A Business Organization is an integrated human matrix of interdependent entrepreneurs with subordinated goals aligned to the business of an organization for creating profit by satisfying the demand of market and in turn creating wealth for its stake holders Defining a Business Organization
Businesses have two major functions: • Production of goods or creation of services. • Marketing those goods and services. Copyright © 2001 by Harcourt, Inc. All rights reserved.
BUSINESS ORGANISATION PRODUCE SELL VALUE CHAIN
The Operations System Inputs • People • Technology • Capital • Equipment • Materials • Information Transformation Process Outputs • Goods • Services © Prentice Hall, 2002 19-5
Value Delivery Network The network made up of the company, suppliers, distributors, and ultimately customers who “partner” with each other to improve the performance of the entire system. Definition
Value Chain Management What is Value Chain Management? value - performance characteristics, features, and attributes, and any other aspects of goods and services for which customers are willing to give up resources organizations must provide value to attract and keep customers value provided through the transformation of raw materials into some product or service that end-users need where, when, and how they want it © Prentice Hall, 2002 19-7
Fundamental Principles of Marketing Customer Value Focus Differentiation
Value is perceived benefits over perceived cost V= PB/PC HERE PB = ∑ Functional + Mental + Emotional Benefits HERE PC = ∑ Time + Money + Energy spent WHAT IS VALUE ?
Goal: create customer value that is greater than the value created by competitors Strategy: Expand or improve product and/or service benefits Reduce the price Combine these two elements Customer Value V = PB PC
Value Chain Management (cont.) Goal of Value Chain Management create a value chain strategy that meets and exceeds customers’ needs recognizes that ultimately customers are the ones with power create a full and seamless integration among all members of the chain sequence of participants work together as a team each adds a component of value to the overall process the better the collaboration among chain participants, the better the customer solutions © Prentice Hall, 2002 19-11
BUSINESS ORGANISATION PRODUCE SELL VALUE CHAIN SO …………….. HOW DOES BUSINESS ORGANISATIONS SELL ? AND WHERE DO THEY SELL ? WHAT IS A MARKET ? WHERE IS THE MARKET? WHAT IS MARKETING? HOW IS MARKETING DONE? WHAT ARE MARKETING STRATEGIES?
SALESPEOPLE WORK IN TWO MARKETS • Consumer • Business Copyright © 2001 by Harcourt, Inc. All rights reserved.
There are three groups of customers: • Household –Is the individual who buys goods for his or her own use. Decision-making unit buying for personal use. • Firm – an organization that produces goods and services. • Government – an organization that has two functions: the provision of goods and services to households and firms and the redistribution of income and wealth. Copyright © 2001 by Harcourt, Inc. All rights reserved.
BUSINESS ORGANISATION PRODUCE SELLING VALUE CHAIN MARKET TARGET CUSTOMER AUDIENCE BUSINESS (RESALE, REMAKE REUSE) CONSUMERS (PERSONAL ENDUSE) GOVERNMENT & INSTITUTIONS HOUSEHOLD MIDDLEMEN & FIRMS WHOLESALER, AGENT, BROKER, COMPANIES RETAILERS
The Marketing Concept • To be successful, a company must determine the needs and wants of specific target markets and deliver the desired satisfactions better than the competition.
