Marketing Principles

I.

An overview of marketing.
a.
b.
c.
d.
e.

What is marketing?
Five ERAs in the history of marketing.
Sales vs. Market Orientation
Role of Marketing
Career Opportunities

What is marketing?
- explain how it creates utility, and describe its role in the global
marketplace. (Boone & Kurtz)
- The process of creating, distributing, promoting, and pricing goods,
services, and ideas to facilitate satisfying exchange relationships with
customers and develop and maintain favorable relationships with
stakeholders in dynamic environment. (Ferrell & Hult)
-is a system concerned with the planning and development of products and
services, determination of prices, creation of promotional programs and
distribution system to present and prospective market for satisfaction of their
existing needs and wants, thus maximizing profit in the long run. (AlminarMutya)
Four Elements of the 3rd definition
1. First element of the definition is that Marketing is a System.
2. The second element is the product or service development, pricing,
promotion and place of distribution.
3. The third element of in the definition is the presence of current and
potential market.
4. The fourth element is the satisfaction of existing human needs and
wants.

Operational Dimension of Marketing

T
Target
arget
Market
Market

Marketing
Marketing
System
System

Things
Things to
to
be
be
Marketed
Marketed

Marketing
Marketing
Organizati
Organizati
on
on

Marketing Organization - product or service

manufacturers, wholesalers or retailers of goods.

Things to be marketed products, services and ideas.

Target Market the buyers of the goods.

sellers.

Ex:

Five ERAs of Marketing (Market Orientation)

The Production ERA (before 1920s)

A good product will sell itself.

The Sales ERA (1920-early 1950s)

Creative advertising and selling will overcome consumers

resistance and persuade them to buy.

The Marketing ERA (since 1950s)

The consumer rules! Find a need and till it.

The Relationship ERA (since 1990s)

Long term relationships with customers and other partners lead

to success.

The Social ERA (since 2000s).

Connecting to consumers via internet & social media sites is an

effective tool.
Sales vs. Market Concept
Market Concept is a management orientation which holds that the key task
of the organization is to determine the needs and wants of the target
markets & to adapt the organization to deliver the desired satisfaction more
effectively & efficiently than its competitors. (Kotler)
Sales Concept is a management orientation which assumes that consumers
will either buy or not buy enough of the organizations products unless the
organization makes a substantial effort to stimulate their interest in its
products.

Marketin
g
concept

Selling
concept

Determinati
on of
customer
needs &
wants

Product
Planning &
developme
nt

Product
Planning &
developme
nt

Promotional
programs

Why study
Marketing?

It is important to
society
It is important to
business
Good career
opportunities

Available Careers:

Sales

Public Relations

Retailing

Advertising

Marketing Management

Marketing Research

Product Management
(Source: Principles of Marketing, Boone & Kurtz, Phil. Ed.)

II.

The Marketing Environment

1. What is Environmental Scanning & Analysis?

Political
Economics
Socio-cultural
Technological
Legal/Regulatory
Competitors

Environmental Scanning is the process of collecting information about

forces in the Marketing Environment.
Scanning involves observation; secondary sources such as business, trade,
government, and general-interest publications; and marketing research.
Environmental Analysis is the process of assessing and interpreting the
information gathered through environmental scanning.
Environmental Scanning is the process of collecting information about
forces in the Marketing Environment.
Scanning involves observation; secondary sources such as business, trade,
government, and general-interest publications; and marketing research.
Environmental Analysis is the process of assessing and interpreting the
information gathered through environmental scanning.

Two Approaches to Environmental Forces:

1. Passive and Reactive Approach. Marketing managers view
environmental forces as uncontrollable. Instead of trying to influence
forces in the environment, marketing managers adjust current
marketing strategies to environmental changes. Opportunities are
discovered through environmental scanning and analysis.
2. Proactive
Approach.
Marketing
managers
believed
that
environmental forces can be shaped or adopt. For example, if a market

is blocked by traditional environmental constraints, managers may

apply economic, psychological, political, and promotional skills to gain
access to and operate within it. (marketing by Ferrell & Hult)
Selection of a particular approach depends on an organizations
managerial philosophies, objectives, financial resources, customers,
and human skills, as well as on the environment within which the
organization operates. (marketing by Ferrell & Hult)
Six Environmental Forces in Marketing:
1. Competitive Forces. Competition is defines as the other firm that
market products that are similar to or can be substituted for a
marketers product in the same geographic area.
Four types of competitors:

