Principles of Marketing

Chapter 1-Introduction
Sub-Chapters

1.1. Marketing and the Marketing Process

1.2. Marketing and the 4Ps of Marketing
1.3. Factors Comprising and Affecting the Marketing Environment
1.4. Evolution of the Marketing Concept
1.5. Determining Consumer Needs and Wants
1.6. Customer Relationship Management
1.7. Ethical Marketing
 1.1. Marketing and
the Marketing Process
Marketing Defined

“the activity, set of institutions, and processes for creating, communicating, delivering,
and exchanging offerings that have value for customers, clients, partners, and society at
large”
-American Marketing Association
Marketing Defined

Marketing can also be defined as the set of activities involved in

identifying and anticipating customer needs and then attempting to
satisfy those needs profitably.
 Identifying customer needs. This is typically where marketing
research comes in. Methods of marketing research will be
covered in a later chapter, but market research helps a company
develop a detailed picture of its customers, including a clear
understanding of their wants and needs.
 Anticipating customer needs. After analyzing the data collected,
marketers can predict how products might be changed, adapted,
or updated.
Marketing Defined

 Satisfying customer needs. If marketers have done their

homework correctly and clearly understand their customers’
needs, consumers will be pleased with their product purchase
and will be more likely to make additional purchases
 Profitably. Profitability is a relatively simple term; it’s when a
company’s revenue is greater than its expenses. In terms of
marketing, the road to profitability means adding value to a
product so that the price customers pay is greater than the
cost of making the product
How Marketing Benefits the Organization, Its
Interested Parties, and Society

Before we go on, let’s consider all the people and groups that an
organization needs to consider and serve.
Interested parties are those persons or entities that have an
interest in the success or failure of a company.
Internal interested parties are entities that reside within the
organization and that affect—or are affected by—the actions of
the company. These entities include employees, owners,
managers, and investors (shareholders). Internal marketing
involves promoting the objectives, products, and services of a
company to its internal constituents—particularly employees
How Marketing Benefits the Organization, Its
Interested Parties, and Society

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. However, they are vital to the
success of the company because companies can only succeed with
the support of others.
It draws out their needs, creates new demand, locates untapped
opportunities, and determines the possibilities of selling new
products. Second, marketing creates form, time, place, and
possession utilities for the company’s goods and services.
How Marketing Benefits the Organization, Its
Interested Parties, and Society

Utility refers to a product’s usefulness to customers so that they are

convinced enough to make a purchase. In other words, when you
hear “utility” in marketing, think “usefulness to customers.”
Marketing creates several different types of utility:
 Form utility refers to how well an organization can increase the
value of its product in the customer’s eyes by making changes and
altering its physical appearance.
 Marketing creates time utility when it makes products and
services available to customers so that they can buy it when it is
most convenient for them.
 Marketing creates place utility when it makes goods or services
physically available, convenient, and accessible to customers.
How Marketing Benefits the Organization, Its
Interested Parties, and Society

 Marketers facilitate possession utility by ensuring that a

product is relatively easy to acquire. Possession utility also
encompasses the pride or satisfaction you get from owning a
new product, such as a great-fitting pair of running shoes or a
smartphone with all of the features you’ve been wanting.

Marketing’s primary benefit to society is that it drives the

consumer economy. Marketing leads to increased sales and
revenue for a business which enables them to expand operations,
create more internal jobs and external jobs for partners like
suppliers. Marketing also contributes tax revenue to local, state,
and federal governments, ultimately leading to overall economic
growth.
 Steps in the Marketing Process

The marketing process

refers to the series of
steps that assist
businesses in planning,
analyzing, implementing,
and adjusting their
marketing strategy.
Steps in the Marketing Process

Step 1. Understand Both the Marketplace and Customers.

