CHAPTER 1: AN OVERVIEW OF MARKETING AND MARKETING MANAGEMENT

Contents
1.0 Aims and Objectives
1.1 Introduction
1.2 The Core Concepts of Marketing
1.3 Importance of Marketing
1.4 Marketing Management
1.4.1 Meaning of Marketing Management.
1.4.2 Marketing Management Philosophies/Concepts
[Link] The Production Concept
[Link] The Product Concept
[Link] The Selling Concept
[Link] The Marketing Concept
[Link] The Societal-Marketing Concept
[Link] Relationship Marketing Concept
1.5 Summary

1.0 AIMS AND OBJECTIVES

This unit aims at introducing marketing and gives a brief description of market, core concepts of
marketing, marketing management and marketing management philosophies.

After reading this unit you will be able to:

 know the meaning of market and marketing
 describe the core concepts of marketing
 know the meaning of marketing management
 identify the importance of market and marketing
 identify the different marketing management philosophies used to date.

1.1 INTRODUCTION
 Marketing can be defined in various ways. In order to understand the term marketing we can use
the following definitions.

 Marketing is a social and managerial process by which individuals and groups obtain
what they want and need through creating, offering and exchanging products of
value with others.
 Marketing is the process of development and efficient distribution of goods and
services to a target market with the objective of making profit.
 Development:- refers to the identification of a new product, its design,
production, branding and packing.
 Distribution:- refers to the placement of products at the right quantity, right
time and to the right place where the target consumer is available.
 Marketing is a process of anticipation, management and satisfaction of demand
through exchange.
 Anticipation of demand refers to the estimation or forecasting how consumers
demand for products in the future changes.
 Management of demand also refers to the stimulation of demand, facilitation
of usage and regularity of supply.
 Satisfaction of demand refers to the ability to meet or exceed the expectation
of customers demand by providing after sales service such as packing,
transportation, maintenance, availability of spare parts, guarantee etc.
 Marketing consists of individual and organizational activities that facilitate and
expedite satisfying exchange relationships in a dynamic environment through the
creation, distribution, promotion and pricing of goods, services and idea.
In order to further understand marketing it is better to know the core concepts of marketing,
which is presented as follows.

1.2 THE CORE CONCEPTS OF MARKETING

Needs Value, cost Exchange Relationships Marketers

Products Markets
Wants and
Demand And And And and
 Figure 1.1
The core concept of marketing
A) Needs, Wants and Demands.
The starting Point for the discipline of marketing lies in human needs and wants.
People needs and wants many varieties of things and marketing has to satisfy these needs and
wants. Needs and wants of people are unlimited and continuously changes and so the
marketer’s task is to meet these changing human needs and wants.

Needs: Need is a state of felt deprivation of some basic satisfaction. It is also defined as a
discrepancy between the actual state and desired state of a human being. It is the deficiency of
something useful. Needs are not created by society or by marketers. They exist in the very
nature of human biology and the human condition.

Wants: Wants are desires for specific satisfiers of these needs. A want for one person may not
be a want for another person. In other words, what is desired by one person may not be desired
by another- what is good for one person may be worse for another. For example: When a
person felt hungry, he wants to eat food, but the type of food wanted by different persons may
be different.

Although people’s needs are few, their wants are many. Human wants are continually shaped
and reshaped by social forces and institutions, including churches, schools, families and
business corporations.

Demands: Demands are wants for specific products that are backed by an ability and
willingness to buy them. Wants become demand when they are backed up by purchasing
power. Therefore, marketers should measure the wants of the people that are backed by
purchasing power because only demand guarantees sales.

B) Products (Goods, Services and Ideas)/Marketing offerings

Human needs and wants are satisfied with products offered by the marketer. Product is
anything that can be offered to the market for acquisition, use and/or attention. Alternative to
product we can use other terms such as offering or solution to define the same thing. Products
 may have three forms: physical goods (people, place, machinery, food, etc), services
(intangible products) and ideas (human conceptions).

For example: a computer manufacturer is supplying all three forms: physical goods (computer,
monitor, printer, etc), services (delivery, installation, training, maintenance, and repair), and
ideas (computation power).

The physical object is a means of packaging a service. The marketer’s job is to sell the benefits
or services built into physical products rather than just describe their physical features. For
example, the soap manufacturer is selling the benefits it offers such as cleaning ability,
durability and flavor but not the physical item. If the product does not offer the expected
benefit, consumers will not buy the product any more. Therefore, marketers should focus their
attention on the benefits the product offers not on the physical features of the product.

