MODULE [[PRINCIPLES OF MARKETING]

CHAPTER 1: THE MARKETING SYSTEM, ITS NATURE AND THE

ELEMENTS

OBJECTIVES:

a) To apply the prime goal of the marketing system

b) To explore the nature and elements of marketing

Analysis of the definition of Marketing

Marketing is a dynamic system and the most up-to-date activity, it being
present in everywhere we go. It is always centered around the customer who is
the concern of anybody under marketing management responsibility.
The prime goal of a marketing system is the efficient utilization of these
resources that nature has made available to man in order to satisfy man’s
unlimited needs. Production and distribution complement total marketing system.
Elements in the definition of Marketing
1. Marketing is a system. It requires planning to determine the products or
services that shall be produced. It also involves the organization of basic
resources involving money or budget and machineries that will be utilized
for creating goods and services. Finally, the direction and control of these
elements make it a system in itself, for purposes of evaluating whether
products plane were successful or failures thus requiring further
development.
2. The product or service planning and development, pricing, promotion and
the place of distribution (4P’s of Marketing). Also known as the Marketing
Mix.

Planning for
Pricing Promotion Place Distribution
Products/ Services

Marketing objectives can only be achieved if those products and

services will reach the heads of the consumers.
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3. The presence of current and potential market. Market consists of the

buyers or users of the products or services. We undertake product
planning and development for fulfilling demand of current buyers and
thereby perceiving or forecasting needs of a future market which can be by
the features or benefits derived from the products or services.
4. The satisfaction of existing human needs and wants. It is said, based
on economic principle, that human needs and wants are insatiable. Within
this context, it can be seen that buyers continuously demand for new or
developed goods for their satisfaction. It is out of these needs that new
products should be planned and developed. And out of these needs
satisfaction we can be assured of sales, as human requirements are
fulfilled.
Operational Dimensions of Marketing
Three dimensions of total marketing system:
1. Marketing Organizations or Marketers
Marketers may mean the buyers. In the marketing context,
marketers are marketing organizations, the producer, manufacturers,
wholesalers or retailers of goods.
 Producers – those constitutions that buys raw materials and
process these materials into final products.
 Manufacturers – those buying intermediate or half furnished
materials and process it into final products.
 Wholesalers – institutions who buys final furnished products and re-
sell them in bulk in the same original form.
 Retailers – those who buy finished products and re-sell in small
quantities, the same goods to final users.
2. Things to be Marketed
 Products – tangible goods such as pens, appliances, shoes, etc.
 Services – intangible goods such as ideas of selling, beauty parlors,
barber shops, health shops or catering services.
 Ideas – sold through institutional advertisements.
 People – the concept of selling the platform or goodwill like that of a
political candidate.
3. Target market or the buyers of the goods
They can be the present products users or they can be the
perspective buyers being targeted by the marketing organizations. Market
shall not mean “palengke”, but “people” with needs to satisfy, capacity or
money to spend, and willingness to buy.
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Classifications of Target Market

1. Consumer Market – those who buy goods for their own personal use or
purpose.
2. Industrial Market – those institutions or people who buy industrial goods
either for the purpose of using in business operations. Objective of this
industrial market is to gain profit out of the purchased industrial goods.

Target Market

Marketing
Things to be System
Marketing
Marketed
Organizations

Marketing Concept Vs. Selling Concept

They are known to be marketing management philosophies.
Marketing Concept – is a management organization which holds that the key
task of the organization is to determine the needs and wants of the target
markets and to adapt the organization to delivering the desired satisfactions
more effectively and efficiently than its competitors. It focused on the seller’s
needs.
Selling Concept – is a management orientation which assumes that consumers
will either buy or not buy enough of the organization’s products unless the
organization makes a substantial effort to stimulate their interest in its products.
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Simplified Comparison of Marketing and Selling Concept:

Marketing Concept Selling Concept
vs.
Steps involved are:
Steps involved are:
1. Product Planning and
1. Determination of customers
development.
Needs and wants.
2. Promotional programs or
2. Product Planning and devel-
personal selling functions in
Opment
order to sell products.

The Marketing Concept

Discovers market needs

Research

Product Planning and

Development

Production

Distribution of Products and

Services

GUARANTEED SALES VOLUME

AND PROFITS AT CUSTOMERS
SATISFACTIONS

The Selling Concept

Product Planning and
Development

Production
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Promotional Methods and Selling

Persuasive Techniques

Distribution of Products and

Services

UNGUARANTEED SALES VOLUME

AND PROFIT. UNGUARANTEED
CUSTOMER SATISFACTION.