Before you can start the marketing process, you need to
have a good idea of what your marketplace looks like. This means
answering some basic questions about your customers, like who
they are, their income and purchasing power, and how much
they’re likely to spend (particularly on your products or services).
Step 2. Develop a Customer-Driven Marketing Strategy
Marketing strategy refers to a business’s overall “game plan” to
focus its limited resources in order to reach prospective customers
and turn them into paying customers, hopefully for the long run.
Steps in the Marketing Process

It’s said that there are two basic types of marketing strategy: a
product-driven, “build-it-and-they-will-come” strategy and a
customer-driven strategy, in which you analyze prospective
consumers and then—and only then—create something that they
want or need. In a customer-driven marketing strategy, the
company shifts the focus from the product or service itself to its
users. Customers’ needs are the central focus and the point of
beginning, not an afterthought. Your primary goal in a customer-
driven marketing strategy is to determine what users want and/or
need and then satisfy those users.
Steps in the Marketing Process

In a nutshell, it’s about establishing a connection and a

relationship. It’s about understanding who your customers are,
what their needs and wants are, and how you can best meet those
needs and wants. It’s about knowing your target market better
than your competitors do and creating a strong value proposition
for those users—a promise of value that communicates the
benefits of your company’s products or services.
Steps in the Marketing Process

Step 3. Deliver High Customer Value

Customer value is the ratio between the perceived benefits and
costs incurred by the customer in acquiring your products or
services. But “value” from the customer’s perspective is a complex
term, because we’re really considering four different values types.
 Functional value: what the product “does” for the customer in
terms of solving a particular want or need
 Monetary value: what the product actually costs relative to its
perceived worth
 Social value: how much owning the product allows the customer
to connect with others
Steps in the Marketing Process

 Psychological value: how much that product allows the customer to

“feel better”
Value is increased by boosting the benefits (in the form of product,
place, or promotion) or minimizing the price.

Step 4. Grow Profitable Customer Relations

The bottom line is that profitable customer relationships are the “secret
sauce” of any business. This step in the marketing process is where
marketers acquire, keep, and grow customer relationships.
Steps in the Marketing Process

It isn’t enough to have a one-and-done sale. You want repeat buyers, so

marketers need to remind customers about the company’s products
and/or services and how those products and services have met their
needs and improved their lives so they make repeat purchases. Marketers
need to consider how to reach customers about their offerings and make
it easy and convenient for those customers to make continued purchases.
When customers have a positive relationship with a company or its
products or services, they’re more likely to become repeat buyers.
Satisfied customers are also more likely to be interested in buying
additional products or services from your company, and they tend to
recommend products to others, further reducing the company’s costs of
getting new customers.
Steps in the Marketing Process

Step 5: Capture Customer Value in the Form of Profits

The goal of successful customer relationship management (CRM) is
creating high customer equity—the potential profits a company earns
from its current and potential customers. It’s a relatively simple concept:
increasing customer loyalty results in higher customer equity.
Increasing customer equity is the goal of marketers because it’s a
bellwether for financial success. Think about it in simple terms: the higher
a company’s customer equity, the more profit the company generates,
and the more valuable that company (and its products or services)
becomes on the market.
 1.2. Marketing and
the 4Ps of Marketing
The Marketing Mix and the 4Ps of Marketing

The marketing mix is commonly referred to as the tactics a

company can use to promote its products or services in the market
in order to influence consumers to buy. The marketing mix is also
known as the 4Ps: product, price, place, and promotion.
• The product is the good or service that the company provides.
• The price is what the consumer pays in exchange for the product.
• The place is where the product is purchased.
• Promotion is comprised of advertising, sales, and other communication
efforts the company utilizes to attract the customer.
1.3. Factors Comprising and
Affecting the Marketing
Environment
Factors Comprising and Affecting the Marketing
Environment

The marketing environment is comprised of both the external and

internal factors and forces that influence an organization’s decision
regarding its marketing activities. Some of these factors—internal
factors— are within the control of the organization. Other factors—
external factors—are outside the control of the organization.
As we’ll explore, the internal environment is company-specific and
includes the 5M framework and organizational culture. The
external environment is subdivided into two components: the
microenvironment (or task environment) and the
macroenvironment (or broad environment).
Components of the Internal Environment

