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Principles of Marketing

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Principles of Marketing ­ MGT301
Lesson ­ 5
Lesson overview and learning objectives:
In last Lesson the focus of discussion was core concepts of the marketing and the increasingly
important role of the marketing process in the ever-changing domestic and global business
environment Today we will be covering following topics:
The marketing concept has changed dramatically over the last several decades, and recently the
focus has increasingly moved to customers (versus products and selling) marketing globally and the
various technology issues that impact the market. In addition, there is renewed emphasis in
marketing on creating and innovating with new and better products and services rather than just
competing against other firms and following the marketing patterns established by competitors.
A. Porter's 5 Forces Model of Competition:
Marketing is facing different challenges in the 21st century to meet these Before entering the
business Porter model can be used to analyze the environment both for new and existing business
and can be used to overcome and meet the challenges.
 Threat of New Entrants
Ratio of new entrants in the
T h re a t o f
N ew
industry greater the ratio greater
T h rt r a n ts
E n eat of
will be intensity of competition
N ew
E n tra n ts
 Bargaining  Power  of
B a rg a in in g
When   B a r g a in in g
Pow er of
R iv a lr y A m o n g C o m p e tin g
Pow er of
competition  is  intense  and
B u ye rs
F irm s in In d u s tr y
S u p p lie rs
number of manufacturer is greater
the buyer have more options for
product switching over this will
T h re a t o f
S u b s titu te
increase the buying power of
P ro d u c ts
 Threat of Substitute: As
obvious from the term greater the threat of new entrants will result in greater higher
completion that in tern will result in increase in the number of substitutes
 Bargaining Power of Suppliers: Greater number of the supplier will provide the stronger
buying power to the manufacturer/customer and vice versa
 Rivalry Among Competing Firms in Industry: Larger number of the manufacturers and
greater number of product variety increases the rivalry among the competitors, which
demands for more quality and customer satisfy9ng products in order to meet the
A. The information technology revolution
The information age, particularly the advent of the Internet is having a major impact on the
direction of marketing science and practice.
Digitalization and Connectivity: The flow of digital information requires connectivity Intranets,
Extranets, and the Internet are key drivers of the "new economy
Technologies for Connecting
b. The major force behind the new connectedness is technology.
Principles of Marketing ­ MGT301
c. The boom in computer, telecommunications, and information technology, as well as the
merging of these technologies, has had a major impact on the way businesses bring value to their
1). Using today's powerful computers, marketers create detailed databases and use them to
target individual customers with offers designed to meet their specific needs and buying patterns.
2). Cell phones; fax machines, and CD-ROM to interactive TV are just a few of  the tools
being used to make connections.
a). Electronic commerce allows consumers to shop and buy without ever leaving home.
b). Virtual reality displays, virtual shopping, and virtual salespeople are just a few of the
changes that consumers seem to be embracing. The Information Superhighway (and its backbone--
the Internet) will link customers to companies in ways that were unimagined only a few years ago.
The Internet is a vast and burgeoning global web of computer networks, with no central
management or ownership. The user-friendly World Wide Web has changed us all.
1). The Internet has been hailed as the technology behind a new model for doing business.
2). New applications include:
a). Internet--connecting with customers.
b). Intranets--connecting with others in the company.
c). Extranets--connecting with strategic partners, suppliers, and dealers.
3). Marketplaces have now become market spaces.
2). However, new opportunities abound.
 Connections with Customers
Today, most marketers are realizing that they don't want to connect with just any  customers.
Instead, most are targeting fewer, potentially more profitable customers.
1).  Greater diversity and new consumer connections have meant greater market
a). Marketers have responded by moving to more segmented marketing where they
target carefully chosen sub markets or even individual buyers.
2). At the same time, companies are analyzing the value of the customer to the firm. What
value does the customer bring to the organization? Are they worth pursuing?
a). Connect with those that will be bring in profits.
h. Connect for a customer's lifetime.