WHAT’S MARKETING IS ALL ABOUT • A HUMAN ACTIVITY DIRECTED AT SATISFYING • NEEDS AND WANTS THROUGH EXCHANGE • PROCESSES • PHILIP KOTLER • IT IS HE PERFORMANCE OF BUSINESS ACTIVITIES • THAT DIRECT THE FLOW OF GOODS AND SERVICES • FROM PRODUCER TO CONSUMERS • AMERICAN MARKETING ASSOCIATION
What is Marketing?? • “A set of decisions and processes that every organization uses to carry out an exchange with others” • “A series of activities leading to an exchange transaction between a seller and a buyer at a profit” • “The process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy organizational objectives” • “Everything from the formation of an idea to satisfying a consumer need”
MARKETING CONTINUED… • IT IS THE PROCES OF • IDENTIFYING CUSTOMER NEEDS • CONCEPTUALISING THOSE NEEDS IN TERMS OF AN • ORGANISATION’S CAPACITY TO PRODUCE. • COMMUNICATING THAT CONCEPTUALISATION TO THE APPROPRIATE LAWS OF POWER IN THE ORGANISATION. • CONCEPTUALISING THE CONSEQUENT OUTPUT IN TERMS OF THE CUSTOMER NEEDS EARLIER IDENTIFIED, AND • COMMUNICATING THAT CONCEPTUALISATION TO • THE CUSTOMER • JOHN.A. HOWARD • COLUMBIA UNIVERSITY 1973
MARKETING CONTINUED… • IT IS THE PERFORMANCE OF THOSE ACTIVITIES • WHICH SEEK TO ACCOMPLISH AN ORGANISATION’S • OBJECTIVES BY ANTICIPATING CUSTOMER OR • CLIENT NEEDS AND DIRECTING A FLOW OF NEED- • SATISFYING GOODS AND SERVICES FROM • PRODUCER TO CUSTOMER OR CLIENT • E.JEROME MC CARTHY • MICHIGAN STATE UNIVERSITY • SELLING AND ADVERTISING IS JUST THE TIP OF • ICEBERG WHILE MARKETING IS THE ICEBERG • ITSELF.
Marketing Defined “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.”
The Art of Marketing & Sales • Marketing is about Loving a Customer • Sales is about marrying a customer • Marketing Creates Value and Sales Delivers it • The art of marketing is connecting Value with Values • We are an expression of others U α ∑ Pn • A successful Marketer is able to connect within self and also able to connect with others
Seller Oriented • Push Strategy • Revenue/ Profits • Product Based • Customer Oriented • Pull Strategy • Value/Consumer Satisfaction • Need Based Marketing vs. Selling Source Dr. Pramod Kumar “ An introduction to sales management”
Pulling and PushingPromotional Strategies • Pulling strategy: promotional effort by a seller to stimulate demand among final users, who will then exert pressure on the distribution channel to carry the good or service, pulling it though the marketing channel • Pushing strategy: promotional effort by a seller to members of the marketing channel intended to stimulate personal selling of the good or service, thereby pushing it through the marketing channel
NO MORE SELLING FROM TODAY M A R K E T I N G I S A W A Y O F L I F E THERE WILL ALWAYS, ONE CAN ASSUME, BE NEED FOR SELLING. BUT THE AIM OF MARKETING IS TO MAKE SELLING SUPERFLUOUS. THE AIM OF MARKETING IS TO KNOW AND UNDER- STAND THE CUSTOMER SO WELL THAT THE PRODUCT OR SERVICE FITS HIM AND SELLS ITSELF. IDEALLY, MARKETING SHOULD RESULT IN A CUSTOMER WHO IS READY TO BUY. ALL THAT SHOULD BE NEEDED THEN IS TO MAKE THE PRODUCT OR SERVICE AVAILABLE. PETER DRUCKER
AND ULTIMATELY MARKETING IS WAR WEAPONS MAY CHANGE BUT WARFARE IS BASED ON TWO IMMUTABLE CHARACTERISTICS STRATEGIES AND TACTICS KARL VON CLAUSEWITZ AUTHOR OR “ON WAR”
THE TOOLS FOR MARKETING WARFAREThe Marketing Mix: Four P’s • Product: how to develop the firm’s products; how to develop tangible and intangible product features that meet customer needs in diverse markets • PRODUCT: IT’S MORE THAN YOU MIGHT THINK • A good is a physical object that can be purchased. • Service is an action or activity done for others for a fee. • Product refers to both goods and services. Copyright © 2001 by Harcourt, Inc. All rights reserved.
Pricing: how to price the products; how to develop pricing policies that bring in revenues and strategically shape the firm’s competitive environment • Promotion: how to sell the products; how to devise ways to enhance the desirability of the product in the eyes of potential and actual buyers • Place (distribution): how to distribute the product to customers; how to get the products into the hands of customers via transportation and merchandising Copyright © 2001 by Harcourt, Inc. All rights reserved.
