Marketing Essentials: Concepts, Strategies, and Processes

Posted on Feb 13, 2025 in Marketing

Marketing: Definition and Scope

Marketing: is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

The Marketing Process: A Step-by-Step Approach

MARKETING PROCESS:

Understanding Consumers and the Marketplace: Consumers’ needs and wants are fulfilled by market offerings: combinations of products, services, information offered to satisfy a need/want; marketing myopia; brand experiences (e.g., Disney experience). Customers choose among different products based on their expectations about value and satisfaction. Basically, marketing consists of actions taken to create, build, and maintain desirable exchange relationships.
Designing a Customer Value-Driven Marketing Strategy: Key questions arise (example: IKEA): Which customers will we serve (target market)? Young people living alone, together…? And how can we serve these customers best (value proposition)? “Offer quality products at affordable prices and be accessible when people need us.”
Preparing an Integrated Marketing Program: Using the 4Ps (Product, Price, Place, Promotion).
Building Customer Relationships: By delivering superior customer value and satisfaction, relating with selected customers more interactively, and working together with other departments and partners outside the firm.

Marketing Management Orientations: Five Key Concepts

MARKETING MANAGEMENT ORIENTATIONS: There are five alternative concepts under which organizations design and carry out their marketing strategies:

Production Concept: Holds that consumers will favor products that are available and affordable (myopia).
Product Concept: Holds that consumers will favor products that offer the most in quality (myopia).
Selling Concept: Holds that consumers will not buy enough of a firm’s products unless it undertakes large-scale selling.
Marketing Concept: Holds that achieving goals depends on knowing the needs/wants of target markets and delivering satisfaction.
Societal Marketing Concept: Holds that marketing strategy should deliver value to customers in a way that improves consumers’ and society’s well-being.

Strategic Planning: Aligning Goals and Opportunities

STRATEGIC PLANNING: is the process of developing and maintaining a strategic fit between the organization’s goals and capabilities and its changing marketing opportunities.

Defining a Market-Oriented Mission: Four questions arise: What is our business? Who is the customer? What do customers value? What should our business be? (e.g., Google’s mission is to organize the world’s information and make it accessible; Nike: bring inspiration and innovation to athletes; Walmart: deliver low prices every day).
Setting Company Objectives and Goals: Invest in research and design, improve profits, increase sales or reduce costs, increase domestic or international sales, etc. (e.g., Nestlé’s goal is to be a reference for nutrition, health, and wellness; sustainable financial performance; and the trust of stakeholders).
Designing the Business Portfolio: That is, the collection of businesses and products that make up the company (SBU).
Planning Marketing: Marketing plays a key role in the company’s strategic plan as it provides a philosophy, provides inputs by helping to identify attractive market opportunities, and designs strategies for reaching the unit’s objectives.

Managing the Marketing Effort: A Four-Step Process

MANAGING THE MARKETING EFFORT:

SWOT Analysis: Strengths (internal capabilities), Weaknesses (internal limitations), Opportunities (external factors to obtain an advantage), Threats (external factors that challenge company’s performance).
Marketing Planning: Involves choosing marketing strategies that will help the company attain its overall strategic objectives.
Marketing Implementation: Is the process that turns marketing plans into marketing actions to accomplish strategic marketing objectives; it is more important than selecting the strategy.
Marketing Control: Evaluating the results of marketing strategies and plans and taking corrective action to ensure that the objectives are attained.

The Marketing Environment: Micro and Macro Factors

MARKETING ENVIRONMENT: Consists of the actors and forces outside marketing that affect marketing management’s ability to build and maintain successful relationships with target consumers. It consists of:

Microenvironment: Actors Close to the Company

Microenvironment: Comprises the actors close to the company that affect its ability to engage and serve customers.

Company: Top management, finance, R&D, purchasing, operations, and accounting.
Suppliers: They provide the resources needed.
Intermediaries: Retailers, wholesalers.
Competitors: We must provide greater satisfaction than competitors do.
Publics: Groups that have an interest in the company’s goals: financial, media, government…
Customers: The aim of the entire value delivery network is to serve target customers and create strong relationships.

Macroenvironment: Larger Societal Forces

Macroenvironment: Consists of the large societal forces that affect the microenvironment.

