1.

The production concept

The production concept holds that consumers will favor products that are available
and highly affordable, and that management should therefore focus on improving
production and distribution efficiency. This concept is one of the oldest philosophies
that guide sellers.
The production concept is a useful philosophy in two types of situation. The first occurs
when the demand for a product exceeds the supply. Here, management should look for
ways to increase production. The second situation occurs when the product’s cost is too high
and improved productivity is needed to bring it down.

The product concept

Another important concept guiding sellers, the product concept, holds that consumers will
favor products that offer the most quality, performance and innovative features, and that an
organization should thus devote energy to making continuous product improvements. Some
manufacturers believe that if they can build a better mousetrap, the world will beat a path
to their door.4 But they are often rudely shocked. Buyers may well be looking for a better
solution to a mouse problem, but not necessarily for a better mousetrap. The solution
might be a chemical spray, an exterminating service or something that works better than a
mousetrap. Furthermore, a better mousetrap will not sell unless the manufacturer designs,
packages and prices it attractively, places it in convenient distribution channels, and brings
it to the attention of people who need it and convinces them that it is a better product.
A product orientation leads to obsession with technology because managers believe that
technical superiority is the key to business success.

The selling concept

Many organizations follow the selling concept, which holds that consumers will not buy
enough of the organization’s products unless it undertakes a large-scale selling and promotion
effort. The concept is typically practiced with unsought goods – those that buyers do not
normally think of buying, such as Readers Digest and double glazing. These industries must
be good at tracking down prospects and convincing them of product benefits.

The marketing concept

The marketing concept holds that achieving organizational goals depends on determining the
needs and wants of target markets and delivering the desired satisfactions more effectively and
efficiently than competitors do. the marketing concept takes an outside-in perspective. It starts
with a well-defined market, focuses on customer needs, coordinates all the marketing activities
affecting customers and makes profits by creating long-term customer relationships based on
customer value and satisfaction. Under the marketing concept, customer focus and value are the
paths to sales and profits.
2. Since marketing is about making and selling what people want to buy, the most important
first stage in marketing planning is understanding the marketing environment: the setting
where marketing takes place. This has two levels: first, the macroenvironment of broad
societal forces that influence a business; and second, the microenvironment of forces closer to
the company that affects its ability to serve its customers.
The macro- and microenvironment are largely issues that a company cannot control, but
they can have a huge influence on an organization’s performance. PEST analysis systematises an
examination of the Political, Economic, Social and
Technological elements of the macroenvironment. Marketers, like most groups of people,
play a part in setting the PEST agenda, but in most cases their influence is small. The
exception is organisations whose contributions to national economies are very large,
such as food or extraction companies in the Third World, or lobby groups, such as
French farmers or the American gun lobby.
Most organisations need to observe the macroenvironment to understand how they need
to adjust to it. For example, the economic macroenvironment is causing many charities
difficulties. Stock market declines are reducing their earnings from their investments and the
economic pinch is influencing large donors, including governments, who are less willing to
give. This is throwing the charities back onto campaigns based on small donors or profits
from charity shops whose contribution is less cyclical.
Several features of the PEST environment are having a huge influence on many markets.
The economics of high house prices, available technology for planned parenting and a social
change in the number of career women mean that people are setting up home later and
having fewer children. The combined influence of these macroenvironmental factors will
hugely change our world in the coming decades as populations age, children become rarer
and dependency ratios increase. More immediately, many markets are changing as young
adults are lingering with their parents until they are in their thirties and many people choose
to be DINKYs (Double Income, No Kids Yet) rather than face the social and economic
costs of parenting: big cars, big houses, child care fees, etc. This substitution of personal
consumption for the costs of bringing up children is driving the demand for many luxury
products (two-seat cars, designer clothes, clubs, loft living, restaurants, long-haul holidays).
As the macroenvironment shifts, so does the microenvironment. The media are changing
in order to provide channels that serve young wealthy consumers; food retailers move into
town to serve the YUPPY (Young Urban Professionals) market. In many cases, the huge,
steady changes in the marketing environment are conspicuous but still too fast for those
marketers who do not respond quickly to those changes. Hence the rapid decline of Toys ‘R’
Us and the steady decline of Mothercare. Other organisations such as Saga, which provides
holidays, radio stations, insurance, etc. for older people, are doing well.

