Lesson 1
Definitions of Marketing
- Marketing is the process of developing, pricing, promoting, and distributing goods, services and ideas to satisfy the needs of consumers. (Kerin, Hartly & Rudelius, 2005)
- Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others (Kotler, 2003)
To explain the above definitions and illustration, the following terms must define first:
- Needs. The human need is a state of felt deprivation. It is a personal requirements which motivate behavior and which people cannot live without, like food, shelter, and clothing which are considered in psychology as the basic needs. In tourism and hospitality industry, this includes warmth, safety, need for belonging, affection and relaxation. When these needs are not satisfied, a void exists. An unsatisfied person will do one of two things: look for an object that will satisfy the need or try to reduce the need
Wants. These are form taken by human needs as they are shaped by culture and individual personality. These needs are translated into specific satisfiers which may differ from person to person. Wants are described in terms of objects that will satisfy needs. As a society evolves, the wants of its members expand. As people are exposed to more objects that arouse their interest and desire, producers try to provide more want-satisfying products and services.
- Demands. As more and more products are introduced, we crave for more and continuously want more than what we already have. That makes the human wants unlimited, non-stop. However, resources are limited, thus we cannot buy everything we want. When backed by buying power, wants become demands.
- Products. A product is anything that can be offered to satisfy a need or want. The concept of product is not limited to physical objects. Anything capable of satisfying a need can be called a product. It also include such as other entities as experiences, persons, places, organizations, information and ideas. Products should be offered not only as physical acquisitions but also as solutions to a need.
- Value, Satisfaction and Quality. A need can be satisfied by a wide array of products that can choose from. Customer Value is the difference between the value of buying, owning and using the product and the cost of the product. The customer compares the cost of the product with the benefits he gains from using the product. If the benefit exceeds the cost, there is a positive customer value and the customer usually decides to buy the product. It the cost exceeds the benefits, there is negative customer value and the customer would most likely avoid the product and look for something else. Customer Satisfaction refers to the difference between the buyer’s expectation and the perceived performance of the product. Before making any purchase, a customer would already have an expectation in mind and his task is to look for a product which he thinks would perform and deliver according to his expectations. If the product performs less than expected, the customer is dissatisfied. Quality is what the customer says it is. The decision-maker and the final evaluator of quality is the customer. Indeed, quality begins with customer needs and ends with customer satisfaction.
- Exchange, Transactions and Relationships. Exchange is the act of obtaining a desired object from someone by offering something in return. Exchange is only one of several ways people can obtain a desired object. Exchange is said to be the core concept of marketing. In order to have a marketing exchange, five conditions have to be met:
a. There must be at least two parties to the exchange.
b. Each party must have something that the other party needs or wants.
c. Each party must want to deal with the other party.
d. Each party must have the freedom to accept or reject the other party’s offer.
e. Each party must be able to communicate with other party.
Transaction is marketing’s unit of measurement. A transaction consists of a trade of values between two parties. Not all transactions involve money. Marketing must not be seen as a series of exchanges and transactions. TO succeed, exchanges and transactions must be continuous to sustain a firm’s operations. Thus, a new concept has evolved: Relationship Marketing . It treats each transaction with much value and appreciation. Instead of building short-term transactions, marketers build long-term relationship with valued customers, distributors, suppliers and dealers. The operating assumption of relationship marketing is: BUILD GOOD RELATIONSHIP AND PROFITABLE TRANSACTIONS WILL FOLLOW.
- Markets. It refers to a set of actual and potential buyers of a product who have a common need or want that can be satisfied through exchange. Market in marketing does not refer to a place but to a group of people bound by a common need or want. The size of a market is measured by the number of people who exhibit the need. Market has come to cover different groupings of customers. They can be called demographic markets that refers to customers bound by similar demographic characteristics (e.g. markets based on age, gender, income. Another is the geographic markets which are defined by territory.
Lesson 2
Marketing Management
Marketing Management is the analysis, planning, implementation, and control of programs designed to create, build, and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives.
Marketing Managers are person interested in shaping the level, time, and composition and demand for the company’s products and services. At any time, there may be no demand, adequate demand, irregular, demand, or too much demand. Marketing managers are not only concerned with finding and increasing demand, but also at times, with changing or even reducing it.
The Purpose of a Business Is to Create and Retain the Right Customer
Importance of Customer Retention
The Promotional Mix
Advertising
Sales promotion
Packaging
Personal selling
Public relations
The Four Ps
Defining Marketing
Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products and value with others.
Core Marketing Concepts
Need, Wants, Demands
Need. A human need is a state of felt deprivation. Examples include the need for food, clothing, warmth and safety.
