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Chapter 6
Reader 3
Marketing in a Changing World
Philip Kotler, et al..
Introduction
 Marketing touches our daily life: we wear Levi’s jeans and Nike shoes, we eat Kellogg’s
Fruit n’ Fiber and shave with Gillette razors. We shop at Virgin Megastore, eat at
McDonald’s, and book a trip to EuroDisney at an American Express travel agency.
 This marketing system has given us a standard of living that previous generations did
not have.
 Among success factors for businesses are: great strategy, dedicated employees, good
information systems. But today’s successful companies have something in common:
they are strongly customer-focused and heavily committed to marketing.
 Successful companies sense and satisfy the needs of customers, and they deliver high
quality and value to the customer.
 Marketing is practiced by companies of all sizes, in all sectors, and in all kinds of
countries. Service companies are using marketing, and business-to-business companies
are using marketing.
 Non-profits organizations (hospitals, schools..) are using marketing principles to grow
their activities and compete for funds.
 Government agencies are using marketing and advertising to discourage smoking and
drugs, and to encourage energy conservation. This is known as social marketing
campaigns.
 Business and government leaders all over the world are learning about modern
marketing practices, even in the countries that were communists like Soviet Union and
Eastern Europe.
What Is Marketing?
 Marketing is a process by which organizations acquire customers and provide them with
products that provide value in exchange for a price. The essence of marketing is to
provide value to customers.
 Marketing is satisfying customer needs, and not just selling. Selling is only one of the
many marketing functions.
 “Hot products” are products that offer new benefits to consumers (like Sony Walkman).
The aim of marketing is to understand the customer need so well that the product sells
itself.
 Marketing is defined as: “a social and managerial process by which individuals and
groups obtain what they need and want through creating and exchanging products and
value with others”.
 The marketing mix includes the product specifications, the price, promotion and selling
campaigns, and channel strategies and tactics.
Human needs:
A human need is a state of ‘felt deprivation’. Human needs include: (a) physical needs
like food, clothing and safety; (b) social needs like belonging and affection; and (c)
individual needs like knowledge and self-expression. Once individuals satisfy one level
of these needs, they start aspiring for the next level.
Human wants and demands:
Wants are needs that have been shaped by culture and individual personality. A hungry
person in India needs to eat but may want a vegetable curry. Firms try to produce
want-satisfying products and services. People have unlimited wants but limited
resources.
When backed with the ability to pay (buying power) wants become demands.
Consumers choose products that give them the best benefits for their money.
Products:
A product is anything that can be offered to a market to satisfy a need or want. Such
products provide benefits (we buy foods to satisfy our hunger). Goods are usually
physical products, and services are intangible products.
Firms should view themselves as providing a solution to a need rather than selling a
product. When firms see customers’ wants (stressing on selling) without seeing the
underlying needs, they suffer from what’s called “marketing myopia”. A physical
product is only a tool to solve a consumer problem. If a new products serves the need
better, the consumer will want it.
Value and satisfaction:
Consumers choose among different products based on their perceptions of the
product’s value and its ability to offer the most total satisfaction.
People choose the product that gives the most benefit for the money spent – the
greatest value. This is the concept of customer value.
Exchange:
Exchange is the act of obtaining a desired object from someone by offering something in
return, to satisfy a certain need. People can concentrate on making things they are
good at making, and trade them for needed items made by others.
Exchange is the core concept of marketing. For an exchange to take place, the following
conditions must be satisfied: (a) at least two parties must participate and each should
have something of value to offer, (b) each party should want to participate and is free to
accept or reject, and (c) each party must be able to communicate and reach an
agreement.
Exchange creates value and gives people choices.
Transactions:
Transaction is marketing’s unit of measurement. A transaction consists of a trading of
values between two parties. One party gives X and gets Y in return. When you pay cash
for a product, this is called monetary transaction. A transaction not involving money
but another product in exchange, is called a barter transaction.