Micromarketing

Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of
specific individuals and locations. Micromarketing includes local marketing and individual
marketing.
Local marketing involves tailoring brands and promotions to the needs and wants of local
customer groups – cities, neighborhoods and even specific stores. Thus, IKEA customizes
each store’s merchandise and promotions to match its local clientele. Local marketing has some
drawbacks. It can drive up manufacturing and marketing costs by reducing economies of scale. It
can also create logistical problems as companies try to meet the varied requirements of different
regional and local markets. Local marketing helps a company to market more effectively in the
face of pronounced regional and local differences in community demographics and lifestyles.

In the extreme, micromarketing becomes individual marketing – tailoring products and

marketing programs to the needs and preferences of individual customers. Individual
marketing has also been labelled ‘markets-of-one marketing’, ‘customized marketing’ and
‘one-to-one marketing’. The prevalence of mass marketing has obscured the fact that for
centuries consumers were served as individuals: the tailor custom-made the suit, the cobbler
designed shoes for the individual, the cabinet maker made furniture to order.

3. The key steps in target marketing are market segmentation, market targeting and
market positioning. Market segmentation is the act of dividing a market into distinct
groups of buyers who might merit separate products or marketing mixes. The marketer
tries different variables to see which give the best segmentation opportunities. For
consumer marketing, the chief segmentation variables are geographic, demographic,
psychographic and behavioral. Business markets segment by business consumer
demographics, operating characteristics, buying approaches and personal characteristics.
The effectiveness of segmentation analysis depends on finding segments that
are measurable, accessible, substantial and actionable.
Next, the seller has to target the best market segments. The company first evaluates
each segment’s size and growth characteristics, structural attractiveness and
compatibility with company resources and objectives. It then chooses one of three
market-coverage strategies. The seller can ignore segment differences (undifferentiated
marketing), develop different market offers for several segments (differentiated
marketing), or go after one or a few market segments (concentrated marketing). Much
depends on company resources, product variability, product life-cycle stage and
competitive marketing strategies.
The core strategy of a company shows how it will address the markets it has targeted.
By differentiation it develops the strengths of the company, so that they meet the target
markets’ needs; then, by market positioning, it manages the way consumers view the
company and its products. Differentiation helps a firm compete profitably. It gives it a
competitive advantage. If a firm does not differentiate, it will be like ‘all the rest’ and be
forced to compete on price. Differentiation is harder in some industries than others,
but it is rare that a creative marketer cannot differentiate a market in some way.
There are four main ways to differentiate: product differentiation, service differentiation,
personnel differentiation and image differentiation. The ease of following new technological
innovations means that the product is becoming an increasingly difficult way to
differentiate. Now service and image are the main ways people distinguish between
products. As systems and methods become more common, personnel differentiation
becomes more important. A firm’s functional strengths give it its competitive advantage.
Market positioning is about managing customers’ view of the company and its products.
It is about perception.
Value-based positioning offers a general positioning alternative based on the value
delivered for the price charged. Several potentially successful strategies range from
more for more, where customers are offered superior products or service at a higher
price, to less for less which offers basic services at discount prices. Combinations
of price and value that are the same as those already in the market are unlikely to
succeed, as are offerings that deliver less value to customers.
There are several positioning strategies for shifting and holding customers’
perceptions. Positioning works by associating products with product attributes or

4. introduction stage
The introduction stage starts when the new product is first launched. Introduction takes time, and
sales growth is apt to be slow. In this stage, as compared to other stages, profits are low or
negative because of the low sales and high distribution and promotion expenses. Much money is
needed to attract distributers and build their inventories. Promotion spending is relatively high to
inform consumers of the new product and get them to try it.
Because the market is not generally ready for product refinements at this stage, the company and
its few competitors produce basic versions of the product. These firms focus their selling on
those buyers who are the most ready to buy usually the higher-income groups. For radical
product technologies, such as mobile telecommunications, business or professional users were
the earliest targets.