The internal environment in marketing refers to those elements within

the organization that define the atmosphere within the company’s
structure. These factors include what’s known as the 5Ms of marketing
and organizational culture.
The 5Ms of marketing (sometimes also called the 5M framework) is a
marketing/management model that defines the elements of a marketing
strategy that must be addressed to be successful.
 Minds (Staffing): This “M” might well be considered the most
important factor because it’s people who make sure the rest of the 5Ms
are utilized in a productive manner to achieve the goals of the
organization.
 Minutes (Time): Time is another valuable asset. We’ve all heard the
saying that time is money, and this is true within the marketing arena.
Components of the Internal Environment

 Machinery (Equipment): Machinery consists of the equipment

and/or physical assets used to process materials into finished or
semifinished products
 Materials (Production): Materials consist of the inputs needed to
produce goods and services.
 Money (Finance): Perhaps second only to staffing, money is a very
critical resource because it’s used to acquire and/or hire other
resources.

Organizational culture is comprised of the shared values, attitudes,

expectations, norms, and practices that guide the actions of all within the
company. Think about organizational culture as “the way we do things
around here,” and the culture can help or hinder an organization.
Components of the Internal Environment

But how does organizational culture impact marketing? Here are three very
tangible ways that your company’s culture can make a positive impact on
marketing:
 Branding and marketing efforts emanate from the organization’s core
values and culture and guide the organization’s marketing message.
Therefore, if your marketing message doesn’t match the reality of the
business, it’s akin to that adage of “putting lipstick on a pig.”
 A strong culture strengthens your marketing message because it gives
prospective customers a better idea of the values of your business, and
customers who know what you believe and value are much more likely to
do business with you.
 A strong organizational culture is also key in attracting and retaining
employees. In his quest for a happier, more positive work environment
Components of the External Environment

There are two elements within the external marketing environment: the
microenvironment and the macroenvironment. Although the factors within
these environments are not directly within the marketer’s control, they still
influence the decisions made by marketers.
The microenvironment consists of five predominant factors.
 Suppliers (sometimes also called vendors) are those partners from whom
we receive the parts and products necessary for our business.
 Market Intermediaries. Often, products are distributed by third-party
sellers such as retailers, wholesalers, and others in the distribution
channel. The reputation of these market intermediaries plays an important
role in the marketing of the product or service, both positive and negative,
so companies need to select and monitor market intermediaries on an
ongoing basis.
Components of the External Environment

Retailers purchase large quantities of goods from producers and then sell
smaller quantities to end customers for personal use or consumption.
Wholesalers purchase large quantities of products from producers and then
sell to smaller businesses such as retail stores.
 Understanding who your customers are will enable you to effectively reach
them, whether online, locally in retail stores, or internationally.
 Competitors. Successful marketing strategies must be implemented after
consideration of your competition. Knowing who your competition is and what
they are and are not offering allows you to find the gap in the market. You want
to be where the competition is not, at least in the sense of offering something
unique to a targeted market.
Components of the External Environment

 General Public. Because companies provide their offerings in

communities that support them, they have an obligation to
satisfy those communities. There’s an old saying that
“perception is reality,” so marketers’ actions must be evaluated
through the perceptual lens of those communities, because the
public’s perception of you—your reputation—is essential to your
success.
Components of the External Environment

Macroenvironment factors can be used to understand current external

influences so that marketers can more easily identify what might change in
the future, mitigate the identified risks, and take advantage of competitive
opportunities. One of the tools used by companies to assess the
environment in which they are operating is a PESTLE analysis. PESTLE is
an acronym for political, economic, social, technological, legal, and
environmental factors that provide marketers with a comprehensive view of
the whole environment from multiple angles.
 Political Factors. These factors include environmental and trade
restrictions, political stability, and business policy. (New Taxes, Fiscal
Policy, Trade Tariffs)
 Economic Factors. Economic factors play a huge role in terms of a
company’s prospects in a market. (Inflation rates, Interest rates, Forex,
GDP)
Components of the External Environment

