S1 - Principles Of Strategic Marketing Management.pdf

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Principles Of Strategic
Marketing Management
SESSION 1
Study world Lanka Campus
Mahesh Hemachandra
MBA (Australia), MSc in Mkt., BSc. (Hons) IT (UK),
MABE (UK), MBCS (UK), MCIM (UK), MCMI (UK)
The Development of Marketing
Origin can be traced
back to early
civilization.

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The Development of Marketing
Watch this video and note
down important points
The Development of Marketing
When communities began to specialise they produced surpluses in certain products which they
then sought to exchange with other communities.
The need to exchange goods encouraged the emergence of local markets where different products
could be brought together in one place for sellers and buyers to trade.

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The Development of Marketing
Industrial Revolution brought with it advances in
technology and production techniques
New processes, greater output and a transformation of
the British economy away from its dependence on
agriculture to one of industrial production.
Industry now became more remote from its markets as it
sought power and fuel to generate its machines.
Large-scale production forced the development of
distribution channels to enable the demand from wider,
larger markets to be met.
The Development of Marketing
• More information to inform their purchase decisions
• More transparent pricing
• Businesses now faced both opportunities and threats
• Improvements in technology and production
processes
• Transition from a production society to a
consumption society
• Increasing competition, not simply local or
regional but national and international
• Customers had wider access to products and
services
The 20th Century

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The Development of Marketing
Struggle to establish customer
preference in favor of their products over
those of the competition.
Start of the marketing era and out of it many
modern marketing practices were born.
Advertising, Branding Packaging, Sales forces
Today
What is Marketing
“Marketing is managing profitable
customer relationships.” (Kotler).
"Marketing is a human activity
directed at satisfying needs and
wants."(Kotler).
"The management process
responsible for identifying,
anticipating and satisfying customer
requirements profitably."(CIM)

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What is Marketing
Successful marketing requires:
• Profitable
• Offensive (rather than defensive)
• Integrated
• Strategic (is future orientated)
• Effective (gets results)
Hugh Davidson 1972
What is Marketing
Marketing is a philosophy of business that places
the customer at the centre of the universe.
Professor Peter Doyle

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What is Marketing
In marketing terms, a customer's needs, wants or
requirements tend to mean a product or service.
Products are tangible, although the wider
meaning of a product includes intangible benefits
such as after-sales service and services are
intangible.
What is Marketing
There are still things that the customer wants in
order to deal with a real or imagined requirement
or, to put it another way, the customer has a
problem to solve.
People can satisfy their requirements, or problems, in one of four ways:
• self-solution (coming up with the answer to the problem themselves)
• force (threatening/stealing)
• begging (pleading/seeking sympathy)
• exchange (offering something of value to the owner).

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What is Marketing
The twofold goal of marketing is to attract new customers by promising superior
value and keep and grow current customers by delivering satisfaction.
Sound marketing is critical to the success of every organization. Large for-profit firms, such as
Procter & Gamble, Google, Target, Toyota, and Marriott use marketing. But so do not-for-profit
organizations, such as colleges, hospitals, museums, symphony orchestras, and even churches
has become the world’s largest retailer—and the world’s largest company—by
delivering on its promise, “Save money. Live better.”
’s fulfills its “i’m lovin’ it” motto by being “our customers’ favorite place and way to eat” the
world over, giving it a market share greater than that of its nearest three competitors combined.
What is Marketing
Marketing
The process by which companies create
value for customers and build strong
customer relationships in order to capture
value from customers in return.
Marketing is a social and managerial
process by which individuals and groups
obtain what they need and want through
creating and exchanging products and
values with others. (Principals of Marketing 17e)