1). Rather than always looking for new customers, the focus has now shifted to keeping
current customers and building lasting relationships based on superior satisfaction and value.
2). Long-term profits have superseded short-term gain.
3). Companies are spending more time considering "share of customer" and less time
worrying about "share of market."
a). Employees are being trained in cross-selling.
b). Up-selling is now a common practice.
Today, beyond connecting more deeply, many companies are also taking advantage of new
technologies that let them connect more directly with their customers.
1). Products are now available via telephone, mail-order catalogs, kiosks, and electronic
2). Business-to-business purchasing over the Internet has increased even faster than online
consumer buying.
3). Some firms sell only via direct channels (Example: Dell Computer,
4). Other firms use a combination of traditional selling and direct selling methods.
Direct marketing is redefining the buyer's role in connecting with sellers.
1). Buyers are now active participants in shaping the marketing offer and process.
2). Some companies allow buyers to design their own products online.
Principles of Marketing ­ MGT301
3). Some marketers have hailed direct marketing as the "marketing model of the next
 Connections with Marketing's Partners
Connecting inside the company--traditionally, marketers have played the role of intermediary,
charged with understanding customer needs and representing the customer to different company
departments, which then acted upon these needs.
1). Marketing no longer has sole ownership of customer interactions.
a). Now, every employee must be customer-focused.
b). Companies are reorganizing their operations to align them better with customer
c). Teams coordinate efforts toward the customer.
Connecting with outside partners--most companies today are networked companies, relying heavily
on partnerships with other firms.
1). Supply chain management--the supply chain describes a longer channel, stretching from
raw materials to components to final products that are carried to final buyers. Each member of
the supply chain creates and captures only a portion of the total value generated by the supply
2). Supply chain management allows all partners to strengthen relationships for mode of
payment and delivery.
3). Strategic alliances--companies need strategic partners.
a). Many strategic alliances take the form of marketing alliances--can be  product or
service oriented in which one company licenses another to produce its product, or two companies
jointly market their complementary products.
b). Alliances could be promotional, logistical, or even pricing in nature.
c). Companies must be careful when choosing partners so as to complement strengths
and offset weaknesses.
Connections with the World Around Us
Marketers are taking a fresh look at how they connect with the broader world around them.
1). Global connections--geographical and cultural differences and distances have shrunk
dramatically in the last decade.
2). Today, almost every company, large or small, is touched in some way by global
a).  Firms are challenged by international competitors in their once safe domestic
b). Companies are not only exporting, but buying more components and supplies from
c). Domestically purchased goods and services are hybrids (with components coming
from many international sources).
d). The secret for business success in the next century will be to build good global
The New Connected World of Marketing
Smart marketers of all kinds are taking advantage of new opportunities for connecting with their
customers, marketing partners, and the world around them.
1). The old marketing thinking saw marketing as little more than selling or advertising. It
a). Customer acquisition.
b). Short-term profit.
Principles of Marketing ­ MGT301
c). Goal--sell products.
2). The new marketing thinking believes that improving customer knowledge and customer
connections is a corporate goal.
a). Target profitable customers.
b). Find innovative ways to capture and keep these customers.
c). Form direct connections and build lasting customer relationships.
 Use targeted media.
 Integrate communications.
 Use technologies to provide connections.
 View suppliers and distributors as partners, not adversaries.
 Deliver superior value.
B. Rapid Globalisation
Technological and economic developments continue to shrink the distances between countries.
World is becoming global village due to advancement in the connecting technologies. The world is
shrinking rapidly with the advent of faster communication, and transportation, and financial flows.