C) Customer Value and Satisfaction.

How do consumers choose among the products that might satisfy a given need? A number of
products can satisfy a need. We call these alternative products the consumer’s product choice
set. The consumer has to decide on the most satisfying product from among the product choice.

Value is the consumer’s estimate of the product’s overall capacity to satisfy his or her needs.
Consumer, in order to maximize their satisfaction, they have to consider not only the value
they can acquire from owning and using a product, but also the cost they incurs to acquire the
product. The product with the highest value might cost substantially more than the other
alternatives. Therefore, consumers will consider the products value and cost before making a
choice. A rational consumer will choose the product that produces the most value per Birr.

D) Exchange and Transactions

Exchange is the act of obtaining a desired product from someone by offering something in
return. Exchange is one of the four ways in which people can obtain products they want. They
are:

1st. Self –production – Eg. Relieving hunger through hunting, fishing, or fruit
gathering. Here there is no market and no marketing.
2nd. Coercion – Hungry people can wrest or steel food from others. Here no
 benefit is offered to the others except that of not being harmed.
Therefore, there is no market and no marketing.
3rd. Begging – Hungry people can approach others and beg for good. They have
nothing tangible to offer except gratitude. There fore there is no
market and marketing.
4th. Exchange – Hungry people can offer a resource in return for food, such as
money, a good or a service. Her, there is market and marketing.
Marketing emerges when people decide to satisfy needs and
wants through exchange.

For exchange to take place, five conditions must be satisfied:

i. There are at least two parties (individuals or groups)
ii. Each party has something that might be of value to other party
iii. Each party is capable of communication and delivery
iv. Each party is free to accept or reject the exchange offer
v. Each party believes it is appropriate or desirable to deal with the other party.

If these conditions exist, there is a potential for exchange. Whether exchange actually takes
place depends on whether the two parties can agree on terms of the exchange that will leave
them both better off (or at least not worse off) than before the exchange. Exchange is
frequently described as a value – creating process because exchange normally leaves both
parties better off.

Transaction: Two parties are engaged in exchange if they are negotiating and moving toward
an agreement. When an agreement is reached, we say that a transaction takes place.
Transactions are the basic unit of exchange. A transaction consists of a trade of values between
two or more parties. Transaction may be either monetary or barter transaction.

Transaction involves several dimensions: at least two things of value, agreed up on conditions,
a time of agreement and a place of agreement. Transactions are supported and enforced
through certain legal systems.
 Transaction differs from transfer. In a transfer nothing is received in return for an offer.
Transferor behavior can be understood through the concept of exchange. The transferor expects
to receive something in exchange for his or her gift.

Marketers seek to elicit a behavioral response from another party. Hence, marketing consists of
the actions undertaken to elicit desired responses from a target audience.

E) Relationships and Networks.

Relationships: - Transactions marketing is part of a larger idea, that of relationship marketing.
Relationship marketing is the practice of building long-term satisfying relation with key
parties-customer, supplies and distributors – in order to retain their long-term preferences and
business. Smart marketers try to build up and “win-win” relationships with customers,
distributors, dealers and suppliers. This is accomplished by promising and delivering high
quality goods, services and fair prices to the other party over time. Relationship marketing
results in strong economic, technical, and social ties among the parties. It also cuts down
transaction costs and time.

The ultimate outcome of relationship marketing is the building of a unique company asset
called marketing network. A marketing network consists of the company and all its supporting
stakeholders’ customers, employees, suppliers, distributors, retailers, ad agencies and others
with whom it has built mutually profitable business relationships. The operating principle of
relationship marketing is: Build a good network of relationships with key stakeholders, and
profits will follow.

F) Markets
The concept of exchange leads to the concept of market. A market consists of all the potential
customers sharing a particular need or want who might be willing and able to engage in
exchange to satisfy that need or want. Thus the size of the market depends on the number of
persons who exhibit the need or want, have resources that interest others and are willing and
able to offer these resources in exchange for what they want.
 Communication

Goods/services

Industry Market

(A Collection of sellers) (A collection of buyers)

Money

Information

Figure 1-2
A simple marketing system

Markets viewed from three perspectives. The first is a traditional perspective which views
market as the place where buyers and sellers gathered to exchange their goods, as a village
square. Economists use the term market to refer to a collection of buyers and sellers who
transact over a particular product or product class as a housing market, stock market, financial
market, etc. Marketers, however, see the sellers as constituting the industry and the buyers as
constituting the market. The relationship between the industry and the market is shown in the
above figure 1-2.

