HARAMAYA UNIVERSITY

COLLGE OF BUSINESS AND ECONMICS

DEPARTMENT OF MANAGEMENT

PRINCIPLE OF MARKETING

BY Nejat A. ( MBA)
 CHAPTER ONE
An Introduction to Marketing
What is marketing? Some of the most important scope of marketing are as
follows:
1. Goods 2. Services 3. Events 4. Experiences 5. Persons 6. Places
7. Properties 8. Organizations 9. Information 10. Idea.

The scope of marketing deals with the question, ‘what is marketed?’ According to
Kotler, marketing people are involved with ten types of entities.

1. Goods:
Physical goods constitute the major part of a country’s production and marketing
effort. cars, refrigerators, television and machines.

2. Services:
Services include the work of airlines, hotels, car rental firms, beauticians, software
programmers, management consultants and so on. Many market offerings consist of
a mix of goods and services. For example, a restaurant offers both goods and
services.

3. Events:
Marketers promote events. Events can be trade shows, company anniversaries,
entertainment award shows, local festivals, health camps, and global sporting
events.
4. Experiences:
Marketers create experiences by offering a mix of both goods and services. A
product is promoted not only by communicating features but also by giving
unique and interesting experiences to customers. For example, Maruti Sx4 comes
with Bluetooth technology to ensure connectivity while driving. Similarly
residential townships offer landscaped gardens and gaming zones.

5. Persons:
Celebrity person has become a business. All popular personalities such as film
stars, TV artists, and sportspersons have agents and personal managers. They also
tie up with PR agencies for better marketing of oneself.

6. Places:
Cities, states, regions, and countries compete to attract tourists. Today, states and
coun­tries are also marketing places to factories, companies, new residents, real
estate agents, etc. Place marketers are largely real estate agents and builders. They
are using mega events and exhibitions to market places. The tourism ministry is
also aggressively promoting tourist spots locally and globally.
7. Properties:
Properties can be categorized as real properties or financial properties. Real
property is the ownership of real estates, whereas financial property relates to
stocks and bonds. Properties are bought and sold through marketing.
8. Organizations:
Organizations actively work to build image in the minds of their target public. The
PR department plays an active role in marketing an organization’s image. Marketers
of the services need to build the corporate image, as exchange of services does not
result in the owner­ship of anything. The organization’s goodwill promotes trust and
reliability. The organization’s image also helps the companies in the smooth
introduction of new products.
9. Information:
Information can be produced and marketed as a product. Educational institutions,
encyclopedias, non-fiction books, specialized magazines and newspapers market
information.
10. Idea:
Every market offering includes a basic idea. Products and services are used as
platforms for delivering some idea or benefit. Social marketers widely promote
ideas. XYZ Limited company promoted safe driving habits, need to wear seat belts,
need to prohibit children from sitting near the driver’s seat, and so on.
1.1 Basic concepts and definitions
What is Marketing?
Marketing must be understood not in the old sense of
making a sale - 'selling' - but in the new sense of
satisfying customer needs.
Many people think of marketing only as selling and
advertising. Marketing can be defined in different ways
Marketing is:
The very heart of modern marketing thinking and practice says
marketing is Creating customer value and satisfaction.
 A very simple definition of Marketing is the delivery of customer
satisfaction at a profit.
According to a social definition, Marketing is
defined as a social and managerial process by
which individuals and groups obtain what they
need and want through creating, offering, and
exchanging products and services of value with
other

Marketing can also be defined as process of

planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and
services to create exchanges that satisfy individual
and organizational objectives.”
The aim of marketing is to know and
understand the customer so well that the
product or service fits him and sells itself
1.2 Core concepts of marketing
(1) Needs, Wants, and Demands;

(2) Market offerings (products, services, and

experiences);

(3) Value and satisfaction;