In the Twenty-First century, firms can no longer afford to pay attention only to their domestic
market, no matter how large it is. Many industries are global industries, and those firms that
operate globally achieve lower costs and higher brand awareness. At the same time, global
marketing is risky because of variable exchange rates, unstable governments, protectionist tariffs
and trade barriers, and other prohibitive factors
Global Marketing into the Twenty-First Century:
a. The world is shrinking rapidly with advent of faster communication, transportation, and
financial flows.
c. Domestic companies never thought about foreign competitors until they suddenly found
them in their backyard. The firm that stays at home to play it safe might not only lose its chance to
enter other markets but also risks losing its home market.
d.  Although some companies would like to stem the tide of foreign imports through
protectionism, this response would be only a temporary solution and, in the long run, would raise
the cost of living and protect inefficient firms.
e. The longer that companies delay taking steps toward internationalizing; the more they risk
being shut out of growing global markets.
h. A global firm, is a firm that, by operating in more than one country, gains marketing,
production, R&D, and financial advantages in its costs and reputation that are not available to
purely domestic competitors.
C. The Changing World Economy
Even as new markets open to rising affluence in such countries as the "new industrialised" pacific
rim, poverty in many areas and slowed economies in previously industrial nations has already
changed the world economy. The New Economy presents many new challenges and opportunities
for the marketer. The most important point is that the New Economy assuredly places the
customer more firmly in the driver's seat for decisions on her/his product and service choices
(customization and customerization). In addition, there have been and will be many changes in
business and marketing practices as both consumers and businesses have virtual and real-time
access to literally millions of products, offers, options, prices, people, competitors, and sources of
information that did not exist until recent years. As a result, the marketing mix will change as
marketers and firms identify new uses for intangible assets and effective customer relationship
Principles of Marketing ­ MGT301
management that is more than a marketing term. We can assume that this increasingly rapid
growth and rate of change will continue, and despite the dot-com bust, recession, and other major
social, political, and economic adjustments, the Internet and the New Economy have changed
marketers and marketing for the long-term future.
D. The Call for More Ethics and Social Responsibility
The greed of the 1980's and the problems caused by pollution in Eastern Europe and elsewhere
has spurred a new interest in ethical conduct in business. Social and ethical issues in marketing:
Connections with our values and social responsibilities--as the worldwide consumerism and
environmentalism movements mature, today's marketers are being called upon to take greater
responsibility for the social and environmental impact of their actions. The social responsibility and
environmental movements will place even stricter demands on companies in the future. Those
that resist will be forced into compliance by legislation or consumer outcries.
High Prices High Costs of Distribution can be misleading. Among other reasons, consumers
want to know about products, it is expensive to advertise and promote, brands provide
psychological benefits and quality standards, and distribution costs include delivering the product
not just promoting it.  High Advertising and Promotion Costs are determined in a competitive
marketplace where consumers often have real choices. Excessive Markups are the exception rather
than the rule and are more likely in uncompetitive industries. Ethics can influence strategic
decisions on such pricing decisions as market penetration versus market skimming
High costs of distribution. It is often argued that middlemen are greedy and mark up
prices beyond the value of their services. A comprehensive implementation of marketing ethics
should include policies and guidelines for defining the company's relationship with distributors
High advertising and promotion costs. Modern marketing is also accused of pushing
prices up to cover the costs of heavy advertising and sales promotion. When considered in light of
increasing activism among consumer groups to regulate advertising, marketers have a unique
opportunity to proactively address the needs for strong advertising ethical standards. While
protecting free speech, marketers could adopt a statement on ethics in advertising that promotes
accurate information exchange, encourages creative and innovative message generation.
Excessive middlemen gross profit margins. Critics say that middlemens gross margins
are excessive.
Deceptive Practices Deceptive pricing includes practices such as falsely advertising "factory"
or "wholesale" prices or a large price reduction from a phoney high list price. Deceptive promotion
includes practices such as overstating the product's features or performance, luring the customer to
the store for a bargain that is out of stock, or running rigged contests. Deceptive packaging includes
exaggerating package contents through subtle design, not filling the package to the top, using
misleading labeling, or describing size in misleading terms.
6. High-Pressure Selling People are free to not respond to selling tactics. Moreover, most
states have "cooling off" periods that allow buyers to return products or back out of a
purchase for large ticket items.