Brand competitors. Firms that market products with similar

features and benefits to the same customers at similar prices.
Example, a thirsty, calorie-conscious customer may choose a diet
soda such Diet Coke or Diet Pepsi from the soda machine.
Product competitors. Firms that compete in the same product
class but market products with different features, benefits and
prices. The thirsty dieter mentioned above may purchase iced tea,
juice, mineral bottled water instead of soda.
Generic Competitors. Firms that provide very different products
that solve that solve the same problem or satisfy the same basic
customer need. The same dieter might simply have a glass of water
from the kitchen tap to satisfy her thirst.
Total budget competitors. Firms that compete for the limited
financial resources of the same customers. Total budget competitors
for Diet Coke, for example might include gum, a newspaper and
bananas. (marketing by Ferrell & Hult)

Four types of Competitive Structures:

Monopoly. A competitive structure in which an organization

offers a product that has no close substitutes, making that
organization the sole source of supply. Example is an electric
corporation (MERALCO).

Oligopoly. A competitive structure in which a few sellers control

the supply of a large proportion of a product. Example is oil
refinery.
Monopolistic competition. A competitive structure in which a
firm has many potential competitors and tries to develop a
marketing strategy to differentiate its product. Example is blue
jeans originally established by Levi Strauss.
Pure competition. A market structure characterized by
extremely large number of sellers, none strong enough to
significantly influence price or supply. Example is the
unregulated farmers market.

Selected Characteristics of Competitive Structures

Type of
Structure
Monopoly

Number of
Competitors
One

Ease of Entry
Into Market
Many Barriers

Product

Example

Almost no
substitute

Oligopoly

Few

Some Barriers

Homogeneous
or Differentiated
(with
real
perceived
differences)

DeBeers
through
much of the 20th
century
(diamonds)
Honda (autos)

Monopolistic
Competition

Many

Few Barriers

Pure
Competition

Unlimited

No Barriers

or

Product
differentiation, with
many substitute
Homogeneous
products

Levi Strauss
(jeans)
Vegetable farm
(green bean)

(Marketing by Ferrell & Hult)

2. Economic Forces. This factor examines the effects of general
economic condition as well as the buying power and the factors that
affect peoples willingness to spend.
Economic conditions affect supply and demand, buying power,
willingness to spend, consumer expenditure levels, and intensity
of competitive behavior.
Business cycle. Pattern of economic fluctuations that has four stages:
prosperity, recession, depression, and recovery.
1. Prosperity. A stage of the business cycle characterized by low
unemployment and relatively high total income, which together ensure
high buying power (provided the inflation rate stays low).

2. Recession. A stage of the business cycle during which unemployment

rises and total buying power declines, stiffing both consumer and
business spending.
3. Depression. A stage of the business cycle when unemployment is
extremely high, wages are very low, total disposable income is at a
minimum, and consumers lack confidence in the economy.
4. Recovery. A stage of the business cycle in which the economy moves
from recession or depression toward prosperity.
Buying power depends on economic conditions and size of the
resources-money, goods, and services that can be traded in an
exchange. The major financial sources of buying power are
income, credit and wealth.
Income. The amount of money received through wages, rents, investments,
pensions, and subsidy payments for a given period.
Disposable income. After-tax income.
Discretionary income. Disposable income available for spending and
saving after an individual has purchased the basic necessities of food,
clothing, and shelter.
Wealth. The accumulation of past income, natural resources, and financial
resources.

Peoples willingness to spend means their inclination to

spend/buy because of expected satisfaction from a product,
influenced by the ability to buy and numerous psychological and
social forces.