As it is depicted in figure 1-2, the seller and the buyers are connected by four flows. The sellers
(Industry) send goods and services and communication (through ads, direct mail, etc) to the
buyers (the market): in return they receive money and information (altitudes, sales data, etc).
The inner lines show an exchange of money, whereas the outer loop shows an exchange of
information.
G) Marketers and Prospects
The concept of markets brings us full circle to the concept of marketing. Marketing means
working with markets to actualize potential exchanges for the purpose of satisfying human
needs and wants. In the concept of marketing we find two parties – the seller and the buyer.

When one party is more actively seeking an exchange than the other party, we call the first
party a marketer and the second party a prospect. A marketer is someone seeking one or more
prospects who might engage in an exchange of values.
 The marketer can be a seller or a buyer. Suppose you want to buy a house that has just become
available. You go for it, ask the owner of the house, take the initiative, and develop a desire in
yourself for the house. Now you are the marketer, the house owner is a prospect. In reverse, the
owner of the house, need to sell his house, - advertise the sell bargaining with many potential
buyers including you. Here, the owner of the house is the marketer and you become a prospect.

In the event that both parties actively seeking an exchange, both are marketers and the situation
is one of reciprocal marketing. For example, if both the buyer and seller of the house show an
interest to buy and sell respectively at al time, they both become marketers.

1.3. IMPORTANCE OF MARKETING

Marketing is an important social activity that offers benefits to all the parties concerned. As such
importance of marketing can be summarized as follows.

a) As a producer and businessman we usually make such marketing related decisions such
as finding out who are our customers? What are their need and want and what good and
service to offer and at what price.
b) As a consumer we make such marketing related decision where to shop, which
salesperson to contact, what price to pay, what to buy.
c) As an employee we are concerned with the employment opportunity that can be created
by marketing activities.
d) To the society, marketing contributes to the economic growth of the society through
making profit and make people at a better off.
e) Marketing creates utility such as:
Place utility: -Marketing makes products readily available at a place where
customers want them.
Time utility: -Marketing makes products available at the time when they are
wanted by customers.
Possession utility: -Marketing makes possession by selling the product to
customer.
Form utility: - Form entails the physical or chemical change that takes place
through production which is based on the marketing effort in
 identifying what customers need and want.

1.4 MARKETING MANAGEMENT

1.4.1 Meaning of Marketing Management

Marketing management is the process of planning and executing the conception, pricing,
promotion and distribution of ideas, goods and services to create exchange that satisfy individual
and organizational goals.
Marketing management is a process of analysis, planning, implementing and control of programs
designed to create, build and maintain beneficial exchanges with target consumer segments
through providing goods and services in the exchange process.
These definitions recognize that marketing management as:
i. A process involving analysis, planning, implementation & control
ii. Covering ideas, goods and services
iii. Resting on the notion of exchange
iv. Having a goal to produce satisfaction for the parties involved

Marketing management is an activity that can be practiced in any market such as: labor market,
raw – materials market, food market, Stock market, etc.

The popular image of the marketing manager is someone whose task is primarily to stimulate
demand for the company’s products. Marketing management has the task of influencing the
level, timing and composition of demand in a way that will help the organization achieve its
objectives. Marketing management is essentially demand management i.e. marketing managers
need to identify the different state of demand so that they can design different marketing tasks.
The organization presumably forms an idea of a desired level of transactions with a target
market. At times the actual demand level may be below, equal to, or above the desired demand
level. That is; there may be no demand, weak demand, adequate demand, and excessive demand
and so on and marketing management has to cope with these different states.

The various states of demand and the corresponding marketing tasks can be discussed as follows.

1. Negative demand: - a market will be in a state of negative demand when the majority
of the market dislike the product and even pay a price to avoid it.
Example: - people may have a negative demand for vaccination & dental work.
Employers have a negative demand for alcoholic employees.
Marketing strategy- Conversional marketing (making attitudinal adjustment by promotion,
features redesigning, lowering price, etc.). The marketing task is to analyze why the market
dislikes the product and whether a marketing program consisting of product design, lower price
and more positive promotion can change the market belief and attitude.

2. No Demand: - This state of demand may occur when target consumers are unaware of
or uninterested in the product.

Example: - A college student may be uninterested in foreign language courses

- Farmers may not be interested in a new farming method.
Marketing strategy-Stimulation marketing (the company tries to find way to associate the
benefits of the product with people’s natural needs and interests through advertisement.