 Social Factors. Social factors take in a wide swath of elements,

such as cultural norms and expectations, health consciousness,
population growth/decline, the age distribution of a population,
and even career attitudes. (Demographics, Cultural Trends,
Population Analytics)
 Technological Factors. These factors encompass the
innovations and developments in technology that impact an
organization’s operations, as well as the rate of technological
change. (Innovations, Automation, R&D, Technological Awareness)
Components of the External Environment

 Legal Factors. These factors include changes to legislation

impacting employment, industry regulation, licenses and permits,
and intellectual property. (Consumer Laws, Labor Laws, Safety
Standards)
 Environmental Factors. In the context of a PESTLE analysis,
environmental factors refer to variables affecting the physical
environment, like climate change, pollution, the scarcity of raw
materials, and the growing concern over companies’ carbon
footprints. (Climate, Geographical Location, Stakeholder and
consumer values).
 1.4. Evolution of
the Marketing Concept
Evolution of the Marketing Concept

Let’s take a trip back through

time to look at the evolution of
marketing practices and how
many of today’s marketing
strategies came to be.
Evolution of the Marketing Concept

The Production Concept (19th century)

Spurred on using steam power, the Industrial Revolution began in the United
States by the middle of the 19th century. Although much of the population was
still employed in agriculture, the expansion of commerce and industry drew
millions of factory workers into cities and towns. Suddenly, an abundance of
manufactured goods was available to households at a rate never experienced
before. The production concept assumed that consumers were mostly
interested in product availability and price, not necessarily product
features. As a result, companies concentrated on high production, low costs,
and mass distribution. The production concept is thought to have lasted from
just after the Civil War (1861–1865) until the 1920s
Evolution of the Marketing Concept

The Product Concept (1920s-1950s)

From the 1920s until the 1950s, the product concept dominated.
With product availability a thing of the past, consumers began to
favor products that offered quality, performance, and/or innovative
features. As a result, companies concentrated on making superior
products and improving them over time. One of the problems
with this type of thinking is that marketers may fall in love with a
product (known as “marketing myopia”) and may not realize what
the market truly wants or needs
Evolution of the Marketing Concept

The Sales Concept (1950s)

By the 1950s, mass production had become the norm rather than the
exception. Competition had increased over the years, and there
was little unfulfilled demand in the marketplace. Marketing evolved
from simply producing products that customers wanted to trying to
persuade customers to buy through advertising and personal
selling. The basic premise of the sales concept was that consumers
and businesses need to be “coaxed” into buying, and the aim of
companies was to sell what they made rather than make what
consumers wanted.
Evolution of the Marketing Concept

The Marketing Concept (1950s onwards)

The marketing concept was built on the premise that an organization
will achieve its goals when it satisfies the needs and wants of the
consumer. As a result, firms began to focus on customer needs
before developing products, rather than developing products and
then trying to “sell” them to consumers. The marketing concept was
also the start of relationship marketing— fostering long-term
relationships with customers in order to ensure repeat sales and
achieve stable relationships and reduced costs.
Evolution of the Marketing Concept

The Societal Marketing Concept (modern day)

In a nutshell, the societal marketing concept is simple. Companies
make good marketing decisions by considering not only consumers’
wants and needs but additionally the balance between those wants
and needs and the company’s capabilities and society’s long-term
interests. The concept emphasizes the social responsibilities that
companies bear. This means meeting consumers’ and businesses’
current needs while simultaneously being aware of the environmental
impact of marketing decisions on future generations’ ability to meet
their needs.
1.5. Determining Consumer
Needs and Wants
Identifying Consumer Needs and Wants

We’ve repeatedly mentioned satisfying customer needs. But

understanding those needs and/or wants isn’t always as simple as
it sounds. To better understand this concept here are really five
types of customers needs
 Stated Needs. Stated needs are those that are clearly specified
by the customer.
 Real Needs. Real needs are one level above stated needs; they
are more specific and define the parameters that are immediate
to defining and fulfilling the need.
Identifying Consumer Needs and Wants

 Unstated Needs. Unstated needs are what the customer also

expects but doesn’t ask for.
 Delight Needs. Delight needs are those that provide the “wow”
factor. These needs, like unstated needs, can make some
products more desirable than others if they meet those needs.
 Secret Needs. Secret needs are those that a customer may not
state or realize but can be one of the main reasons for choosing
a particular product to fulfill the basic stated need.
Satisfying Consumer Needs and Wants