(4) Exchanges and relationships; and

(5) Markets.
1. Needs
Human needs are the basic reasons for the emergence and
existence of marketing.
 A need is a necessity or basic for human being. They are states
of felt deprivation.
Marketing Process starts when the individual comes to know of
a particular need. If this need is not satisfied it creates a state of
tension within the minds of the person. This state will drive the
people to adopt a behavior that will help reduce the tension.
Needs are naturally endowed and marketers cannot create them
Marketers but can identify them and respond to them by
developing a solution that will meet the aroused needs.
2. Wants
 Human wants are the form taken by human needs as a
result of socio-cultural and individual personality they are
shaped by :-
culture and individual personality.
Needs are general and common to all human beings
whereas wants are specific which differ between and among
people.
 Wants are best described in terms of objects. For example,
all people have a need for food but not all people try to
satisfy their hunger or thirsty with identical products.
Enjera is a favorite food for Ethiopians; rice is a staple food
for Indians; pourage is a favorite food for Kenyans; etc.
3. Demands

Demand refers to the quantity of a particular item which

customers are able to buy at a given price level.
 Human wants become demands when supported by buying
power.
 A mere interest of customers to a particular product is not
enough if are not able to afford the charged price.
There are eight possible demand states.
1. None-existent demand: customers may be unaware of or
uninterested in the product. They neither like nor dislike the product.
Marketing strategy-Stimulation marketing (the company tries to
find way to associate the benefits of the product with people’s natural
needs and interests through advertisement.
2. Negative demand: customers dislike the company’s product.
 Marketing strategy- Conversional marketing (making attitudinal
adjustment by promotion, features redesigning, lowering price, etc).
3. Declining demand: customers begin to buy the product less
frequently or not at all may be because of product obsolescence, stiff
competition, high price, etc.
 Marketing strategy- Remarketing (changing product features,
searching for new target markets, more effective communication,
etc will re-stimulate the declining demand).
4. Latent demand: customers may develop a strong need that can not be
satisfied by an existing product.
 Marketing strategy-Developmental marketing (the company decides
to measure the size of the potential market and develop a product that
satisfies the demand).
5. Irregular demand: customers purchase the company’s product on
seasonally, monthly, weekly, daily even hourly basis.
 Marketing strategy-Synchro-marketing (the company decides to
increase price, decrease advertisement and augmented services during
peak periods and doing the reverse during slack demand periods).
6. Full demand: customers are adequately buying all the products put into
the marketplace.
Marketing strategy-Maintenance marketing (maintain the current
level of demand in the face of changing customers preferences and
increasing competition).
7. Over full demand: Sometimes a demand level that is
beyond an organization’s ability may arise.
Marketing strategy-De marketing (marketers facing
overfull demand decide a temporary or permanent reduction
or shift of demand).
8. Unwholesome demand: customers may be attracted to
products that have undesirable social consequences. These
products are liked some and disliked by others in the
society.
E.g. cigarettes, alcohol, hard drugs, handguns, etc.
 Marketing strategy-Destroy marketing (marketers
attach cautionary label on the package and reduce explicit,
positive and direct promotion, fear messages, price hikes,
reduce availability to get people to give it up.
4. Marketing offer
A marketing offer is anything that can be offered to the
market with a bundle of benefits to satisfy needs and wants.
Products may be tangibles or intangibles.
some combination of products, services, Information, or
experiences offered to a market to satisfy a need or 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,
commodities, transportation, hotel, telecommunication,
persons, places, organizations, and ideas and home repair
services.
5. Customer value and satisfaction
Customer value is the difference between the benefit that the customer
gains from owning and using a product and the costs of obtaining the
product.
Customers do not often judge product values and costs accurately or
objectively--they act on perceived value.
Customer satisfaction depends on a product’s perceived performance in
delivering value relative to a buyer’s expectations.
If the product’s perceived performance equals to customer expectation,
customers are satisfied.
If the product’s perceived performance is greater than customer
expectation, customers are delighted.
If the product’s perceived performance is less than customer expectation,
customers are dissatisfied.
Satisfied and delighted customers will make a repeat purchase of the
company’s products, they are company’s good advertising medium.
dissatisfied customers disparage the company’s product to others
 Exchange is the act of obtaining a desired object from
6. Exchange ,transactions, and relationship

someone by offering something in return.