The Marketing System

Marketing system deals with identification of major institutional
components in an organization’s environment that interacts to produce results in
the marketplace.
Goods and Services

Gathering of Information
Marketing Target
Organizati Market
-ons

Information

Payments
Market Segmentation
The process of knowing the overview of the entire target market, but
differentiating them from competitors by recognition of sub-markets with similarity
in needs but differs in demographic, geographic, economic, cultural and
psychological ways.
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The Strategy Segmentation

The strategy of segmentation tries to find a market and penetrate it to the
greatest extent possible through customized product, services and marketing
strategies to satisfy their needs.
Examples:
 San Miguel Beer – sell different kinds of beer
 Jollibee – introduced several product mixes such as: hamburgers,
spaghetti, etc.
Bases for Market Segmentation
These bases can be the possible choices for segmenting the market:
1. Identify whether buyers are: consumer market or industrial market.
2. Demographic bases:
a. Population – its distribution and composition
a. 1 Total population
a. 2 Regional distribution
a. 3 Urban, rural distribution
b. Age groups
b. 1 Children
b. 2 teenagers
b. 3 young adults – 20-34
b. 4 younger middle-aged – 35-49
b. 5 older age – 50 above
c. Sex category
c. 1 male
c. 2 female
3. Cultural bases
a. Race
b. Religion
c. Nationality
d. Education
e. Occupation
4. Economic bases
a. Income bracket
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a. 1 High income group – A

a. 2 Upper middle income group – B
a. 3 Lower middle income group – C
a. 4 Low income group – D
5. Psychographic (psychological) basis
a. Personality
b. Buying attitudes
c. Product benefits desired
Classifications of Market and Goods
Consumer Goods
These are products purchased by the consumer market.
1. Convenience goods
a. Consumers know, what, how, when and where to buy these
products because they have complete product knowledge.
b. Consumers do not exert so much effort in buying, since they
are purchased in accessible outlets like sari-sari stores.
c. If temporary or permanent product in-availability exists,
consumers are willing to accept substitute brands.
d. These products are not bulky and have low unit prices.
Examples: toothpaste, seasonings, candies, cigarettes.
Marketing consideration: there should be intensive product
distribution; wider product selection by carrying several brands.
2. Shopping goods
a. They may be sub-classified into service goods or fashion
goods.
b. Generally, consumers “shop-around” before buying. They
compare prices, styles or other product features before
deciding for the best buy.
c. Market may not have full-product knowledge, so product
information is solicited as they shop around.
d. Service goods have high unit value, bulky and require
servicing like delivery, installation, repair and maintenance.
Examples: RTW, shoes, appliances, furniture
Marketing considerations: Fewer retail outlets for shopping
goods are required but advantageous if they are near each
other for consumers convenience to go from one outlet to
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another as they compare features. Image or reputation of the

outlet may be important to buyers than manufacturers brands.
3. Specialty goods
a. Consumers are willing to exert special buying effort and may
spend time to reach exclusive dealers of these products.
b. Consumers are after the brand prestige irrespective of its high
price.
c. Consumers, in some cases, may not accept substitute brands.
Examples: Signature items like Sylvia Santos’ bags.
Marketing considerations: Exclusive distributorship or
dealership is used for this product. Franchise agreement is
utilized for control of sales territories and effective distribution.
Industrial Goods
These are products purchased by the industrial users or market classified
according to the broad uses as differentiated from consumer goods which were
classified on the basis of buying habits.
1. Raw materials
a. Products which will become a part of another final product.
b. Products when integrated to produce another product can be
unidentifiable or cannot be physically separated.
Examples: Flour for making bread; eggs for processing milk.
Marketing considerations: Supply may be low or limited,
standardization and grading is essential. Distribution can be
direct from producer or manufacturer to industrial user.
2. Fabricating materials and parts
a. These are industrial goods which will become a part of
another final product but are identifiable in finished form.
b. These are assembled products with no further change in form.
Examples: Sparkplugs and fan belts in automobile; buttons on
dresses.
Marketing considerations: Purchase in bulk ahead of the
selling season. Direct personal selling is done between
producer and consumer. Branding may be unimportant.
3. Installations
a. These are major equipment of the industrial user.
b. They affect operating scale for production quota of the
company.
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Examples: Adding dozen of typewriters in a business; Adding

three presser machines for a tin can industry.
Marketing considerations: presale and postsale services are
needed, with no middlemen involve. Pre-sale includes
negotiation period before closing of sale through personal
selling.
4. Accessory equipment
a. They facilitate or aid in the production operation of the
industrial market.
b. It will not be part of any final product nor gives significant effort
in production scale.
Examples: Cash registers for food chain outlets; Calculators
for auditing firms.
Market considerations: Direct selling is used for bulky orders.
Middlemen are used for geographically dispersed market.
5. Operating supplies
a. These are the convenience goods of industrial market.
b. They have low unit price; short-lived, which facilitates
business operations.
Examples: Pens, pencils, typewriting papers.
Marketing considerations: It demands broad distribution. Price
wars can happen since products are highly competitive.

Activity:
Make a product plan and development depending on the market needs and provide
promotional program or promotional selling functions in order to sell the product.

References:
Elements of Marketing (Third Edition)
Chapter 1: THE MARKETING SYSTEM, ITS NATURE AND THE
ELEMENTS