FOUR MARKETING-MIX ELEMENTS AND FOUR PROMOTION ACTIVITIES Product Price Place Promotion Copyright © 2001 by Harcourt, Inc. All rights reserved.
MARKETING MIX It is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. The Four Ps of the Marketing Mix MARKETING MIX Quality Features Options Style Brand Name Packaging Sizes Services Warranties Returns Channels Coverage Locations Inventory Transport PRODUCT PLACE TARGET MARKET PRICE PROMOTION List Price Discounts Allowances Payment Period Credit terms Advertising Personal Selling Sale promotion Public Relations
BUSINESS ORGANISATION MARKETING + SELLING MARKET PRODUCT PRICE PLACE PROMOTION
EXAMPLES OF EACH MARKETING-MIX ELEMENT Copyright © 2001 by Harcourt, Inc. All rights reserved.
MARKETING MANAGEMENT • Marketing is so basic that it can’t be considered a separate function. • It is the whole business seen from the point of view of its final result, • that is, from the customer’s point of view • … Peter Drucker. • Key terms to be understand • -Needs - Wants - Demands -Product -Utility -Value -Satisfaction • Core concepts of Marketing Management • Production Concept • Product Concept • Selling Concept • Marketing Concept
FUNDAMENTAL TERMINOLOGIES NEEDS : FELT DEPREIVATION WANTS : FORM TAKEN BY HUMAN NEEDS AS THEY ARE SHAPED BY CULTURE AND PERSONALITY. DEMAND : WANTS BACKED BY PURCHASING POWER. PRODUCT : ANY OFFERING TO SATISFY NEEDS AND WANTS MAINLY PHYSICAL OBJECTS, SERVICES, INFORMATION, PROPERTIES EXPERIENCES, EVENTS, PLACES, ORGANISATIONS, IDEAS, PERSONS. FEATURES : PHYSICAL ATTRIBUTES OF THE PRODUCT ADVANTAGES : OPERATIONAL FEATURES OF THE PRODUCT BENEFITS : IMPLICIT, SUBJECTIVE OUTCOME AFTER USE OF THE PRODUCT WHICH LEADS SATISFACTION. VALUE : IT IS (FUNCTIONAL BENEFIT+ EMOTIONAL BENEFIT)/ (MONEY + TIME+ ENERGY + PSYCHIC COSTS) SATISFACTION : PERFORMANCE VS EXPECTATION FUNCTION EXCHANGE : OBTAINING OF SOMETHING BY OFFERING SOMETHING ELSE IN RETURN. TRANSACTION : MARKETING’S UNIT OF MEASUREMENT OF THE EXCHANGE.
CONCEPTS IN MARKETING • PRODUCTION CONCEPT : WIDELY AVAILABLE AND INEXPENSIVE • PRODUCTS WILL BE PREFERRED. • PRODUCT CONCEPTS : MOST QUALITATIVE, HIGH PERFORMING • AND INNOVATIVE FEATURES ORIENTED • PRODUCTS WILL BE PREFERRED. • SELLING CONCEPTS : IF LEFT ALONE, CONSUMERS AND • BUSINESS WON’T BUY ENOUGH OF • PRODUCTS SO DO AGGRESSIVE SELLING • MARKETING CONCEPT : MEETING NEEDS PROFITABLY; • FIND WANTS AND FILL THEM; • LOVE THE CUSTOMER, NOT THE PRODUT; • HAVE IT YOUR WAY… BURGER KING • YOU’RE THE BOSS… UNITED AIRLINES; • PUTTING PEOPLE FIRST BRITISH AIRWAYS; • SOCIAL MARKETING CONCEPTS: GIVE TASTE BUT NOT AT THE • COST OF HEALTH
Exchange & Transactions Five conditions for exchange potential • There are at least two parties • Each party has something of value to other party. • Each party is capable of communication and delivery. • Each party is free to accept or reject the offer. • Each party believers it is appropriate or desirable to deal with • the other party. • Exchange is a process of value creation. • Transaction involves –two things of some value, agreed upon • Conditions, a time of agreement, and a place of agreement and • Above all a legal system to endorse it all.