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Core marketing concepts
Core marketing concepts
Value,
satisfaction,
and
quality
Customer value—The consumer’s assessment of the product’s overall capacity to satisfy his
or her needs.
Customer satisfaction—The extent to which a product’s perceived performance matches
a buyer’s expectations. If the product’s performance falls short of expectations, the buyer is
dissatisfied. If performance matches or exceeds expectations, the buyer is satisfied or delighted.
Outstanding marketing companies go out of their way to keep their customers
satisfied. They know that satisfied customers make repeat purchases and tell others
about their good experiences with the product.
The key is to match customer expectations with company performance. Smart
companies aim to delight customers by promising only what they can deliver, then
delivering more than they promise

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Core marketing concepts
Exchange, transactions &
relationships
Exchange—The act of obtaining a desired object from someone by offering something in return.
Transaction—A trade between two parties that involves at least two things of value, agreed-
upon conditions, a time of agreement and a place of agreement.
Relationship marketing— The process of creating, maintaining and enhancing strong,
value-laden relationships with customers and other stakeholders.
The Marketing Process
In the first four steps, companies work to understand consumers, create customer value, and
build strong customer relationships.
In the final step, companies reap the rewards of creating superior customer value.
By creating value for consumers, they in turn capture value from consumers in
the form of sales, profits, and long-term customer equity.

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The Marketing Process
As a first step, marketers need to understand customer needs and wants and the marketplace
in which they operate.
We examine five core customer and marketplace concepts:
(1)needs, wants, and demands
(2)market offerings (products, services, and experiences)
(3)value and satisfaction
(4) exchanges and relationships
(5) markets.
The Marketing Process
Understanding the Marketplace and
Customer Needs
The most basic concept underlying marketing is that of human needs.
Human needs are states of felt deprivation.
They include basic physical needs for food, clothing, warmth, and
safety; social needs for belonging and affection; and individual needs for knowledge and
self-expression.
Marketers did not create these needs; they are a basic part of the
human makeup.
Needs

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The Marketing Process
Understanding the Marketplace and
Customer Needs
Wants are the form human needs take as they are shaped by culture and
individual personality.
Examples:
An American needs food but wants a Big Mac, french fries, and a soft drink.
A person in Papua New Guinea needs food but wants taro, rice, yams, and pork.
Wants are shaped by one’s society and are described in terms of
objects that will satisfy those needs.
Wants
The Marketing Process
Understanding the Marketplace and
Customer Needs
Demand
demands are Human wants that are backed by buying power.
Given their wants and resources, people demand products with benefits that add up to
the most value and satisfaction.
Outstanding marketing companies go to great lengths to learn
about and understand their customers’ needs, wants, and
demands.
They conduct consumer research and analyze mountains of customer data. Their people at all
levels—including top management—stay
close to customers.

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The Marketing Process
For example,
Retailer Cabela’s vice-chairman, James W. Cabela, spends hours each morning reading through customer comments and hand-
delivering them to each department, circling important customer issues.
At Zappos, CEO Tony Hsieh uses Twitter to build more personal connections with customers and employees. Some 1.6 million people
follow Hsieh’s Twitter feed.
P&G, executives from the chief executive officer down spend time with consumers in their homes and on shopping trips. P&G brand
managers routinely spend a week or two living on the budget of low-end consumers to gain insights into what they can do to improve
customers’ lives.
Understanding the Marketplace and
Customer Needs
The Marketing Process
Understanding the Marketplace and
Customer Needs
Consumers’ needs and wants are fulfilled through market offerings.
some combination of products, services, information, or experiences offered to a
market to satisfy a need or a want.
Market offerings are not limited to physical products. They also include
services—activities or benefits offered for sale that are essentially
intangible and do not result in the
ownership of anything. (Examples include banking, airline, hotel, tax preparation,
and home repair services)
MarketOfferings

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The Marketing Process
Understanding the Marketplace and
Customer Needs
Marketing
myopia
The mistake of paying more attention to the
specific products a company offers than to the
benefits and experiences produced by these
products.
The Marketing Process
Understanding the Marketplace and
Customer Needs
Customer
Value
&
Satisfaction
How do they choose among these many market offerings?
Customers form expectations about the value and satisfaction that various market
offerings will deliver and buy accordingly.
Marketers must be careful to set the right level of expectations. If they set
expectations too low, they may satisfy those who buy but fail to attract enough buyers. If
they set expectations too high, buyers will be disappointed.
Customer value and customer satisfaction are key building blocks for
developing and managing customer relationships.

