Core concepts in marketing 

1. Need Wants and Demands

The marketer must try to understand the target market’s needs, wants, and demands. Needs are the basic human requirements. People need food, air, water, clothing and shelter to survive. People also have strong need for recreation, education, and entertainment. These needs become wants when they are directed to specific object that might satisfy the need. An American needs food but may want a hamburger, French fries and soft drink. A person in Mauritius needs food but may want a mango, rice, lentils and beans. Wants are shaped by ones society.

Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one. Companies must measure not only how many people want their product but also how many would actually be willing and able to buy it.

The distinctions shed light on the frequent criticism that “marketers create need” or “marketers get people to buy things they don’t want.” Marketers do not create needs; need pre-exist marketers. Marketers, along with other societal factors, influence wants. Marketers may promote the idea that a Mercedes would satisfy a person’s need for social status. They do not however, create the need for social status.

Understanding customers need and wants is not always simple. Some customers have needs of which they are not fully conscious, or they cannot articulate these needs, or they use words that require some interpretation. What does it mean when the customer asks for a “powerful” lawnmower, a “fast” lathe, an “attractive” bathing suit, or a “restful” hotel?

Consider the customer who says he wants an “inexpensive car.” The marketer must probe further. We can distinguish among five types of needs.

Stated need: The customer wants an inexpensive car.

Real needs: The customer wants a car whose operating cost, not its initial price is low.

Unstated need: The customer expects good service from the dealer.

Delight need: The customer would like the dealer to include an onboard navigation system.

Secret need: The customer wants to be seen by friends as a savvy consumer.

Responding only to the stated need may short change the customer. Many consumers do not know what they want in a product. Consumers did not know much about cellular phones when they were first introduced. Nokia and Ericsson fought to shape consumer perceptions of cellular phones. Consumers were in a learning mode and companies forged strategies to shape their wants. As stated by carpenter, “simply giving customers what they want isn’t enough anymore – to gain an edge companies must help customers learn what they want.”

In the past, “responding to customer’s needs” meant studying customer needs and making a product that fit these needs on the average, but some of today’s companies instead respond to each customer’s individual needs. Dell computer does not prepare a perfect computer for its target market. Rather it provides product platforms on which each person customizes the features he or she desires in the computer. This is a change from a “make-and-sell” philosophy to philosophy of “sense and respond”   

2. Target markets, positioning and segmentation

A marketer can rarely satisfy every consumer in the market. Not everyone likes the same cereal, hotel room, restaurant, automobile, college or movie. Therefore marketers start by dividing up the market into segments. They identify and profile distinct groups of buyers who might prefer or require varying product and service mixes by examining demographic, psychographic, and behavioral differences among the buyers. The marketer then decides which segments present the greatest opportunity – which are its target markets. For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefit. For example, Volvo develops its cars for buyers to whom automobile safety is a major concern. Volvo therefore positioned its car as the safest a customer can buy.

3. Offerings and brands

Companies address needs by putting forth a value proposition, a set of benefits they offer to customers to satisfy their needs. The tangible value proposition is made physical by an offering, which can be a combination of products, services, information, and experiences.

A brand is an offering from a known source. A brand name such as McDonald's carries many associations in the minds of people: hamburgers, fun, children, fast food, convenience, and golden arches. These associations make up the brand image. All companies strive to build brand strength—that is, a strong, favorable, and unique brand image.

4. Value and satisfaction

    The offering will be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings on the basis of which it is perceived to deliver the most value. Value reflects the perceived tangible and intangible benefits and costs to customers. Value can be seen as primarily a combination of quality, service, and price (qsp), called the "customer value triad." Value increases with quality and service and decreases with price although other factors can also play an important role.

Value is a central marketing concept. Marketing can be seen as the identification, creation, communication, delivery, and monitoring of customer value. Satisfaction reflects a person's comparative judgments resulting from a product's perceived performance (or out­come) in relation to his or her expectations. If the performance falls short of expectations, the customer is dissatisfied and disappointed. If the performance matches the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied or delighted.

5. Marketing channels

To reach a target market, the marketer uses three kinds of marketing channels. Communication channels deliver and receive messages from target buyers, and include newspapers, magazines, radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet. Beyond these, communications are conveyed by facial expressions and clothing, the look of retail stores, and many other media. Marketers are increasingly adding dialogue channels (e-mail and toll-free numbers) to counterbalance the more normal monologue channels (such as ads).

The marketer uses distribution channels to display, sell, or deliver the physical product or service(s) to the buyer or user. They include distributors, wholesalers, retailers, and agents.

The marketer also uses service channels to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks, and insurance companies that facilitate transactions. Marketers clearly face a design problem in choosing the best mix of communication, distribution, and service channels for their offerings.

6. Supply chain

Whereas marketing channels connect the marketer to the target buyers, the supply chain describes a longer channel stretching from raw materials to compo­nents to final products that are carried to final buyers. The supply chain for women’s purses starts with hides, and moves through tanning operations, cutting operations, manufacturing, and the marketing channels bringing products to customers. The supply chain represents a value delivery system. Each company captures only a certain percent­age of the total value generated by the supply chain. When a company acquires competi­tors or moves upstream or downstream, its aim is to capture a higher percentage of sup­ply chain value.

