PRINCIPLES OF MARKETING

KABRI DAHAR UNIVERSITY

COLLEGE OF BUSINESS AND
ECONOMICS
MANAGEMENT DEPARTMENT

PRINCIPLES OF MARKETING

University of Kabridahar

September 2025

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UNIT1 FUNDAMENTAL CONCEPTS OF MARKETING

Learning Objectives
Upon completion of this unit a student will be able to:
 Define marketing,
 Discuss the core concepts of marketing,
 Identify the various demand states and explain the respective marketing tasks,
 Discuss the various marketing management philosophies and infer their
marketing implications, and
 Explain the basic marketing mix model known as the 4 P's

Introduction
Marketing is part of all of our lives and touches us in some way every day. To be
successful each company that deals with customers on a daily basis must be customer-
driven. The best way to achieve this objective is to develop a sound marketing function
within the organization. Marketing is defined as a social and managerial process by
which individuals and group obtain what they need and want through creating and
exchanging products and value with others. Marketing is a key factor in business
success. The marketing function not only deals with the production and distribution of
products and services, but it also is concerned with the ethical and social responsibility
functions found in the domestic and global environment. Marketing must be aware and
respond to changes. Marketing and its core concepts, the exchange relationship, the
major philosophies of marketing thought and practices are the major topics presented in
this introductory unit.

1.1 What is marketing?

Marketing, more than any other business function, deals with customers.
Understanding, creating, communicating and delivering customer value and satisfaction
are at the very heart of modern marketing thinking and practice.

Although we will explore more detailed definitions of marketing later in this unit,
perhaps the simplest definition is this one: Marketing is the delivery of customer
satisfaction at a profit. The twofold goal of marketing is:
(a) to attract new customers by promising superior value and
(b) to keep current customers by delivering satisfaction.
Sound marketing is critical to the success of every organization - large or small, for -
profit or not -for-profit, domestic or global companies. Today, marketing must be
understood not in the old sense of making a sale “telling and selling", but in the new
sense of satisfying customer needs.

Are selling and advertising meaning the same thing to marketing?

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Marketing is much more than selling and advertising. Today, marketing must be understood
beyond the old "telling and selling." The new dimension is that of satisfying customer needs.
Major differences between selling and marketing include:
Commentary
 Selling occurs only after a product is produced. By contrast, marketing starts long
before a company has a product. Marketing is the homework that managers
undertake to assess needs, measure their extent and intensity, and determine
whether a profitable opportunity exists.
 Marketing continues throughout the product's life, trying to find new customers and
keep current customers by improving product appeal and performance, learning
from product sales results, and managing repeat performance.
 If the marketer does a good job of understanding consumer needs, develops products
that provide superior value and prices, distributes, and promotes them effectively,
these products will sell very easily.
Thus, selling and advertising are only part of a larger “marketing mix" - a set of
marketing tools that work together to affect the marketplace.

Marketing is defined differently by different people. In this course we choose the

following three definitions.

1. "Marketing 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" (The American Marketing Association).
This definition shows the wide-ranging dimensions of marketing. The discipline is not
limited to activities in which businesses are involved. It can involve the activities of a
non-profit organization or marketing of a idea or a service as well as a product.

2. "Marketing is the anticipation, management, and satisfaction of demand through the

exchange process" (Evans Joel R, and Berman Barry).According to Evans and Berman,
marketing involves:
(a) Anticipation of demand
(b) Management of demand
(c) Satisfaction of demand

What should marketers do to anticipate, manage, and satisfy

demand?

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Commentary

1. Anticipation of demand requires a firm to do consumer research on a regular basis so as to

develop and introduce offerings that are desired by consumers.
2. Management of demand involves:
a. Stimulation tasks
b. Facilitation tasks and
c. Regulation tasks
Stimulation tasks arouse consumers to want the firm's offering through attractive
product design, intensive promotion, reasonable prices, and other strategies.
Facilitation is the process whereby the firm makes it easy to buy its offering through
convenient locations, availability of credit, well-informed salespeople, and other
strategies.
Regulation is needed when there are peak periods for demand rather than balanced
demand throughout the year or when demand is greater that the availability of the
offering, then the goal is to spread demand throughout the year or to demarket a
good or service (reduce demand).
3. Satisfaction of demand involves actual performance, safety, availability of options, after-
sale service, and other factors. For consumers to be satisfied, the goods, services,
organizations, people, places, and ideas must fulfill their expectations.

