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Module 2: Introduction to Marketing Management

Learning Outcomes
After reading this lesson you should be able to:
ӹ Develop basic understanding of marketing management.
ӹ Discuss the importance of marketing
ӹ Articulate the evolution of marketing concept
ӹ Understand the different types of marketing environment

INTRODUCTION
Marketing is everywhere and it affects our day- to-day life in every
possible manner. Formally or informally people and organizations engage in a vast
number of activities that could be called as marketing. Good marketing is no
accident, but a result of careful planning and execution. It is both an art and science.
Let’s discuss various concepts and issues in marketing.

DEFINITION
Marketing management is the art and science of choosing target markets and
getting, keeping and growing customers through creating, delivering and
communicating superior customer value. In short Marketing is “Meeting needs
profitably”. Marketing has been defined by different authors in different ways which
can be broadly classified into three

Product Oriented Definition

The emphasis is given on products.
In1985 AMA redefined marketing as “Marketing is the process of planning and
executing the conception, pricing, promotion and distribution of ideas, goods and
services to create exchanges that satisfy individual and organizational goals.”

Customer- Oriented Definition

Here the emphasis is on customers and their satisfaction.
In the words of Philip Kotler “Marketing is the human activity directed at satisfying
needs and wants through an exchange process.”

Value Oriented Definition (Modern Definition)

In 2004 the American Marketing Association defined “Marketing is an
organizational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that
benefit the organization and its stakeholders.”

SCOPE OF MARKETING
The scope of marketing can be understood by discussing what is marketing,
how it works, what is marketed and who does the marketing.
Peter Drucker, a leading management theorist, puts it this way, there will
always, one can assume, be need for some selling. But the aim of marketing is to
make selling superfluous. The aim of marketing is to know and understand the
customer so well that the product or services fits him and sells itself. Ideally
marketing should result in a customer who is ready to buy. All that should be needed
then is to make the product or service available.
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What is marketed?
Marketing people market 10 types of entities; let’s take a quick look at these;
1. GOODS physical goods constitute the bulk of most countries production and
marketing efforts.
2. SERVICES include the work of airlines, hotels, cars rental firms, barber and
beauticians, maintenance and repair people, and accountants, bankers, lawyers,
engineers’ doctors, software programmers, and management consultants
3. EVENTS marketers promote time-based events, such as major trade shows, artistic
performances, and company anniversaries. Global sporting events such as the
Olympics and the World cup are promoted aggressively to both companies and fans.
4. EXPERIENCES by orchestrating several services and goods, a firm can create, stage
and market experiences. Veega land, Black Thunder etc represents this kind of
experiential marketing
5. PERSONS celebrity marketing is a major business, Artists, Musicians, CEOs,
physicians, high- profile lawyers and financiers, and other professionals all get help
from celebrity marketers.
6. PLACES cities, states, regions, and whole nations compete actively to attract tourists,
factories, company headquarters, and new residents. Place marketers include
economic development specialists, real estate agents, commercial banks, local
business associations, and advertising and public relations agencies
7. PROPERTIES properties are intangible rights of ownership of either real property
(real estate) or financial property (stocks and bonds). Properties are bought and
sold, and these exchanges require marketing.
8. ORGANIZATIONS organizations actively work to build a strong, favorable, and
unique image in the minds of their target publics.
9. INFORMATION information is essentially what books, schools, and universities
produce, market, and distribute at a price to parents, students, and communities.
10. IDEAS Every market offering includes a basic idea. Social marketers are busy
promoting such ideas as “Friends Don’t Let Friends Drive Drunk” and “A Mind Is a
Terrible Thing to Waste.”

Who markets?
MARKETERS AND PROSPECTS
A marketer is someone who seeks a response- attention, a purchase, a vote, a
donation – from another party, called the prospect. If two parties are seeking to sell
something to each other, we call them both marketers.

IMPORTANCE OF MARKETING

Marketing is important not only for organizations but for individuals, society and
economy as a whole. Financial success often depends on marketing ability. Finance,
operations, and other business functions will not really matter if there isn’t sufficient
demand for products and services so the company can make a profit. There must be top line
for there to be a bottom line. Many companies have now created a Chief Marketing Officer,
or CMO, position to put marketing on a equal footing with other C-level executives, such as
the Chief Executive Officer (CEO) and Chief Financial Officer (CFO).

Also marketing steps its foot in every walk of life. Some of its importance can be discussed
as follows

IMPORTANCE OF MARKETING TO COMPANIES

Sound marketing is critical to the success of the organization in the following ways:
 Helps in income generation.
 Helps in planning and decision-making.
 Helps in distribution
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

 Helps in exchanging information.
 Helps to adapt to changing environment.
 Expands global presence.
 Helps to earn goodwill.

IMPORTANCE OF MARKETING TO CONSUMERS

 Provides quality products.
 Provides variety of products.
 Improves knowledge of consumers.
 Helps in selection.
 Consumer satisfaction.

IMPORTANCE OF MARKETING TO SOCIETY

Marketing bridges the gap between firm and society.
 Provides employment.
 Raises standard of living.
 Creates utilities.
 Reduces costs.
 Solves social problems.
 Makes life easier.
 Enriches society.

