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Introduction to
Business

5. Marketing

2019-2020
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Outline:
1. The Nature of Marketing
2. Marketing Strategy
3. Innovation and R&D
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“Because the purpose of business is to create

a customer, the business enterprise has two-
and only two-basic functions: marketing and
innovation. Marketing and innovation produce
results; all the rest are costs. Marketing is the
distinguishing, unique function of the
business.”
Peter Drucker
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HOW WOULD YOU DEFINE MARKETING?

https://www.youtube.com/watch?v=i1xz5Kv-7VY

© 2012 South-Western, a part of Cengage

4
Learning
 1. THE NATURE OF MARKETING

Marketing: A group of activities designed to accelerate transactions by

creating, distributing, pricing, and promoting goods, services, and ideas.

Marketing is not:
• Manipulating consumers to get them to buy products they do not want
• Just selling and advertising

Marketing is a systematic approach to satisfying consumers

Marketing Activities: Buying, Selling, Transporting, Storing, Grading, Financing,

Research, Risk Taking
 1. THE NATURE OF MARKETING

Customer
Value = Customer
Benefits – Customer
Costs
Selecting a Target Market
 1. THE NATURE OF MARKETING

Evolution of the Marketing Concept

a) Product – oriented: consumers will favor those products that offer the most
quality, performance, or innovative features.

b) Sales – oriented: It holds that consumers and businesses, if left alone, will
ordinarily not buy enough of the selling company’s products. The organization
must, therefore, undertake a selling and promotion effort. Their aim is to sell
what they make rather than make what the market wants.

c) Market – oriented: Its central ideas crystallized in the 1950s. It holds that the
key to achieving its organizational goals (goals of the selling company)
consists of the company being more effective than competitors in creating ,
delivering, and communicating customer value to its selected target customers
 EXERCISE 1: WHICH MARKETING CONCEPT
DO THESE EXAMPLES REPRESENT?
A. Package holiday. From the mid 1960s, demand increased dramatically and the initial
success of a few companies (e.g. Thomson) was soon under severe threat from intense
competition. The holiday market became ever more “cut-throat” and the emphasis was
firmly on cutting prices to drive out competitors. Low prices were often at the expense of
quality and consumer satisfaction. Established companies began to resort to ever more
ingenious (or often just bizarre!) methods of promotion.

B. Pharmaceutical. A pharmaceutical firm has to develop a new product destined to

substitute more traditional painkillers such as paracetamol. The objective is to develop
something similar with less side effects. The main concern is that the medicine is effective
so that it can pass all the quality control test and is demanded by the costumers as a
substitute to other painkillers such as paracetamol.

C. Southwest Airlines has the best customer service record in the airline industry and has
won the industry’s “Triple Crown” for best baggage handling, on-time performance, and
best customer complaint statistics many years in a row. This reinforces the unique image in
the customer’s mind, giving Southwest Airlines its high-value position, which has resulted
in a huge and committed following of satisfied customers and consistently increasing
profits.
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 2. MARKETING STRATEGY

Marketing strategy: A plan of action for developing, pricing

distributing, and promoting products that meet the needs of
specific customers

1. Target Market: A specific group of consumers on whose needs

and wants a company focuses its marketing efforts

2. Marketing Mix
 2. MARKETING STRATEGY

1. How to select the appropriate Target Market:

Total-market approach: a firm tries to capture all potential customers with

similar preferences (single marketing strategy)
• Sellers of salt, sugar, and many agricultural products use a total-market approach
because everyone is a potential consumer of these products

Market segmentation: a firm divides the total market into groups of people
who have relatively similar product needs

Market Segment: A collection of individuals, groups, or organizations who share one

or more characteristics and thus have relatively similar product needs and desires
(based on demographic, geographic, behavioral characteristics for ex.)
 POTENTIAL BASES FOR SEGMENTATION

Geography Demographics Psychographics Benefits Usage Rate

•Region •Age •Personality •Benefits •Former

•Market size •Gender •Motives sought •Potential
•Market •Income •Lifestyle •1st time
density •Ethnicity •Geodemo- •Light or
•Climate •Family life graphics irregular
cycle •Medium
•Heavy

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 MARKET SEGMENTATION

How to identify your target market?

https://www.youtube.com/watch?v=p2AboI8Pzp4&list
=RDQMeChuZYyvj2Q&index=7

Market segmentation
https://www.youtube.com/watch?v=_0yFXLA6YW0&lis
t=RDQMeChuZYyvj2Q&index=5

13
 EXAMPLES

• Total market approach:

• Segmentation approach:

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 EXAMPLES

• Total market approach:

• Segmentation approach:

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SEGMENTING BY AGE

 Products are often

designed to meet the
specific needs of certain
age groups

 Examples: baby food

and toothpaste.
SEGMENTING BY AGE

 Example of people
over 65 (Seniors)

8-17
 SEGMENTING BY
FAMILY LIFE CYCLE
STAGES

 Life Cycle - The process of

family formation and
dissolution.
 The underlying theme is that
life stage, not age per se, is
the primary determinant of
many consumer purchases.
 One important trend - Women
are having children at a later
age.
 USING PSYCHOGRAPHIC
SEGMENTATION
• Psychographic profiles
produce rich descriptions
of potential target
markets
• The greater detail aids in
matching a company’s
image and its offerings
with the types of
consumers who are likely
purchasers
 • Pampers
– This ad is an
example of
geographic
segmentation.

8-20
• Jaguar
– Segmentation
based on income

8-21
TOTAL OR SEGMENT?

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23
24
 2. MARKETING STRATEGY
Depending on the Market Segment selected:

a)Concentration approach: a firm develops one marketing strategy for a single

market segment (single marketing strategy).

b)Multi-segment approach: a firm develops a marketing strategy for two or more

market segments (several marketing strategies)

c) Niche marketing: a firm develops one marketing strategy for a niche, i.e. a
narrow market segment with specific set of needs
• Niche segments are usually very small compared to the total market for the
product
• Many airlines cater to first-class flyers, who comprise only 10% of
international air travelers
• To meet the needs of these elite customers, airlines include special perks
along with spacious seats
 2. MARKETING STRATEGY

a)Concentration approach: a firm develops one marketing

strategy for a single market segment (single marketing
strategy).

• One segment only.

• The marketer caters to the entire market with a single
offering and the same marketing mix.
• Similar to mass marketing
• Example: for products like salt, sugar and staples.
 2. MARKETING STRATEGY

b)Multi-segment approach: a firm develops a marketing

strategy for two or more market segments (several
marketing strategies)

• Selection of two or more segments

• Approach these segments with differentiated offerings
and corresponding marketing mixes and programs.
• Example: Shampoos and toiletries.
 2. MARKETING STRATEGY

c) Niche marketing: a firm develops one marketing

strategy for a niche, i.e. a narrow market segment with
specific set of needs

• This is generally a sub-group within the whole segment.

• The process includes targeting a small segment with a
specialized mix meant only for that segment.
• Example: Sports channels on TV; Religious channels on
TV.
 2. MARKETING STRATEGY

For a firm to successfully use a concentration or multisegment approach to

market segmentation:
1. Consumers’ needs for the product must be heterogeneous
2. The segments must be identifiable and divisible
3. The total market must be divided in a way that allows estimated sales
potential, cost, and profits of the segments to be compared
4. At least one segment must have enough profit potential to justify
developing and maintaining a special marketing strategy
5. The firm must be able to reach the chosen market segment with a
particular market strategy