 Exchange is the core concept of marketing. Conditions of
exchange include:
1. At least two parties must participate (the buyer and the
seller).
2. Each party must have a resource to provide in return for
the other party.
3. Each party must believe that he/she will be benefited from
the exchange.
4. The parties must be capable to communicate each other.
5. Each party has the right to accept or reject the offer of the
counter party.
Transaction (a trade of values between two parties) is marketing’s
unit of measurement. Most involve money, a response, and action.
 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.

Market
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 (such as a village square).
 Economists use the term to designate a collection of buyers and
sellers
 1.3. Importance of Marketing

Marketing process brings goods and services to satisfy the

needs and wants of the people.
It helps to bring new varieties and quality goods to
consumers.
By making goods available at all places, it brings
equipment distribution.
Marketing converts latent demand into effective demand.
It gives wide employment opportunities.
It creates time, place and possession utilities to the
products.
It creates to keep the standard of living of the society.
1.4. Marketing management concepts/ philosophies
There are six alternative concepts based on which organizations
design and carry out their marketing strategies. These include
1. Production Concept
2. Product Concept
3. Selling Concept
4. Marketing Concept and
5. Societal Marketing Concept.
6. Relationship marketing concept
The weight given to the interests of customers,
organization’s objectives and the society’s interests vary in
each philosophy.
 1. Production concept
Production concept holds that customers prefer
products that are highly available and affordable.
Management focuses highly on improving
production and distribution efficiency.
This philosophy works better when there is excess
demand in the market.
Again if producing the product at a small quantity
is costly and producing it in a high volume brings
the high unit production cost, this philosophy is
preferred.
 2. Product concept
This philosophy holds that customers prefer
quality products and innovative features.
Management focuses on continuous product
quality and feature improvement.
Both production concept and product concept
lead to marketing myopia (focusing too
narrowly on their own operations and losing
sight of satisfying customer needs and
building customer relationships.
 3. Selling concept
Assumes that customers will not buy enough of the
firm’s products unless it undertakes large-scale selling
and promotion effort.
Practiced highly for unsought/new products and when
the company faces excess unsold inventory.
Focuses on creating sales rather than building long-
term customer relationships.
Follows make and sell philosophy (inside out
perspective)-starts from the company’s existing
products.
Looking for the right customers for the company’s
product
 4. Marketing concept
Holds that achieving organizational goals
depends on knowing the needs and wants of
target markets and delivering superior value
than competitors.
It is an outside-in perspective-starts from a well
defined market
Find the right products to the right customers
Sense and respond philosophy
Considers marketing as gardening (cultivating
customers to grow as a gardener cultivates his
crops in order to reap high volume).
 Difference between Selling and Marketing
Selling Marketing
Starts and Focuses on the needs
Starts and focuses with the seller
of the buyer. Buyer is the centre of
existing products and needs
the business
preoccupied with the seller’s need
Emphasizes on identification of a
to convert his product into cash;
market opportunity ,fulfilling the
emphasizes on profit
needs of the customers.
views business as a ‘goods
views business as a ‘customer
producing processes’
satisfying processes.
The firm makes the product first
customer determines what is to be
the then decides how to sell it and
offered as a ‘product’ and the firm
make profit.
offering product that would
match the needs of the customers.
 Selling Marketing
Emphasizes accepting the Emphasis’s on innovation of
existing technology and reducing adopting the most innovative
the cost of production. technology.
Seller’s motives dominate Marketing communications
marketing communications. acts as communicating the
Costs determine price. benefits of the product
views the customer as the last Consumer determines price.
link in the business views the customer as the
Seller’s convenience dominates very purpose of the business.
the formulation of the ‘marketing Buyer determines the shape
mix’. of the ‘marketing mix’.
 5. Societal concept
This concept questions whether the pure marketing
concept overlooks possible conflicts between consumer
immediate wants and consumer long-run welfare.
 Societal concept is that marketing strategy should
deliver value to customers in a way that maintains or
improves both the consumers and the society’s well-
being.
 In doing so, companies should balance three
considerations in setting their marketing strategies:
company objectives, consumer wants and society’s
interests. (Society) human welfare putting people
before profit , (consumers) want satisfaction,
(company) profit
 6. Relationship Marketing
 Relationship marketing is the practice of building long
term satisfying relations with key parties-customers,
suppliers, distributors in order to retain their long term
preferences and business.
 The ultimate outcome of relationship marketing is the
building of a unique company asset called a marketing
network.
 In this case, customer experience rather than customer
satisfaction is the most critical component in
relationship marketing.
Marketing Philosophies…

