BBM 212 - Principles OF Marketing Class Notes-converted PDF

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BBM 212 - priciple of marketing...

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MOI UNIVERSITY SCHOOL OF BUSINESS AND ECONOMICS BBM 212: PRINCIPLES OF MARKETING: COURSE OUTLINE INSTRUCTOR: SYLVIA C TALLAM This course aims at exposing students to the principles and concepts of marketing. It also provides a basis for the understanding of marketing mix and requisites of a marketing career. It attempts to provoke creative thinking and also create a desire to participate in the world of marketing profession. At the end of the course students are expected to have appreciated the breadth of marketing as a discipline and profession. They should also understand the role played by marketing function in business organizations. This will enable students to positively respond to the challenges facing contemporary business organizations through leveraging the marketing function. COURSE CONTENT 1. AN OVERVIEW OF MARKETING 1.1 Definitions 1.2 Components of Marketing 1.3 Importance of Marketing 1.4 Marketing Philosophy 1.5 Marketing Environment 2. MARKETING MIX 2.1 Product – product components, new product development, diffusion of innovation and the PLC 2.2 Price – price setting objectives and methods 2.3 Promotion- Personal selling, public relations& publicity and Advertising (more focus on advertising- 5Ms) 2.4 Place – types of channels and factors affecting channel choice 3. SERVICE MARKETING 3.1 Unique characteristics of services 3.2 Adaptation of marketing mix (8Ps of service marketing) 4. CONSUMER AND BUYER BEHAVIOUR 4.1 Influences of consumer behavior 4.2 Buying Process 4.3 Industrial Buyer 5. SEGMENTATION, TARGETING AND POSITIONING 5.1 Segmentation concept and criteria 5.2 Bases of segmentation 5.3 Targeting and Positioning

6

MARKETING INFORMATION SYSTEM 6.1 Importance 6.3 Components (Internal records, Marketing intelligence, Marketing research & Marketing Decision Support Systems) 6.3 Further focus on Marketing Research process

7. GLOBAL MARKETING 7.1 International Marketing Environment 7.2 Factors to consider 8. CONTEMPORARY ISSUES IN MARKETING

Class notes: BBM212 SEPT-DECEMBER 2018.

8.1 Ethics in Marketing 8.2 E-Marketing COURSE EVALUATION CAT 1 CAT 2 End of Semester Exam TOTAL

-

15% 15% 70% 100%

REFERENCES 1. Kotler, Philip and Armstrong, Gary (2004): Principles of Marketing Prentice-Hall of India Private Ltd. New Delhi. 2. Thuo, Kuria J (2008): Principles of Marketing: A Skill-Building Approach. ACrodile Publishing Ltd.Nairobi 3. Kibera, F.N and Waruingi, B.C (1998 Fundamentals of Marketing):: An African Perspective.Kenya Literature Bureau.Nairobi.

Class notes: BBM212 SEPT-DECEMBER 2018.

BBM212: PRINCIPLES OF MARKETING NOTES

1. AN OVERVIEW OF MARKETING The concept of marketing is one that is widely recognized as being central to the success of any business, irrespective of the size or sector of the economy in which it operates. In the past, many organizations relied simply on a production-based approach to their businesses and believed that the ability to mass-produce and competitively price products would be sufficient to ensure success. The underlying assumption was that consumers would look for products that are widely available and affordable.

However, the environment that the businesses operate has greatly continued to change. Organizations are faced with changes in economic conditions, increase in productivity, high cost of energy, threat of recurring inflation/recession, increased government regulations and not to mention the increased technologies occasioned by computerization and globalization causing competition in many markets.

These changes have posed major challenges to marketers. They must design appropriate strategies in order to survive in this ever-changing environment. They must develop societal orientation and an awareness of their social responsibilities. Despite all these, the marketers must satisfy the consumer wants and needs as well as generating profits for their firms.

1.0 1.1

MARKETING

Introduction

The term marketing is one that is widely used and misused at the same time. To some, it has an image of glamorous and exciting careers; to others, it concerns the cynical exploitation of consumers using a variety of means of persuasion. Certain marketing activities such as selling and advertising are highly visible and often form the central component of many people’s understanding of marketing. In practice, though marketing as business activity is much broader than just these activities, it is not always glamorous and rarely does it involve persuading consumers to buy what they don’t require or desire. Therefore, marketing deals with understanding, creating, communicating and delivering customer value and satisfaction at the very heart of modern marketing thinking and practice. It can be referred to as the ‘delivery of customer satisfaction at a profit’ (Kotler and Armstrong, 2002).

Class notes: BBM212 SEPT-DECEMBER 2018.

Marketing has twofold goals namely: ▪

To attract new customers by promising them superior value

▪

To keep current customers

Therefore, sound marketing is critical to the success of every organization (large or small, profit or non-profit making, domestic or global firms). Current successful companies have one thing in common: they are strongly customer focused and heavily committed to marketing. Today marketing must be understood not only from the old sense of making a sale ‘telling and selling’ but in the new sense of customer satisfaction.

