BACKGROUND TO PRINCIPLES OF MARKETING

INTRODUCTION TO MARKETING
Every business, service or product oriented organization must complete its operation by
disposing of its products or rendering its services to the customers.

Various marketing concepts hold that customers will generally not buy a product they
don’t know or they have not been asked/convinced to buy. It is therefore the role of the
marketing function in any business to fill this gap and complete the business operation.

What is Marketing?
Most people think of marketing as creating awareness, or selling and promotion activities
that a firm undertakes. While this is not entirely wrong, marketing is much broader than
promotion. Marketing entails deliberate efforts to identify/anticipate customer needs, and
provide products that would satisfy these needs better than competitors. Therefore,
marketers make profit by meeting customer needs.

Definition of Marketing
The Chartered Institute of Marketing of the United Kingdom defines marketing as, “The
management process which identifies, anticipates, and supplies customer needs
efficiently and profitably.”

Kibera (1996) defines marketing as “the performance of business and non-business

activities which attempt to satisfy a target individual or group needs and wants for mutual
benefit or benefits.”

Kotler (2006), the American marketing guru provides the definition of marketing as “A
social and managerial process whereby individuals and groups obtain what they need and
want through creating and exchanging products and value with others.”

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Kotler and Armstrong (2008) define marketing as “The process by which companies
create value for customers and build strong customer relationships in order to capture
value from customers in return.”

Core Marketing Concepts

1. Needs – The basic concept underlying marketing is that of human needs. Needs
comprise of those things that human beings feel they cannot do without e.g. food,
clothing, shelter, safety, education etc.
2. Wants –Wants are the form of human needs take as they are shaped by culture
and individual personality for example urbanites want Television sets.
Wants can also be defined as the desire to satisfy a need.
3. Demand –Demand is the quantity of a commodity that consumers are willing and
able to buy at a given price over a given time period other factors held constant.
When a want is backed by buying power it becomes demand.
4. Product – Is anything that can be offered to satisfy needs or wants. It can be
tangible or intangible.
5. Market – A constituency of potential customers sharing particular needs or wants
and who might be willing and able to engage in exchange to satisfy that
need or want.
A market also refers to an institutional arrangement/ Platform that brings together
buyers and sellers so that they can engage in exchange to satisy their needs and
wants.
6. Marketing offer – Is a combination of products or service presented to the
market to satisfy a need or a want.
7. Value and Satisfaction – Value is the ability of a commodity to satisfy human
wants. It also refereed to as quality or utility. Customers look for value in a
product before paying for it. The ability of a product to meet customer
expectations results in customer satisfaction.

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8. Exchange – Is the act of obtaining a desired object from someone by offering
something in return.
9. Transaction – An exchange of value between two or more parties, where either
party gains.
10. Marketing Management – Is the art and science of choosing target markets and
building relationships with them.

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The Marketing Process
This is a process by which companies create value for customers and build strong
customer relationships in order to capture value from customers in return. The FIVE steps
of the marketing process include:
i. Understand the market place and customer needs and wants
ii. Design a customer driven marketing strategy
iii. Construct an integrated marketing program that delivers superior value
iv. Build profitable relationships and create customer delight
v. Capture value from customers to create profits and customer equity
MARKETING PHILOSOPHIES

A marketing philosophy according to Kotler (2006) is a marketing logic which an

organisation uses to relate to its market.

Marketing has evolved overtime starting from days when firms concentrated in
production to meet excess demand, to modern days when firms strive to meet customer
expectation in the face of increased competition.

This historical evolution of marketing is discussed in five competing concepts as follows.

The competing concepts are also referred to as marketing philosophies.