3. Political Forces influence marketing decisions and strategies. Many

marketers view political forces as beyond their control and simply
adjust to conditions that arise from those forces. System of
government as well as political cultures influence marketing managers
in designing strategies.
4. Legal and Regulatory Forces. A number of national laws influence
marketing decisions and activities. Various laws and regulations
restricts marketing towards designing marketing strategy specially
corporation laws, tax laws, labor laws and social legislation.
5. Technological Forces.
Technology is the application of knowledge and tools to solve problems and
perform tasks more efficiently.

III.

Ethics and Social Responsibility

1. Ethics
Ethics refers to the moral principles or values that generally govern the
conduct of an individual or a group. It can also be viewed as the standard of
behavior by which conduct is judged. Standards that are legal may not
always ethical, and vice versa.

Ethical Theories. Theories that guides a person in

solving ethical dilemma:

Deontology. The deontological theory states that the people should adhere
to their obligations and duties when analyzing an ethical dilemma. This
means that a person will follow his or her obligations to another individual or
society because upholding ones duty is what is considered ethically correct.
Utilitarianism. The utilitarian theory is founded on the ability to predict the
consequences of an action. To a utilitarian, the choice that yields the greatest
benefit to the most people is the choice that is ethically correct. This point
system provides a logical and rational argument for each decision and allows
a person to use it on a case-by-case context.
Casuist. The casuist ethical theory compares a current ethical dilemma with
examples of similar ethical dilemma and their outcomes. Past decisions from
case bearing similar facts could be the most ethical decision of the ethical
dilemma.
Moral Relativists. Moral relativists believe in time-and-place ethics, that is,
ethical truths depends on individuals and groups holding them. The proper
resolution to ethical dilemma is based upon weighing the competing factors
at the moment and then making determination to take the lesser of the evils
as the resolution. Moral relativists do not believe in absolute rules. Their
beliefs center on the pressure of the moment and whether the pressure
justifies the action taken.
Virtue Ethics. Aristotle and Plato taught that solving ethical dilemmas
requires training, that individuals solve ethical dilemmas when they develop
and nurture a set of virtues (character trait valued as being good).

Ethical Behavior in Business

First approach to developing a personal set of ethics is to examine the

consequences of a particular act. How? You need to ask the following
questions: who is helped or hurt? How long lasting are the consequences?
What actions produce the greatest good for the greatest number of people?
The second approach stresses the importance of rules. Rules come in the
form of customs, laws, professional standards, and the common sense.
Example: always treat others as you would like to be treated; copying
copyrighted computer software is against the law; and it is wrong to lie,
bribe, or exploit.
The third approach emphasizes the development of moral character within
individuals. Ethical development can be thought of as having three levels:
Preconventional morality, the most basic level is childlike. It is
calculating, self-centered, and even selfish, based on what will be
immediately punished or rewarded.
Conventional morality moves from egocentric viewpoint toward
expectation of society. Loyalty and obedience to the organization (or
society) become paramount. Marketing decision maker would be
concerned only with whether the proposed action is legal and how it
will be viewed by others.
Postconventional morality represents the morality of the mature
adult. At this level, people are less concerned about how others might
see them and more concerned about how they see and judge
themselves over the long run. A marketing decision maker who has
attained the postconventional level of morality might ask. Even
though it is legal and will increase company profits, is it right in the
long run? Might it do harm than good in the end?
Ethical Decision Making. The following factors tend to
influence ethical decision making and judgment:
Extent of ethical problems within the organization: Marketing
professional who perceived fewer ethical problems in their organization
tend to disapprove more strongly of unethical or questionable
practices than those who perceive more ethical problems. Apparently,
the healthier the ethical environment, the more likely that marketers
will take strong stand against questionable practices.
Top-management actions or ethics: top managers can influence
the behavior of marketing professionals by encouraging ethical
behavior and discouraging unethical behavior.

 Potential magnitude of consequences: The greater the harm done

to victims, the more likely that marketing professionals will recognize a
problem as unethical.
Social concensus: The greater the degree of agreement among
managerial peers that an action is harmful, the more likely that
marketers will recognize a problem as unethical.
Probability of harmful outcome: The greater the likelihood that an
action will result in harmful outcome, the more likely that marketers
will recognize a problem as unethical.
Length of time between the decision and the onset of
consequences: the shorter length of time between the action and the
onset of negative consequences, the more likely that marketers will
perceive a problem as unethical.
Number of people to be affected: The greater the number of
persons affected by a negative outcome, the more likely that
marketers will recognize a problem as unethical.

