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  Teaching Material on Principles of Marketing Prepared by: Birhanu Ts. Page 1 CHAPTER ONE I. NATURE AND SCOPE OF MARKETING 1.1 BASIC CONCEPTS AND DEFINITION: Marketing deals with customers and marketers needs to understand customer needs and wants and the market place within which they operate. There are five core customer and market place concepts: these include;     Needs, wants and demands    Marketing offers which includes products, services and experiences    Value and satisfaction    Exchange and relationships, and    Markets Customer needs, wants and demands Human needs are the most basic concept underlying marketing. They are the states of felt deprivation. Human beings are born with needs to be satisfied and they are in continuous struggle and effort to satisfy them. They need food, air, clothing and shelter, both of which are  biological in nature. Needs : can be defined as a state of feeling necessary for our survival or well being and not yet satisfied. It is a state of felt deprivation. Wants:  can be defined, as the desire for specific satisfiers of the basic needs taken as shaped by culture and individual personality. Demands : People have unlimited wants but limited resources. They, therefore, choose products that produce the most satisfaction for their money. When accompanied or backed up by  purchasing power, wants become DEMAND. The marketing offers-products, services and experiences Consumers’ needs and wants are fulfilled through a marketing offer  - some combination of  products, services, information, or experiences offered to a market to satisfy a need or want. A  product is anything that can be offered to a market to satisfy a need or want which can be tangible (goods) or intangible (services). The product will be successful if it delivers value and satisfaction to the target buyer. Usually the word product suggests a physical object, such as a car, television set, or a bar of soap. However, the concept of product is not limited to physical objects- anything capable of satisfying a need can be called a product. The importance of physical goods lies not so much in owning them as i n the benefits they provide. We don’t buy food to look at, but because it satisfies our hunger. We don’t buy a micro wave to admire, but because it cooks our food. Marketers often use the expressions goods and services to distinguish between physical objects and intangible ones. Marketing offers also include services, activities or benefits offered for sale that are essentially intangible and do not result in the ownership of anything. Examples includes banking, airline, hotel, tax preparation, and home repair services. More broadly, marketing offers also include other entities, such as persons, places, organizations, information, and ideas. Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and e xperiences produced by these products. These sellers suffer from” marketing myopia “.    Teaching Material on Principles of Marketing Prepared by: Birhanu Ts. Page 2 They are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs. They forget that a product is only a tool to solve a consumer  problem. Smart marketers look beyond the attributes of the products and services they sell. By orchestrating several services and products, they create brand experiences for consumers. “What consumers really want (are offers) that dazzle their senses, touch their hearts, and stimulate their minds,” declares one expert. They want (offers) that deliver an experience.   Customer value and satisfactions How do consumers choose among products and services that might satisfy a given need? Customers form expectations about the value and satisfaction that various marketing offers will deliver and buy accordingly. And consumers make buying choices based on their perceptions of the value that various products and services deliver. Customer value : - is the difference between the values the customer gains from owning and using a product and the cost of obtaining the product. Customers often do not judge product values and costs accurately or objectively. They act on perceived value. Customer satisfaction : - is the extent to which a product’s perceived performance matches a  buyer’s expectations. If the product’s performance falls short of expectations, the buyer is   dissatisfied . If performance matches or exceeds expectations, the buyer is satisfied  or delighted respectively. Outstanding marketing companies go out of their way to keep their customers satisfied because they know that satisfied customers make repeat purchases, and they tell others about their good experiences with the product, whereas dissatisfied customers often switch to competitors and disparage the product to others. The key is to match customer expectations with company  performance. Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise. WAYS OF OBTAINING A PRODUCT There are many ways devised by human beings in order to satisfy their needs and wants. These are self-production, begging, coercion, and exchange. Self-production  :- it enables people to obtain goods and services they need and want. A person can self- produce product when he/she hunts, fisher or gather fruit. Begging  : - A person can satisfy his/her needs by begging as happens when a homeless person asks you for food. Coercion: -   A person can use force to get a product as in burglary. Exchange:   - A person can offer a product or money in exchange for something he/she desires. All these ways do not generate transaction and in turn marketing. What necessarily generates marketing is when people are willing to get what they demand through the exchange process. Exchange and transaction Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange : is the act of acquiring the desired object from someone by offering something in return. It enables people to obtain goods and services they need.  Teaching Material on Principles of Marketing Prepared by: Birhanu Ts. Page 3 People satisfy their needs and wants with satisfiers or products (goods and services) that are both  physical objects and intangible services. They select products that provide maximum satisfaction. While consumers are trying to maximize satisfaction with goods and services, the need for exchange arises. As a means of satisfying needs, exchange has much in its favor. People do not have to pray on others or depend on donations. Not must they possess the skills to produce every necessity for themselves. They can concentrate on making things they are good at making and trade them for needed items made by others. Thus, exchange allows a society to produce much more than it would with any alternative system. For an exchange to occur, several conditions must be satisfied.    