In general, the market tries to bring about a response to some offer. The response may
be more than just buying or trading products. Politicians want ‘votes’, associations want
memberships. Marketing consists of actions taken to obtain a desired response from a
target audience.
Relationships:
Marketers work at building long-term relationships with valued customers, distributors,
dealers or suppliers. They promise and deliver high-quality products and service for fair
prices. This is known as relationship marketing, where the company builds good
relationships with customers as a key to success and competitive advantage.
Markets
A market is “the set of current and potential buyers of a product”.
If each person in society was self-sufficient, the hunter would have to hunt and make
pottery and be a farmer at the same time to satisfy needs. In a decentralized exchange,
The hunter would trade meat for the goods of the potter and the farmer.
The centralized exchange is the best solution, where a merchant located in a central
area called ‘marketplace’ has goods from all traders. Merchants facilitate exchanges
and reduce the total number of transactions.
These days transactions can be done over the phone or by mail, and even using the
internet (without physical contact)
The labour market consists of people wanting to work for wages. The money market
includes people wanting to borrow, lend, or save money.
Marketing
Marketing means working with markets to complete exchanges in order to satisfy
human needs and wants. People exchange products and value with each other.
The sellers must:
1. Search for buyers
2. Identify their needs
3. Design good products
4. Promote them
5. Store and deliver these products
6. Set prices for them.
7. Product development, research, communication, distribution, pricing and service are
core marketing activities.
8. Not only sellers are involved in marketing activities, buyers also carry marketing
activities when they search for products they need at prices they can afford. Company
purchasing officers bargain for good terms and also do ‘marketing’.
9. A sellers’ market is one in which sellers have more power and buyers must be more
active ‘marketers’. A buyers’ market buyers have more power and sellers have to be
more active ‘marketers’. When supply grows faster than demand, markets become
buyers’ markets and sellers have to actively look for buyers.
Marketing Management
Marketing management seeks to affect the level, timing and nature of demand in a way
that helps the company achieve its objectives. Therefore, demand needs to be
effectively managed.
Negative demand:
When the market dislikes and avoids the product (like dental work). Marketers must
find ways to persuade the market.
No demand:
Marketers need to connect the product benefits with the market’s needs and interests.
Latent demand: consumer wants that are not satisfied by any current products (like
non-harmful cigarettes). Marketing should measure the potential market and find ways
to satisfy the demand.
Falling demand: Marketers try in this case to re-stimulate demand by finding new
markets, changing product features or creating better communication and promotion.
Irregular demand: The response might be flexible pricing or special promotion and
incentives.
Full demand: The firm needs to maintain this level of demand by offering good quality
and monitoring customer satisfaction to make sure it is doing a good job.
Overfull demand: When demand is higher than the company can handle, demarketing
can reduce the demand temporarily (like raising prices).
Marketing Management Philosophies
Marketing Management can be defined as “the analysis, planning, implementation and
control of programs designed to create, build and maintain beneficial exchanges with
target buyers in order to achieve company’s objectives”.
There are five concepts under which companies conduct their marketing activities: the
production, product, selling, marketing, and societal marketing concepts.
The production concept:
This concept holds that consumers will favor products that are available and highly
affordable, therefore management should concentrate on improving production and
distribution efficiency. This is one of the oldest concepts.
The product concept:
This concept says that consumers will favor products that offer the most quality,
performance and innovative features. The company should therefore have continuous
product improvements. Managers in this case think that technical superiority of the
product is the key to business success. This can lead to ‘marketing myopia’ because the
emphasis will be on the product not on the solution that consumers are looking for.
The selling concept:
This concept considers that consumers will buy if there is large selling and promotion
effort. This mostly applies to products that people don’t usually think of buying
(unsought goods), like encyclopedia or life insurance.
Selling-oriented companies focus on short-term results, rather than long-term customer
satisfaction.
The marketing concept:
This concept stresses on determining the needs and wants of target customers, and
delivering the desired customer satisfaction more efficiently and more effectively than
competitors.
