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CHAPTER II THEORETICAL FRAMEWORK 2.1. Marketing In these times of constantly increasing competition, marketing plays an important role in business. A company’s ability to understand its market and the consumers and design the most appropriate marketing strategy is the key to sustain the business. Kotler and Keller (2012) described marketing as a human activity directed to meet the needs and wants through exchange processes. The most fundamental concept in marketing is human needs, which is described as such a loss of feeling in a person. Human needs are complex. It includes basic needs, security, social, respect and self-actualization. Meanwhile, human want is derived from human needs that are shaped by the culture and an individual’s personalities. In order to obtain a more comprehensive understanding of the marketing, below are several definitions of marketing. Kotler and Armstrong (2012) define marketing as a social and managerial process whereby individuals and groups obtain what they need 15 16 and want through creating and exchanging products and value with others. In addition, marketing is an activity that occurs when people decide to satisfy their needs and wants through exchange. William J. Stanton (2001) defines marketing as a total system of business activities designed to plan, price, promote, and distribute want satisfying product to target markets to achieve organization objective. The management guru Peter Drucker (Simkin, 2000) states that the aim of marketing is to make selling superfluous. The aim is to know and to understand the customer so well that the product or service fits him or her and sells itself. Subsequently, Lyndon Simkin (2000) added that there are common themes in most explanations of marketing. The most important are: 1. the ability to satisfy customers; 2. the exchange of product or service for payment or donation; 3. the need to create an edge over competitors; 4. the identification of favourable marketing opportunities; 5. profits or financial surpluses to enable a viable future for the organisation; 6. that resources are utilised shrewdly to maximize a business's market position; and 7. the aim to increase market share in priority target markets. Based on all of the definitions above, it can be concluded that marketing is a set of strategy undertaken by companies to transfer goods or 17 services to buyers. The process involves motivating consumers to purchase a product that can fulfill their needs and help company achieve their goals. 2.2. Marketing Management Solomon (2011) describes marketing management as the process of planning and implementation of ideas, pricing, promotion and distribution of ideas, goods and services to create exchanges which satisfy the goals of individuals and organizations. In other words, that marketing is the process of planning and conception of the implementation, pricing, promotion and distribution of ideas, goods, and services to create exchanges, which satisfy individual and organizational objectives. To understand a marketing management as a process, a system approach is described as follow: Inputs Process Inputs Objective Figure 2.1 Marketing Management Process (Buchari Alma, 2013) 18 A company needs input, which are gathered from information about activities that are happening in the field or market. Then, the information is processed and analyzed together with several other information sources. The outcome is anoutput, which is a decision or policy that must be taken in order to achieve company goals. Once the decision is made and implemented, the company waits for the results of the implementation or feedbacks. Feedbacks are useful for management to further improve its policies. Meanwhile, Kotler and Keller (2012) defines marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value. From the explanation above, it can be concluded that marketing management is the process of understanding, creating products or services attracts consumers, and developing the strategy market them. 2.3. The Four Ps of Marketing The term “marketing mix” was first introduced in 1964 by Professor Neil Borden of the Harvard Business School. He defined marketing mix as a related group of activities designed to influence buyer behavior. The mix consisted of what are generally referred to as the Four Ps: product, price, place and promotion (Knilans, 2009). 19 Darlymplle and Parsoons (1996) define markketing mix as a the specific colleection of actiions and asssociated instruments empployed by ann organizatiion to stiimulate acceeptance of itss ideas, prodducts, or servvices. William J. Stanton (2001); ( markketing mix is i the term that t is used to descrribed the coombination of o the four inputs that constitute the t core of an organ nization’s marketing m s system. Theese four ellements aree the produuct offerring, the priice structuree, the prom motion activiities, and thhe distributiion systeem. McCarthyy classified various maarketing activities into marketing m m mix toolss of four brooad kinds, which w he callled the four Ps of markeeting: produuct, pricee, place and promotion p (K Kotler and Keller, K 2012)). Marketing Mix Product P (product variety, quaality, design, feeatures, brand d name, pacckaging, sizes,, services, warrranties, returrns) Price (list pricce, discounts, allowances, payment period, creedit terms) Place (chan nnels, coveragge, assortmentts, locations, invento ory, transport)) Prromotion (sales p promotion, advertising, salees force, publicc direct marketing) relations, d Figu ure 2.2. Marrketing Mix or the Fourr Ps (Kotlerr and Kellerr, 2012)