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About the author: This document is authored by Angshuman - a PhD Scholar inMarketing Management at XLRI, Jamshedpur, India. He is a passionate marketingenthusiast, avid blogger and social media addict. He writes exclusive articles onmarketing, advertising, branding and other topics on his personal blog:www.tnmg4u.com. If you want you can connect with him on Gtalk/Gmail:[email protected] or Twitter: http://twitter.com/angshu_tnmg4u

TNMG ClassicsMarketing Basics

Welcome to the ‘Marketing Basics’ – dear friend!This document is created for the purpose of spreading knowledgeabout basic marketing concepts and frameworks in a brief andeasy to understand manner. You are free to use this document forpersonal non-commercial purposes. You can also share thisdocument with anyone and everyone who you think will find theinformation useful. For any further queries about the content orcopyright please write to us at: [email protected]. Anyfeedback, suggestions or comments about this document orTNMG website (www.tnmg4u.com) or our YouTube channel(www.youtube.com/user/TNMGTube) is most welcome. Wewould love to hear back from you!



INTRODUCTION TO MARKETING

“Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses theentire business. It is the whole business seen from the point of view of the final result, that is, from thecustomer’s point of view.” -Peter Drucker

“Marketing is the social process by which individuals and groups obtain what they need and want throughcreating and exchanging products and value with others.” -Kotler

“Marketing is the management process that identifies, anticipates and satisfies customer requirementsprofitably.” -The Chartered Institute of Marketing (CIM)

From the strategic perspective, marketing is satisfying customer needs profitably and better than thecompetition (broader goal – creating value for all the stakeholders including society)

From the tactical perspective, marketing is about ensuring the right product, in the right place, at theright time, at the right price

Need is a generic desire(+) or problem (-) that consumers seek to fulfill or solve (e.g. Hunger) Want is the concrete form in which a need is being shaped (e.g. I want to eat Domino's Pizza) Demand is want backed by buying power (normally directed towards a specific product/brand) Maslow’s Needs: Physiological Safety Belongingness Self-esteem Self-actualization

MARKETING PHILOSOPHIES

PRODUCT CONCEPT

Focus on product quality, design and features – too much technical orientation Basic assumption is customer will purchase if the product is of higher quality, has maximum number

of features and best design Do not consider customer needs, external factors and competition leading to marketing myopia

PRODUCTION CONCEPT

Focus on production efficiencies, low costs and mass distribution Basic assumption is all output can be sold as demand for a product is greater than supply Beneficial when increasing production raises economies of scale and helps reduce price "Doesn't matter what color car you want, as long as it is black." - Henry Ford

SELLING CONCEPT

Focus on selling the product with the objective of profit maximization Basic assumption is any product can be sold if sales people can convince the customers Customer needs or satisfaction is not considered and can be counterproductive in long run Widely criticized yet widely used across industries!

MARKETING CONCEPT

Focus on determining customer needs and wants, produce product and sell it to consumers Basic assumption is supply for a product is greater than demand (high competitive intensity) Very important – market and product fit

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SOCIETAL MARKETING CONCEPT

Focus on all the stakeholders (S Balancing all three aspects: consumer needs + business profit + society’s interests Definitely the best approach

BASIC MARKETING PROCESS

SITUATIONAL ANALYSIS

• External Environment Analysis (Analyzing factors outside the organization)• Macro Environment Analysis

cultural and Technological)• Micro Environment Analysis (Value Chain Analysis=

and Distributors)• Industry or Competitive Analysis (Porter’s Five Forces)

• Internal Environment Analysis (Analyzing factors inside the organization)• Analyze all organizational functions=Marketing, Finance, Production, HR and IT• 5M Framework=• Portfolio Analysis (BCG Matrix, GE McKinsey Matrix)

• Internal + External Analysis (SWOT=

MARKETING OBJECTIVES:

• Should be SMART = Specific,

MARKETING STRATEGY:

• Deals with broader level strategic decisions• STP = Segmentation, Targeting and

MARKETING TACTICS:

• Marketing Tactics or Marketing Mix d• Most widely used framework is 4Ps =• 4Cs= Customer solution, Customer cost, Convenience, and Communication• For services industry 7Ps = 4Ps +

MARKETING IMPLEMENTATION:

• Is equally important as planning

MARKETING AUDIT AND CONTROL

• You can’t manage what you can’t measure• Involves evaluation of marketing strategy and implementation• Provides inputs for future marketing strategy

SituationalAnalysis

MarketingObjectives


ONCEPT

Focus on all the stakeholders (Short term consumer wants Long term consumer welfare)Balancing all three aspects: consumer needs + business profit + society’s interestsDefinitely the best approach – all preaches now-a-days but few follows!