 The selling concept:
Starting point: factory
Focus: existing products
Means: selling, promoting
Ends: profits through sales volume
Inside-out perspective
 The marketing concept:
Starting point: market
Focus: customer needs
Means: integrated marketing
Ends: profits through customer satisfaction
Market-focused, customer-driven
Outside-in perspective
Examples:
IKEA, Toyota, Procter & Gamble, Ritz-Carlton
 Marketing strategies need to be adjusted to the changing marketplace if the company
wants to be marketing oriented. Customer satisfaction is at the core of any strategy.
 A company’s sales come from new customers and repeat customers.
 Customer retention is keeping the current customers, and is very important. Customers
need to be satisfied so that they can be retained as repeat customers.
A satisfied and loyal customer buys more, talks favorably about the firm, and costs less
to serve and attract than first time customer.
The company should meet the needs of customers profitably.
The societal marketing concept
 This concept holds that the firm should determine the needs, wants and interests of
target markets. Firms should deliver satisfactions more effectively and more efficiently
than competitors. The well-being of society and of consumers should be maintained
and improved.
 This concept is the newest of the five marketing management philosophies. It looks at
the environment, society’s needs and services, and worldwide economic problems.
 The societal marketing concept considers the company’s need to make profits in light of
consumers’ want satisfaction and Society’s interests.
 Johnson & Johnson has a credo that puts honesty, integrity and consumers’ interests
before profits.
The recall of Tylenol once cost Johnson and Johnson $240 million in order to keep
consumers’ trust in the company and its products, and to do the right thing according to
the company’s credo.
The Goals of the Marketing System
Buyers want good quality products at reasonable prices in convenient locations. They
want good brand and product assortments, helpful salespeople, and good warranty and
service.
Sellers should decide about which target market to serve, how to satisfy consumers’
needs, what products and prices would offer the greatest value, what retailers or
wholesalers to use, what kind of advertising and promotion to use, how to train sales
force.
Publics like legislators and public interest groups are interested in knowing whether
products are safe, whether instructions and warnings on the package are useful, and
whether the environment is adversely affected.
Society seeks four major goals from its marketing system:
1. Maximize consumption: many businesses think that the more people consume the
happier they are. However, many people see that increased wealth and
consumption don’t necessarily bring happiness
2. . Maximize consumer satisfaction: this view holds that the marketing system should
maximize consumer satisfaction, not just the quantity consumed. However,
consumer satisfaction is very difficult to measure. Federal Express always improves
customer service through advanced package tracking technologies to maximize
customer satisfaction.
3. 3. Maximize choice: product variety is viewed by many marketers as very crucial,
but this can increase the firm’s costs and increase consumers’ confusion and
frustration if not done right.
4. 4. Maximize life quality: quality of life and of the environment are viewed as worthy
goals to a marketing system.
Marketing Challenges in the 1990s
Increased global competition, environmental decline, and economic stagnation are
among the major challenges. Deregulation and decreased barriers to trade are also
important factors.
Rapid globalization: today each company competes in a more global marketplace. New
markets are opening in foreign countries for companies to expand their reach and sales.
Supplies are also purchased from other countries.
The changing world economy:
Buying power is declining in many countries and both spouses work to make ends meet.
Companies are developing new solutions to changing consumer problems. Product
quality is getting better and better, and heavy discounters are emerging with everyday
low prices.
The call for more ethics and social responsibility:
The public is calling for corporate integrity and ethics, and also environmentalists are
alarming everyone about any negligence that might damage our natural resources and
environment.
The new Marketing Landscape
 Global markets, changing customer’s needs, and new technologies are all among the
important issues shaping business today.
 Safety features which offered Volvo a competitive advantage for years are now standard
features in many cars.
 Changing customers’ needs should always be monitored, providing value to customers is
a key to success, and providing good service after sale is also crucial to customer
retention. Companies need to always get customer input and opinion.