MARKETING

Marketing pertains to the interactive process that requires
developing, pricing, placing, and promoting goods, ideas,
or services in order to facilitate exchanges between customers
and sellers to satisfy the needs and wants of consumers.
Thus, at the very center of the marketing process
is satisfying the needs and wants of customers.
NEEDS AND WANTS
Needs are the basic items required for human survival.
Human needs are an essential concept underlying the
marketing process because needs are translated into consumer
wants. Human needs are often described as a state
of real or perceived deprivation. Basic human needs take
one of three forms: physical, social, and individual. Physical
needs are basic to survival and include food, clothing,
warmth, and safety. Social needs revolve around the desire
for belonging and affection. Individual needs include
longings for knowledge and self-expression, through items
such as clothing choices.
Wants are needs that are shaped by both cultural
influences and individual preferences. Wants are often
described as goods, ideas, and services that fulfill the needs
of an individual consumer. The wants of individuals
change as both society and technology change. For example,
when a computer is released, a consumer may want it
simply because it is a new and improved technology.
Therefore, the purpose of marketing is to convert these
generic needs into wants for specific goods, ideas, or services.
Demand is created when wants are supported by an
individual consumer’s ability to purchase the goods, ideas,
or services in question.
Consumers buy products that will best meet their
needs, as well as provide the most fulfillment resulting
from the exchange process. The first step in the exchange
process is to provide a product. Products can take a number
of forms such as goods, ideas, and services. All products
are produced to satisfy the needs, wants, and
demands of individual buyers.
The second step in the satisfaction process is
exchange. Exchange occurs when an individual receives a
product from a seller in return for something called consideration.
Consideration usually takes the form of currency.
For an exchange to take place, it must meet a
number of conditions:
1. There must be at least two participants in the
process.
2. Each party must offer something of value to the
other.
3. Both parties must want to deal with each other.
4. Both participants have the right to accept or to
reject the offer.
5. Both parties must have the ability to communicate
and deliver on the mutual agreement.
Thus, the transaction process is a core component of marketing.
Whenever there is a trade of values between two
parties, a transaction has occurred. A transaction is often
considered a unit of measurement in marketing. The earliest
form of exchange was known as barter.
HISTORICAL ERAS OF MARKETING
Modern marketing began in the early 1900s. The marketing
process progressed through four distinct eras: production,
sales, marketing, and relationship. In the 1920s,
firms operated under the premise that production was a
seller’s market. Product choices were nearly nonexistent
because firm managers believed that a superior product
would sell itself. This philosophy was possible because the
demand for products outlasted supply. During this era,
firm success was measured totally in terms of production.
The second era of marketing, ushered in during
1950s, is known as the sales era. During this era, product
supply exceeded demand. Thus, firms assumed that consumers
would resist buying goods and services deemed
nonessential. To overcome this consumer resistance, sellers
had to employ creative advertising and skillful personal
selling in order to get consumers to buy.
The marketing era emerged after firm managers realized
that a better strategy was needed to attract and keep

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Marketing
customers because allowing products to sell themselves
was not effective. Rather, the marketing concept philosophy
was adopted by many firms in an attempt to meet the
specific needs of customers. Proponents of the marketing
concept argued that in order for firms to achieve their
goals, they had to satisfy the needs and wants of consumers.
The relationship era began in the 1990s and continues
today. The thrust of the relationship era is to establish
and foster long-term relationships with both customers
and suppliers. These long-term relationships with both
customers and suppliers add value to the marketing
process that benefits all affiliated parties.
MARKETING IN THE OVERALL
BUSINESS
There are four areas of operation within all firms:
accounting, finance, management, and marketing. Each
of these four areas performs specific functions. The
accounting department is responsible for keeping track of
income and expenditures. The primary responsibility of
the finance department is maintaining and tracking assets.