30
End!!
 Chapter Two

MARKETING ENVIRONMENT
A company’s marketing environment consists of the
actors and forces outside marketing that affect marketing
management’s ability to develop and maintain successful
relationships with its target customers.
 Changes in the marketing environment are often quick and
unpredictable.
Being successful means being able to adapt the marketing
mix to trends and changes in this environment.
 The marketing environment offers both opportunities and
threats.
The company must use its marketing research and
marketing intelligence systems to monitor the changing
environment.
 Systematic environmental scanning helps marketers to
revise and adapt marketing strategies to meet new
challenges and opportunities in the marketplace.
Generally speaking, the marketing environment can be divided
into two areas:
1. External environment and
2. Internal environment.
The external environment is concerned with everything that
happens outside the organization, and the internal environment
is concerned with those marketing factors that happen within the
organization.
The Marketing Environment is composed of two type of factors:
those that the organization can control and those that it cannot
control
The success of the firm in achieving its goals depends on the
ability to understand the impact of uncontrollable factors, and
the effective management of controllable factors in response. The
marketing environment is made up of a:
1. Micro environment
2. Macro-environment.
1. Micro environment
The microenvironment includes all the actors close to the
company that affect, positively or negatively, its ability to
create value and relationships with its customers.
The microenvironment consists of five components
 To enjoy sustainable success, marketers need to build
harmonious relationships with
a. The company
b. Suppliers
c. Marketing intermediaries
d. Customers
e. Competitors and
f. Publics.
 Company
publics Supplier