IMPORTANCE OF MARKETING TO ECONOMY

It stimulates research and innovation
 Saves the economy from depression.
 Increase in national income.
 Economic growth.
 Ploughing back of resources

EVOLUTION OF MARKETING CONCEPT

Marketing concept has undergone a drastic change over years. Earlier it was
production or later selling which was key to marketing idea but moving ahead now
these have given way to customer satisfaction rather delight developing a modern
marketing concept. Let’s review the evolution of earlier marketing ideas;

THE PRODUCTION CONCEPT

It is one of the oldest concepts in business. It holds that consumers will
prefer products that are widely available and inexpensive. Managers of production-
oriented business concentrate on achieving high production efficiency, low costs,
and mass distribution.

THE PRODUCT CONCEPT

It proposes that consumers favor products that offer the most quality,
performance, or innovative features. Managers in these organizations focus on
making superior products and improving them overtime.

THE SELLING CONCEPT

It holds that consumers and businesses, if left alone, won’t buy enough of the
organization’s product. The organization must therefore undertake an aggressive
selling and promotion effort.

THE MARKETING CONCEPT

It emerged in mid-1950s, instead of a product- centered, make- and –sell
philosophy, business shifted to a customer- centered, sense-and-respond
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philosophy.

The marketing concept holds that the key to achieving organizational goals is being effective than
competitors in creating, delivering, and communicating superior customer value to your chosen
target markets.

Theodore Levitt of Harward drew a perceptive contrast between the selling and marketing
concepts. Selling focuses on the needs of the seller, marketing on the needs of the buyer. Selling is
preoccupied with the seller’s need to convert his product into cash, marketing with the idea of
satisfying the needs of the customer by means of the product and the whole cluster of things
associated with creating , delivering, and finally consuming it.

Several scholars have found that companies that embrace the marketing concept achieve superior
performance. This was first demonstrated by companies practicing a reactive market orientation-
understanding and meeting customers’ expressed needs.

HOLISTIC MARKETING CONCEPT

The trends and forces defining the 21st century are leading business firms to a new set of
beliefs and practices. Today’s best marketers recognize the need to have a more complete, cohesive
approach that goes beyond traditional applications of the marketing concept.

This concept is based on the development, design, and implementation of marketing

programs, processes and activities that recognizes their breadth and interdependencies. Holistic
marketing recognizes that “everything matters” in marketing- and that a broad, integrated
perspective is often necessary. Holistic marketing is thus an approach that attempts to recognize
and reconcile the scope and complexities of marketing activities.

MARKETING MIX
In the words of Philip Kotler, “Marketing Mix is the set of controllable variables and their
levels that the firm uses to influence the target market.” Marketing mix is a combination of various
elements, namely, Product, Price, Place (replaced by Physical Distribution) and Promotion. (see
fig:1)

Fig: 1 Components of Marketing Mix

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Opportunities. What favorable environmental trends may benefit our firm? (Is our market
size growing? Are family income levels rising in our market? Is merchandise priced
correctly for the target market?) What is the competition doing in our market? (Are new
firms entering or are existing firms leaving? What is the impact on us?) What areas of
business that are closely related to ours are undeveloped? (Is it possible for us to expand
into a related field serving the same customers and take advantage of our good name in the
marketplace?)

Threats. What unfortunate environmental trends may hurt our future performance? (Has
deflation caused consumers to delay purchasing durable goods hoping that next year prices
will be significantly lower? As a result, has the consumer become both price and time
sensitive? Has this prevented us from raising our prices in order to pass increasing costs on
to consumers? How could our competitor’s prices, new products, or services.
The retailer must develop a retail marketing strategy with strong financial elements.
A fully developed marketing strategy should address the following considerations: the
specific target market, location, the specific retail mix that the retailer intends to use, and
the retailer’s value proposition.
1. The specific target market is the group or groups of customers that the retailer is
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seeking to serve. It is important for retailers to understand that different target
markets demand different product offerings. For this reason, successful retailers
must determine which customers make them the most money and then segment
them carefully, realign their stores, and empower employees to target those favored
shoppers with products and services that will encourage them to spend more and
come back often
2. A location---whether a traditional store in a geographic space, a person’s home in
relation to a print catalog or television shopping, or a virtual store in cyberspace---
should be consistent with the needs and wants of the desired target market
3. The specific retail mix a retailer intends to use to appeal to its target market and
thereby meet its financial objectives is the combination of merchandise, price,
advertising and promotion, location, customer services and selling, and store layout
and design that the retailer uses to satisfy the target market (see Exhibit 2.5).
4. The retailer’s value proposition is a clear statement of the tangible and intangible
results a customer receives from using the retailer’s products or services. It is the
difference between the benefits offered by one retailer versus those of the
competition

