Foundations of Marketing

1. Foundations of Marketing Tuesday 1pm – 3.30pm Felix Stravens

2. Foundations of Marketing Lecture 1 Overview & Introduction

3. Overview of the Subject Week 1: Introduction and overview of Marketing Week 2: Marketing Planning and outline of the Marketing Plan Week 3: Target Markets and Segmentation Week 4: Copy Testing and Message Development Week 5: Media Planning and Selection

4. Overview of the Subject Week 6: The use of Promotions Week 7: Distribution Week 8: The use of PR and Direct Marketing Week 9: The use of New Media Week 10: Class Free

5. Overview of the Subject Week 11: Class Free Week 12: The use of Viral Marketing Week 13: Summary of the Subject Week 14: Presentation of the Marketing Plan Week 15: Revision

6. Assessment Class Presentation 20% Marketing Plan 40% Final Examination 30% Class Participation 10%

7. Foundations of Marketing The Changing Face of Marketing

8. Marketing today is not a function. It is a way of doing business. It is not a new ad campaign or this month’s promotion. It has to be all-pervasive, part of everyone’s job description. Marketing: A Definition Marketing concepts, processes, and principles are universally applicable all over the world

9. Marketing draws on a number of social science disciplines In particular economics, sociology, anthropology, psychology and social psychology Many of the theories, concepts and techniques used in various fields within marketing are borrowed from these social science disciplines The underlying Theory of Marketing

10. What is Marketing Satisfaction of human needs and wants Aim is to make selling superflous Aim is to know and understand the customer Process for identifying, anticipating and satisfying

11. What is Marketing Marketing is defined as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others

12. The underlying assumptions • Economists such as Smith, Ricardo and Mengler based their theories on premises about individual psychology and behaviour. • They emphasised individual activity and choice: market exchange. • Twentieth-century anthropologists were also concerned about the central role that exchange plays in social life: social exchange.

13. Exchange theory • Exchange theorists conceptualise social interaction as an exchange of tangible and intangible goods and services, ranging from food and shelter to social approval or sympathy. • The exchange process is a process by which one or more parties give something of value to each other to satisfy perceived needs.

14. Nothing new • The underlying assumption of contemporary marketing thinking – the marketing concept – is nothing new. • Contrary to popular mythology, it was not invented in America during the 1950s or 1960s.

15. It’s as old as the hills... … the idea that consumer needs and wants should be the starting point for business thinking is certainly not revolutionary.For a century or more, economists have made assertions that the aim of our economic and business structure and its functioning was the satisfaction of consumer needs. H.R. Tosdal, ‘Some recent changes in the marketing of consumer goods’, HarvardBusinessReview, X1, no.2, January, 1993, p.157.

16. Evolution of marketing thought and practice High demand for manufactured goods P&G product manager Use of the term ‘marketing management’ US scholars in Germany 1820s–late 1800s – advertising, selling, branding Adam Smith – classical economics 1776 1920s–1930s 1950s Mid–late 1800s

17. 21st-century marketplace Marketplace transition from 1950s Transition of information technology Logistics/ digitalisation Market orientation Cost-cutting re-engineering Price competition Growing emphasistowards competitiveness – emergence of strategic marketing concept Rise of quality Globalisation Re-emergence of competition Rediscovery of the marketing concept 1950s–1960s 1970 1980 1990 2000

18. The rediscovery of the marketing concept General Electric1952 Drucker1954 Levitt1960 McCarthy 1960 Kotler1967

19. 1 General Electric Our philosophy introduces the marketing man at the beginning rather than the end of the production cycle and would integrate marketing into each phase of the business. Thus marketing, through its studies and research, will establish for the engineer, the designer and the manufacturing man what the customer wants in a given product, what price he is willing to pay, and where and when it is wanted. Marketing would have authority in product planning, production scheduling and inventory control, as well as in sales distribution and servicing of the product. General Electric Company, Annual Report, New York, 1952, p.21.

20. 2 Drucker:The Practice of Management, 1954 There is only one valid definition of business purpose: to create a customer … It is the customer who determines what a business is… Because it is its purpose to create a customer, any business enterprise has two–and only two–basic functions: marketing and innovation. P.F. Drucker, The Practice of Management, Harper & Row, New York, 1954, p.37.

21. 3 Levitt: ‘Marketing Myopia’, 1960 Levitt asserted that short-sightedness by business firms causes management to define their business too narrowly, for example: • Railroads assumed they were in the railroad business rather than in the transportation business. • Hollywood assumed it was in the movie business when it was actually in the entertainment business. • The buggy whip industry might have staved off its death sentence had it defined itself as being in the transportation business rather than the buggy whip business.

22. 4 Kotler (1967) andMcCarthy (1960) • Marketing is the performance of business activities which direct the flow of goods and services from producer to consumer or user in order to satisfy customers and accomplish the company’s objectives. E.J. McCarthy & W.D. Perreault, Jr, Basic Marketing,Irwin,Homewood, Ill., 1960. • Marketing is human activity directed at satisfying needs and wants through exchange processes. P. Kotler,Marketing Management: Analysis, Planning, Implementation and Control, Prentice-Hall,Englewood Cliffs, NJ,1967.

23. What’s the difference? Production orientation A focus on what the organisation makes. Sales orientation A focus on selling what the organisation makes. Marketing orientation A focus on satisfying the needs and wants of the organisation’s customers.

24. The Development of Marketing Science • Consumer (goods) marketing Major areas of marketing focus • Business-to-business marketing Non-profit & societal marketing Relationships and Customer Retention • Services marketing • Customer Satisfaction, • Global Marketing, • Synchronous Marketing 1950’s 1960’s 1970’s 1980’s 1990’s

26. Needs, Wants, and Demands • Needs • Emerge from a state of felt deprivation • Wants • The form taken by human needs • Shaped by culture and individual experiences • Demands • Wants backed by buying power

27. Value, Satisfaction, and Quality • Value • The difference between the values the customer gains from owning and using the product and the cost of obtaining the product • Satisfaction • Dependant on the product’s perceived performance in delivering value relative to expectation • Quality • Achieved only when the product or service meets or exceeds the customer’s expectation

28. Exchange, Transactions, and Relationships • Exchange • There must be two parties involved • The item for exchange must have a perceived value • A medium to communicate and deliver the exchange of value must exist • Parties should be free to accept or reject the offer • Parties should be comfortable with each other

29. Exchange, Transactions, and Relationships • Transaction • Two parties involved • At least two things of value • Agreed upon conditions • A time of agreement • A place of agreement • Relationships • Long-term commitment built with valued customers

30. Suppliers The Marketing System Competitors Company (Marketer Marketing Intermediaries Environment Environment End User Market