1.2 Core Concepts of Marketing

Needs, Wants
and demands

Products
Markets
Core (Goods,
Marketing services etc)
Concepts

Exchange,
transactions, and Value,
relationships satisfaction, and
quality

Figure 1 -1 Core concepts of marketing

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1) Needs, wants and Demands

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Needs: Human needs are the most basic concept underlying marketing. Human need is
a state of felt deprivation of the basic human requirements such as food, air, water,
clothing and shelter. The following are basic issues about human needs related to
marketing.
i) Humans have many complex needs.
a) Basic, physical needs for food, clothing, shelter, and safety.
b) Social needs for belonging and affection.
c) Individual needs for knowledge and self-expression.
ii) These needs are part of the human makeup. Marketers can‟ t create
human needs, rather they have to understand and create a product which
can satisfy those needs.
Wants: needs directed to specific objects that might satisfy the need. A human want is
the form that a human need takes as shaped by culture and individual personality.
Wants are basically specific satisfiers of human needs. For example, an American needs
food but wants a hamburger, French fries and soft drinks. A Mauritius needs food but
wants mango, rice, lentils, and beans. In short, wants are shaped by one‟ s society.
Demands: are wants for specific products backed by buying [Link] people want a
Mercedes; only a few are able and willing to buy one.

2) Product or offering
A product is any offering that can satisfy a need or want. A product is also known as a
solution to customers‟ problems. A product is also any thing that can be offered to a
market for attention, acquisition, use, or consumption and that might satisfy a need or
want. The concept of product is so broad that it doesn't include only goods and services.
Marketing people are involved in marketing ten types of product: goods, services,
experiences, events, persons, places, properties, organizations, information, and ideas.
Goods: Constitute the bulk of most countries' production and marketing effort.
Services: As economies advance, growing proportions of their activities are
focused on the production of services.
Experiences: By orchestrating several services and goods, one can create, stage
and market experiences.
Events: Marketers promote time - based events such as Olympics, trade shows,
sports events and artistic performances.
Persons: Celebrity marketing has become a major business. Examples include
artists, musicians, CEOs (chief executive officers) physicians, high profile lawyers
and financiers.
Places: Cities, states, regions and nations compete to attract tourists, factories,
Company head quarters, and new residents.
Properties: Intangible rights of ownership of either real property or real estate or
financial property (Stocks and bonds)
Organizations: Actively work to build a strong favorable image in the mind of
their publics.
Information: The production, packaging, and distribution of Information is a
major industry in a given society. Marketers of Information may include school,
and universities; publishers of encyclopedias, nonfiction books, and specialized
magazines; makers of CDs; and internet web sites.

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Ideas: Every Market offering has a basic idea at its core. Products and Services
are platforms for delivering some idea or benefit to satisfy a core need.

3) Value and satisfaction

Value is the consumer's estimate of the product's overall capacity to satisfy his or her
needs. According to De Rose, value is the satisfaction of customer's requirements at the
lowest possible cost of acquisition, ownership, and use. The concept of value is highly
related with utility, price, satisfaction, and profit. Value is a measure of the usefulness of
a product. It is a measure of the quantitative worth of a product to attract other product
for exchange. Value is also defined as a ratio between what the customer gets and what
he gives. It is the difference between the "get" component and the "give" component.

Value = Benefits = Functional benefits + Emotional benefits

Costs Monetary costs + time costs + energy costs + psychic costs.

An increase in the value of the customer offering can be done by:

1. Raising Benefits.
2. Reducing costs
3. Raising benefits and reducing costs
4. Raising benefits by more than the raise in costs, or
5. Lowering benefits by less than the reduction in costs.