3. Latent demand: - This state of demand may occur when many consumers may share a
strong need that cannot be satisfied by any existing product. For example, consumers
have a strong demand for harmless cigarettes, more fuel-efficient cars and cleaner
neighbor-hood, AIDS vaccine, etc.

Marketing strategy-Developmental marketing, the marketing task is to measure the size of the
potential market and develop effective goods and services that would satisfy the demand.

4. Declining demand: - every organization sooner or later, faces declining demand for one
or more of its products. The marketer must analyze the cause of market decline and
determine whether demand can be re-stimulated by finding new target markets, changing
the products features or developing more effective communication.
Marketing strategy- Remarketing (changing product features, searching for new target
markets, more effective communication, etc will re-stimulate the declining demand). The
marketing task is to reverse the declining demand through creative remarketing of the product.

5. Irregular demand: - many organizations face demand that varies on a seasonal, daily
or even hourly basis, causing problems of idle or overworked capacity. For example,
much of the vehicles used for public transportation are idle during off-peak hours and
 insufficient during peak travel hours, and museums and churches are under visited on
weekdays.
Marketing strategy-Synchro-marketing (the company decides to increase price, decrease
advertisement and augmented services during peak periods and doing the reverse during slack
demand periods). The marketing task, called synchro marketing, is to find ways to alter the same
pattern of demand through flexible pricing, promotion and other incentives

6. Full Demand: - Organizations face full demand when they are pleased with their
volume of business.
Marketing strategy-Maintenance marketing, the marketing task is to maintain the current
level of demand in the face of changing consumer preferences and increasing competition
through maintaining or improving its quality and continually measure consumer satisfaction.

7. Overfull Demand: - some organizations face a demand level that is higher than they can
or want to handle.
The marketing strategy, called de-marketing, requires finding ways to reduce the demand
temporarily or permanently through such steps as: raising prices, and reducing promotion and
service. De-marketing aims not to destroy demand but only to reduce its level, temporarily or
permanently.

Demarketing may be general or selective demarketing. General demarketing seeks to discourage

overall demand and consists of such steps as rising prices and reducing promotion and services.

Selective demarketing consists of trying to reduce the demand coming from those parts of the
market that are less profitable or less in need of the product.

8. Unwholesome demand: customers may be attracted to products that have undesirable

social consequences. These products are liked by some and disliked by others in the
society. E.g. cigarettes, alcohol, hard drugs, handguns, etc.
Marketing strategy-Destroy marketing (marketers attach cautionary label on the package and
reduce explicit, positive and direct promotion, fear messages, price hikes, reduce availability to
get people to give it up.

1.4.2 Marketing Management Philosophies/Concepts

Marketing management is defined as a conscious effort to achieve desired exchange outcomes
with target markets. But what philosophy should guide marketing efforts? What relative weights
should be given to the interests of the organization, the customers and society? Very often these
interest conflict.

There are five competing concepts under which organizations can choose to conduct their
marketing activities: the production concept, the product concept, the selling concept, the
marketing concept and the societal marketing concept. Let us look at each of these concepts in
detail.

a) The Production Concept/Philosophy

The philosophy is probably the oldest concept in guiding marketing (in the early 1905). The
concept holds that consumers will favor those products that are widely available and low in cost.
The management’s focus, therefore, should be in increasing production efficiency and wide
distribution. This philosophy is a useful concept in the situations when
i. The demand for the product exceeds its supply. Here consumers are more interested
in obtaining the product than in its fine points.
ii. The products cost is high and has to be decreased to expand the market.

Some service organizations also operate on the production concept while this management
orientation can handle many cases per hour; it is open to charges of impersonality and poor
service quality.
Production era ‘Cut costs. Profits will take care of themselves’
b) The Product Concept
The product concept holds that consumers will favor those products that offer the most quality,
performance or innovative features. The management’s focus, therefore, should be on marketing
good products and on constant improvement of the product.

Under this concept, managers assume that buyers admire well-made products and can appraise
product quality and performance. However, these managers are sometimes caught up in a love
affair with their products and do not realize that the market may be less “turned on”.
Product oriented companies often design their products with little or no customer input. They
trust that their engineers will know how to design or improve the product.
 Product era ‘A good product will sell itself

Both production concept and product concept lead to marketing myopia (focusing too narrowly on
their own operations and losing sight of satisfying customer needs and building customer
relationships.

