January 10, 2015

Philip Kotler - Keller Definition and Explanation of Marketing Management for 21st Century - 14th Edition

This article is a supplement to a more detailed article The Marketing Concept - Kotler. Please read the article for the basic explanation of marketing by Kotler.

Marketing is an important activity in organization. Finance, Operations, Accounting, and other functions have no job to do unless products and services with sufficient demand are identified and the organization is set up to satisfy that demand at required profit.  Marketing's broader importance extends to society as a whole. Marketers identify unsatisfied demand for various needs and thereby provide information to entrepreneurs to come up with new products and services to satisfy those needs. Thereby they help to grow the economy. Marketers take the new product ideas and prototypes and test market them and give feedback to the organizations to improve the products and make them ore useful to the society. Then they identify other needs of people like the place where they want to buy and develop marketing channels accordingly. Chief executives recognize the role of marketers in brand building and market loyalty. Brand refers to the market recognition of the products and services provided by an organization. This is developed through investment in branding or market development expenditure and this investment is totally managed by marketing department.

In a survey, 83% stated that marketing and sales capabilities were a top priority but only 6% felt they were doing an extremely good job.

Marketers must decide what features to design into a new product or service, what prices to set, where to sell products or offer services, and how much to spend on advertising, sales, the Internet or mobile marketing.

The Scope of Marketing

To prepare to be a marketer, one has to understand what marketing is, how it works, who does it, and what is marketed.

What is Marketing?

Marketing is about identifying and meeting human and social needs. Kotler and Keller  give the short definition of marketing as meeting customer needs profitably.

The American Marketing Association provides this definition for marketing.
"Marketing is the activity, set of institutions and processes for creating, communicating, delivering, and exchaging offerings that have value for customers, clients, partners, and society at large."

Selling is only tip of the marketing iceberg.

What is Marketed?

Marketers market 10 main types of entities: Goods, services, events, experiences, persons, places, properties, organizations, information and ideas

Marketers do demand management. To manage demand, they use marketing mix.

Eight demand states are possible. To change a demand state, marketing mix elements have to be changed. That requires expenditure or investment on the part of an organization. If the return on investment is positive, marketers recommend marketing investment.

Eight States of Demand

Negative demand: customers dislike a product and pay for avoiding it. (for example pollution control)
Nonexistent demand
Latent demand
Declining demand
Irregular demand
Full demand
Overfull demand
Unwholesome demand

Market place is physical market.

Market space is digital market.

Metamarket describes a cluster of complementary products and services which are closely related in the minds of consumers but are spread across a diverse set of industries. A traveller may consider car, rail, ship and air travel as complementary products and make his choice after collecting information on them. The participants in metamarkets are called as metamediaries. (Mohan Sawhney).

New Concepts introduced in 14th Edition

Supply Chain
Supply chain is a long channel stretching from suppliers (raw materials, components) to assemblers (finished goods), warehouse, retail shops and final consumer. The supply chain is a value delivery system and each firm in the chain captures only certain percentage.

The New Marketing Realities

Changes during the last 10 years. 12 Key Ones.

1. Network Information Technology
2. Globalization
3. Deregulation
4. Privatization
5. Heightened competition
6. Industry convergence
7. Retail transformation
8. Dintermediation
9. Consumer buying power
10. Consumer information
11. Consumer participation
12. Consumer resistance

New Company Capabilities

Recent advances in communications and production techniques have given companies new capabilities to satisfy needs of people.

1. Marketers can use internet as powerful information and sales channel.
2. Marketers can collect fuller and richer information about markets, customers, prospects and competitors.
3. Marketers can tap into social media to amplify their brand message.
4. Marketers can facilitate and speed external communication among customers.
5. Marketers can send ads, coupons, samples, and information to customers who have requested them or given the company the permission to do so.
6. Marketers can reach consumers on the move with mobile marketing.
7. Companies can make and sell individually differentiated goods.
8. Companies can improve purchasing, recruiting, training, internal and external communications.
9. Companies can improve their cost efficiency by skillful use of internet.