Wants. Wants are how people communicate their needs. A hungry person may want a hamburger, noodles, or cheese and bread.
Demands. When backed by buying power, wants become demands.
Product
Value, Satisfaction, and Quality
Customer value is the difference between the benefits that the customer gains from owning and/or using a product and the costs of obtaining the product.
Customer satisfaction depends on a product’s perceived performance in delivering value relative to a buyer’s expectations.
Quality begins with customer needs and ends with customer satisfaction.
Why Satisfaction May Not Lead To Customer Loyalty
Some customers never return to an area – but they can still recommend
Some customers shop for the best price - differentiate your product
Some customers like to have different purchase experiences – like to stay or dine at different places
Why Managers Should Be Concerned About Customer Loyalty
Customer loyalty leads to increased profit
Customer loyalty leads to increased partnership
Lower marketing and sales costs
Exchange, Transactions, and Relationships
Exchange is the act of obtaining a desired object from someone by offering something in return.
A transaction is marketing’s unit of measurement and consists of a trade of values between two parties.
Relationship marketing builds relationships with valued customers, distributors, dealers, and suppliers by promising and consistently delivering high-quality products, good service, and fair prices.
The Life Time Value of the Customer
Revenue and profits by average customer over a lifetime by segment
Increase average purchase, frequency of visit, life
Example
Corporate business traveler - 4x a year, 2 nights per visit, $200 per visit = $800 a year
Average life is 4 years
4 yrs x $800 = $3200 lifetime value
Markets
Marketing Management Philosophies
Marketing and Sales Concepts Contrasted
Marketing’s Future
“It (marketing) encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer’s point of view.”
- Peter Drucker
Marketing has become the job of everyone.
Intangibility
High risk associated with services. It is difficult to evaluate service before the experience. Furthermore, lack of tangibility after the experience
Tangibilizing the intangible
Create strong organization image
Engage in post-purchase communication
Stimulate “Word of Mouth” & Publicity
Inseparability
The customer becomes part of the service
Service encounter, Moment of truth
Managing employees
Communication training
Empowerment
Managing customers
What do you expect customers to do?
Interaction with other customers
Variability
Lack of consistency
Managing consistency
Standardized procedure: industrialize service and cutting interaction
Customized: taking care of individual
Educate customers
Train contact and non-contact employees
Manage suppliers’ quality
Perishability
Lack of ability to inventory
Capacity and demand management
Managing demand
Understanding demand patterns
Price, Shift demand
Reservation, Overbooking
Create promotional events
Managing capacity
Cross-train employees
Schedule downtime during periods of low capacity
Management Strategies for Service Business
Managing differentiation
Managing service quality
Tangibilizing the product
Managing the physical surroundings
Stress Advantages of Non-Ownership
Management Strategies for Service Business
Managing employees
Managing perceived risk
Managing capacity and demand
Managing consistency
Strategic Planning
The High-Performance Business
Corporate Strategic Planning–Four Planning Activities
Defining the corporate mission.
Establishing strategic business units.
Assigning resources.
Developing growth strategies
Corporate Strategic Planning
Defining the corporate mission
The mission should define the competitive scopes within which the company will operate. Industry scope, products and applications scope, competencies scope, market-segment scope, and vertical scope.
Mission
What business are we in? What businesses should we be in? What do we do best? What are the values/ethics of the firm?
Define business by need rather than product.
Lodging vs hotel
Quick service restaurants vs fast food hamburgers
Marketing myopia - Transportation vs railroad
Analyzing Current SBU’s:
Boston Consulting Group Approach
Developing Growth Strategies in the Age of Connectedness
Corporate Strategic Planning
Developing Growth Strategies
Intensive growth opportunities: Identify further opportunities to achieve growth within the company’s current business.
Market penetration strategy seeks to increase current products in current markets.
Market development strategy looks for new markets in which current products can expand.
Product development strategy considers new product possibilities
Business Strategy Planning
Business mission
External environment analysis– opportunities and threats
Internal environment analysis– strengths and weaknesses
4.Goal Formulation (What do we want?)–The vision
Business Strategy Planning
Strategy Formulation (How do we get there?)
Michael Porter’s three generic types of strategy:
Overall cost leadership
Differentiation
Focus
Strategic Alliances: companies need to form strategic alliances with domestic or multinational companies that complement or leverage their capabilities and resources to achieve leadership nationally or globally.
Business Strategy Planning
Program formulation. A company must develop hiring, training, advertising, and other programs to support its strategy.
Implementation. A firm must communicate its strategy to its employees and it must have the resources to carry out its strategy.
Business Strategy Planning
Feedback and control are absolutely necessary to track results and monitor new developments in the environment.
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