Analysis (Analyzing factors outside the organization)Macro Environment Analysis (PEST=Political-legal, Economic

echnological)Micro Environment Analysis (Value Chain Analysis= Customers, C

tors)Industry or Competitive Analysis (Porter’s Five Forces)

Internal Environment Analysis (Analyzing factors inside the organization)Analyze all organizational functions=Marketing, Finance, Production, HR and IT5M Framework=Men, Money, Machinery, Materials and MinutePortfolio Analysis (BCG Matrix, GE McKinsey Matrix)

Internal + External Analysis (SWOT=Strength, Weakness, Opportunity and

pecific, Measurable, Achievable, Realistic and Time-

Deals with broader level strategic decisionsargeting and Positioning

Marketing Tactics or Marketing Mix deals with more specific and tactical level decisionsMost widely used framework is 4Ps = Product, Price, Place and Promotion

Customer solution, Customer cost, Convenience, and CommunicationFor services industry 7Ps = 4Ps + (People, Process and Physical Evidence)

TION:

Is equally important as planning but many a times not properly executed

AND CONTROL:

You can’t manage what you can’t measure - so, measure and then manage!Involves evaluation of marketing strategy and implementation

for future marketing strategy

MarketingStrategy

MarketingTactics

MarketingImplementation

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ong term consumer welfare)Balancing all three aspects: consumer needs + business profit + society’s interests

Analysis (Analyzing factors outside the organization)conomic-demographic, Socio-

Customers, Competitors, Suppliers

Internal Environment Analysis (Analyzing factors inside the organization)Analyze all organizational functions=Marketing, Finance, Production, HR and IT

pportunity and Threat)

-bound

tactical level decisionsromotion (by McCarthy)

Customer solution, Customer cost, Convenience, and Communicationhysical Evidence)

any a times not properly executed

so, measure and then manage!

MarketingImplementation

MarketingAudit and

Control



MAJOR MARKETING FRAMEWORKS

PORTER’S FIVE FORCES

Contributed by Michael E. PorterHelp analyze competitive scenario in

an industry Ideal scenario to enter:

Entry Barrier=High Buyer Power=Low Supplier Power=Low Threat of Substitution=Low Competitive Rivalry=Low to

medium Current players try to build high

entry barriers to prohibit new comersfrom entering

Examples of high entry barrier –strong distribution channel of ITC inthe Cigarette industry

Example of low Supplier Power – HULgetting long credit periods fromsuppliers

BCG MATRIX

Contributed by Boston ConsultingGroup

Best-known portfolio planningframework (simple to understandand use, provides quick guidelinesin strategic investment planning)

Used to analyze current businessportfolio at the SBU level (can beadapted to use for products also)

Four possible strategies for SBUsor products: build market share,hold, harvest and divest

Helps to decide which SBUs orproducts should receive more or less investment and which SBUs or products should be divested

Pitfall: oversimplifies a complex decision, assumes that higher rates of profit are directly related to highrates of market share (based on economies of scale or experience curve) – which might not be the case –a new or disruptive technology might give better profitability

The GE/McKinsey Matrix is a more advanced form of the BCG matrix which addresses its pitfalls

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ANSOFF’S MATRIX

Contributed by Igor Ansoff (Harvard Business Review 1957) Helps in deciding growth strategy; also called growth

Existing Products/Services

Existing Markets Market Penetrationsell more to existing customers

New MarketsMarket Developmentnew markets

SWOT ANALYSIS

• A tool for auditing an organization and its environment; used in early stage of planning• Strengths and Weaknesses are• Objective of decision making will be to capitalize on

time minimize the effects ofPositive FactorsStrengths: Good relationship with suppliers and distributors An innovative product/service and q Specialist marketing expertise and expert people Strong distribution channel and reputation Location of business (store location for retail)Opportunities: Potential international market (e.g. BRIC markets) A new or developing market (e.g. Acquisition, mergers, JV or strategic alliances New market segments that offer improved profits A market vacated by an ineffective competitor

STP

SEGMENTATION AND TARGETING Bases of segmentation can be: (a) demographics, (b) Evaluation of segments and then targeting can be done based on following decision parameters

HOMOGENEITY•Companiesshould try tochoose andtargetsegments thatarehomogenousin the kinds ofvalue sought

MEASUREABILITY•Can we

understand thesize and needsof the marketsegment?


Harvard Business Review 1957)Helps in deciding growth strategy; also called growth opportunities matrix

Existing Products/Services New Products/Services

Market Penetration: Gain market share,sell more to existing customers

Product Developmentto current customers

Market Development : Enter and develop Diversification: Launch new product innew markets (diversify portfolio)

A tool for auditing an organization and its environment; used in early stage of planningStrengths and Weaknesses are internal factors and Opportunities and Threats areObjective of decision making will be to capitalize on Strengths and Opportunitiestime minimize the effects of Weaknesses and Threats

Negative Factors

relationship with suppliers and distributorsand quality process

Specialist marketing expertise and expert peopleand reputation

(store location for retail)

Weaknesses : Lack of goodwill or poor reputation Poor quality/undifferentiated goods or services Lack of marketing expertise Weak supply chain; poor relation with vendors Poor location of business

(e.g. BRIC markets)(e.g. Internet)

or strategic alliancesNew market segments that offer improved profitsA market vacated by an ineffective competitor

Threats: Competition: new competitors,

or better products, better distribution channel Environmental factors: new laws with higher

taxes, weak economy or recession, issues insupply for flood, draught, strikes etc

AND TARGETINGBases of segmentation can be: (a) demographics, (b) psychographics, (c) behavioral, (d) benefits soughtEvaluation of segments and then targeting can be done based on following decision parameters

ACCESSIBILITY•Can we

communicatewith thesegment sothat servingthe segmentis possible?

