MARKETING: CONCEPT ORIENTATION ENVIRONMENT AN OVERVIEW OF MARKETING MANAGEMENT-I LECTURE 1 MARKETING: CONCEPT ORIENTATION ENVIRONMENT

Definitions of Marketing The management process responsible for anticipating and satisfying customer requirements profitably (Chartered Institute of Marketing) The process of defining, anticipating and creating customer needs and of organizing the company’s assets and resources to satisfy them for the greater profit of the customer and the firm (Anon) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________

What marketing is not “A sophisticated form of selling done by graduates” “Advertising, sales promotion, selling, PR, direct mail, market research” “What the marketing department does” “A process which increases costs” “An irrelevance to what I do”

Some definitions CUSTOMER Person or organisation who actually buys the product or service BUYER Same as customer but more B2B CLIENT A customer for whom a service is performed CONSUMER The person who ultimately consumes or uses the end product

Some definitions PROSPECT A potential customer MARKET The actual or potential customers for a given product or service STAKEHOLDER Anyone with a stake in the organisation

3 Levels of Marketing 1st Level: Tactical Output (promotional literature, advertising – WHAT THEY SEE) 2nd Level: Management Process (allocation of resources – WHAT WE DO) 3rd Level: Marketing Orientation (a philosophical approach to doing business which puts customer at the heart of the enterprise – HOW WE ACT) _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________

Evolution of the Marketing Concept Integrated customer focus Marketing Orientation Long run profits through customer satisfaction Sales Orientation Push! Push! Sell! Sell! by promotion Short term gains in profit via sales increases Production Orientation “Any colour you like, as long as it’s black” Profits through production controls 16 15

The Marketing Concept Marketing concept Customer orientation The achievement of corporate goals through meeting and exceeding customer needs better than the competition Marketing Concept The achievement of corporate goals through meeting and exceeding customer needs better than the competition Customer orientation Corporate activities are focused upon providing customer satisfaction Integrated effort All staff accept the responsibility for creating customer satisfaction Goal achievement The belief that corporate goals can be achieved through customer satisfaction Customer orientation Corporate activities are focused upon providing customer satisfaction Integrated effort All staff accept the responsibility for creating customer satisfaction Goal achievement The belief that corporate goals can be achieved through customer satisfaction 2

VMV What are Vision, Mission and Values? What part does each of the above play in helping a company achieve its goals? Watch the video clip of a well-known organisation, and work out their VMV

Possible Descriptions VMV Issue Possible Descriptions What are we here for? Purpose Mission Aim Where are we going? Vision Goal, destination Strategic Intent What beliefs will guide our behaviour? Values, credibility Ethos, principles Guidelines, rules ?

Review - the marketing concept SOMETHING OF VALUE money, credit, donations, labour, goods BUYER (consumer) Satisfaction Exchange process SELLER (provider) Profit SOMETHING OF VALUE goods, services, ideas

The Marketing Environment VMV Macroenvironment Economic Legal Microenvironment S W O T Suppliers Customers Company Distributors Competitors Social Political Technological

WHY scan the environment? Scanning the environment WHY scan the environment? “Assessing the potential impact of likely changes in the environment offers organisations an advantage over their competitors by enabling decision-makers to narrow their range of options. It is clear that, in a dynamic & complex business environment, attempting to forecast sometimes discontinuous trends is fraught with difficulty….. However, to do nothing is even more dangerous for an organisation, as is over-reliance on internal sources of information, rather than external channels”

Model 1 - Using PEST/PESTEL analysis to scan the “MACRO” environment Legal Ecological ORGANISATION Economic _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ Social Technological Political

Some possible PEST factors Political / Legal Deregulated markets Taxation policy International trade policy Joint Ventures legislation Social / Ecological Population demographics (household size, no of cars) Income distribution Level of environmental concern Attitudes to work & leisure Education levels Economic Business cycle Interest rates / inflation Unemployment level Raw materials availability Disposable income Technological Govt spending on research Speed of take-up of new technology Barriers to entry Impact of Internet Merging of “ unrelated” sectors e.g. banks & telecomms _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ Note: EXAMPLES ONLY!