In contrast selling only occurs after a product has been produced, but marketing starts long before a company produces a product. It is therefore a homework that marketers undertake to assess customer needs, measure their extent and intensity and determine whether a profitable opportunity exists in the market or not. Marketing therefore, means managing markets to bring about exchanges and relationships for the purpose of creating value satisfying customer needs and wants. This can be achieved through proper marketing management practices.

Marketing management is the analysis, planning, implementation and control of the programmes designed to create, build and maintain beneficial exchanges with target buyers for the purpose of achieving organizational objectives. Thus, marketing involves managing demand which in turn involves the management of customer relationships. For example, an organization may have desired level of demand and sometimes experience no demand, irregular demand, too much demand or adequate demand. Marketers must therefore, find ways of managing the various levels of demand facing tem which may mean creating demand or reducing it.

1.2

Definitions of Marketing

Marketing is the creation and delivery of a standard of living. It involves: (i)

Finding out what the consumers want

(ii)

Planning and developing the product that will satisfy those wants

(iii)

Determining the best way to price, promote and distribute that product/service

Briefly, it can be stated that marketing is a total system of business activities designed to plan, price, promote and distribute want satisfying goods and services to both present and potential customers (Stanton, W. J).

Marketing is “a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and sharing of value with others.” Therefore,

Class notes: BBM212 SEPT-DECEMBER 2018.

marketing means working with consumers to actualize their potential needs for the purpose of satisfying them (Kotler, P.) With this definition, it would suffice to define these terms: 1.2.1

Needs

A need is a state of deprivation. Needs may include basic physical needs, e. g. for food, clothing, safety, social interaction, knowledge and self-expression among others. The human needs are unlimited yet the mean or resources to satisfy them are limited. 1.2.2

Wants

This is the society’s need that is shaped by culture and individual personality of a customer. For example, an individual needs food but wants a hamburger, irio, ugali, matoke, French fries, etc. Consumer wants are shaped by the society one comes from. This gives him/her the orientation to the consumption of a particular product or service. 1.2.3

Demand

These are human wants that are backed by the purchasing power of an individual. Consumers view products as offering a bundle of benefits and choose products that accord them the best bundle for their money. That is, for an ordinary car, the benefits may include basic means of transportation, affordable price and fuel economy among others. Whereas, for a luxury products (Mercedes Benz, Lexus, Land Rover Discovery, Hummer, etc), the benefits may include luxury, comfort, speed, prestige, and so on.

1.2.4

Product

A product is anything that is capable of satisfying a need or a want (This definition is not only limited to physical objects but also the intangible products i.e. services). 1.2.5

Services

These are the intangible products that are demanded by the consumers. They are activities or benefits offered for sale that are essentially intangible and do not result in ownership of anything e. g. banking, airline, teaching, hotel, tax preparation, home repair services and many others. Therefore, products may include experience, persons, ideas, organizations and information.

NOTE: Customer experience has become one of the tools for differentiating the marketing offers. For example, hard rock cafe, Nandos, steers and many others, that is, consumers decide on which events to experience which entertainment to watch which organization to support and which ideas to adopt. 1.2.6

Customer Value

This is the difference between the value the customer gains from owning and using a product and the cost of obtaining the product. For example, in the transport industry, customers of

Class notes: BBM212 SEPT-DECEMBER 2018.

Akamba Bus, Coast Bus, Kenya Bus gain benefits such as quicker and faster services, reliable, comfortable services whereas for those traveling by air the benefits may include reliability comfort speed and so on. The customers rate these services in terms of costs, efforts and time spent while using a service. In addition they also compare the value of using certain services I. e the choice to use one or the other (air, rail, road or water) the customers’ judgment about the products is based on their perception. That is they act on perceived value. The main concern for the marketers is to change the customer perception in favor of their products. 1.2.7

Customer Satisfaction

This depends on the customers’ perceived performance in delivering value relative to the buyers’ expectation that is •

If the products performance falls short of customer’s expectation, the buyer is dissatisfied.

•

If the product performance matches the customer’s expectation, the buyer is satisfied and

•

If the product performance exceeds the buyer’s expectation, the buyer is delighted.

Therefore outstanding marketing organizations go out of their way to achieve customer satisfaction. This leads to repeat purchase and breeds customer loyalty. Marketers must therefore not only aim to satisfy their customers but to delight them, this is the basis of company survival today in a competitive environment.

1.2.8

Quality

Customer satisfaction is closely linked to quality of products and services. Many marketers have now adopted total quality management (TQM) programmes assigned to constantly improve the quality of their offers and marketing processes. TQM can be defined narrowly as “freedom from defects” but the customer focused organizations define it as “The totality of features and characteristics of a product or service that bear on its ability to satisfy customer expectations” or quality is doing something for the customer” These definitions suggest that companies can only achieve TQM if their products or services meet or exceed customer expectations. Thus quality begins with customer needs and ends with customer satisfaction. 1.2.9

Relationship Marketing

This is process of creating, maintaining and enhancing strong value-laden relationships with customers and other stakeholders. Marketers therefore must strive to go beyond short-term transactions to build long-term relationships with valued customers, distributors, dealers and suppliers among others. The marketers’ main concern is to build strong economic and social

Class notes: BBM212 SEPT-DECEMBER 2018.

connections by promising and consistently delivering high quality products, services and fair prices. This enables the organizations to build mutually beneficial relationships with their stakeholders. Today, most companies are striving to establish a strong marketing network in their operations i. e. they have networks with other stakeholders with whom they have built mutually profitable business relationships.