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The Marketing Process
Understanding the Marketplace and
Customer Needs
Markets
market is the set of actual and potential buyers of a product or service.
Marketing means managing markets to bring about profitable customer
relationships.
Creating these relationships takes work. Sellers must search for buyers, identify
their needs, design good market offerings, set prices for them, promote them, and store and
deliver them.
Activities such as consumer research, product development, communication, distribution,
pricing, and service are core marketing activities.
The Marketing Process
Designing a Customer-Driven
Marketing Strategy
Once it fully understands consumers and the marketplace, marketing
management can design a customer-driven marketing strategy.
Marketing management as the art and science of choosing target
markets and building profitable relationships with them.
To design a winning marketing strategy, the marketing manager must
answer two important questions:
1. What customers will we serve (what’s our target market)?
2. How can we serve these customers best (what’s our value
proposition)?

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The Marketing Process
Designing a Customer-Driven
Marketing Strategy
value proposition is the set of benefits or values it promises to deliver to
consumers to satisfy their needs.
AT&T - “Your World. Delivered.”
T-Mobile - family and friends can “Stick together.”
The diminutive Smart car - “Open your mind to the car that challenges the
status quo,”
Infiniti - “Makes luxury affordable,”
BMW - “the ultimate driving machine.”
Value
Proposition
The Marketing Process
Marketing is about identifying and meeting human and social needs.
These manufacturers were swamped with orders, because they had designed the right product, based on
doing careful marketing homework.

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The Strategic orientation of Business
The different approaches to markets
are referred to as Strategic Business Concepts or
Strategic Business Orientation.
There are only really four different types as outlined
below:
1. Production concept (or production
orientation)
2. Product concept (or product orientation)
3. Sales concept (or sales orientation)
4. Marketing concept (or marketing orientation)
The Strategic orientation of Business
Production concept
A company following the production concept is operating on the idea that the more you can produce
the more you can sell.
Managers assume that customers are only interested in the availability of products and low prices and that
marketing is not necessary.
This may or may not be true.

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The Strategic orientation of Business
The idea that consumers will favor products that are available and highly affordable and that the
organization should therefore focus on improving production and distribution efficiency.
Production concept
This concept works when:
• The market is low cost and high turnover
• There is high demand for the product
• Buyers are sensitive to price
• The organisation has the capacity to mass produce, and
• The marginal production costs incurred are low.
Production Concept will lose:
• Any degree of exclusive appeal
• Close contact with customer needs
• High levels of customer loyalty.
The Strategic orientation of Business
Product concept
Product orientation is present when managers in the company believe that customers will recognise a good product
or service and buy it when it is made available.
The managers have such a firm belief in the quality and appeal of the product, that they cannot accept that customers
may not readily see the same advantages.
The managers fail to undertake any marketing or even carry out essential research before beginning production.

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The Strategic orientation of Business
sinclair c5
Product concept
The idea that consumers will favor products that offer the most quality, performance, and
features and that the organization should therefore devote its energy to making continuous
product improvements.
Companies following a product orientation can only be
successful if:
• There is a current demand for the product
• There is a potential demand for the product
• Products are given full marketing support
• Products meet customer requirements.
Thus it is obvious that product orientation MUST, if it is to be
successful, be adopted only after research has been carried out.
The Strategic orientation of Business
Selling concept
The idea that consumers will not buy enough of the firm’s products unless it
undertakes a large-scale selling and promotion effort.
The aim often is to sell what the company makes rather than making what the market wants.
The sales concept only works when:
• There is little need for an after-sales service
• Companies are not interested in forming
relationships with customers
• Buyers have low expectations of the product or
service
• Repeat purchasing is unlikely.