SUBSTANTIALITY•Does the

segment desirethe values thatan offeringpresents?

ATTRACTIVENESS•Market,Competitive,Channel, Internaland OtherConsiderations

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New Products/Services

Product Development: Sell more productsto current customers

: Launch new product innew markets (diversify portfolio)

A tool for auditing an organization and its environment; used in early stage of planningd Opportunities and Threats are external factors

Opportunities and at the same

goodwill or poor reputationndifferentiated goods or services

ack of marketing expertiseWeak supply chain; poor relation with vendors

business

new competitors, price wars, newbetter distribution channels

Environmental factors: new laws with highertaxes, weak economy or recession, issues insupply for flood, draught, strikes etc

(c) behavioral, (d) benefits soughtEvaluation of segments and then targeting can be done based on following decision parameters

ATTRACTIVENESS

Competitive,Channel, Internaland OtherConsiderations

ACTIONABILITY•Can we

create acompetitiveadvantagewith respectto the needsof thesegment?

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POSITIONING

CONSUMER DECISION MA KING PROCESS

TYPES OF DECISION PROCESSES

NeedRecognition

ConsiderationSet

Picking•Low involvement and

limited problemsolving

•Undifferentiatedbrands

Variety seeking•Low involvement andlimitedsolving

•Differentiated brands

Problem solving•Normally for complex,high priceddifferentiatedproducts

•High degree ofuncertainty


Positioning refers to theconsumer's perception of a product orservice in relation to its competitors Perceptual mapmap is used to map competing productsto analyse their positioning Generic positioningproduct; Differentiate on needs Attribute positioningmarket; Differentiate on attributes Emotional positioningmarket; Differentiate on intangibleattributes/ brand image

KING PROCESS

OCESSES

InformationSearch

AlternativeEvaluation

PurchaseDecision

Variety seekingLow involvement andlimited problemsolvingDifferentiated brands

Legalistic•Requires approval

from external sources•Based on legal and

societal norms

complex,

Heuristics•Used for repeat

decisions•Buyers uses rules of

thumb• Very quick and easy

decisions

Habit•Absence ofinformation searchand alternativeevaluation

•Standard decisions forrepeat purchases

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Positioning refers to theconsumer's perception of a product orservice in relation to its competitors

Perceptual map or positioningmap is used to map competing productsto analyse their positioning

neric positioning: NewDifferentiate on needsAttribute positioning: GrowthDifferentiate on attributesEmotional positioning: Mature

Differentiate on intangibleattributes/ brand image

PostPurchase

Evaluation

Subcontracted•Buyer obtain a

recommendationfrom a personal ornon personal source(ex. doctor)

information searchand alternative

Standard decisions forrepeat purchases



PLC OR PRODUCT LIFECYCLE

A popular tool to decideMarketing Strategy andInvestment

Basic steps: which stage in PLC Overall Marketing Mix Reshape and control PLC

Find below an indicativeguideline for normal productsbased on PLC stage but cannotbe generalized

PLC Stage Introduction Growth Maturity DeclineMarketingObjective

Market development bycreating awareness

Maintain and buildmarket + Stressdifferentiation

Defend marketshare + Maintainbrand loyalty

Harvest (‘milk’the cow) orDelete(‘divest’ thedog)

Competition Almost not there Increasingly more Many but stable ReducedProduct Limited variety New variety and

models introducedImprovement andupgrade ofproduct

Withdraw lessprofitableproducts

Price Skimming or penetrationpricing

Aggressive pricingto increase sales

Defensive pricingto defend MS &profit

At least break-even (>marginal cost)

Promotion Brochures, ads etc toeducate people

Build preference bystressing difference

Reminder ads +Trade promotion

Minimalpromotion

Place(Distribution)

Exclusive/selectivedistribution

More outlets toensure reach

Maximum reach toensure availability

Reducednumber ofoutlets

No one knows how actual PLC curve will look like – will depend on product, industry and environment! Failure to recognize PLC stage will lead to wrong decisions; such decisions might lead to Pygmalion effect

(self-fulfilling prophesy); for example, stopping investment in a product thinking that it is going to reachdecline phase will actually lead to the decline!

INNOVATION DIFFUSION PROCESS

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