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Marketing Basics

Welcome to the ‘Marketing Basics’ – dear friend! 
This document is created for the purpose of spreading knowledge
about basic marketing concepts and frameworks in a brief and
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About the author: This document is authored by Angshuman - a PhD Scholar in
Marketing Management at XLRI, Jamshedpur, India. He is a passionate marketing
enthusiast, avid blogger and social media addict. He writes exclusive articles on
marketing, advertising, branding and other topics on his personal blog:
www.tnmg4u.com. If you want you can connect with him on Gtalk/Gmail:
ghosh.angshuman.fpm@gmail.com or Twitter: http://twitter.com/angshu_tnmg4u

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INTRODUCTION TO MARKETING

“Marketing is not only much broader than selling, it is not a specialized activity at all. It encompasses the
entire business. It is the whole business seen from the point of view of the final result, that is, from the
customer’s point of view.” -Peter Drucker

“Marketing is the social process by which individuals and groups obtain what they need and want through
creating and exchanging products and value with others.” -Kotler

“Marketing is the management process that identifies, anticipates and satisfies customer requirements
profitably.” -The Chartered Institute of Marketing (CIM)

 From the strategic perspective, marketing is satisfying customer needs profitably and better than the
competition (broader goal – creating value for all the stakeholders including society)
 From the tactical perspective, marketing is about ensuring the right product, in the right place, at the
right time, at the right price
 Need is a generic desire(+) or problem (-) that consumers seek to fulfill or solve (e.g. Hunger)
 Want is the concrete form in which a need is being shaped (e.g. I want to eat Domino's Pizza)
 Demand is want backed by buying power (normally directed towards a specific product/brand)
 Maslow’s Needs: Physiological  Safety  Belongingness  Self-esteem  Self-actualization

MARKETING PHILOSOPHIES

PRODUCT CONCEPT
 Focus on product quality, design and features – too much technical orientation
 Basic assumption is customer will purchase if the product is of higher quality, has maximum number
of features and best design
 Do not consider customer needs, external factors and competition leading to marketing myopia

PRODUCTION CONCEPT
 Focus on production efficiencies, low costs and mass distribution
 Basic assumption is all output can be sold as demand for a product is greater than supply
 Beneficial when increasing production raises economies of scale and helps reduce price
 "Doesn't matter what color car you want, as long as it is black." - Henry Ford

SELLING CONCEPT
 Focus on selling the product with the objective of profit maximization
 Basic assumption is any product can be sold if sales people can convince the customers
 Customer needs or satisfaction is not considered and can be counterproductive in long run
 Widely criticized yet widely used across industries!

MARKETING CONCEPT
 Focus on determining customer needs and wants, produce product and sell it to consumers
 Basic assumption is supply for a product is greater than demand (high competitive intensity)
 Very important – market and product fit



SOCIETAL MARKETING CONCEPT
ONCEPT
 Focus on all the stakeholders (S
(Short term consumer wants Long term consumer welfare)
ong
 Balancing all three aspects: consumer needs + business profit + society’s interests
 Definitely the best approach – all preaches now-a-days but few follows!

BASIC MARKETING PROCESS

Marketing Marketing
Situational Marketing Marketing Marketing
Audit and
Analysis Objectives Strategy Tactics Implementation Control

SITUATIONAL ANALYSIS

• External Environment Analysis (Analyzing factors outside the organization)
• Macro Environment Analysis (PEST=Political-legal, Economic conomic-demographic, Socio-
cultural and Technological)
echnological)
• Micro Environment Analysis (Value Chain Analysis= Customers, C Competitors, Suppliers
and Distributors)
tors)
• Industry or Competitive Analysis (Porter’s Five Forces)

• Internal Environment Analysis (Analyzing factors inside the organization)
• Analyze all organizational functions=Marketing, Finance, Production, HR and IT
• 5M Framework=
Framework=Men, Money, Machinery, Materials and Minute
• Portfolio Analysis (BCG Matrix, GE McKinsey Matrix)

• Internal + External Analysis (SWOT=
(SWOT=Strength, Weakness, Opportunity and Threat)
pportunity

MARKETING OBJECTIVES :
• Should be SMART = Specific, Measurable, Achievable, Realistic and Time-
pecific, -bound

MARKETING STRATEGY:
• Deals with broader level strategic decisions
• STP = Segmentation, Targeting and Positioning
argeting

MARKETING TACTICS:
• Marketing Tactics or Marketing Mix d deals with more specific and tactical level decisions
• Most widely used framework is 4Ps = Product, Price, Place and Promotion (by McCarthy)
romotion
• 4Cs= Customer solution, Customer cost, Convenience, and Communication
• For services industry 7Ps = 4Ps + (People, Process and Physical Evidence)
hysical

MARKETING IMPLEMENTATION:
TION:
• Is equally important as planning but many a times not properly executed
any

MARKETING AUDIT AND CONTROL
CONTROL:
• You can’t manage what you can’t measure - so, measure and then manage!
• Involves evaluation of marketing strategy and implementation
• Provides inputs for future marketing strategy



MAJOR MARKETING FRAMEWORKS

PORTER’S FIVE FORCES

 Contributed by Michael E. Porter
 Help analyze competitive scenario in
an industry
 Ideal scenario to enter:
 Entry Barrier=High
 Buyer Power=Low
 Supplier Power=Low
 Threat of Substitution=Low
 Competitive Rivalry=Low to
medium
 Current players try to build high
entry barriers to prohibit new comers
from entering
 Examples of high entry barrier –
strong distribution channel of ITC in
the Cigarette industry
 Example of low Supplier Power – HUL
getting long credit periods from
suppliers