Ethical Guidelines and Training. Developing a code of

ethics as a guideline to help marketing managers and other
employees to make better decision. Advantages:
The guidelines help employee identify what their firm recognizes as
acceptable business practices
A code of ethics can be effective internal control on behavior, which is
more desirable than external controls like government regulation.
A written code helps employee avoid confusion when determining
whether their decisions are ethical.
A process of formulating the code of ethics facilitates discussion
among employees about what is right and wrong and ultimately leads
to better decisions.
Ethics Training. Ethics training is a good way to help
employees put good ethics into practice.
(Source: Marketing Principles, Daniel, Lamb, Hair, Phil.ed.)

2. Corporate Social Responsibility

Arguments For & Against CSR

Green Marketing

IV - Consumer Behavior
Buying Process

Social
Influences

Situational
Influences

Marketing
Influences
Psychological
Influences

Consumer Decision
Making

1. Social Influences on Consumer Decision Making

Culture and Subculture
Social Class
Reference Group and Families
Culture can be defined as the values, beliefs, preferences, and tastes handed down
from one generation to the next. It is the broadest environmental determinant of
consumer behavior. (Boone & Kurtz)
Culture is one of the most basic influences on an individuals needs, wants, and
behavior, since all the facets of life are carried out against the background of the
society in which an individual lives.
Cultural values are transmitted through three basic organizations:
The Family
Religious Organizations and
Educational Institutions
Subculture is group with their own distinct modes of behavior. They differ by
ethnicity, nationality, age,, rural vs. urban location, and geographic distribution.
Social Class

As a consumer, you belong to a number of social groups. Your earliest group

experience is your family. As you grow older, you will join various group like, sports
team, choral group, and a volunteer in a community, thus, by the time you became
an adult, you are already a member of many social groups. Every group establishes
certain norms of behavior are values, attitudes, and behaviors, a group deems
appropriate for its members. Group members are expected to comply with these
norms. (Boone & Kurtz)
Different group status can also influence buying behavior:

Upper Class
Middle Class
Working Class
Lower Class

Reference Group and Families

Primary reference group families and friends
Secondary reference groups fraternal organizations and professional
association
Family group is the most important determinant of consumer behavior because of
the close, continuing interaction among family members.
2. Marketing Influence on Consumer Decision Making
Marketing strategies are often designed to influence consumer decision making and
lead to profitable exchanges. Each element of the marketing mix (product, price,
promotion, place) can affect consumers in various ways.
Product Influence
Brand name
Quality
Newness
Complexity
Physical appearance
Packaging
Labeling information
Price Influences
The price of the product and services often influences consumers than any other
attributes. Example, supermarkets which are perceived to charge lower prices
attracts many consumers based on this fact alone.
Promotion Influences
Advertising, sales promotions, salespeople, and publicity can influence what
consumers think about products. Since consumers receive so much information
from marketers and screen out a good deal of it, it is important for marketers to
device communications that (1) offer consistent messages about their products and
(2) are placed in media that consumers in the target market are likely to use.