Company Orientation toward the Marketplace in the 21st Century

To successfully survive and grow in the new market place of 21st Century, companies and their marketers have to embrace holistic marketing concept.

Holistic Marketing

Holistic marketing recognizes that there are many variables and activities related to these variable that matter in marketing and therefore a broad integrative perspective is often necessary.

Kotler and Keller highlighted four components of holistic marketing.

Relationship marketing

Integrated marketing

Internal marketing

Social responsibility marketing.

Relationship Marketing

Relationship marketing aims to develop deep enduring relationships with people and organizations that directly or indirectly affect the success of firm's marketing activities. Four key constituents for relationship marketing are customers, employees, channel partners and members of the financial community. Companies are estimating the life time value of customers and making them offers to maximize value to them and in turn profit for the companies. Customer relationship management and partner relationship management are the focus areas of companies now. All efforts have to made to retain customers that customer centricity is the order of the day,

Integrated Marketing

Entire marketing function or mix is to be treated as a system and each activity has an effect on other activities. Synergy can be created among the activities and the overall effect can be magnified when integrated marketing or systems thinking based marketing is practiced.

Internal Marketing

It is marketing of the idea inside the organization that customer has to come first. Marketing orientation has to be value in the company. Every employee must try to understand the customer need and competitor action. They need to know the company's strategy and tactics in serving customers. They need to put in their role to ensure customer satisfaction and competitive advantage. Marketing department managers have to establish vertical alignment and horizontal alignment in the organization to create the environment where every employee works in harmony with the marketing activities being promoted by the company.

Performance Marketing

Performance marketing is optimizing financial and nonfinancial returns to business and society from marketing activities and programs.

Updating the Four Ps

McCarthy has given the original Four Ps: Product, Price, Place and Promotion.
In the new age, Kotler and Keller propose: People, Processes, Programs and Performance

Marketing Management Tasks

Developing Marketing Strategies and Plans,
Capturing Marketing Insights,

Connecting with Customers,
Building Strong Brands,

Shaping the Market Offerings, 27
Delivering Value, 27
Communicating Value, 27
Creating Successful Long-Term Growth, 27

Contents of the Chapter in Book

Chapter 1. Defining Marketing for the 21st Century, 2

The Importance of Marketing, 3
The Scope of Marketing, 5
What Is Marketing?, 5
What Is Marketed?, 5
Who Markets?, 7
Core Marketing Concepts, 9
Needs, Wants, and Demands, 9
Target Markets, Positioning, and Segmentation, 10
Offerings and Brands, 10
Value and Satisfaction, 10
Marketing Channels, 11
Supply Chain, 11
Competition, 11
Marketing Environment, 11
The New Marketing Realities, 12
Major Societal Forces, 12
New Company Capabilities, 14
Marketing in Practice, 15
Marketing Insight: Marketing in an Age of Turbulence, 16
Company Orientation toward the Marketplace, 17
The Production Concept, 18
The Product Concept, 18
The Selling Concept, 18
The Marketing Concept, 18
The Holistic Marketing Concept, 18
Marketing Memo: Marketing Right and Wrong, 19
Relationship Marketing, 20
Integrated Marketing, 20
Internal Marketing, 21
Performance Marketing, 22
The New Four Ps, 25
Marketing Management Tasks, 26
Developing Marketing Strategies and Plans, 26
Capturing Marketing Insights, 26
Marketing Memo: Marketers’ Frequently Asked Questions, 26
Connecting with Customers, 27
Building Strong Brands, 27
Shaping the Market Offerings, 27
Delivering Value, 27
Communicating Value, 27
Creating Successful Long-Term Growth, 27
Summary, 28
Applications, 28

14th Edition - Kotler and Keller - Marketing Management

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