BCG MATRIX

 Contributed by Boston Consulting
Group
 Best-known portfolio planning
framework (simple to understand
and use, provides quick guidelines
in strategic investment planning)
 Used to analyze current business
portfolio at the SBU level (can be
adapted to use for products also)
 Four possible strategies for SBUs
or products: build market share,
hold, harvest and divest
 Helps to decide which SBUs or
products should receive more or less investment and which SBUs or products should be divested
 Pitfall: oversimplifies a complex decision, assumes that higher rates of profit are directly related to high
rates of market share (based on economies of scale or experience curve) – which might not be the case –
a new or disruptive technology might give better profitability
 The GE/McKinsey Matrix is a more advanced form of the BCG matrix which addresses its pitfalls



ANSOFF’S MATRIX
 Contributed by Igor Ansoff (Harvard Business Review 1957)
Harvard
 Helps in deciding growth strategy; also called growth opportunities matrix

Existing Products/Services New Products/Services
Market Penetration Gain market share,
Penetration: Product Development Sell more products
Development:
Existing Markets
sell more to existing customers to current customers
Market Development : Enter and develop Diversification: Launch new product in
:
New Markets
new markets new markets (diversify portfolio)

SWOT ANALYSIS
• A tool for auditing an organization and its environment; used in early stage of planning
• Strengths and Weaknesses are internal factors and Opportunities and Threats are external factors
d
• Objective of decision making will be to capitalize on Strengths and Opportunities and at the same
time minimize the effects of Weaknesses and Threats
Positive Factors Negative Factors
Strengths: Weaknesses:
 Good relationship with suppliers and distributors  Lack of goodwill or poor reputation
 An innovative product/service and q quality process  Poor quality/undifferentiated goods or services
ndifferentiated
 Specialist marketing expertise and expert people  Lack of marketing expertise
ack
 Strong distribution channel and reputation  Weak supply chain; poor relation with vendors
 Location of business (store location for retail)  Poor location of business
Opportunities: Threats:
 Potential international market (e.g. BRIC markets)  Competition: new competitors, price wars, new
 A new or developing market (e.g. Internet) or better products, better distribution channel
channels
 Acquisition, mergers, JV or strategic alliances  Environmental factors: new laws with higher
 New market segments that offer improved profits taxes, weak economy or recession, issues in
 A market vacated by an ineffective competitor supply for flood, draught, strikes etc

STP

SEGMENTATION AND TARGETING
 Bases of segmentation can be: (a) demographics, (b) psychographics, (c) behavioral, (d) benefits sought
 Evaluation of segments and then targeting can be done based on following decision parameters

HOMOGENEITY MEASUREABILITY ACCESSIBILITY SUBSTANTIALITY ATTRACTIVENESS
ATTRACTIVENESS ACTIONABILITY
•Companies •Can we •Can we •Does the •Market, •Can we
should try to understand the communicate segment desire Competitive,
Competitive, create a
choose and size and needs with the the values that Channel, Internal
Channel, competitive
target of the market segment so an offering and Other
and advantage
segments that segment? that serving presents? Considerations
Considerations with respect
are the segment to the needs
homogenous is possible? of the
in the kinds of segment?
value sought



POSITIONING

 Positioning refers to the
consumer's perception of a product or
service in relation to its competitors
 Perceptual map or positioning
map is used to map competing products
to analyse their positioning
 Generic
neric positioning:
positioning New
product; Differentiate on needs
 Attribute positioning Growth
positioning:
market; Differentiate on attributes
 Emotional positioning Mature
positioning:
market; Differentiate on intangible
attributes/ brand image

CONSUMER DECISION MA KING PROCESS

Need Information Purchase
Recognition Search Decision

Consideration Alternative Post
Set Evaluation Purchase
Evaluation

TYPES OF DECISION PROCESSES
OCESSES

Picking Variety seeking Legalistic Subcontracted
•Low involvement and •Low involvement and
Low •Requires approval •Buyer obtain a
limited problem limited problem from external sources recommendation
solving solving •Based on legal and from a personal or
•Undifferentiated •Differentiated brands
Differentiated societal norms non personal source
brands (ex. doctor)

Problem solving Heuristics Habit
•Normally for complex, •Used for repeat •Absence of
high priced decisions information search
differentiated •Buyers uses rules of and alternative
products thumb evaluation
•High degree of • Very quick and easy •Standard decisions for
Standard
uncertainty decisions repeat purchases



PLC OR PRODUCT LIFECYCLE
 A popular tool to decide
Marketing Strategy and
Investment
 Basic steps: which stage in PLC
 Overall Marketing Mix 
Reshape and control PLC
 Find below an indicative
guideline for normal products
based on PLC stage but cannot
be generalized
PLC Stage Introduction Growth Maturity Decline
Marketing Market development by Maintain and build Defend market Harvest (‘milk’
Objective creating awareness market + Stress share + Maintain the cow) or
differentiation brand loyalty Delete
(‘divest’ the
dog)
Competition Almost not there Increasingly more Many but stable Reduced
Product Limited variety New variety and Improvement and Withdraw less
models introduced upgrade of profitable
product products
Price Skimming or penetration Aggressive pricing Defensive pricing At least break-
pricing to increase sales to defend MS & even (>
profit marginal cost)
Promotion Brochures, ads etc to Build preference by Reminder ads + Minimal
educate people stressing difference Trade promotion promotion
Place Exclusive/selective More outlets to Maximum reach to Reduced
(Distribution) distribution ensure reach ensure availability number of
outlets
 No one knows how actual PLC curve will look like – will depend on product, industry and environment!
 Failure to recognize PLC stage will lead to wrong decisions; such decisions might lead to Pygmalion effect
(self-fulfilling prophesy); for example, stopping investment in a product thinking that it is going to reach
decline phase will actually lead to the decline!

INNOVATION DIFFUSION PROCESS


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