involved with an expensive, in situations characterized by low consumer
involvement but significant perceived brand differences. Consumers can obtain information from any of several
In such cases, consumers often do a lot of brand sources. These include personal sources (family, friends,
switching. Brand switching occurs for the sake of variety neighbors, acquaintances), commercial sources
rather than because of dissatisfaction. (advertising, salespeople, dealer and manufacturer web
and mobile sites, packaging, displays), public sources
In such product categories, the marketing strategy may
(mass media, consumer rating organizations, social
differ for the market leader and minor brands. The
media, online searches and peer reviews), and
market leader will try to encourage habitual buying
experiential sources (examining and using the product).
behavior by dominating shelf space, keeping shelves
The relative influence of these information sources
fully stocked, and running frequent reminder
varies with the product and the buyer.
advertising. Challenger firms will encourage variety
seeking by offering lower prices, special deals, coupons, Traditionally, consumers have received the most
free samples, and advertising that presents reasons for information about a product from commercial sources
trying something new. —those controlled by the marketer. The most effective
sources, however, tend to be personal. Commercial
Buyer Decision Process
sources normally inform the buyer, but personal
sources legitimize or evaluate products for the buyer.
Few advertising campaigns can be as effective as a next-
door neighbor leaning over the fence and raving about
a wonderful experience with a product you are
considering.
The buyer decision process consists of five stages: need
recognition, information search, evaluation of c. Evaluation of Alternatives
alternatives, the purchase decision, and post purchase Marketers need to know about alternative evaluation,
behavior. Clearly, the buying process starts long before that is, how consumers process information to choose
the actual purchase and continues long after. Marketers among alternative brands. Unfortunately, consumers do
need to focus on the entire buying process rather than not use a simple and single evaluation process in all
on the purchase decision only. Consumers pass through buying situations. Instead, several evaluation processes
all five stages with every purchase in a considered way. are at work. How consumers go about evaluating
But buyers may pass quickly or slowly through the purchase alternatives depends on the individual
buying decision process. And in more routine purchases, consumer and the specific buying situation. In some
consumers often skip or reverse some of the stages. cases, consumers use careful calculations and logical
Much depends on the nature of the buyer, the product, thinking. At other times, the same consumers do little or
and the buying situation. no evaluating. Instead, they buy on impulse and rely on
a. Need Recognition intuition. Sometimes consumers make buying decisions
on their own; sometimes they turn to friends, online
The buying process starts with need recognition—the reviews, or salespeople for buying advice.
buyer recognizes a problem or need. The need can be
triggered by internal stimuli when one of the person’s Consumers are said to view a product or service as a
normal needs—for example, hunger or thirst—rises to “bundle of product attributes,” and you evaluate
a level high enough to become a drive. A need can also several. attributes of a product or service in reaching
be triggered by external stimuli. your purchase decision
An interested consumer may or may not search for The consumer ranks brands and forms purchase
more information. If the consumer’s drive is strong and intentions. Generally, the consumer’s purchase
a satisfying product is near at hand, he or she is likely to decision will be to buy the most preferred brand, but
buy it then. If not, the consumer may store the need in two factors can come between the purchase intention
memory or undertake an information search related to and the purchase decision. The first factor is the
the need. attitudes of others. If someone important to you thinks
that you should buy the lowest-priced car, then the companies cannot simply wait for dissatisfied customers
chances of you buying a more expensive car are to volunteer their complaints. Most unhappy
reduced. The second factor is unexpected situational customers never tell the company about their
factors. The consumer may form a purchase intention problems. Therefore, a company should measure
based on factors such as expected income, expected customer satisfaction regularly. It should set up systems
price, and expected product benefits. However, that encourage customers to complain. In this way, the
unexpected events may change the purchase intention. company can learn how well it is doing and how it can
improve.
e. Post purchase Behavior
Stage 3: Product Specification. B2B buyers often Stage 7: Order-Routine Specification. After selecting
develop product specifications, a blueprint that suppliers, the B2B buyer negotiates the details of the
outlines the product to be built, how it will look, what order. The critical items here are what is needed (i.e.,
features it will have, and how it will function. The the technical specifications), how much is needed (i.e.,
product specification needs to be concise and the quantity required), and when it is needed (i.e., the
readable for everyone in the buying center and yet expected time of delivery). This stage will likely also
contain sufficient technical data to provide the include negotiation of things such as return policies,
product team with the information it needs to warranties, and other critical items involved with the
develop the new product or feature. purchase.
Stage 4: Supplier Search. Now that you’ve established Stage 8: Performance Review. Just as consumers
the technical specifications for the product, it’s time to evaluate purchases after they have made them, and
identify potential suppliers. This is where the similar to the way that your employer may conduct a
experience of those in the buying center comes into performance review to assess your job performance,
play, as they attempt to determine which suppliers the B2B buyer periodically reviews the performance
have the best quality, delivery, and price. Just like of the selected supplier to assess if the product and
consumers in the “information search” stage of the the supplier meet expectations.
consumer buying process, those in the buying center
may look online to find suppliers, but there are many
other resources available to B2B buyers, such as trade
magazines, industry expert blogs, and webinars
conducted by suppliers.
As defined by Kotler and Armstrong, CRM is “the Module 2.2 DEFINING RELATIONSHIP MARKETING
overall process of building and maintaining profitable
customer relationships by delivering superior The concept of relationship marketing is very vital in
customer value and satisfaction.” getting customers loyalty and establishing and
maintaining a long lasting relationship. Hence,
Marketers believe that CRM helps the company in relationship marketing is a set of activities designed to
gaining, maintaining and increasing market share. develop and manage customer loyalty and long-term
customer relationship.
Another value of a customer in marketing is being the Many marketers believe that relationship is a
source of information in developing or improving the continuous process of knowing the customers,
identifying the things that will truly satisfy them to
strengthen the mutual bond between the seller and
the buyer.