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MNM1601 Principles of Marketing Management Summary Study Notes
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Thursday, 01 August 2019Marketing Management - Learning Unit 1 The
Nature of Marketing
1.1 What is Marketing?
Marketing can be defined as a process whereby an organisation, in its drive to meet its
organisational goals, focuses on meeting customer needs and wants, by offering the right product, at
the right price, at the right place, and by using the right marketing channels. It is the process of
planning and executing the conception, pricing, marketing communication and distribution of ideas,
products and services to create changes that satisfy individual and organisational goals. Marketing
must be viewed as the process by which the organisation focuses on satisfying customer needs.
Marketing can also be defined as encompassing a ‘set of processes for creating, communicating,
and delivering value to customers’ in a mutually beneficial relationship between the organisation and
it’s stakeholders.
1.1.1 Exchange and Marketing
Exchange is central to the marketing process and includes all activities associated with a customer
giving up something (money, time, goods) in order to receive something (product or service) in return
for another. In order for any kind of exchange to take place, five conditions are required:
- At least two parties should be involved in exchanging products or services
- Each party must offer something of value to the other party
- Each party must be able to communicate with the other party, and be able to deliver the goods or
services wanted by the other trading party
- Each party must be free to accept or reject the others offer
- Each party must want to deal with the other party
1.2 Marketing Gaps
A marketing gap is created when the users of a product are not where the product is manufactured.
Identifying these gaps can be described as a core marketing aspect. If all the gaps in the marketing
process are not covered, the successful marketing of a product offering is not possible. There are 5
main types of marketing gaps:
- Space Gap
- Time Gap
- Information Gap
- Ownership Gap
- Value Gap
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There are three main kinds of intermediaries, namely:
- Middlemen - organisations directly involved in taking title of products that are later sold to others.
- Sales Intermediaries - agents who do not take title of products they sell, but provide services to
facilitate the sales process and are paid for these services.
- Auxiliary Enterprises - not directly involved in the transfer of title but provide support services to
facilitate the selling process. Eg travel agencies, HR agencies and commercial banks.
1.3.1 Primary Marketing Activities
Refers to the most basic activity that has to be performed, namely transport. The purpose is to
deliver the product to the consumer in the quickest and safest way possible.
1.3.2 Auxiliary Marketing Activities
Refer to additional services and include the following:
- Sourcing and Supplying Information
- Standardisation and Grading
- Storage
- Financing
- Risk Taking
1.3.3 Exchange Marketing Activities
These activities are buying and selling - ownership is transferred from one person to another. Buying
activities are not regarded as a marketing task but rather as the responsibility of the purchasing
department. Selling is an important task for the marketing department of any organisation.
1.4 Marketing Orientations
1.4.1 The Production Concept
This concept holds that consumers will favour products that are readily available and highly
affordable. The focus was mainly on producing or manufacturing the products as efficiently as
possible. The central notion of the production era was that products would sell themselves and the
major concern of businesses was production, rather than marketing. The needs of consumers were
largely ignored and marketers got away with this due largely to the lack of competition and the high
demand for products at the time. During this era, consumers were relatively poor and
unsophisticated, they bought products whenever they could afford to do so. This led to a situation
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where supply exceeded the demand and gradually stocks began piling up, causing management to
realise the importance of stimulating demand to dispose of the stockpile.
1.4.2 Sales Orientation Concept
This concept focuses on the selling of products and services, rather than on whether or not they are
actually needed. Advertisements are placed to inform consumers of the availability of products, while
sales reps promote products by means of a direct personal contact. A ‘hard sell approach’ (selling at
any cost) is often used. The main aim of businesses during the sales era was to maximise the sales
volume at any cost. Profitability was not a major concern, the basic assumption was that the sales
volume was the key to profitability - the higher the sales, the higher the profit. This was obviously not
true as higher sales may incur higher costs. Bringing economies of scale into play and resulting in a
lower profit.
1.5 The Marketing Concept
This is a managerial philosophy where the organisation focuses on meeting customer needs
(customer orientation or focus). They ensure that all departments and people in the organisation
work towards satisfying the needs of the consumer (systems orientation or integrated approach) and
making a profit in the process. The marketing concept emphasises that marketing begins and ends
with the customer and can be regarded as an ethical code or management philosophy, according to
which tasks of the business are performed. The essence of the marketing concept lies in four
principles namely customer orientation, profit orientation, systems orientation and social
responsibility.
1.5.1 Customer Orientation
This is a focus on meeting all the needs of customers by acting and performing in a manner that will
satisfy the needs and desires of customers - requirements of customers comes first. Customers are
the focal point of decision making and all other functional areas are geared towards satisfying
customer needs and wants. They check on how satisfied customers are with the product/service and
what can be done to enhance their satisfaction. Concentration is on maintaining contact with the
customer, providing quality, ensuring customer satisfaction and retaining customers. Increased
customer delight, and ultimately customer loyalty, results in higher profits, company growth, greater
investor commitment, as well as increased employee satisfaction. A business should therefore
examine the expectations of the consumer and compare them to the consumer’s perception of the
value received - the consumer will be delighted only if the perception of the value received exceeds
expectations.
1.5.2 Profit Orientation
By providing market offerings that satisfy customer needs and wants, the business will be able to
achieve its own profit goals as well. If your products have a reputation for quality, this enables the
company to set pricing based on desired profit margins, rather than relying on sales designed to
increase volume or matching its competitors pricing.
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1.5.3 Systems Orientation
A system is an integrated whole, a group of units that works together to achieve a joint objective.
Systems orientation is also known as organisational integration. Each department thought of its own
activity as the centre of the business. People were not concerned with the whole system as long as
the business made a profit. Ideally all departments should work together to achieve the successful
marketing of the market offering of the business. The effort of the personnel in the different functional
areas should be co-ordinated and integrated. The systems orientation implies that the activities of
the business should be co-ordinated to satisfy customer needs and wants, and to achieve a
satisfactory rate of return on investment.
1.5.4 Social Responsibility and Green Marketing
Social responsibility is a concept that maintains that businesses are part of the larger society in
which they exist and are accountable to society for their performance. Marketers should strike a
balance between targeting customers needs, long term interests, society’s best long term interests
and the long term financial goals of the business.
Green marketing involves the promotion of products and services based on environmental factors or
awareness. It incorporates a broad range of activities such as product modification, changes to the
production process, packaging changes, alternative distribution methods and modifying
advertisements. These are aimed at taking advantage of the changing consumer attitude towards a
brand. Green marketing focuses on the businesses environmental projects and sustainability efforts.
1.6 Marketing Process
The focus of the marketing department is on performing the activities associated with marketing in
such a way that the company will derive the maximum benefit from them. The key areas or variables
that marketing management has to take decisions about are commonly known as the four P’s:
- The Product itself
- The Place where it is to be sold (distribution of the product)
- The Promotion to be used to inform the consumer
- The Price of the product, which should reflect its value to the consumer
These four variables combine in a marketing offering, where the consumer may decide to buy if it
satisfies his or her needs. Decisions regarding the four marketing instruments combine to form an
integrated marketing strategy (or marketing plan). This strategy is directed at a group of consumers
(target market) in a specific environment. It is therefore evident that if anything were to change in the
environment, the market offering and the marketing strategy must be changed accordingly. If the
target market to be focused on is large, it offers more advantages to the manufacturer and the
intermediaries as the profit and sales potential are increased. Marketing management selects a
specific target market (or markets) from many different market segments - the market offering is
often changed in some way or another to meet the preferences of different target markets. The
process is as follows:
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