4) Exchange and Transactions

Exchange: Marketing occurs when people decide to satisfy needs and wants through
exchange. Exchange is the act of obtaining a desired product from someone by offering
something of value in return. Exchange is only one of many ways to obtain a desired
object. Exchange allows a society to produce much more than it would with any
alternative system. The following are the major conditions for exchange.
1. There are at least two parties.
2. Each party has something that might be of value to the other party.
3. Each party is capable of communication and delivery
4. Each party is free to accept or reject the exchange offer.
5. Each party believes it is appropriate or desirable to deal with the other party.

Transaction: It takes place when the two parties reach into an agreement. A transaction
(a trade of values between two parties) is marketing‟ s unit of measurement. Most
transactions involve money, response and action. A transaction also involves:
a) At least two things of value,
b) Agreed upon condition,
c) A time of agreement, and
d) A place of agreement.

5) Relationships and Networks.

Transaction in marketing is part of a larger idea of relationship marketing. Beyond
creating short-term transactions, marketers need to build long-term relationships with
valued customers, distributors, dealers, and suppliers. To build this relationship (beyond
offering consistently high value and satisfaction), the marketer can build a marketing

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network (consisting of customers, suppliers, distributors, retailers, advertising agencies,

and others with whom the company has built mutually profitable-business relationships).

Relationship Marketing aims to build long-term mutually satisfying relations with key
parties-customers, suppliers, distributors - in order to earn and retain their long-term
preference and business. Transaction marketing is a part of relationship marketing. The
ultimate outcome of relationship marketing is the building of a unique company asset called
a market network.

A marketing Network consists of the company and its supporting stakeholders - customers,
employees, suppliers, distributors, university scientists and others with whom it has built
mutually profitable business relationships.

6) Markets – the concepts of exchange and relationships lead to the concept of a market.
A market is the set of actual and potential buyers of a product. Originally a market was a
place where buyers and sellers gathered to exchange goods. Economists use the term to
designate a collection of buyers and sellers who transact in a particular product class (as
in the soft drink market). Marketers see buyers as constituting a market. Modern
economies operate on the principle of division of labor, where each person specializes in
producing something, receives payment, and buys needed things with this money. Thus,
modern economies abound in markets.

7) Marketing – the concept of markets finally brings us full circle to the concept of
marketing. Marketing means managing markets to bring about exchanges and
relationships for the purpose of creating value and satisfying needs and wants. Modern
marketing system is characterized by the company and competitors sending their
respective products and messages to the consumers either directly or indirectly through
marketing intermediaries to the end users.

1.3 Marketing Management

Marketing management is defined as the analysis, planning, implementation, and
control of programs designed to cerate, build, and maintains beneficial exchanges with
target buyers for the purpose of achieving organizational objectives. It is the art and
science of choosing target markets and getting, keeping and growing superior value.
Thus, marketing management involves managing demand, which in turn involves
managing customer relationships.

1.3.1 Demand Management

Some people think of marketing management as finding enough customers for the
company‟ s current output but this view is too limited. The organization has a desired
level of demand for its products. At any point in time, there may be no demand,
adequate demand, irregular demand, or too much demand, and marketing management
is concerned not only with finding and increasing demand but also with changing or
even reducing it. In cases of excess demand, demarketing may be required to reduce
demand temporarily or permanently. The aim of demarketing is not to destroy demand
but only to reduce or shift it. Thus, marketing management seeks to affect the level,
timing, and nature of demand in away that helps the organization achieve its objectives.

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Simply put, marketing management is demand management. In order to effectively

manage demand there is a need to know the products demand states so that appropriate
marketing tasks can be initiated.