Demographic: Is the study of human populations: age structure (baby boomers, Gen X, Gen Y, Gen Z), family structure, education…
Economic: Economic factors that affect purchasing power and spending patterns: income level, income distribution, exchange rates.
Natural: Natural resources that marketers should be aware of: shortages, pollution…
Technological: New technologies can offer exciting opportunities for marketers.
Political: Consists of laws, government agencies, and pressure groups that influence or limit organizations.
Cultural: Affects a society’s basic values, perceptions, preferences, and behaviors: core beliefs, people’s view of themselves/others…

Characteristics Affecting Consumer Behavior

CHARACTERISTICS AFFECTING CONSUMER BEHAVIOR:

Cultural Factors

Culture: Growing up in a society, a child learns basic values, perceptions, wants, and behaviors from his or her family and other institutions.
Subculture: Includes nationality, religions, racial groups, and geographical differences.
Social Class: Society’s relatively permanent and ordered divisions whose members share similar values; it is determined by the level of income, occupation, and level of education.

Social Factors

Groups and Social Networks: Marketers try to identify the reference groups of their customers. They expose a person to new behaviors and lifestyles, influence the person’s attitudes and self-concept, and may affect the person’s product and brand choices.
Family: Marketers are interested in the roles and influence of every member in the family.
Roles and Status: A role consists of the activities people are expected to perform according to the people around them. Each role carries a status reflecting the general esteem given to it by society (e.g., a woman can play the role of brand manager, mother in her family…).

Personal Factors

Age and Life-Cycle Stage: Marketers often define their target market in terms of life-cycle stage and develop appropriate products for each stage.
Occupation: Marketers try to identify the occupational groups that have an above-average interest in their products (e.g., blue-collar vs. executives).
Economic Situation: Marketers watch trends in personal income, savings, and interest rates.
Lifestyle: Is a person’s pattern of living as expressed in his psychographical activities and opinions; this can help marketers understand changing consumer values.
Personality: Consumers are likely to choose brands with personalities that match their own (e.g., Jeep = ruggedness, Apple = excitement).
Self-Concept: People’s possessions contribute to and reflect their identities; this is important to understand the relationship between consumer self-concept and possessions (e.g., Apple = if you see yourself as young, laid-back, and cool, you need a Mac).

Psychological Factors

Motivation
Perception: Process by which people select, organize, and interpret information.
Learning: Describes changes in an individual’s behavior arising from experience.
Beliefs and Attitudes: A belief is a thought about something, and an attitude describes a person’s relatively consistent evaluations, feelings, and tendencies towards an object or idea (e.g., German cars are the best).

The Buyer Decision Process: A Five-Stage Model

BUYER DECISION PROCESS: It starts long before the actual purchase and continues long after. It consists of 5 stages:

Need Recognition: The consumer recognizes a problem or need that can be triggered by internal stimuli (e.g., hunger) or external stimuli (e.g., advertisement); an example is thinking of buying a new car.
Information Search: For example, pay more attention to car ads, cars owned by friends, gather information in other ways, etc.
Evaluation of Alternatives: The consumer uses information to evaluate alternative brands in the choice set. Some use careful calculations, others buy on impulse. An example is a person that has narrowed his car choices to three brands and is interested in (price, warranty, and styling).
Purchase Decision: Once the consumer has ranked brands, he will have purchase intentions (the most preferred). Example: if someone important to you thinks that you should buy the lowest-priced car, you could change your mind. Unexpected events may also change the purchase intention.
Post-Purchase Behavior: After purchasing the product, the consumer will either be satisfied or not.

The Buyer Decision Process for New Products: Adoption

BUYER DECISION PROCESS NEW PRODUCTS: First of all, the adoption process is the mental process through which an individual passes from first hearing about an innovation to final adoption. The stages in the adoption process are: Awareness — Interest — Evaluation — Trial — Adoption. Moreover, there are 5 adopter groups: innovators (try new ideas), early adopters (adopt new ideas but carefully), early majority (adopt new ideas before average people), late majority (skeptical, adopt new products after the majority), and laggards (traditionals, adopt the innovation when it has become a tradition).