Model 2 – Using 5 Forces analysis to scan the “MICRO” environment New Entrants Threat of New Entrants Bargaining Power of Suppliers Industry Competitors Bargaining Power of Buyers Suppliers Buyers Intensity of Rivalry 1.     Porter’s 5 Forces. (The ideas discussed here are attributable to the work of Professor Michael Porter of Harvard Business School)   In any segment there is a limited total amount of profit that can be shared among the various players. Hence, given normal business drivers, they can all be expected to fight for the bulk of the profit. This means that competitor analysis must be extended beyond conventional rivals to include all of these forces. Specifically, firms need to understand structural rivals’ needs, power, capabilities and motivations and to develop strategies to achieve their own profit and performance objectives given the constraints the five forces impose. Ø       Customers: in consumer markets, end customers and powerful retailers apply pressures for lower prices and better benefits. In industrial and other organisational markets, customers and/or channel members apply this same profit pressure. They demand the best levels of benefits at the lowest attainable prices by playing off the various suppliers against each other. Their ability to do this is strong when: products are not well differentiated: they have monopoly power: and can buy in bulk. Defensive options for suppliers include: building differential advantage; fixing long-term contracts; forward integration; and targeting the less powerful customers. Ø       Conventional Competitors: Rivalry here is usually most intense in oligopoly markets (where only a few firms supply all or most of the market). This typifies most markets. Company growth is only possible at the expense of rivals so that fighting for market share is common and fierce and, of course, encouraged by customers. The outcome is usually downward-spiralling profits for all competitors that are unable to protect themselves. Ø       New Entrants: These are competitors entering markets they haven’t played in before because they believe they have differential advantage. Further, as they are not known or understood as well as existing rivals, their actions are less predictable, they raise market uncertainty and frequently cause existing firms to panic, thus increasing competitive pressure. Examples include: creation of differential advantage; patents; captive channels and/or suppliers and threats of massive retaliation by attacking entrants own markets or market spoiling tactics. Ø       Substitutes: These take the form of new technologies or benefits that satisfy buyer needs more effectively than they were satisfied before. For instance: railways damaged the canal business; electricity replaced steam; calculators killed off the slide rule; television eroded cinema attendance; Encarta CD Rom replaced Encyclopaedia Britannica. Ø       Suppliers: Competition with suppliers is similar to that with buyers. Firms and their conventional rivals seek maximum benefits and minimum prices from suppliers, who are seeking the opposite. Supplier power is enhanced when suppliers are few, have a strong differential advantage, cannot be played off against each other, provide essential inputs, or can integrate forward, and when users face high switching costs. Options for defence include: accepting lower margins; shifting the costs to customers; finding new suppliers or substitutes; integrating backwards; fixing long-term deals and/or targeting particular suppliers with which to form close strategic partnerships. Threat of Substitutes Substitutes

5 Forces example: (Mobile phones) Weak Cost of licence High barrier to entry Huge cost to 3G New functions? Weak Nokia Motorola Ericsson Competing strongly For share of Mature market Strong Customers have many competing offers, some including airtime, some not. Cheap deals through Internet Strong Airtel Reliance Vodaphone Medium Customers returning to land lines Convergence with PDAs Location technology

Basic information we need CUSTOMERS COMPETITORS Who are they? Who could they/should they be? How are their needs/expectations met? How loyal are they? How do they rate the company – product/price/service How do they rate the company in relation to the competition? What relevant broad macro changes are taking place? Who are they and what are their objectives? Are they likely to change? What is happening to market share? Can we compare our profitability with their profitability? What are their strengths and weaknesses? How do customers rate the competition in relation to our company? What will provoke the biggest retaliation from the competition?

Internal analysis What are we doing right? What are we doing wrong? What are our internal strengths? What are our internal weaknesses?

Bringing Macro/Micro/Internal information together - Marketing Audit Summary – Model 3 - SWOT Use the preceding steps to help complete the SWOT. SWOT should come at end of Marketing Audit and summarize it. Highlight the key issues from the SWOT, - summary of the issues and implications for the company. Should provide a succinct, interesting and readable summary of the state of the business and the external factors and trends impacting on it. Beware! Inherent simplicity of the technique is often its undoing Can become vague, confused, irrelevant, lacking in direction A strength is only a truly a strength if you are stronger than your competitors on that attribute

An example of a SWOT Strengths Opportunities Weaknesses Threats Strong market research teams Distribution network Strong financial resources Service Reputation Opportunities Deregulated markets for utilities Competitors prices rising due to currency fluctuation Strategic alliance possibilities Weaknesses Admin costs 20% higher in UK than elsewhere Major competitors more innovative Little synergy between divisions Threats EC widening may bring in low cost competitors Business activity in world economy starting to slow _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________

Effective use of SWOT STRENGTHS WEAKNESSES Matching Strategies Conversion Strategies OPPORTUNITIES THREATS Conversion Strategies

Model 4 - The Marketing Plan Corporate objectives Marketing audit SWOT Assumptions Marketing objectives/strategies FEEDBACK Estimate results Alternative plans/ mix Measure/review Programmes

10 benefits for you from Marketing Planning It looks like hard work – why bother? 10 benefits for you from Marketing Planning Hitting the best customer targets Winning new customers Expanding markets Beating the competition Keeping abreast of market developments Using resources to best advantage Improving internal communications Minimising threats to Reduce risk and surprise Identifying company strengths and weaknesses Achieving consistency