1. The Production Concept

- It is the idea that consumers will buy products which are highly available
and affordable.
- Therefore businesses managers should concentrate on achieving high
production efficiency, low costs, and mass distribution.
- They assume that consumers are primarily interested in product
availability and low prices.
- Though one of the oldest marketing concepts it is still widely adopted by
leading firms like e.g. Coca cola

2. The Product Concept

- This concept holds that consumers will favour products that offer the best
quality, performance and features.
- Therefore the organisation should devote its energy in making continuous
improvements to the product e.g. Auto mobile industry
- However overemphasis on product development might also lead to
marketing myopia. Marketing myopia refers to a mistake of paying more

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 attention to specific product features a company offers than to the benefits
and experiences produced.

3. The Selling Concept

- The idea that consumers will not buy enough of the organizations products
unless the organisation undertakes large scale selling and promotional
effort
- This concept is typically practiced by unsought goods providers e.g.
Insurance services.

4. Marketing Concept
- The marketing management philosophy holds that achieving
organizational goals depends on knowing the needs and wants of target
markets and delivering the desired satisfaction better than competitors do.
- Under this concept, customer satisfaction is the path to sales and profits.
Hence the slogan, “the customer is the king as is adopted by some
organisations.”
- Customer driven companies undertake massive marketing research on
customer needs and desires, gather new product and service ideas and test
product improvements.
The Selling and Marketing Concepts Contrasted

Starting Focus Means Ends

Point
The selling
Factory Existing Selling Profits
Concept Products and Through
Promoting sales volume

The marketingMarket Customer Intergrated Profits

Concept Needs marketing through
Customer
satisfaction

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5. Societal Marketing Concept
Holds that customers will favour products and services that attempt to promote
the values of the society, hence the emergence of corporate social responsibility in
the recent past as a core marketing strategy e.g. Safaricom, Celtel, KCB.

It is a principle of enlightened marketing that holds that a company should make

good marketing decisions by considering consumers wants, the company’s
requirements, consumer’s long run interests and society’s long run interests.

Society
(Human welfare)

Societal
marketin
g concept

Consumer Company
(Wants satisfaction) (Profits)

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 CUSTOMER RELATIONSHIP MARKETING (CRM)

CRM is defined as the overall process of building and maintaining profitable ties between
organizations and customers by delivering superior customer values and satisfaction.

Overtime, relationship marketing has grown and replaced transactional marketing as

summarized in the table below.

Transactional marketing Relationship marketing

(One way communication) (Two way communication)

 Focus on a single sale  Focus on customer retention

 Product features oriented  Orientation on product benefits
 Short time scale  Long timescale
 Little customer service  High customer service
 Limited customer commitment  High customer commitment
 Moderate customer contact  High customer contact
 Quality is the concern of  Quality is the concern of all
production

CRM therefore involves attracting, retaining and growing customers.

Basic Tenets of CRM

To effectively manage customer relationship, marketers normally employ the following

three approaches:

1. Customer Value and Satisfaction

Customer perceived value is the customer’s evaluation of the difference between
the benefits and costs of a marketing offer relative to those of the competing
offers. Whereas the customer may not be accurate in judging the cost and values,
they would always want to maximize their benefits at minimum cost.

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 Customer satisfaction refers to a products perceived performance as compared to
the buyers’ expectation. If the products performance falls short of expectation the
customer is dissatisfied and vice versa. Smart companies aim at delighting
customers by exceeding their expectation.

2. Customer loyalty and retention

Satisfied customers produce several benefits to the company including
(a) They are less price sensitive.
(b) They spread a favourably word of mouth to others about the company
(c) They remain loyal for a longer time.
(d) They buy a wider range of products
(e) They cost less to service as they are familiar with the product and business
design
(f) They exhibit strong Lifetime Customer Value (LCV) as the customer
grows through the loyalty ladder from prospect, to customer, to client to a
supporter, and finally to an advocate as shown below

Hence for companies to retain their customers for a longer period, they must aim
high in satisfying their needs and wants.

3. Growing share of customers

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 Marketers are pre-occupied by the want to increase their share of customers i.e.
the share they get of the customers purchasing in their product categories.

To increase share of customers,

Firms can offer greater variety to current customers
(a) Train employees to cross sell - Cross selling means getting more business
from current customers of one product by selling them additional offering
e.g. offering a customer who comes to buy a suit, a shirt, tie, a belt and
shoes.