C) The Selling Concept

The selling concept holds that consumers, if left alone, will ordinarily not buy enough of the
organization’s products. The organization must, therefore, undertake an aggressive selling and
promotional effort. Marketers believed that the most important marketing activities in the selling
concept are personal selling and advertising.

This concept assumes that consumers typically show buying resistance and must be persuaded in
to buying. It also assumes that the company has available effective selling and promotional tools
to stimulate more buying. It assumes that customers who are persuaded into buying the product
will like it, and if they do not, that they will not bad-month it (talk negatively) and they will
possibly forget their disappointments and buy it again. These are indefensible assumptions to
make about buyers. Normally dissatisfied customers bad-month (talk negatively) the product to
many people. Hence, marketing based on hard selling carries high risk. This concept is practiced
most aggressively when the company has an overcapacity – to fill his capacity and the products
are unsought (those goods that buyers normally do not think of buying).

This concept has an inside-out perspective. It starts from the company and produce what the
company can. Then, through personal selling and advertising, the company tries to maximize its
profits through increased sales volume.

Sales era ‘Selling is laying the bait for the customer

D) The Marketing Concept

This concept holds that the key to achieve organizational goals consists of being more effective
than competitors in integrating marketing activities towards determining and satisfying the needs
and wants of target market.
This concept starts from the target customer’s needs and wants. It is customer oriented. The
company achieves its profit through creating and maintaining customer satisfaction. The key to
achieve organizational goals is generating customer satisfaction. Its main principle is to love
customers.
Marketing era; ‘The customer is King!’ Love the customers, not the product.

Difference between Selling and Marketing concepts

Selling concept Marketing concept
 Starts and focuses with the seller  Starts and focuses on the needs of the
existing products and needs buyer. Buyer is the center of the business
 preoccupied with the seller’s need to  Emphasizes on identification of a market
convert his product into cash; opportunity, fulfilling the needs of the
emphasizes on profit customers.
 views business as a ‘goods producing  Views business as a ‘customer satisfying
processes’ processes.
 The firm makes the product first the then  customer determines what is to be offered
decides how to sell it and make profit. as a ‘product’ and the firm offering
product that would match the needs of the
 Emphasizes accepting the existing customers
technology and reducing the cost of  Emphasis’s on innovation of adopting the
production. most innovative technology.
 Seller’s motives dominate marketing  Marketing communications acts as
communications. communicating the benefits of the product
 Costs determine price.  Consumer determines price.
 views the customer as the last link in the  views the customer as the very purpose of
business the business.
 Seller’s convenience dominates the  Buyer determines the shape of the
formulation of the ‘marketing mix’. ‘marketing mix’.

E) The Societal - Marketing Concept

The question whether the marketing concept is an appropriate philosophy in an age of
environmental deterioration, resource shortages, explosive population growth, world hanger and
poverty, and neglected social services is raised in the recent years. It is questioned whether
satisfying consumers wants is necessarily acting in the best long-run interests of consumers and
society.
These and other questions lead to a new concept that enlarger the marketing concept i.e. The
societal marketing concept. The societal marketing concept holds that the organizations task is to
determine the needs, wants and interests of target markets and to deliver the desired satisfactions
more effectively and efficiently than competitors in a way that preserves or enhances the
consumer’s and the society’s well-being. The societal marketing concept calls upon marketers to
build social and ethical considerations and to create balances between customer satisfaction,
company’s objectives, and society’s interest into their marketing practices. It believes that what
is good for the customer may not be good for the society.
F. Relationship Marketing
 Focuses on needs/ wants of target markets
and delivering superior value
 Is building Long-term satisfying relationships with customers and other partners like
suppliers, distributors, etc.
 Create networking with customers and develop the relationship to the highest level. In
this case, customer experience rather than customer satisfaction is the most critical
component in relationship marketing
Relationship marketing era; ‘Relationship with customers determine our firm’s future
1.4 SUMMARY

Marketing is the performance of business that directs goods and services to the external
environment. In other words marketing is the link between the firm's internal environment and its
external customers. The starting point of any marketing activity should be discovering the needs
and wants of customers in the market and then to develop product according to the needs of the
customers and finally delivering the desired satisfaction for customers better than competitors.

Marketing management is the management of demand. The task of the marketing is to identify
customers' needs and wants, producing the needed products and offering them to the market.
Marketing management gets its importance as the role of customers to organizational sellers
increases. Hence marketing management philosophers passes through certain levels of
development as: production concept, product concept, selling concept, marketing concept and
societal-marketing concept.