7. Competition

Competition includes all the actual and potential rival offerings and substitutes that a buyer might consider. Suppose an automobile company is planning to buy steel for its cars. There are several possible levels of competitors. The car manufacturer can buy steel from U.S. Steel or other integrated steel mills in the United States (e.g., from Bethlehem) or abroad (e.g., from Japan or Korea); or buy steel from a mini-mill such as Nucor at a cost savings; or buy aluminum for certain parts of the car to lighten the car's weight (e.g., from Alcoa); or buy engineered plastics for bumpers instead of steel (e.g., from GE Plastics). Clearly, U.S. Steel would be thinking too narrowly of competition if it thought only of other integrated steel companies. In fact, U.S. Steel is more likely to be hurt in the long run by substitute products than by its immediate steel company rivals. It must also consider whether to make substitute materials or stick only to those applications where steel offers superior performance.

8. Marketing Environment

Competition represents only one force in the environment in which the marketer operates. The marketing environment consists of the task environment and the broad environment.

The task environment includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are the company, suppliers, distributors, dealers, and the target customers. Included in the supplier group are material suppliers and ser­vice suppliers such as marketing research agencies, advertising agencies, banking and insur­ance companies, transportation companies, and telecommunications companies. Included with distributors and dealers are agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers.

The broad environment consists of six components: demographic environment, eco­nomic environment, physical environment, technological environment, political-legal environment, and social-cultural environment.

These environments contain forces that can have a major impact on the actors in the task environment. Market actors must pay close attention to the trends and developments in these environments and make timely adjustments to their marketing strategies.

9. Marketing planning

In practice, there is a logical process that marketing follows. The marketing planning process consists of analyzing marketing opportunities; selecting target markets; designing marketing strategies; developing marketing programs; and managing the marketing effort.

10. Exchange and transaction

         Marketing emerges when people decide to satisfy needs and wants through exchange. Exchange is one of four ways people can obtain products.

• The first way is self-production. People can relieve hunger through hunting, fishing, or fruit gathering. They need not interact with anyone else. In this case, there is no market and no marketing.

• The second way is coercion. Hungry people can wrest or steal food from others. No benefit is offered to the others except that of not being harmed.

• The third way is begging. Hungry people can approach others and beg for food. They have nothing tangible to offer except gratitude.

• The fourth way is exchange. Hungry people can approach others and offer a resource in exchange, such as money, another good, or a service.

Marketing arises from this last approach to acquiring products. Exchange is the act of obtaining a desired product from someone by offering something in return. For exchange to take place, five conditions must be satisfied:

1. There are at least two parties

2. Each party has something that might be of value to the other party

3. Each party is capable of communication and delivery

4. Each party is free to accept or reject the offer

5. Each party believes it is appropriate or desirable to deal with the other party

If these conditions exist, there is a potential for exchange. Whether exchange actually takes place depends upon whether the two parties can agree on terms of exchange that will leave them both better off (or at least not worse off) than before the exchange . This is the sense in which exchange is described as a value-creating process; that is, exchange normally leaves both parties better off than before the exchange.

Exchange must be seen as a process rather than as an event. Two parties are said to be engaged in exchange if they are negotiating and moving toward an agreement. If an agreement is reached, it means that a transaction has taken place. Transactions are the basic unit of exchange. A transaction consists of a trade of values between two parties. It is possible to say: A gave X to B and received Y in return. A gave Rs.14000/- to B and obtained a television set. This is a classic monetary transaction. Transactions, however, do not require money as one of the traded values. A barter transaction would consist of A giving a refrigerator to B in return for a television set. A barter transaction can also consists of the trading of services instead of goods, as when a lawyer writes a will for a physician in return for a medical examination.

To conduct successful exchanges, the marketer analyzes what each party expects to give and get. Simple exchange situations can be mapped by showing the two actors and the wants and offers flowing between them. Suppose the process of trying to arrive at mutually agreeable terms is called negotiation. Negotiation leads to either mutually acceptable terms or a decision not to transact. 

Transaction marketing is part of a larger idea, that of relationship marketing. Smart marketers try to build up long-term, trusting, "win-win" relationships with valued customers, distributors, dealers, and suppliers. That is accomplished by promising and delivering high quality goods, good service, and fair prices to the other parties over time. It is accomplished by building strong economic, technical, and social ties with the other parties. Relationship marketing cuts down on transaction costs and time; in the best cases, transactions move from being negotiated each time to being routinized.

The ultimate outcome of relationship marketing is the building of a unique company asset called a marketing network. A marketing network consists of the company and its suppliers, distributors, and customers with which it has built solid, dependable business relationships. Increasingly, marketing is shifting from trying to maximize the profit on each individual transaction to maximizing mutually beneficial relationships with other parties. The operating principle is to build good relationships, and profitable transactions will follow.