Figure 2.5 constitute the retail mix that every retailing manager can
focused on in improving in order to have a successful management
THE RETAIL STRATEGIC PLANNING AND OPERATIONS MANAGEMENT MODEL.
The strategic planning and operations management model, suggests that a
retailer must engage in two types of planning and management tasks: strategic
planning and operations management. Each task is undertaken to achieve high-
profit results.
Strategic Planning Strategic planning, as we pointed out at the beginning of
the chapter, is concerned with how the retailer responds to the environment in an
effort to establish a long-term course of action. In principle, the retailer’s strategic
planning should best reflect the line(s) of trade in which the retailer will operate,
the market(s) it will pursue, and the retail mix it will use. Remember, strategic
planning requires a long-term commitment of resources by the retailer. An error in
strategic planning can result in a decline in profitability, bankruptcy, or a loss of
competitive position. On the other hand, effective strategic planning can help
protect the retailer against competitive onslaughts.
The initial steps in strategic planning are to define the firm’s mission,
establish goals and objectives, and perform a SWOTanalysis. The next steps are to
select the target market and appropriate location(s). It is important to note that
most retail managers or executives have very little control over location decisions
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Exhibit 2.6 profiles the major environmental forces that should be assessed.
Briefly these are consumer behavior, competitor behavior, supply chain behavior,
the socioeconomic environment, the technological environment, and the legal and
ethical environment.
1. Consumer behavior. The behavior of consumers will obviously have a
significant impact on the retailer’s future. Specifically, the retailer will
need to understand the determinants of shopping behavior so that it can
identify likely changes in that behavior and develop appropriate
strategies.
2. Competitor behavior. How competing retailers behave will have a major
impact on the most appropriate strategy
3. Supply chain behavior. The behavior of members of the retailer’s supply
chain can have a significant impact on the retailer’s future
4. Socioeconomic environment. The retailer must understand how
economic and demographic trends will influence revenues and costs in
the future and adapt its strategy according to these changes.
5. Technological environment. The technical frontiers of the retail system
encompass new and better ways of performing standard retail functions.
6. Legal and ethical environment. The retailer should be familiar with local,
state, and federal regulations of the retail system

Operations Management. Operations management is concerned with maximizing the

efficiency of the retailer’s use of resources and with how the retailer converts these
resources into sales and profits. In other words, its aim is to maximize the performance of
current operations. Our retail strategic planning and operations management model
(Exhibit 2.6) shows that operations management involves managing the buying and
handling of merchandise, pricing, advertising and promotion, customer services and selling,
and facilities. All of these activities require day-to-day attention

High-Performance Results. The far-right box of the retail strategic planning and operations
management model (Exhibit 2.6) suggests that the cumulative effect of well-designed and
executed strategic and operations plans will be the achievement of high profit. Mistakes in
either of these two areas will severely hamper the retailer’s performance and prevent it
from being among the leaders in its industry

EXERCISES: TRY THIS (Discussion should not exceed 100 words including comma, space and
period. A corresponding deduction will be implemented for any excess of words.)
I. Fill in the correct answer:
1. When a retailer sets goals based on a comparison of its actions against its competitors, it
is establishing _______ goals
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2. The best way for a retailer to differentiate itself from the competition in the eyes of the
consumer is to ____________.

II. Dolph Drake, the owner of Bulldog Books, has three bookstores near the campus of a large
state university. In the past, he has run his stores very informally. He likes to claim that he is
successful because he doesn’t think too much and that he makes most of his decisions by the
‘‘seat of his pants.’’ Over the past five years profits at each store have increased between 5
percent and 7 percent each year, despite the fact that the average price of textbooks has
doubled. Also, Drake has never given much thought to changing his original plans for his
bookstores. While Drake was the first to open off-campus stores and therefore got the
prime locations, competitors are beginning to appear near all three of his stores. In fact, just
recently an out-of-town competitor gathered the majority of the end-of semester textbook
buybacks, one of the most profitable activities for a campus bookstore. This out of towner
merely set up a drive-through buyback operation at a nearby parking lot so that students
could pull up under an awning, hand over their books, and drive off with money within
minutes. Even though the competitor left town the next day, Drake expects other book
buyers will seek to ‘‘hit and run’’ at the end of the fall semester. As a result of this recent loss
of business, Drake feels that it is time to develop a more structured approach for his
business and asks you as part of your summer internship to research the strategic planning
process. You are to prepare a memo on the basic steps and tasks that are involved in
developing a strategic plan. Be sure to include in your memo a mission statement and a list
of objectives that Bulldog Books should seek to achieve.
III. You now have an idea how to estimate the net profits that your business might earn. You
saw what would happen if your sales estimate was off by 10 percent. Now it’s time to
analyze the dollar investment you need in assets to support your business and how you
might finance these assets. Your investment in assets needs to cover inventory, fixtures,
equipment, cash, customer credit (i.e., accounts receivable), and perhaps other assets. These
assets could be financed with debt or by investments you or perhaps other investors make
in the business. Compute the strategic profit model ratios under the assumption that your
first-year sales are 700,000, net profit is 66,000, total investment in assets is 400,000, and
the total debt to finance these assets is 250,000. (Hint: Net worth is equal to total assets less
debt.) What would happen to these ratios if net profit rose to 75,000?

HAENG-UN-EUL BIBNIDA

-daekeul -
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