SELLING CONCEPT MARKETING CONCEPT FACTORY EXISTING PRODUCTS SELLING/ PROMOTING PROFITS THROUGH SALES VOLUME STARTING POINT MARKET CUSTOMER NEEDS FOCUS INTEGRATED MARKETING MEANS PROFITS THROUGH CUSTOMER SATISFACTION ENDS
DIFFERENCES BETWEEN PRODUCTION-ORIENTED AND MARKET-ORIENTED ORGANIZATIONS Business activity or function Production orientation Marketing orientation Company makes what it can sell; primary focus on customers’ needs and market opportunities. Broad. Based on perceived benefits provided. Market research; focus on identifying new opportunities and applying new technology to satisfy customer needs. Designed for customer convenience; a promotional tool. A customer service; a tool to attract customers. Emphasis on product benefits and ability to satisfy customer’s needs or Solve problems. Product offering Product line Pricing Research Packaging Credit Promotion Company sells what it can make; primary focus on functional performance and cost. Narrow. Based on production and distribution costs. Technical research, focus on product improvement and cost cutting in the production process. Protection for the product; minimize costs. A necessary evil; minimize bad debt losses. Emphasis on product features, quality and price.
Company Product Oriented Market Oriented Revlon Ikea Xerox Bendigo Fertilisers Esso Columbia Pictures Encyclopedia Britannica Qantas Kodak We make cosmetics We make furniture We make copiers We sell fertiliser We sell petrol We make movies We sell encyclopedias We run planes We produce film We sell hope We create democracy We improve office productivity We improve agricultural productivity We supply energy We market entertainment We are in the information production and supply business We bring people together We bind families together Product Oriented vs Market Oriented Concept
How the Internet is Affecting the Four ‘P’s • Place • From market place to market space (no borders!) • Product • From batches to custom orders (CUSTOMer) • Price • From cost plus to value minus (bidding, i.e. E-Bay) • Promotion • From monologue to dialogue (interactive)
The Societal Marketing Concept • All companies prosper when society prospers. • Companies as well as individuals, would be better off if social responsibility was an integral component of every marketing decision. • Requires all marketers adhere to principles of social responsibility in marketing of their goods and servicesendeavour to satisfy the needs and wants of their target markets in ways that preserve and enhance the well-being of consumers and society as a whole.
“The behaviour that consumers display in seeking, purchasing, using, evaluating, and disposing of products and services that they expect will satisfy their personal needs” - Schiffman et al (2001: 5) Consumer Behaviour
The Scope of Consumer Behaviour • How do individuals make decisions to spend their resources (time, money, effort)? Includes: • whatthey buy, • whythey buy it, • when they buy it, • where they buy it, • how often they buy it, and • how often they use it. • How do individuals dispose of their once-new purchases? Do they store it, throw it or give it away, sell it, rent it, or lend it out?
Firm’s Marketing Efforts 1. Product 2. Promotion 3. Price 4. Channels of distribution Sociocultural Environment 1. Family 2. Informal sources 3. Other noncommercial sources 4. Social class 5. Subculture and culture Input External Influence Need Recognition Pre-purchase Search Evaluation of Alternatives Psychological Field 1. Motivation 2. Perception 3. Learning 4. Personality 5. Attitudes Process Consumer Decision Making Experience Purchase 1. Trial 2. Repeat purchase Figure 1-2 A Simplified Model of Consumer Decision Making Post decision Behavior Output Post purchase Evaluation
Pre-purchase activities Purchase/Selection Post-purchase activities
Consumer Decision Processes Decision Making Model Individual Influence Environmental Influences Need Recognition Internal Search External Search Information Search Pre-purchase Evaluation Purchase Consumption, Post-consumption Evaluation & Divestment
Individual Influences Intentions, Attitudes, Beliefs & Feelings Consumer Knowledge & Behavioral Learning Individual Determinants of Consumer Behavior Information Processing Consumer Motivation Psychographics & Behavior-graphic Demographics, Geographic's
Environmental Influences Environmental Influences of Consumer Behavior Culture, Ethnicity & Social Class Group, Family & Personal Influences