Growth stage
If the new product meets market needs or stimulates previously untapped needs, it will enter
a growth stage, in which sales will start climbing quickly. The early adopters will continue to
buy, and later buyers will start following their lead, especially if they hear favorable word-of
mouth. Attracted by the opportunities for profit, new competitors will enter the market. They
will introduce new product features, improve on the pioneer’s product and expand the market
for the product. The increase in competitors leads to an increase in the number of distributions
outlets, and sales jump just to build reseller inventories. Prices remain where they are or fall
only slightly. Companies keep their promotion spending at the same or a slightly higher level.
Educating the market remains a goal, but now the company must also meet the competition.
Profits increase during the growth stage, as promotion costs are spread over a large volume
and as unit-manufacturing costs fall. The firm uses several strategies to sustain rapid market
growth as long as possible. It improves product quality and adds new product features and
models. It enters new market segments and tries to grow sales further by selling through new
distribution channels. It shifts some advertising from building product awareness to building
product conviction and purchase, and it lowers prices at the right time to attract more buyers.
In the growth stage, the firm faces a trade-off between high market share and high current
profit. By spending a lot of money on product improvement, promotion and distribution,
the company can capture a dominant position. In doing so, however, it gives up maximum
current profit, which it hopes to make up in the next stage.

Maturity stage
At some point, a product’s sales growth will slow down and the product will enter a maturity
stage. This maturity stage normally lasts longer than the previous stages, and it poses strong
challenges to marketing management. Most products are in the maturity stage of the lifecycle,
and, therefore, most of marketing management deals with the mature product.
The slowdown in sales growth results in many producers with many products to sell. In turn,
this overcapacity leads to greater competition. Competitors begin to cut prices, increase their
advertising and sales promotions, and raise their R&D budgets to find better versions of the
product. These steps lead to a drop in profit. Some of the weaker competitors start dropping
out of the industry, and the industry eventually contains only well-established competitors.
Although many products in the mature stage appear to remain unchanged for long
periods, most successful ones stay alive through continually evolving to meet changing
consumer needs. Product managers should do more than simply ride along with or defend
their mature products – a good offensive is the best defense. They should stretch their
imagination and look for new ways to innovate in the market (market development), or to
modify the product (product development) and the marketing mix (marketing innovation).

Decline stage
The sales of most product forms and brands eventually dip. This is the decline stage. The
decline may be slow, as in the case of oatmeal cereal, or rapid, as in the case of gramophone
records. Sales may plunge to zero, or they may drop to a low level where they continue for
many years.
Sales decline for many reasons, including technological advances, shifts in consumer
tastes and increased competition. As sales and profits decline, some firms withdraw from the
market. Those remaining may reduce the number of their product offerings. They may drop
smaller market segments and marginal trade channels, or they may cut the promotion budget
and reduce their prices further.
Carrying a weak product can be very costly to a firm, and not just in profit terms. There
are many hidden costs. A weak product may take up too much of management’s time. It often
requires frequent price and inventory adjustments. It requires advertising and sales force
attention that might be better used to make ‘healthy’ products more profitable or to create new
ones. A product’s failing reputation can cause customer concerns about the company and
its other products. The biggest cost may well lie in the future. Keeping weak products delays
the search for replacements, creates a lopsided product mix, hurts current profits and weakens
the company’s foothold on the future.
For these reasons, companies need to pay more attention to their ageing products. The
firm should identify those products in the decline stage by regularly reviewing sales, market
shares, costs and profit trends. Then management must decide whether to maintain, harvest
for cash or drop each of these declining products.

5. Promotion mix strategies

Marketers can choose from two basic promotion mix strategies – push promotion or pull
promotion. The relative emphasis on the specific promotion tools differs for push and pull
strategies. A push strategy involves ‘pushing’ the product through distribution channels to final
consumers. The firm directs its marketing activities (primarily personal selling and trade
promotion) towards channel members to induce them to carry the product and to promote it to
final consumers. Using a pull strategy, the producer directs its marketing activities (primarily
advertising and consumer promotion) towards final consumers to induce them to buy the
product. If the pull strategy is effective, consumers will then demand the product from channel
members, who will in turn demand it from producers. Thus under a pull strategy, consumer
demand ‘pulls’ the product through the channels.