You may be asking yourself at this point, “Does marketing satisfy

needs, or does it create needs?” Some people feel that marketing
creates needs and pressures consumers into buying unneeded
products or services.
However, marketing does not create needs; rather, it opens
consumers’ eyes to their wants, and it’s up to marketers to
understand those wants in order to guide consumers on the path to
purchasing their products or services. Marketing creates value, and
value speaks to the satisfaction of customer needs and the benefits
customers receive from the product. It’s the customer, however,
who ultimately determines how well the product fulfills their
needs and how much value the product creates.
The Value Proposition

A value proposition identifies the quantifiable benefits that

customers can expect when they choose to purchase your company’s
product or service. A value proposition is, in effect, a promise from
the company to the customer, and it can serve as a competitive
differentiator to motivate customers to purchase your company’s
products or services.
Your value proposition should bring together in a brief, concise
statement what your customer wants and/or needs and how your
product or service will meet those wants and needs better than your
competitors
The Exchange Process

Marketing facilitates what is

known as the exchange
process—the act of obtaining a
desired product or service from
an individual or business by
providing in return something of
value,
The Exchange Process

 The buyer (or customer) initiates the exchange process. The

buyer (who has a want or need) is the individual or business who
is willing to pay money or provide other personal resources to
satisfy this need or want.
Keep in mind here, however, that there is a difference
between a customer and a consumer. The customer is the
individual or business that purchases the product or service. The
consumer is the user of the product or service.
The Exchange Process

 The desired object is the product or service itself. It may be a

physical good, service, or experience that consumers expect will
satisfy their wants and/or needs.
 The seller is the individual or organization that supplies the
need-satisfying product, service, or experience.
 Inherent in the exchange process is what’s known as value—the
benefit to the customer or consumer relative to the cost in the
exchange. In other words, value is the monetary worth of the
benefits the customer receives in exchange for the product or
service.
1.6. Customer Relationship
Management
The Impact of CRM on Customer
Loyalty and Retention

Companies want to accomplish two things: improve customer

service relationships and improve customer retention. It is typically
easier and less expensive to retain a loyal customer than acquire a
new one. One way to accomplish that is through customer
relationship management (CRM)—the means through which
companies track, manage, and analyze customer interactions.
The Impact of CRM on Customer
Loyalty and Retention

There are many types of CRM software; however, most CRM

software focuses primarily on one of the following major
categories:
 Operational. Operational CRM software deals with three types of
operations: marketing, sales, and service automation.
Operational CRM software is intended to assist businesses in
automating how they approach leads and potential customers in
order to convert those potential customers into actual
customers.
The Impact of CRM on Customer
Loyalty and Retention

 Analytical. Analytical CRM software is all about data

management and analysis. The software is designed to collect,
organize, and analyze the inputted data, providing management
with insights needed to better understand market trends,
understand customer needs and wants, and make data-driven
strategic decisions.
 Collaborative. No business functions on an island. When
businesses share customer data with one another, they gain
insights and additional perspectives on customer behavior that is
mutually beneficial. This collaboration allows each business to
obtain information that it would not otherwise have access to.
The Impact of CRM on Customer
Loyalty and Retention

Before we can explore how CRM impacts customer loyalty and

retention, it’s probably a good time for a few definitions.
Customer loyalty is an ongoing positive relationship between a
customer and a business. Customer loyalty is at the crux of repeat
purchases of your product versus those of your competitors.
Customer retention is a closely related concept; it refers to a
company’s ability to transform new customers into returning
customers. In its simplest terms, it’s how you keep your customers
coming back for more. The goal of customer retention is to reduce
the number of customer defections, or those who buy your product
at least once and then not again.
The Impact of CRM on Customer
Loyalty and Retention