The Company’s Forces affecting a

Microenvironment company's ability to
serve customer

intermediaries
competitors

customers
 A. The Company
The first is the company itself\ organization’s
internal environment—its several departments and
management levels
 Top management is responsible for setting the
company’s mission, objectives, broad strategies, and
policies.
 Marketing managers must also work closely with other
company departments.
Areas such as finance, R & D, purchasing,
manufacturing, and accounting all produce better results
when aligned by common objectives and goals.
 All departments must “think consumer” if the firm is to
be successful. The goal is to provide superior customer
value and satisfaction.
B. Suppliers
Suppliers:-Suppliers are firms and individuals that
provide the resources needed by the company
They are an important link in the company’s overall
customer “value delivery system.”
1). One consideration is to watch supply availability
(such as supply shortages).
2). Another point of concern is the monitoring of price
trends of key inputs. Rising supply costs must be
carefully monitored.
C. Marketing Intermediaries
 Marketing intermediaries are firms that help the company to promote,
sell, and distribute its goods to final buyers.
1). Resellers are distribution channel firms that help the company
find customers or make sales to them.
 These include wholesalers and retailers who buy and resell
merchandise.
2)Physical distribution firms help the company to stock and move
goods from their points of origin to their destinations.
Examples would be warehouses (that store and protect goods before they
move to the next destination).
3)Marketing service agencies (such as marketing research firms,
advertising agencies, media firms, etc.) help the company target and
promote its products.
4)Financial intermediaries (such as banks, credit companies,
insurance companies, etc.) help finance transactions and insure
against risks.
 D. CUSTOMERS
The company must study its customer markets closely
since each market has its own special characteristics. These
markets normally include:
1) Consumer markets (individuals and households that
buy goods and services for personal consumption).
2). Business markets (buy goods and services for further
processing or for use in their production process).
3). Reseller markets (buy goods and services in order to
resell them at a profit).
4). Government markets (agencies that buy goods and
services in order to produce public services or transfer
them to those that need them).
5). International markets (buyers of all types in foreign
countries
 E. Competitors
Those company that share the same customer groups and target market
Every company faces a wide range of competitors.
A company must secure a strategic advantage over competitors by
positioning their offerings to be successful in the marketplace.
F. Publics
A public is any group that has an actual or potential interest in or
impact on an organization’s ability to achieve its objectives.. Generally,
publics can be identified as being:
1). Financial publics--influence the company’s ability to obtain funds.
2). Media publics--carry news, features, and editorial opinion.
3). Government publics--take developments into account.
4). Citizen-action publics--a company’s decisions are often questioned by
consumer organizations.
5). Local publics--includes neighborhood residents and community
organizations
6) Internal publics--workers, managers, volunteers, and the board of
directors.
2. MACRO ENVIRONMENT
The company and all of the other actors operate in a larger
macro environment of forces that shape opportunities and
pose threats to the company. There are six major forces
(outlined below)
a. Demographic.
b. Economic.
c. Natural.
d. Technological.
e. Political.
f. social/Cultural.
 Demographi
c

Supplier
Compan
Publics
y
Compan Economi
Political y c
Customer Competitor
The s
Intermediarie
s
Cultura
Company’s
l
s Natural
Macro
environmen Technological
t
 A. Demographic Environment
Demography refers to the study of human
population in terms of size, age, gender, density,
location, occupation, income, education level,
religion, etc. The demographic environment is of
major interest to marketers because it involves
people and people makeup markets.
Population size-as population size moves up,