Must have something of value to exchange(product or money)     Need to be able to communicate    Must be able to exchange (under 21 drinking)    Must want to exchange    At least 2 people needed for an exchange to occur These conditions simply make exchange possible. Whether exchange actually takes place depends on the parties’ coming to an agreement. If they agree, we must conclude that the act of exchange has left both of them better off, or at least not worse off. After all, each was free to accept or reject the offer. In this sense, exchange creates value just as  production creates value. It gives people more consumption possibilities. Whereas exchange  is the core concept of marketing, a transaction   is marketing’s unit of measurement.  When people reach an agreement for exchange, it is called TRANSACTION . Transaction is a trade between two parties that involves:- -at least two things of value, - agreed up on conditions, - Time of agreement, and - Place of agreement. The process of exchange transaction is carried out in a market. In transaction, we must be able to say that one party gives x to another party and gets y in return. For example, you may pay 400 dollar for a TV set. This is a classic monetary transaction, but not all transactions involve money. In a barter transaction, you might trade your old refrigerator in return for a neighbor’s second hand TV set. Market : is defined as a group of actual and potential customers with needs to satisfy, money to spend, and willingness to spend it. Marketing : In business firms, marketing generates the revenues that the financial people manage and the production people use in creating goods and services. The challenges that face  Teaching Material on Principles of Marketing Prepared by: Birhanu Ts. Page 4 marketing are to generate those revenues by satisfying customers’ wants at a profit and in a socially responsible manner. However, marketing is not limited to business organizations. Whenever we try to persuade somebody to do something donate to RED CROSS, not to litter the highways, save energy, vote for candidate, we are engaging in marketing; thus marketing has a broad societal meaning and it is applicable not only for profit making but also not for profit organizations. 1.   According to American Marketing Association, marketing is defined as the  performance of business activities that direct the flow of goods and services from  producers to consumers or users. 2.   According to William J. Stanton, Marketing is a system of business activities designed to plan, price, promote and distribute want satisfying goods and services to  present and potential customers. 3.   According to Evans and Berman, Marketing is the anticipation, stimulation, facilitation, regulation and satisfaction of consumer and public’s demand for  products, services, organizations, people, places, and ideas through the exchange  process. 4.   According to Philip Kotler, Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Generally, the definition of marketing can be grouped into two: classical (narrow) definition and modern (broad) definitions. Classical Definition : In classical terms marketing can be defined as the performance of business activities that direct the flow of goods and services form producers to consumers. This definition is too narrow to describe marketing. It emphasizes the distribution aspect of marketing. Modern Definition : In broader terms marketing is defined as a system of business activities designed to plan,  price, distribute and promote want satisfying products (goods and services) to present and  potential customers. In marketing, there are combinations of activities, which start before the creation of a  product and doesn’t end until cust omers are satisfied. Therefore, product planning,  pricing, distribution and promotion are the main activities performed in marketing. Marketing includes anticipating demand, which requires a firm to do customer research on a regular bases so that it develops and introduces products that are desired by consumers, Management of demand which consists of stimulation, facilitation, and regulation of tasks; and satisfaction of demand which involves actual performance, safety, availability of options, after sale service and other factors. From the definitions given above, we can derive the following important points:  Teaching Material on Principles of Marketing Prepared by: Birhanu Ts. Page 5 a.   Marketing is the business activity concerned with the flow of goods and services from  producers to consumers.  b.   Marketing generates and facilitates exchange c.   The concept of marketing lies on needs, wants, and demands of customers. d.   Marketing is greater than selling. e.   Marketing is an integrated activity. f.   Marketing is concerned with customer satisfaction. 1. 2: APPROACHES AND EVOLUTION OF MARKETING 1.2.1. APPROACHES OF MARKETING We have two approaches to marketing: old  and new  and their comparison is presented as follows. Classical View    The boundary of marketing ranges between production and selling;    Sales and promotion are the means to increase the sales volume so as to get profit.    The focal point of the effort is the product    Marketing is a disintegrated activity /it is the responsibility of the sales department/.    Marketing is equal to selling. Modern View    Marketing starts early before manufacturing of products and continues after selling;    Customer satisfaction is emphasized to increase profit.    The focal point is the customer.    Marketing is an integrated activity /it is the responsibility of every member of the department in the organization/.    Marketing is greater than selling 1.2.2: THE EVOLUTION OF MARKETING The development of marketing is an evolutionary process. It has got five stages of development. 1.   Simple trade era : when people first moved toward some specialization of production and away from subsistence economy, traders played an important role. As bartering  becomes more difficult, societies moved into the simple trade era- a time when families traded or sold their surplus output to local middlemen. This was the early role of marketing and it is still the focus of marketing in less developed areas of the world. 2.   The production era . From industrial revolution until 1920s, most companies were in the production era. It was a stage where the emphasis of marketing was increasing  production or out put. Higher demands, low competition, and absence of consumer research characterized this stage. Therefore, marketing was devoted to increasing  production and physical distribution of products to satisfy the higher demand. 3.   Sales era : by about 1930s, most companies in the industrialized western nations had more production capabilities than ever before. Once a company was able to maximize its production capabilities, it hired a sales force to sell its inventory. When the company developed its products, consumer needs received little consideration. The role of advertising and the sales force was to make the desires of consumers fit the attributes of the products being manufactured. 4.   The Marketing Department Era : this era was started by about 1950s. It was an era that occurred when research was used to determine consumer needs. As competitions grow, supply began to exceed demand. A firm could not prosper without input from
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