How does CRM impact customer loyalty and retention? Let’s take a
look at some of the ways CRM accomplishes this:
 Leveraging Customer Data. With CRM, a business can gather
data on your existing customers and prospective customers so
that their experience is a more positive one.
 Enhanced Customer Communications. CRM software can be
programmed to automatically send thank you notes to customers,
send newsletters regarding new products, and send customer
satisfaction surveys or polls so that you can glean more insight
into your customers’ levels of satisfaction with your product or
service.
The Impact of CRM on Customer
Loyalty and Retention

 Ascertaining Customer Needs. Fostering customer loyalty

begins with understanding what your customers want and need.
An effective CRM program can track customers’ purchase
history, habits and preferences, and even web and email
interaction. From this information, you can gain valuable insights
that will aid you in developing targeted marketing strategies.
 Gathering Feedback. We’d previously mentioned distributing
customer surveys through use of your CRM software. This will
provide you with valuable feedback not only about customers’
perceptions of your product or service but also about their
customer experiences.
The Impact of CRM on Customer
Loyalty and Retention

 Managing Customer Loyalty Programs. CRM software can

assist you in identifying prospective loyalty program members
and track member rewards. Loyalty programs reward members
for purchases and have been shown to increase customer
retention.
The Role of CRM in Building
Customer Equity

We have already talked about customer equity—the potential profit

a company earns from all of its customers, both current and
potential—and customer equity is a core CRM benchmark. CRM
isn’t a one-way communication street to customers. It’s a
two-way street that allows customers to define and
consequently shape offerings in terms of their
requirements. This paves the way for open, honest dialogue
that can ultimately lead to benefits to customers, thus
resulting in higher customer equity.
1.7. Ethical Marketing
Ethical Marketing Defined

As the term suggests, ethical marketing involves companies not

only trying to market their products and services but considering
how society will benefit from the introduction of those offerings. It’s
not so much a practice as it is a philosophy that tries to promote
fairness, honesty, and a sense of responsibility in all of the
marketing done by the company.
Ethical Marketing Defined

What are the principles of ethical marketing? According to Lapaas Digital,

a digital marketing agency based in
Delhi, India, some of those principles include the following:
 All marketing should be true.
 The privacy of the end user is most important.
 Marketing campaigns must adhere to the norms, standards, rules, and
regulations set forth by the government and other lawmaking
authorities.
 Marketing professionals must be transparent about what they are trying
to convey and whom they are approaching to convey the same
The Importance of Ethical
Marketing

Ethics are critical to a company’s reputation, particularly when public

opinion—particularly negative public opinion—can go viral in an instant,
thanks to social media.
Ask yourself a question: how important are a company’s ethics to you
when you decide to purchase a product or service? According to new
research by Mintel, 56 percent of US consumers stop buying from
companies they believe are unethical. Perhaps even more
importantly, approximately one-third of consumers are inclined to tell
others when they perceive a brand to be taking actions that they
perceive to be honest, fair, and responsible. Taking this one step further,
29 percent of them will share their support of ethical companies via
social media.
The Dos and Don’ts of Ethical
Marketing

the dos:
 Ensure transparency. Transparency is key, and marketers should
attempt to provide the maximum amount of information to the
consumer regarding the product, its usage, and safety concerns.
 Respect data privacy. As we noted in our discussion of CRM above,
marketers have the ability to collect vast amounts of data about
consumers. Data privacy is the biggest concern for consumers in this
data-driven world, so marketers must always respect data privacy.
 Prioritize the concerns of the consumer. No matter how small the
concern of your consumer is, a marketer’s top priority should be to
respond to those concerns in a prompt, meaningful way.
The Dos and Don’ts of Ethical
Marketing

the don’ts:
 Don’t overemphasize or exaggerate. In marketing, this is
sometimes referred to as “puffery.” Of course, you want to convey
the features and benefits of the product or service to the customer,
but these need to be stated clearly and accurately. Don’t promise
something you can’t deliver— doing so is unethical and not
beneficial in the long run.
 Don’t make false or unverified claims.
 Don’t make false comparisons. Not only shouldn’t you make
false or unverified claims about your own products or services, but
you shouldn’t do it to competitors’ products either.