7. Unsafe Products Dangerous products are most often illegal.
Corporate marketing policies can provide broad guidelines that everyone in the organization must
Principles of Marketing ­ MGT301
8. Product Development. Product development may be influenced by ethical codes seeking
more desirable products or changes is salutary product concepts to make them more desirable.
E. The New Marketing Landscape
The new marketing landscape is a dynamic, fast-paced and evolving function of all these changes
and opportunities. More than ever there is no static formula for success. Customer is known as the
king in the marketing and all efforts of the organization rate directed towards the customer
satisfaction this provides new landscape to the marketing and development of the connecting
technologies are playing primary role in this concern.
Table of Contents:
  1. PRINCIPLES OF MARKETING:Introduction of Marketing, How is Marketing Done?
  5. MARKETING CHALLENGES IN THE 21st CENTURY:Connections with Customers
  6. STRATEGIC PLANNING AND MARKETING PROCESS:Setting Company Objectives and Goals
  7. PORTFOLIO ANALYSIS:MARKETING PROCESS,Marketing Strategy Planning Process
  8. MARKETING PROCESS:Analyzing marketing opportunities, Contents of Marketing Plan
  9. MARKETING ENVIRONMENT:The Companyís Microenvironment, Customers
  10. MARKETING MACRO ENVIRONMENT:Demographic Environment, Cultural Environment
  12. THE MARKETING RESEARCH PROCESS:Developing the Research Plan, Research Approaches
  14. CONSUMER BUYING BEHAVIOR:Model of consumer behavior, Cultural Factors
  15. CONSUMER BUYING BEHAVIOR (CONTINUED):Personal Factors, Psychological Factors
  16. BUSINESS MARKETS AND BUYING BEHAVIOR:Market structure and demand
  17. MARKET SEGMENTATION:Steps in Target Marketing, Mass Marketing
  18. MARKET SEGMENTATION (CONTINUED):Market Targeting, How Many Differences to Promote
  19. Product:Marketing Mix, Levels of Product and Services, Consumer Products
  20. PRODUCT:Individual product decisions, Product Attributes, Branding
  21. PRODUCT:NEW PRODUCT DEVELOPMENT PROCESS, Idea generation, Test Marketing
  23. KEY TERMS:New-product development, Idea generation, Product development
  24. Price the 2nd P of Marketing Mix:Marketing Objectives, Costs, The Market and Demand
  25. PRICE THE 2ND P OF MARKETING MIX:General Pricing Approaches, Fixed Cost
  26. PRICE THE 2ND P OF MARKETING MIX:Discount and Allowance Pricing, Segmented Pricing
  27. PRICE THE 2ND P OF MARKETING MIX:Price Changes, Initiating Price Increases
  28. PLACE- THE 3RD P OF MARKETING MIX:Marketing Channel, Channel Behavior
  29. LOGISTIC MANAGEMENT:Push Versus Pull Strategy, Goals of the Logistics System
  30. RETAILING AND WHOLESALING:Customer Service, Product Line, Discount Stores
  31. KEY TERMS:Distribution channel, Franchise organization, Distribution center
  32. PROMOTION THE 4TH P OF MARKETING MIX:Integrated Marketing Communications
  33. ADVERTISING:The Five Mís of Advertising, Advertising decisions
  34. ADVERTISING:SALES PROMOTION, Evaluating Advertising, Sales Promotion
  35. PERSONAL SELLING:The Role of the Sales Force, Builds Relationships
  36. SALES FORCE MANAGEMENT:Managing the Sales Force, Compensating Salespeople
  38. DIRECT MARKETING:PUBLIC RELATIONS, Major Public Relations Decisions
  39. KEY TERMS:Public relations, Advertising, Catalog Marketing
  40. CREATING COMPETITIVE ADVANTAGE:Competitor Analysis, Competitive Strategies
  41. GLOBAL MARKETING:International Trade System, Economic Environment
  42. E-MARKETING:Internet Marketing, Electronic Commerce, Basic-Forms
  43. MARKETING AND SOCIETY:Social Criticisms of Marketing, Marketing Ethics