The management department is responsible for creating
and implementing procedural policies of the firm. The
marketing department is responsible for generating revenue
through the exchange process. As a means of generating
revenue, marketing objectives are established in
alignment with the overall objectives of the firm.
Aligning the marketing activities with the objectives of
the firm is completed through the process of marketing
management. The marketing management process involves
developing objectives that promote the long-term competitive
advantage of a firm. The first step in the marketing
management process is to develop the firm’s overall strategic
plan. The second step is to establish marketing strategies
that support the firm’s overall strategic objectives. Lastly, a
marketing plan is developed for each product. Each product
plan contains an executive summary, an explanation of
the current marketing situation, a list of threats and opportunities,
proposed sales objectives, possible marketing
strategies, action programs, and budget proposals.
The marketing management process includes analyzing
marketing opportunities, selecting target markets,
developing the marketing mix, and managing the marketing
effort. In order to analyze marketing opportunities,
firms scan current environmental conditions in order to
determine potential opportunities. The aim of the marketing
effort is to satisfy the needs and wants of consumers.
Thus, it is necessary for marketing managers to
determine the particular needs and wants of potential customers.
Various quantitative and qualitative techniques of
marketing research are used to collect data about potential
customers, who are then segmented into markets.
MARKET SEGMENTATION
In order to better manage the marketing effort and to satisfy
the needs and wants of customers, many firms place
consumers into groups, a process called market segmentation.
In this process, potential customers are categorized
based on different needs, characteristics, or behaviors.
Market segments are evaluated as to their attractiveness or
potential for generating revenue for the firm. Four factors
are generally reviewed to determine the potential of a particular
market segment. Effective segments are measurable,
accessible, substantial, and actionable. Measurability
is the degree to which a market segment’s size and purchasing
power can be measured. Accessibility refers to the
degree to which a market segment can be reached and
served. Substantiality refers to the size of the segment in
terms of profitability for the firm. Action ability refers to
the degree to which a firm can design or develop a product
to serve a particular market segment.
Consumer characteristics are used to segment markets
into workable groups. Common characteristics used
for consumer categorizations include demographic, geographic,
psychographic, and behavioral segmentation.
Demographic segmentation categorizes consumers based
on such characteristics as age, ethnicity, gender, income
level, and occupation. It is one of the most popular methods
of segmenting potential customers because it makes it
relatively easy to identify potential customers.
Categorizing consumers according to their locations
is called geographic segmentation. Consumers can be segmented
geographically according to the nations, states,
regions, cities, or neighborhoods in which they live, shop,
and/or work. Psychographic segmentation uses consumers’
activities, interests, and opinions to sort them into
groups. Social class, lifestyle, or personality characteristics
are psychographic variables used to categorize consumers
into different groups. In behavioral segmentation, marketers
divide consumers into groups based on their knowledge,
attitudes, uses, or responses to a product.
Once the potential market has been segmented, firms
need to station their products relative to similar products
of other producers, a process called product positioning.
Market positioning is the process of arranging a product
so as to engage the minds of target consumers. Firm managers
position their products in such a way as to distinguish
them from those of competitors in order to gain a
competitive advantage in the marketplace. The position of
a product in the marketplace must be clear, distinctive,
and desirable relative to those of its competitors in order
for it to be effective.
COVERAGE STRATEGIES
Marketing managers use three basic market-coverage
strategies: undifferentiated, differentiated, and conceneobf_

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trated. An undifferentiated marketing strategy occurs
when a firm focuses on the common needs of consumers
rather than their different needs. When using this strategy,
producers design products to appeal to the largest number
of potential buyers. The benefit of an undifferentiated
strategy is that it is cost-effective because a narrow product
focus results in lower production, inventory, and
transportation costs.
A firm using a differentiated strategy makes a conscious
decision to divide and target several different market
segments, with a different product geared to each
segment. Thus, a different marketing plan is needed for
each segment in order to maximize sales and, as a result,
increase firm profits. With a differentiated marketing
strategy, firms create more total sales because of broader
appeal across market segments and stronger position
within each segment.