Brainstorming Session

Zero defects. The following story is well known but it is worth repeating. An IBM
plant in Windsor, Ontario, is said to have ordered a shipment of components from
a Japanese firm, specifying an acceptable quality level (AQL) of three defective
components per 10,000 shipped. In a covering letter accompanying the shipment,
the Japanese company apologized and said it had met with great difficulty
producing these defective parts, and had been unable to understand why they were
required. They wrote: “We Japanese have hard time understanding North
American business practices, but the three defective parts per 10,000 have been
included and are wrapped separately. Hope this pleases.”

Challenge
Do you think it was fair for the Japanese firm to have supplied the defective
parts? Why?

The Concept of De-marketing

Most companies’ in the hotel industry have trouble meeting demand during peak usage
t.3imes. In this and other excess demand situations a need to carry out activities that may
discourage the high demand is necessary. This is called De-marketing.

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De-marketing is marketing to reduce demand temporarily or permanently. The aim is not
to destroy demand but to reduce or shift it.

MARKETING MANAGEMENT AND THE MARKETING MIX

Marketing management aims at designing strategies that will build profitable

relationships with the target customers. To do so every organization endeavors to adopt
an effective marketing mix.

The marketing mix is a combination of controllable, tactical marketing tools that a firm
blends to produce the response it wants in the target market. The marketing mixes
consist of everything the firm can do to influence the demand for its product.

The many possibilities can be collected into four groups of variables also known as the
“four Ps” of marketing mix i.e. product, price, place and promotion.
The conventional 4 P’s of marketing have since been expanded to 7 P’s as :

Marketing Mix Description

Product The goods and services on offer and their quality, feature, and
design.
Price That which consumers are willing to pay to get a unit of the
product or services
Place The distribution methodology of the products or service to the
market place or target market
Promotion The selling activity used to motivate the customers and entice
them to buy more of the product
People People are the human beings who drive product or service
delivery
Process The framework that is followed in the marketing and delivery of
products and services
Physical evidence The tangible elements of services, ideas or any other intangible
products put on offer
MARKETING CHALLENGES IN THE NEXT MILLENNIUM

There have been a number of concerns of marketing in this highly dynamic global world
and these must constitute the bulk of challenges that a marketing student must also face.

1. Growth of Non profit Marketing

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Schools, Hospitals, churches, the Army, the police and Museums are now practicing
marketing, an activity that was the preserve of highly competitive profit making
enterprises.

Challenges in these fields include: Declining enrolment, Competition, Cost of service and
Public relation

2. Rapid Globalisation

It is definite that today the world has become a global village. That which used to be
exclusively for a particular market and culture is now a product of the entire universe
with the improved transport and communication systems. When blending the Marketing
Mix, we must now take into consideration the variable and diversified global preferences.

3. The Challenging World Economy

A larger part of the world is becoming poorer and making the global economy growth
sluggish. This is a big challenge on pricing and quality. Wal-Mart for instance echoes that
they sell for less. Why? Because they are aware of the challenge.

4. The Call for More Ethics and Social Responsibility

People don’t just buy successful products but ethically produced and sold products. The
society would want to know how they benefit from a product they buy.

5. The New Marketing Landscape

The new marketing landscape loudly screams, “The Customer is everything”. The past
theoretical and highly academic texts of marketing are being challenged with the new
teaching and gospel represented by a number of publications whose titles tell clearly of
the new marketing landscape, for instance: The Customer Driven Company, The
customer is always right, Keep the Customer, Customer for Life Total customer service:
The Ultimate weapon.

6. The New Digital Age

The explosive growth in computers, telecommunication, information, transportation and

other technologies has had a major impact on the ways companies bring value to their
customers

Advancement in technology has seen the marketer adopt new approaches such as
videoconferencing, internet marketing, customer database management, interactive
Television, cell phones, websites etc.

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