Marketing Strategy: Segmentation, Targeting, and Positioning

MARKETING STRATEGY: Is the logic by which the company hopes to create this customer value and achieve this relationship. The company decides which customers to serve (segmentation & targeting) and how (differentiation & positioning). Guided by marketing strategy, the company designs an integrated marketing mix (4 Ps). Nowadays, buyers are too numerous, so a company must identify the parts of the market that it can serve best and most profitably; it means to design CUSTOMER-DRIVEN MARKETING STRATEGIES that build the right relationship with the right customers. The four major steps in designing a customer-driven marketing strategy are: segmentation, targeting, differentiation, and positioning.

Market Segmentation: Dividing the Market

MARKET SEGMENTATION: There is no single way to segment a market. Marketers have to try different segmentation variables (alone and in combinations) to find the best way to view market structure. There are 4 major variables that can be used in segmentation:

Geographic: Dividing the market into different geographical units (nations, regions, cities…) e.g., Walmart.
Demographic: Divides the market into segments based on variables such as age, gender, family size, education… e.g., Oscar Mayer Lunchables (bacon for children) and Oscar Mayer Deli Creations (bacon for older generations).
Psychographic: Divides buyers based on social class, lifestyles, personality… e.g., Rip Curl is a specialist in clothes providing a certain lifestyle (surf).
Behavioral: Occasions, user status, usage rate, loyalty status, and benefits sought.

Requirements for Effective Segmentation

The requirements for an effective segmentation are that the market segments must be: measurable, accessible, substantial, differentiable, and actionable.

Market Targeting: Selecting the Right Segments

MARKET TARGETING: Now, the firm has to evaluate the various segments and decide how many and which segments it can serve best. It is a two-step process:

Evaluating Market Segments: It must look at 3 factors: segment size and growth, segment structural attractiveness, and company objectives and resources.
Selecting Target Market Segments: A target market consists of a set of buyers who share common needs or characteristics that the company decides to serve. Market targeting can be carried out at different levels:

Levels of Market Targeting

Undifferentiated (Mass): The company decides to ignore market segment differences and target the whole market with one offer, focusing on what is common to customers rather than on what is different. Although it is cheaper, usually this approach doesn’t work because not all consumers want the same.
Differentiated (Segmented): The company decides to target several market segments and designs separate offers for each, hoping for higher sales and a stronger position within each segment. Implies a higher cost, but it is more effective than mass marketing.
Concentrated (Niche): The company goes after a large share of a small market or a few smaller segments or niches, achieving a strong market position because of its greater knowledge of consumer needs. This strategy is riskier.
Micromarketing: Tailoring products and marketing programs to the needs/wants of specific individuals and local customer segments. It includes local marketing (cities, neighborhoods…) and individual marketing (one-to-one marketing, customized marketing…).

Differentiation and Positioning

Differentiation and Positioning: The company must decide on a value proposition. A product’s position is the way the product is defined by consumers on important attributes. It consists of 3 steps: identifying a set of differentiated competitive advantages (CA) on which to build a position, choosing the right CA (superior, important, distinctive…), and selecting an overall positioning strategy (brand’s value proposition: the full mix of benefits on which a brand is differentiated and positioned).

Product Classification and Life-Cycle Strategy

PRODUCT CLASSIFICATION: A product is anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a need/want. Includes more than just tangible objects; it includes services and experiences (e.g., Apple = self-expression, entertainment). Product classification: convenience, shopping, specialty, and unsought.

Product Life-Cycle Strategy

Introduction: Profits are nonexistent, slow sales. Strategy: promotional expenditures and prices are high because costs are high.
Growth: Rapid market acceptance, profit improvement. Strategy: maintain promotional expenditure, same prices or fall slightly, and improve quality, adding new models, new market segments…
Maturity: Slowdown in sales, market saturation, profits stabilize or decline… Strategy: market/product/marketing-mix modification.
Decline: Sales decrease, profits erode. Strategy: increasing/maintaining or decreasing firm’s investment.

Pricing Strategies: Determining Value

WHAT IS A PRICE? Is the sum of all values that customers exchange for the benefits of having or using a product/service (i.e., going to a club). It is the only element in the marketing mix that produces revenue. The considerations affecting price decisions are: demand (sets a ceiling on the price), costs (set the floor on the prices), and competition.

New Product Pricing Strategies

Market-Skimming Pricing: Set high initial prices to skim revenues layer by layer (iPhone Apple).
Market-Penetration Pricing: Set a low initial price to penetrate the market quickly and gain market share (IKEA to boost the Chinese market).