Demand States and Marketing Tasks

1. Negative Demand - Majority of the market dislikes the product and avoids it.
Marketing task:
 To analyze why the market dislikes the product
 To develop marketing programs that can change consumers beliefs
and attitudes consisting of:
 product redesign,
 lower prices, and
 more positive promotion.
2. No Demand – Consumers show lack of awareness or interest in a product.
Marketing task: To find ways to connect the benefits of the product with the
person‟ s natural needs and interests.
3. Latent Demand – A product has a strong need that can't be satisfied by existing
products.
Marketing task: To measure the size of the potential market and develop goods
and services to satisfy the demand.
4. Declining Demand – A product has a lower demand in the market.
Marketing tasks: To reverse declining demand through creative remarketing.
5. Irregular Demand – A product has varying demand by season, day or hour.
Marketing task: To find ways to alter the pattern of demand through flexible
pricing, promotion and other incentives (Syncro-Marketing).
6. Full demand – A product has a satisfying level of demand in the market.
Marketing task: To maintain the current level of demand in the face of changing
consumer preferences and increasing competition. To maintain or improve
product quality and continually measure consumer satisfaction.
7. Overfull Demand – A product has more demand than can be handled or
delivered in the market.
Marketing task: To find ways to reduce demand temporarily or permanently
(Demarketing) via raising prices and reducing promotion and services.
8. Unwholesome demand - demand for unhealthy or dangerous products.
Marketing task: To get people who like something to give it up, using fear
message, price hikes, and reduced availability.

To meet the organization's objectives, marketing managers must influence the level,
timing, nature and Composition of these various demand states. Examples of products
with various states of demand are cited below.

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Activity 3
Identify products in Ethiopia that have:
a) Negative demand
b) No demand
c) Latent demand
d) Declining demand
e) Irregular demand
f) Full demand
g) Overfull demand
h) Unwholesome demand

Commentary
a) Negative demand – Royal Crown mineral water, K-50, etc
b) No demand – Bure Baguna mineral water etc
c) Latent demand – cigarettes without any side effect etc
d) Declining demand – High land mineral water etc
e) Irregular demand – umbrella, rain jackets, etc
f) Full demand – Coca Cola, St George Beer, etc
g) Overfull demand – Mugher cement, Wonji sugar, etc
h) Unwholesome demand – drugs, hand guns, etc

1.3.2 Building Profitable Customer Relationships

Managing demand means managing customers. A company's demand comes from two
groups: new customers and repeat customers. Traditionally, marketers have focused on
attracting new customers and creating transactions with them. In today’s marketing
environment, however, changing demographic, economic, and competitive factors mean
that there are fewer new customers to go around. The costs of attracting new customers
are rising. Thus, although finding new customers remains very important, the emphasis
is shifting toward retaining profitable customers and building lasting relations with them.

Companies have also discovered that losing a customer means losing not just a single
sale but also lifetime’s worth of purchases and referrals. Thus, working to keep profitable
customer makes good economic sense. The key to customer retention is superior
customer value and satisfaction. With this in mind, many companies are going to
extremes to keep their customers satisfied.

1.4 Marketing Management Philosophies

Marketing management is described, as carrying out tasks to achieve desired exchanges
with target markets. What philosophy should guide these marketing efforts? What
weight should be given to the interests of the organization, customers, and society? The
answer to these questions defines the five marketing philosophies that guide marketers‟
behavior:
1. the production concept
2. the product concept
3. the selling concept
4. the marketing concept
5. the societal marketing concept

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The production concept:

It is one of the oldest concepts in business. It holds that consumers prefer products that
are widely available and inexpensive. Managers of production - oriented businesses
concentrate on achieving high production efficiency, low costs, and mass distribution.
Production oriented marketers assume that consumers are primarily interested in
product availability and low prices. The production concept is useful:
a) When demand for a product exceeds the supply
b) When the product‟ s cost is too high and improved productivity is needed to
bring it down
c) In developing countries, where consumers are more interested in obtaining the
product than its features.
d) When a company wants to expand its market.
The risk with this concept is in focusing too narrowly on company operations. Do not
ignore the desires of the market.

The product Concept

It holds that consumers will favor products that offer the most quality, performance, and
innovative features. Thus, an organization should devote energy to making continuous
product improvements. Some manufacturers mistakenly believe that if they “build a
better mousetrap”, consumers will beat a path to their door just for their product. The
product concept can lead to marketing myopia (a shortsighted view of marketing, which
focuses on the product itself rather than the customers‟ benefits and the challenges
presented by other products).

