Principles of Marketing - Basic Concepts and Fundamentals
What is Marketing?
"Marketing consists of all the activities of individuals and organizations designed to identify, anticipate, and mutually satisfy the needs of all parties involved in the exchange."
Marketing cannot take place unless some sort of exchange occurs. One party must exchange a product or service with another party for some form of payment. This is the exchange process and is the central focus for all marketing activities.
Four marketing utilities, which are the capacities of the product offering to satisfy the needs of a customer, are enhanced when exchange occurs.
- Form Utility - The product is produced, or modified for the customer. An example of this might be a car manufacturer designing their car so that a driver will be able to plug in his I-pod or other devices.
- Time Utility - The consumers ability to buy the product when he or she wants to buy the product. A grocer may store certain amounts of certain foods until the prime season they are bought. It is ensuring customers will have access to the food when they most desire them.
- Place Utility - This describes when a consumer is able to buy the product at a location that is convenient to him or her. The best example of this is online sales. Home is the most convenient location for a consumer.
- Possession Utility - Ownership of the product is transferred from the marketer to the buyer. An example is a getting a loan and then buying a car. This is concerned with the ease of transferability for the consumer.
The Marketing Management Concepts
There are four marketing management concepts that companies will utilize in their marketing objectives. All of these aim to achieve profits and objectives, but the focus and means by which they do so will differ. They will typically follow one of these four major concepts:
- Product Concept - This management orientation says that if you build a quality product and set a reasonable price, very little marketing effort is needed to sell it. The product generates the demand "build it, and they will come"
- Selling Concept - This management orientation says that consumers will not normally buy enough of a product unless it is aggressively promoted to them.
- Marketing Concept - This management orientation says the major purpose of an organization is to identify consumer needs and then adapt the organization in a way that will satisfy the customers needs more effectively and efficiently than competition. (i.e. Chain restaurants may alter their menu in different countries)
- Societal Concept - This management orientation focuses on satisfying consumers needs and demonstrating long run concern for societal welfare in order to achieve company objectives and attend to its responsibilities for society. The idea is to find a balance between social welfare, consumer needs, and company profits.
Quality product, reasonable price, little marketing effort
Achieve profits or objectives by products generating consumer demand
Aggressive advertising and selling efforts
Achieve profits or objectives by generating sales volume
Achieve profits or objectives through customer satisfaction
Customer satisfaction and long run public welfare
Constant search for better products in terms of appeal and benefit
Satisfy organizational goals and responsibilities for society
Traditional vs. Integrated Marketing
To understand the fundamentals of marketing, it is important to understand two different approaches used when a company chooses to introduce a new product. Here we see traditional and integrated marketing.
There are typically 5 different departments directly involved with the product during creation and launch: Development, Engineering, Production, Marketing, and Distribution.
If a company opts to use a traditional approach, all of these departments work as separate entities. For example, development will draw up a product and then pass it along to engineering to create it. Engineering will then pass it along to production mass produce it. They will afterwards pass it to marketing, who will eventually move the product to distribution for a product launch.
If a firm opts to utilize an integrated marketing approach, all of the departments work together as a single unit. Engineering will not begin a product without ensuring that production has the capabilities to produce it. Development will check with marketing to ensure the product is line with the company image and approach. Basically, every department will at some point integrate their work with all other departments in the process.
Clearly, integrated marketing is the better approach. While it may take longer to launch a product, the likelihood of success is greater. The traditional approach leaves much room for interdepartmental conflicting interest and is therefore regarded as an outdated approach in marketing. It all too often ignores the consumers needs. The integrated marketing approach helps a business work collectively as one unit.
Perceived Value and Satisfaction
A customers perceived value is equal to the benefits derived divided by the costs.
Value = Benefits/Costs
Further, benefits can include functional and emotional benefits. Costs may include monetary costs, time costs, energy costs, and psychic costs.
Functional benefits + emotional benefits / monetary cost + time cost + energy cost + psychic costs
Satisfaction is a person's feelings of pleasure or disappointment resulting from comparing a products performance in relation to the person's expectations of performance.
Most expectations are derived from past buying experiences, friends, the marketer, peers, competitors, and promises of performance.
It is also important to keep in mind that a person is twice as likely to tell others about a negative product or experience than they are about a good product or positive experience. Dissatisfied customers can also have a negative impact on employee morale.
The Marketing Mix - The Four P's
There are four marketing mix variables that are associated with a product. These must be taken into consideration when making any decisions regarding marketing activities. These are often known as the "Four P's" in marketing. Note that these should only be identified after a target market is selected. All marketing mix variables are controllable, internal factors. These include:
- Product - This variable described all factors relating to the actual product visible to the consumer. These may include things such as quality, features, options, style, packaging, brand, sizes, labels, variety, and warranties.
- Price - The price variable includes not only the list price, but all other pricing factors associated with a product. These may include discounts, allowances, payment options and periods, and credit terms. All of these are related to the final, whole price of the product.
- Place - Place deals with all distribution and location aspects of a product. How and what are the products available to consumers? These may include assortments, channels, coverage areas, locations, and inventories.
- Promotion - Promotion is any and all efforts by a company to make publicize a product and make the consumer aware of it. Efforts might include advertising, personal selling, sales, public relations, or internet activities.
The marketing mix should only be determined after a target market is determined.
Target market = The group or groups of customers for which the marketer will direct attention. This group is determined after thorough segmentation and analysis of the market. (more on segmentation in part 2)
While the marketing mix consists of factors that are controllable by a company, there are numerous external factors that must be taken into consideration when scanning the environment the product or service is marketed in. The company can do nothing about these in the long run, but can react to them in the short run. They will certainly impact what the marketer can do.
External Factors (Uncontrollable)
- Demographic environment - The features of a country that can be statistically described
- Economic environment - The financial and economic conditions in a country will determine demand for any and all products.
- Competitive environment - The intensity of competition in the market the business is in cannot be controlled.
- Physical environment - Availability, use, and disposal of natural resources
- Technological environment - Determines how the marketing should be done. What medium should be used?
- Political and legal environment - Laws and restrictions may be set by various government agencies in regard to competition, consumer protection, or societal welfare.
- Social/Cultural environment - What is acceptable in what culture may not be acceptable in another.
- Company related environment - Goals and objectives of top Gethsemane and company as a whole
- Principles of Marketing - Part 3 - The Segmentation Process
A look at the segmentation process marketers use in determining a target market and then positioning themselves in that market
- Principles of Marketing - Part 2 - Buyer Behavior
This is an overview of the processes a consumer goes through when he or she seeks to make a purchase and how a marketer reacts throughout that process.
Why are you reading this article?
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.