Product Mix Pricing Strategies

Product Line Pricing: Management must determine the price steps to set between the various products in a line (Rossignol offers seven products that range from 150-1100).
Optional Product Pricing: When companies offer to sell optional accessory products along with the main product (car buyer can choose to add GPS).
Captive Product Pricing: Companies that make products that must be used along with a main product (razor blade, Nespresso).
Product Bundle Pricing: Sellers often combine several products and offer the bundle at a reduced price (phone service, menu).

Price Adjustment Strategies

Discount and Allowance Pricing: Seasonal discount (outlets).
Segmented Pricing: Adjusting prices to allow for differences in customers, products, or locations (museums, cinema, children free).
Psychological Pricing: Some people are willing to pay $100 for a perfume, which contains $3 worth of scent, because this price indicates something special.
Promotional Pricing: Temporarily reducing prices below list (limited-time offers).
Geographical Pricing: Big Mac is sold for different prices depending on the country.
Dynamic and Internet Pricing: Adjusting prices continually to meet the characteristics and needs of individual customers and situations (airlines, eBay).

Channel Behavior and Organization

CHANNEL BEHAVIOR: Channels are behavioral systems made up of real companies and people who interact to accomplish their individual and collective goals. Sometimes there are channel conflicts:

Horizontal Conflict: Among firms at the same level of the channel (e.g., between different car dealers of the same brand).
Vertical Conflict: Among firms at different levels (e.g., between franchisor and franchisees).

Channel Organization

CHANNEL ORGANIZATION: Conventional distribution has resulted in damaging conflict and poor performance. One of the biggest channel developments has been the emergence of other systems:

Vertical Marketing System (VMS)

A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member can:

Own the others (corporate VMS (IKEA)).
Have contracts with them (contractual VMS (franchise)).
Or have power that they all cooperate (administered VMS (Coca-Cola)).

Horizontal Marketing System (HMS)

A channel arrangement in which 2+ companies at one level join together to follow a new marketing opportunity (McDonald’s Express + Walmart).

Multichannel Distribution System

A distribution system in which a single firm sets up 2+ marketing channels to reach one or more customer segments (Nespresso).

Retailing and Wholesaling

RETAILING: Retailing includes all the activities involved in selling products/services directly to final consumers for their personal use. Types: specialty stores (DRUNI), department stores (Corte Inglés), supermarkets (Consum), convenience stores (Opencor), superstores (Carrefour), discount stores (Walmart), off-price retailers (Mango Outlet).
WHOLESALING: Includes all the activities involved in selling goods/services to those buying for resale or business use. Types: MERCHANT WHOLESALERS: full-service wholesalers (provide a full range of services), limited-service wholesalers (offer fewer services). BROKERS (bring buyers and sellers together and assist in negotiation (air brokers)) AND AGENTS (represent either buyers or sellers on a more permanent basis).

Marketing Communications: Advertising, Sales, and More

ADVERTISING: Any paid nonpersonal presentation and promotion of ideas, goods, or services. It includes businesses, non-profit organizations, and governments.

Setting the advertising objectives (informative, reminder…).
Deciding on the ad budget.
Choosing the ad message.
Deciding on media and measuring effectiveness.
Evaluating advertising effectiveness.

Sales Promotion

SALES PROMOTION: Collection of incentive short-term tools to stimulate the purchase of goods and services: additional value offered in a short-term period. It includes: consumer promotion (2×1), trade promotion (prize for best retailers), sales force promotion (incentives offered to the sales force). Some tools are: samples, coupons, price packs, premiums, contests, games…

Public Relations

PUBLIC RELATIONS: Set of generic programs that are designed to promote or to protect the image. Building good relations with the company’s various publics by obtaining favorable publicity, building up a good corporate image, etc.

Personal Selling

PERSONAL SELLING: Consists of transmitting a message from one person to the next through direct contact. The eight steps of personal selling: prospecting, preparation, approach, diagnosis, presentation, dealing with objections, closing, and following up.

Direct Marketing

DIRECT MARKETING: The use of consumer-direct channels to reach and deliver goods and services to customers without intermediaries. Consists of connecting directly with carefully targeted consumers, often on a one-to-one, interactive basis.

Benefits:
Customers: convenient, easy, and private.
Sellers: mailing list, personal long-term relationships.