Selling concept
Many organizations follow the selling concept, which holds that consumers will not buy
enough of the organization’s products unless it undertakes a large- scale selling and
promotion effort. The following are the common features of the selling concept.
a) This concept it typically practiced with unsought goods (goods that buyers do not
normally think of buying such as encyclopedias or insurance).
b) To be successful with this concept, the organization must be good at tracking
down prospects and selling them on product benefits.
c) Most firms practice the selling concept when they have over capacity. Their aim
is to sell what they make rather than make what the market wants.
d) Such marketing carries high risks. It focuses on creating sales transaction rather
than on building long-term relationships. There are not only high risks with this
approach but low satisfaction by customers.

The Marketing Concept:

The marketing concept holds that achieving organizational goals depends on
determining the needs and wants of target markets and delivering the desired satisfaction
more effectively and efficiently than competitors do. The company should be more
effective than its competitors in creating, delivering, and communicating customer value
to its chosen target markets.
The marketing concept has been expressed in many colorful ways:
"Meeting needs profitably."
"Find wants and fill them."
"Love the customer, not the product."

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The Marketing concept rests on four pillars: target market, customer needs, integrated
marketing, and profitability.
a) Target Market: Companies do best when they choose their target market (s)
carefully and prepare tailored marketing programs.
b) Customer Needs: clearly, understanding customer needs and wants is not
always simple. Some customers have needs of which they are not fully
conscious; some can't articulate these Needs or use words that require some
interpretation. We can distinguish five types of needs: stated needs, real needs,
unstated needs, delight needs, and secret needs.
c) Integrated marketing: results when all of the company's department's work
together to serve the customers interests. Integrated marketing takes place on
two levels. First the various marketing functions (sales force, advertising,
customer service, product management, marketing research must work together
from customer‟ s point of view) second, marketing must be embraced by the
other departments. To foster team work among all departments the company
must carry out internal and external marketing.
d) Profitability: The ultimate purpose of the marketing concept is to help
organizations achieve their objectives. In the case of private firms, the major
objective is profit; in the case of non-profit and public organizations, it is
surviving and attracting enough funds to perform useful work.
Activity 4

Draw distinction between the selling concept and the

marketing concept.

Commentary
Theodore Levitt drew a contrast between the selling and marketing
concepts:
 Selling focuses on the needs of the seller; marketing focuses on
the needs of the buyer.
 The selling concept takes an “inside-out” perspective i.e.,
focuses on existing products and uses heavy promotion and
selling efforts.
 The marketing concept takes an “outside-in” perspective i.e.,
focuses on customers needs, values, and satisfaction
 Selling is preoccupied with the seller's need to convert his/her
product into cash; marketing is concerned with the idea of

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The selling concept

Starting point Focus Means Ends Perspective
Factory Products Selling & promoting Profits through sales volume In-out
The Marketing concept

Starting point Focus Means Ends Perspective

Target market Customer Integrated marketing Profit through customer Out-in
needs satisfaction

The Societal Marketing Concept

The societal marketing concept holds that the organization should determine the needs,
wants, and interests, of target markets. It should then deliver superior value to customers
in a way that maintains or improves the consumer's and the society's well being. The
societal marketing concept is the newest of the five marketing management philosophies.

The societal marketing concept questions whether the pure marketing concept is
adequate in an age of environmental problems, resource shortages, rapid population
growth, worldwide economic problems, and neglected social services. It asks if the firm
that senses, serves, and satisfies individual wants is always doing what's best for
consumers and society in the long run. According to the societal marketing concept, the
pure marketing concept overlooks possible conflicts between consumer short-run wants
and consumer long-run welfare.
The societal concept calls upon marketers to balance three considerations in setting their
marketing policies.
a) Company profits
b) Customers wants
c) Society’s interest

It has become good business to consider and think of society‟ s interests when the
organization makes marketing decisions.