1.3

Historical Development of Marketing

The need for marketing arose and grew as the society moved from agriculture and individual self-sufficiently

to an economy built around division of labor,

industrialization and

urbanization. In an agricultural setting, people are largely self-sufficient. That is, they grow their own food, make their own clothes and build their own houses. At this stage, there was no marketing because there was no exchange of goods and services.

As time passed by, the concept of division of labor began to evolve. People began to produce what they produced best. The result was that, they produced more than they needed or less than they needed, the foundation was laid for trade (exchange) and trade is n now the cornerstone of marketing. Typically, marketing has evolved through three significant stages with a fourth stage emerging recently. 1.3.1 Production Orientation Stage Here, the production process was a simple one with the main emphasis laid on production, which was believed to be in short supply, and the economy was characterized by shortages. Little or no attention was devoted to marketing and production processes were very local, i. e. within neighboring areas. The function of a sales department in an organization was simply to sell the company’s output at a price (This was a period of up to 1930). 1.3.2 Sales Orientation Stage At this stage, the small producers began to manufacture their goods in larger quantities in anticipation of future orders. Further division of labor occurred and a type of business developed to help sell the increased output, i. e. intermediaries/middlemen. To facilitate communication and buying and selling, the various interested parties tended to settle near each other hence the formation of trading centers. The main idea at this stage was to sell whatever was produced and this called for heavy/substantial promotional effort to be expended. Unfortunately, this was the period that the concepts of selling acquired its bad reputation (This was the age of hard selling i. e the period up to 1950).

Class notes: BBM212 SEPT-DECEMBER 2018.

1.3.3 Marketing Orientation Stage Modern marketing was born with the Industrial Revolution where there was growth of urban centers and declining rural population resulting in rural-urban migration. The emphasis here was on the growth of manufacturing enterprises because the market demand exceeded the available supply (demand greater than supply) but this has changed and supply has now exceeded demand shifting the emphasis from production to marketing. The

marketers

must now

embrace

the

concept of

integrated/coordinated

marketing

management, directed towards the twin goal of customer orientation and profitable sales volume. Emphasis here is on marketing rather than selling. But how well the companies have embraced the marketing concept is still questionable. 1.3.4 Social Responsibility and Human Orientation Stage The condition of the 1970’s led to this fourth stage, which was characterized by the concern for the society. The emphasis here is on social responsibility on the part of marketers for their survival in the industries. Marketers must therefore be concerned wit creating and delivering a better quality of life rather than only a material standard of living. The rise in social responsibility as a concept for business was highly influenced by the rise in consumerism movement. 1.4

Marketing Concepts (Philosophies)

The five alternative (competing) concepts under which organizations can conduct their marketing activities include: 1.4.1 The Production concept This is a management philosophy that holds that consumers will favor products that are available, as well as affordable. The aim of the marketer is to focus on how to improve production and distribution since the economy was characterized by shortages (demand exceed supply). Here, the marketers/producers are deeply concerned with production since what they produce will quickly be sold. Product quality at this stage is not an issue. The production philosophy is useful in two situations: ▪

When the demand for the product exceeds supply- marketers should look for ways of increasing the production level

▪

When the product cost is too high- marketers need to improve the productivity I order to bring the cost down.

1.4.2 The Product Concept The marketers contend that consumers will buy products of high quality, performance and innovative features and shun products of low quality. The emphasis here was still on production since little marketing effort needed to secure satisfactory sales. The concept is again more

prevalent

in

societies

with

shortages

of

products.

It

is

also

assumed

that

people/consumers are aware of product quality and will not be persuaded to make purchases.

Class notes: BBM212 SEPT-DECEMBER 2018.

Therefore, a marketer at this stage should devote their energy to making continuous improvement and innovation. That is, they should have a detailed version of the new idea stated in meaningful consumer terms. NOTE: A good product will not sell unless the marketer designs the right packaging, affordable pricing; right channels of distribution, creates awareness and persuades the buyers that it is a better product or service.

The product concept can also lead to marketing myopia. For example, the Kenya Railways once thought that users wanted trains rather than satisfying the transportation need and overlooked the growing challenges of airlines, buses, trucks and automobiles. 1.4.3 The Selling Concept This concept holds that consumers will not buy products until some large scale selling and promotional effort is expended despite the fact that they look for quality precuts (the concept is typically practiced with unsought goods). At this stage, marketing is still looked at from the producer’s/seller’s point of view and works best where there is over capacity. The aim is to sell what they have rather than what the consumer requires. That is, they concentrate on sales transactions rather than building long-term customer relationship hence involves hard selling and ignores relationship marketing. This kind of marketing carries high risks. The selling concept makes two assumptions: ▪

That customers who are coaxed into buying the product will eventually like it.