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The Strategic orientation of Business
Marketing concept
A philosophy that holds that achieving organizational goals depends on knowing the
needs and wants of target markets and delivering the desired satisfactions better than
competitors do.
If an organisation is following the marketing concept it will have three distinct characteristics:
Customer Orientation
Define customer needs from the point of view of the customer, not its own.
Need to actively seek information from the marketplace
Organisational Integration
All functions, sections or departments of the organisation must work together to meet the overall
objectives of the organisation
Mutually Profitable Exchange
The organisation is entitled to a reasonable profit for a reasonable product.
The Strategic orientation of Business
Societal Marketing concept
The idea that a company’s marketing decisions should consider consumers’ wants,
the company’s requirements, consumers’ long-run interests, and society’s long-run
interests.

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Business Case Study
Company Case Argos: Creating Customer Value amid Change and Turbulence
https://www.youtube.com/watch?v=1bRhANT4Cew
THE MARKETING AUDIT
Kotler gives the following definition of a marketing audit:
"A marketing audit is a comprehensive, systematic, independent and
periodic examination of a company's marketing environment,
objectives, strategies and activities with a view to determining
problem areas and opportunities, and recommending a plan of action
to improve the company's marketing performance."

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THE MARKETING AUDIT
Scope and Objectives of a Marketing Audit
Kotler lists six components of the marketing audit, each of which could function alone if a full
audit is not needed or desirable:
1. Environment audit
2. Strategy audit
3. Organisation audit
4. Systems audit
5. Productivity audit
6. Function audit.
Audits cost money and should be done with a specific purpose in mind. Like most marketing
activities, auditing should have a clearly defined, measurable objective.
MARKET SEGMENTATION,TARGETING AND POSITIONING
Market segmentation
Dividing a market into smaller segments
with distinct needs, characteristics, or
behavior that might require separate
marketing strategies or mixes.
Market targeting (targeting)
The process of evaluating each market
segment’s attractiveness and selecting one or
more segments to enter.

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MARKET SEGMENTATION,TARGETING AND POSITIONING
Differentiation
Differentiating the market offering to create
superior customer value.
Positioning
Arranging for a market offering to occupy a
clear, distinctive, and desirable place relative
to competing products in the minds of target
consumers.
MARKET SEGMENTATION,TARGETING AND POSITIONING

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MARKET SEGMENTATION,TARGETING AND POSITIONING
Market Targeting
"The act of developing measures of
segment attractiveness and
selecting one or more of the
market segments to enter.“- Kotler
MARKET SEGMENTATION,TARGETING AND POSITIONING
Target-Market Selection

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MARKET SEGMENTATION,TARGETING AND POSITIONING
Positioning
Arranging for a market offering to occupy a clear, distinctive, and desirable place relative to competing
products in the minds of target consumers.
Positioning Map - By taking two of the key variables
influencing consumers it is possible to plot organisations or
offerings against one another.
Positioning statements
Positioning statements are succinct descriptions
of the exact position that the product is to take in
the minds of the target market.
THE MARKETING MIX
The marketing mix is the set of controllable tactical marketing tools that the firm blends to produce the
response it wants in the target market.
The marketing mix consists of everything the firm can do to influence the demand for its product.

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THE MARKETING MIX
It is the "toolbox" of the marketer.
The Seven Ps
The term "marketing mix" covers the seven
controllable variables of:
1. Product
2. Price
3. Place
4. Promotion
5. People
6. Processes
7. Physical evidence.
THE MARKETING MIX
Kotler's Seven Cs
The concept of the seven Ps has developed from the marketer's
viewpoint of what is required;
Kotler considers marketing's role from the perspective of what
customers and consumers need,
• Customer Value
• Cost
• Convenience
• Communication
• Consideration
• Coordination and Concern
• Confirmation

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THE MARKETING MIX
The Promotion Mix
In this chapter we address the last of the four Ps of the marketing mix –
promotion.
The entire range of activities is known as the promotion mix and covers
the activities involved in
Advertising,
Sales promotion,
PR,
Direct marketing
Personal selling