new market segments emerge and existing

market expands, the demand of various
products grows..
Age structure-The products which people buy are
different at different age levels. For instance, different
garment factories decide to target kids, teenagers, adults
and old age people separately. Hair styling, recreational
centers, the clubs and associations people join, etc are
age dependent.
Gender-in product preference not both genders respond
the same way. E.g. clothes, shoes, cosmetics, etc.
Educational level-the educational level of people highly
influences their consumption pattern in that more
educated people are impressed with high quality
products and new innovation, need much recreation and
visit, etc than less educated people.
Occupation- Some jobs require people to be obeyed by
certain agreed up on rules. E.g. bank employees, hotel
servants, employees in hospitals use formal wear while
they are in duty.
 Unlike the past, this time women equally participate to
apply for job vacancies in various professions.
 This trend has resulted in time squeezed families who
haven’t time to prepare families’ food and treating
children. So, people tend to buy constantly fast foods and
go to the labor market to search for home workers and
baby sitters.
Religion-the edibles we eat, the beverages we drink, the
clothes we wear, the styles we follow, the festivals we
celebrate are religion dependent.
Income- people are different in their earning and wealth
possession. So, their buying decisions are guided by their
income level and wealth status.
Climate and Weather-. People living in desert regions do
not react the same way as people living in tropical and
temperate regions. E.g. the clothes and shoes we wear,
public transports we use in Dire Dawa differ from the
clothes and shoes we wear, public transports we use if we
would live in Addis Ababa
Family size and structure- the traditional family
includes husband, wife, children and retired parents or
old age people. The volume of purchase and the type of
products being purchased vary when human beings
live alone, live with spouse, bear one child, have many
children and retired parents.
Diversity- countries vary in their ethnic and racial
make up. As a result, very diverse markets exist. Theses
diverse markets respond to the marketing stimuli
uniquely.
 B. Economic Environment
The economic environment includes those factors that affect
consumer purchasing power and spending patterns.
Stages of economic development
Subsistence economy: It is the level of economic development
where production is lower than or equal to consumption (hand-to-
mouth economic system). Countries experiencing subsistence
economy have no marketable surplus. These countries offer few
market opportunities because they have no enough surpluses to
transact with others. It is practiced by 3rd world countries.
Industrialized economy: constitutes rich markets for many
different kinds of commodities. There is specialization of
production and shortage of capital is not the problem.
Industrialized countries try to increase production through the use
of modern technology.
Service based economy: the focus of marketing is not materialism
rather focuses on advanced society needs and welfare. These
countries offer significant market opportunities to numerous
 Distribution of income
Income between and among people and nations is
unevenly distributed. Based on income distribution the
society is classified in to three groups.
Upper class consumers-this class comprises affluent
society members whose spending pattern is not
affected by current economic events and they are major
markets for luxury products.
Middle class consumers-have moderate income and
are careful about their spending but can still afford
good life some of the time.
Lower class consumers- are all buyers who stick close
to the basics of food, clothing.
 C. Natural Environment
Natural environment involves the natural resources that
are needed as inputs by marketers or that are affected by
marketing activities.
Marketers should be aware of several trends in the natural
environment which include growing shortage of raw
materials, increased pollution and increased government
intervention in natural resource management.
 D. Technological environment
The technological environment is perhaps the most
dramatic force now shaping our destiny.
It has released such innovations as laptop computers, the
internet, nuclear missiles, chemical weapons, etc.
The technological environment changes rapidly. All
today’s common products were not available some
centuries ago. Therefore, the advent of such technologies
resulted in the obsolescence of the past ones. E.g. before
the emergence of disc top and laptop computer, type
writing machine was the common technology used by the
larger society as a writing machine.
 E. Political environment
Political environment consists of laws, government agencies
and pressure groups which influence or limit various
organizations and individuals.
Governments develop public policy (sets of laws and
regulations to govern businesses for the good of the society
as a whole.
Almost every marketing activity is subject to the influence of
a wide range of laws and regulations covering competition
(patent and copy right, protecting home land industries
from abroad competitors’ attack, protecting illegal trade
practice like contraband), fair trade practices,
environmental protection, product safety, consumer privacy,
packaging and labeling, truth in advertising, pricing.
 F. Social/ Cultural Environment
Cultural environment is made up of institutions and
other forces that affect a society’s basic values,
perceptions, preferences and behaviors.
Persistence of cultural values
People in a given society hold many believes and values.
Among these, some are core ones which have high
degree of persistence.
Core believes and values are passed on to the new
generation from parents and society and are reinforced
through various institutions (schools, churches,
mosques, business government agencies). For example,
getting marriage and getting child are core believes.
Shifts in secondary believes
Secondary believes and values are more open to
change.
E.g.1. Believing in marriage is a core belief whereas
believing in early marriage is a secondary belief.
E.g.2. believing in getting child is a core belief whereas
considering many children as wealth is a secondary
belief.
Marketers have some chance of changing secondary
believes but have little chance of changing core
believes.
Responding to the Marketing environment
Many companies view the marketing environment
elements as an uncontrollable to which they must react
and adapt. They analyze the environmental forces and
design strategies that will help the company avoid the
threats and take the advantages of the opportunities the
environment provide.
Other companies take a proactive stance by taking
proactive actions to affect forces in their marketing
environment. For example, importers and exporters face
merchandises’ delay in the shore until they are cleared by
the nations’ customs authority. To ease this impact,
importers and exporters may negotiate with the
government and contribute help to the authority to hire
more employees to expedite custom clearing activities in
order to dispatch the merchandises on time.
End