Activity 5
Carefully list and then compare the five marketing management
philosophies. Be sure to indicate the key components of each philosophy.

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Commentary
a) The production concept:
Consumers favor products that are available and highly affordable. Management
should focus on improving production and distribution efficiency. The production
concept is still useful in two types of situations: (1) when the demand for a
product exceeds the supply - management should look for ways to increase
production, and (2) when the product's cost is too high - improved productivity is
needed to bring it down.
b) The product concept:
Consumers favor products that offer the most value, performance, and innovative
features. Therefore, the organization should devote its energy to making
continuous product improvements. This concept can lead to marketing myopia if
not watched.
c) Selling concept:
Consumers will not normally buy enough products on their own; therefore, the
organization must undertake a large-scale selling and promotion effort. Most
firms practice this concept when they have overcapacity.
d) Marketing concept:
Delivering the needs and wants more efficiently than the competition is the basic
principle. This is an "outside-in" perspective as opposed to the selling concept's
"inside-out" perspective.
e) Societal marketing concept:
The company determines customer needs and wants and society's best interest.
Conflicts in this concept are usually short-run wants versus long-term gains in
welfare.

1.5 Types of Customer Markets

Marketers need to study their customers closely. There are five types of customer
markets.
(1) Consumer markets consist of individuals and households that buy goods and
services for personal consumption.
(2) Business/industrial markets buy goods and services for further processing or for
use in their production process.
(3) Reseller markets buy goods and services to resell at a profit.
(4) Government markets are made up of government agencies that buy goods and
services to produce public services or transfer the goods and services to others
who need them. Finally,
(5) International markets consist of these buyers in other countries, including
consumers, producers, resellers, and governments. Each market type has special
characteristics that call for careful study by the seller.

Don‟ t mix up the five types of consumer markets with the various stages that customers
pass through in their relationship with a marketer. The various stages that a customer
may pass through in his/her relationship with a marketer are presented below.
Suspects - everyone who might conceivably buy the product or service

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Prospects- people who have a strong potential interest in the product and the ability
to pay for it
First time Customers -qualified prospects who are converted in to trying the product
for the first time
Repeat Customers- satisfied first time customers converted in to repeat purchase
Clients-people whom the company treats very specially and knowledgeably
Members-clients who join the membership program that offers a whole set of
benefits
Advocates-customers who enthusiastically recommend the company and its products
and services to others
Partners-the customer and the company work together actively.

1.6 Marketing Mix

Marketing mix is the set of marketing tools that the firm uses to pursue and achieve its
marketing objectives in the target market. According to Mc Carthy marketing mix
constitutes the 4 P„s - product, price, place and promotion.

Components of Marketing Mix

Product Price Promotion Place

- Product Variably - List Price - Sales Promotion - Channels
- Quality - Discounts - Advertising - Coverage
- Design - Allowances - Sales Force - Assortment
- Features - Payments Period - Public Relations - Location
- Brand Name - Credit Terms - Direct Marketing - Inventory
- Packaging -Transport
- Sizes
- Services
- Warranties

Robert Lauterborn suggested that the 4P's are seller oriented. The customer oriented
marketing mix includes the 4Cs.
4 Ps 4Cs
Product ........................................... Customer Solution
Price ............................................... Customer Cost
Place............................................... Convenience
Promotion....................................... Communication
Summary
Today's successful companies whether large or small, for profit or nonprofit, domestic or
global share a strong customer focus and a heavy commitment to marketing. Many
people think of marketing as only selling or advertising. But marketing combines many
activities - marketing research, product development, distribution, pricing, advertising,
personal selling, and other - designed to sense, serve, and satisfy consumer needs while
meeting the organization's goals. Marketing seeks to attract new customers by promising
superior value and to keep current customers by delivering satisfaction. Marketing
operates within a dynamic global environment. Rapid changes can quickly make
yesterday's winning strategies obsolete. Marketers face many new challenges and
opportunities. To be successful, companies will have to be strongly market focused.
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