Marketing communications play a critical role in informing consumers about

products and services, including where they can be purchased, and in creating
favorable images and perceptions.
Place Influences
The marketers strategy for distributing products can influence consumer in several
ways.
First, products that are convenient to buy in variety of stores increase the chances
of consumers finding and buying them.
Second, product sold in exclusive outlets may be perceived by consumers as
having high quality.
Third, offering products by nonstore method, such as on the Internet or in catalogs
can create consumer perception that the products are innovative, exclusive, or
tailored for specific target market.
3. Situational Influences on Consumer Decision Making
Situational influences can be defined as all those factors particular to a time and
place of observation that have a demonstrable and systematic effect on current
behavior.
Five situational influences:
Physical features most readily apparent features of a situation. These
features include geographical and institutional location, dcor, sounds,
aromas, lighting, weather, and visible configurations or merchandise or other
material surrounding the stimulus object.
Social features features that provide depth to description of a situation.
Other persons present, their characteristics, their apparent roles and
interpersonal interaction are potentially relevant example.
Time is a dimension of situation that may be specified in units ranging from
time of day to season of the year. Time may also be measured relative to
some past or future event for for the situational participant.
Task features of a situation include an intent or requirement to select, shop
for, or obtain information about general or specific purchase. Task may reflect
different buyer and user roles anticipated by the individual. For instance, a
person shopping for a small appliance as a wedding gift for a friend is in
different situation than when shopping for a small appliance for personal use.
Current condition these are momentary moods (such as acute anxiety,
pleasantness, hostility, and excitation) or momentary conditions (such as
cash on hand, fatigue, and illness) rather than chronic individual trait.
4. Psychological Influences On Consumer Decision Making
Information from group, marketing, and situational influences affects what
consumers think and feel about particular products and brands. There are
psychological factors that influence how this information is interpreted and used
and how it impacts the consumer decision-making process. These two important
psychological factors are:
Product knowledge which refers to the amount of information a consumer
has stored in his/her memory about particular product classes, product form,
brands, models, and ways to purchase them. For example, a consumer may

know a lot about coffee, ground vs instant, Folgers vs Maxwell House, and
various package sizes and stores that sells.
Product knowledge influences how quickly a consumer goes through the
decision-making process.
Product involvement refers to a consumers perception of the importance
or personal relevance of an item. Product involvement influences consumer
decision making in two ways. First, if the purchase is for high involvement
product, consumers are likely to develop a high degree of product knowledge
so that they can be confident that the item they purchase is just right for
them. Second, a high degree of product involvement encourages extensive
decision making by consumers, which likely increases the time it takes to go
through the decision making process.

Consumer Decision Making

Consumer Behavior
Consumer behavior describes how consumers make purchase decisions and how
they use and dispose of the purchase goods or services .

Consumer Decision Making Process

Need Recognition

Information
Search

cultural, social, and

psychological affects
Evaluation all steps
alternatives

Purchase

Post purchase
behavior

1. Need Recognition is the starting point in the buying process. It occurs when
consumer are faced with an imbalance between actual and desired states
that arouses and activates the consumer decision-making process. A want is
the new way that a consumer goes about addressing a need.
Need is recognition is triggered when consumer is exposed to either internal
or external stimulus. Internal stimuli are occurrences coming 5 senses like
feeling hungry and wanting some food, feeling a headache coming on and
wanting some Excedrin, or feeling bored and looking for a movie to go to.
External stimuli are influences from outside sources. Example is seeing a
McDonalds sign and then feeling hungry or seeing a sale sign for Zara and
remembering that last year you were wearing coat from there.
Marketers should find out what needs and wants a particular product can and
does satisfy and what unsatisfied needs and wants consumers have for which
a new product could be developed. In order to do so, marketing managers
should understand what types of needs consumers may have.

1.
2.

3.
4.

5.

Five classifications of needs by Abraham Maslow according to

hierarchy
Physiological needs consist of primary needs of body, such as food, water,
and sex.
Safety needs. When physiological needs met, safety needs such as protection
from physical harm, ill health and economic disaster and avoidance of the
unexpected.
Belongingness and love needs. These needs are related to the social and
gregarious nature of humans and the need for companionship.
Esteem needs. These needs consist of both the need for the self awareness of
importance to others (self-esteem) and actual esteem from others.
Satisfaction of these needs leads to feeling of self-confidence and prestige.
Self-actualization needs. This are can be defined as the desire to become
more and more what one is, to become everything one is capable of
becoming.

2. Alternative Search.
Five basic sources of information for alternative search:
Internal sources. Search through whatever store in mind.
Group sources like family, friends, and neighbors and acquaintances.
Marketing sources like advertising, salespeople, dealers, packaging, and
displays.
Public sources which includes publicity such as newspapers, articles about
the product, and independent ratings of the product, such as Consumer
Reports.
Experiential sources refer to handling, examining, and perhaps trying the
products while while shopping.
3. Alternative Evaluation
4. Purchase Decision
5. Postpurchase Evaluation