3.

1 Module Focus

● 3.1 Define marketing, the marketing process, and the exchange of value.
● 3.2 Outline the marketing environment and the purpose of environmental analysis.
● 3.3 List the factors at work in the organisation’s internal environment.
● 3.4 Outline the importance of the different micro-environmental factors.
● 3.5 List the different types of macro-environmental forces.
● 3.6 List the components of marketing planning.

3.2 Marketing Principles

{3.1 Define Marketing, the marketing process, and the exchange of value.}

WHAT IS MARKETING?
The Definition of Marketing
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.
(American Marketing Association 2013)

- Marketing = philosophy/way of doing business that puts the customer, client, partner and
society at heart of all business decisions.
- Customers, clients, partners and society at large’ recognises that organisations need to
conduct their marketing in such a way as to provide mutual benefit, not just for the users of
their products, but also for partners in the supply chain, and that marketers must consider
their impact on society
- With careful planning, some marketing activities can be good for customers, people in the
supply chain and the environment
 - Marketing is a relatively new discipline, which came into its own in the 1960s. Many of the
ideas that underpin marketing theories draw on other disciplines, including psychology,
sociology, economics and management. Many definitions of marketing have been proposed
over the years and marketing, like any new discipline, continues to evolve today

Marketing is used by many different groups and orgs. Inc:

- small businesses and large multinational corporations
- businesses selling goods and businesses selling services
- for-profit and not-for-profit organisations
- private and public organisations, including governments.

Purpose of Marketing
- creation of a mutually beneficial exchange of value between one party and another
The marketing evolution
- Trading and bartering. To access goods and services, people exchanged what they had for
what they wanted. Formal definitions of marketing did not exist at this time, however there
were some core marketing ideas at play, such as mutually beneficial exchange.
- Production orientation. During the late 1800s and early 1900s, technology and
infrastructure developed, enabling businesses to produce greater volumes of an ever-
increasing range of products. Marketers’ offerings were largely determined by what could
be made, and what people bought was largely determined by what was available. This is
summed up in the famous quote from Henry Ford: ‘Any customer can have a car painted any
colour that he wants, so long as it is black’.
- Sales orientation. During the 1930s, competition increased and companies could no longer
rely on consumers to want and buy everything they could make. This led to a focus on
increasing profits through advertising and one-to-one selling.
- Market orientation. In the mid to late 1900s, businesses realised that customers would not
automatically buy any product that a business happened to devise. Businesses worked to
determine what potential customers wanted and then made products to suit. Marketing
became mainstream business practice. Successful businesses responded to the market’s
needs and wants.
- Societal market orientation. Businesses are expected to be socially responsible corporate
citizens. Companies with a societal market orientation have practices and policies that seek
to minimise their negative impact on society and maximise their positive impact.

3.3 Marketing is a science and an art

- It is a learning process and an art → it incorporates detailed analysis + creativity.
- It is a structured way of learning abt org. and its market + a vehicle for developing new
ideas
- Need to learn customers, clients, partners and society wants -- this is ongoing as customer
preferences are constantly evolving.
- M must use info. to maintain understanding and must be creative and able to develop new
ideas
- The best marketers are able to offer something that is unique or special to consumers

Left and right brain marketers

Both sides of the brain produce personality traits associated with them. These are commonly cited
as:
Left brain marketer: Right brain marketer:

● Logical ● Emotional
● Focused on facts ● Focused on art and creativity
● Realism predominates ● Imagination predominates
● Planned and orderly ● Occasionally absentminded
● Math and science minded ● Prefers fiction
● Prefers nonfiction ● Enjoys creative storytelling

Types of Advertising Left Brain Right Brain

Approach

The commercial describes the The commercial is structured

Television advertising product or service from a like a short story, following a
approach practical standpoint: what you mini-plot with a climax and a
get, why you need it , and why resolution that involves the
no other company does it quite brand. Focuses on outrageous
the same. The commercial comedy and the element of
focuses heavily on the product surprise to make the
or service and less on the commercial memorable.
actors in it. It shows many
shots of the product in use,
and displays testimonials from
satisfied customers explaining
why you'll love it.

Implements a custom URl for Creates a fold out and spread

Magazine advertising each magazine the ad is placed focused on breathtaking
approach in, so that leads and sales can imagery and vivid language to
be tracked in terms of ROI per captivate the readers'
publication. attention. The goal is to
romanticise the reader into
ignoring the competing
content of the publication,
instead of discussing the
practicality of the product.

Uses billboard placement to Creates a sparkling digital

Billboard approach strategically advertise timely billboard accentuating the
sales. The billboard shows the luxurious or pleasurable
viewer how much they will lifestyle a brand can offer you.
save on the company's
products if they buy now.
 Uses a targeted paid-search Focuses on building a robust
Online marketing approach campaign with traffic analytics and personality-rich social
software to track every metric media campaign to spread
of the campaign and gauge the brand awareness. Uses
program's impact on direct channels such as YouTube,
sales Facebook and Twitter to
encourage conversation and
distinguish the company from
its less social competitors.