The last market coverage strategy is known as the
concentrated marketing strategy. The concentrated strategy,
which aims to serve a large share of one or a very few
markets, is best suited for firms with limited resources.
This approach allows firms to obtain a much stronger
position in the segments it targets because of the greater
emphasis on these targeted segments. This greater emphasis
ultimately leads to a better understanding of the needs
of the targeted segments.
MARKETING MIX
Once a positioning strategy has been determined, marketing
managers seek to control the four basic elements of the
marketing mix: product, price, place, and promotion,
known as the four Ps of marketing. Since these four variables
are controllable, the best mix of these elements is
determined to reach the selected target market.
Product. The first element in the marketing mix is the
product. Products can be either tangible or intangible.
Tangible products are products that can be touched;
intangible products are those that cannot be touched,
such as services. There are three basic levels of a product:
core, actual, and augmented. The core product is the most
basic level, what consumers really buy in terms of benefits.
For example, consumers do not buy food processors, per
se; rather, they buy the benefit of being able to process
food quickly and efficiently.
The next level of the product is the actual product—
in the case of the previous example, food processors. Products
are typically sorted according to the following five
characteristics: quality, features, styling, brand name, and
packaging. Finally, the augmented level of a product consists
of all the elements that surround both the core and
the actual product. The augmented level provides purchasers
with additional services and benefits. For example,
follow-up technical assistance and warranties and guaranties
are augmented product components. When planning
new products, firm managers consider a number of
issues including product quality, features, options, styles,
brand name, packaging, size, service, warranties, and
return policies, all in an attempt to meet the needs and
wants of consumers.
Price. Price is the cost of the product paid by consumers.
This is the only element in the marketing mix that generates
revenue for firms. In order to generate revenue, managers
must consider factors both internal and external to
the organization. Internal factors take the form of marketing
objectives, the marketing-mix strategy, and production
costs. External factors to consider are the target
market, product demand, competition, economic conditions,
and government regulations.
A number of pricing strategies are available to marketing
managers: skimming, penetration, quantity, and
psychological. With a price-skimming strategy, the price is
initially set high, allowing firms to generate maximum
profits from customers willing to pay the high price.
Prices are then gradually lowered until maximum profit is
received from each level of consumer.
Penetration pricing is used when firms set low prices
in order to capture a large share of a market quickly. A
quantity-pricing strategy provides lower prices to consumers
who purchase larger quantities of a product. Psychological
pricing tends to focus on consumer
perceptions. For example, odd pricing is a common psychological
pricing strategy. With odd pricing, the cost of
the product may be a few cents lower than a full-dollar
value. Consumers tend to focus on the lower-value fulldollar
cost even though it is really priced closer to the next
higher full-dollar amount. For example, if a good is priced
at $19.95, consumers will focus on $19 rather than $20.
Place. Place refers to where and how the products will be
distributed to consumers. There are two basic issues
involved in getting the products to consumers: channel
management and logistics management. Channel management
involves the process of selecting and motivating
wholesalers and retailers, sometimes called middlemen,
through the use of incentives. Several factors are reviewed
by firm management when determining where to sell their
products: distribution channels, market-coverage strategy,
geographic locations, inventory, and transportation methods.
The process of moving products from a manufacturer
to the final consumer is often called the channel of distribution.

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Promotion. The last variable in the marketing mix is promotion.
Various promotional tools are used to communicate
messages about products, ideas, or services from firms
to their customers. The promotional tools available to
managers are advertising, personal selling, sales promotion,
and public relations. For the promotional program
to be effective, managers use a blend of the four promotional
tools that best reaches potential customers. This
blending of promotional tools is sometimes referred to as
the promotional mix. The goal of this promotional mix is
to communicate to potential customers the features and benefits of goods, ideas, or services