Profit begins with marketing. Marketing is an art, not a

Thoughts on marketing The best way to measure a science. Its impact is measured
accountability marketing campaign's success with brand loyalty and
is through its impact on perception. It can't always be
bottom-line revenue. measured with math.

3.4 The Marketing Process

Definition:
The marketing process involves understanding the market to create, communicate and deliver an
offering for exchange. It is an ongoing cycle and often marketers will be undertaking multiple tasks
simultaneously.

- Marketing is a process that is done as there is a goal at the end of it.

Step 1: Understanding
- Need to do a lot of research and analyse the marketing enviro…
- There are different types of enviro.. Internal, micro and macro.
- Creates the foundation for the success of the marketing campaign to deliver to target
consumers.
- Full dedication from the marketer is needed.
Step 2: Create
- Using elements of the Marketing Mix. 4 P’s
- Importance → needs to be made in alignment w/ the understanding of the marketplace.
- Authenticity is crucial in the creation of the marketing campaign.
- Clever, precise, strategic, appropriate and communication is needed.
- Once consumers understand the offering → create urge to require products
Step: 3: Deliver
- Execute the aim of the marketer to deliver to consumers and meet their satisfactory
- Not only by product but by professionalism and ease of delivery of product and authenticity
of product.
Step 4: Communicate
- Create loyalty and positive relationships with or. and consumers.

Exchange and Value

- Exchange = mutually beneficial transfer of offerings of value between the buyer and seller
 - Value = customer’s overall assessment of the utility of an offering based on perceptions of
what is received and what is given. This also includes the ‘total offering’ of an org. including
reputation, ft. of a product, after sales service, quality and price.
- Value changes w/ each purchase, experience and conversation that a person has.
- Value differs from every person's perspective.
- This value is exchanged and the place that this takes place is defined as the market.
- EXAMPLES: A customer buys an 84 inch, ultra high-definition 3D television for $15 999.
The retailer and manufacturer receive money for the purchase and clear one stock unit,
which contributes to their profits. The customer receives their much-wanted television,
which they hang on their wall at home. The customer enjoys better quality sound and
picture and a more aesthetically pleasing television, along with many other benefits. Both
parties have received a benefit and both parties had to give something up to receive
something in return.
- Like exchange, value is a core marketing concept. Value is a customer’s overall assessment
of the utility of an offering based on perceptions of what is received and what is given. 21
Some marketers view this simply as a ratio between quality and price. This is the economic
view of value.
- According to this view, value is a comparison between what a customer gets and what a
customer gives; in other words, the benefits a customer receives from a product in relation
to its price. Other marketers view value as unique and determined by the beneficiary.
According to this view, value is idiosyncratic, experiential, contextual and meaning laden.
When value is viewed this way, it is not thought of in terms of one transaction. Rather, value
is thought of in a way that helps to promote customer loyalty and to consider the lifetime
value of the customer to the firm.
- The idea that value is a ratio between quality and price is a simple view of value to help you
to understand the concept. Marketers know that the idea of value is more complicated.
Value refers to the ‘total offering’. This includes all aspects, from the reputation of the
organisation to how the employees act, the features of the products, the after sales service,
quality and price. Most companies have competitors and value is relative to the competition
as the competing offerings influence how a customer perceives value.

To be considered a successful marketing exchange, the transaction must satisfy the following
conditions:
● two or more parties must participate, each with something of value desired by the other
party
● all parties must benefit from the transaction
● the exchange must meet both parties’ expectations (e.g. quality, price).

The Market
A market is a group of customers w/ heterogenous needs and wants. Markets cover varying groups
of customers from:
- Geographic markets
- Product markets
- Demographic markets

Cont...
- Different marketers have to market to diff. groups
 - Some market to consumers others market to businesses or clients, while other marketers
have to consider the needs and wants of society in general.
- The group in which marketers have to market is the focus of all marketing activities.

3.5 The Marketing Environment

[3.2 Outline the marketing environment and the purpose of environmental analysis]
- Internal and External forces affect the ability of the marketer to create, communicate,
deliver and exchange offerings of value.
- Environmental analysis is an analytic approach that involves breaking the marketing
environment into smaller parts to better understand .

The marketing environment encompasses the internal environment, the micro-environment, and
the macro-environment:

● The internal environment describes the organisation, and the way it creates and
delivers value. It includes those factors directly controllable by the organisation.
● The micro-environment comprises the forces and factors within the industry in which
the marketer operates. This includes customers, partners and competitors.
● The macro-environment includes the larger-scale forces that influence not only the
organisation and its industry, but all industries.

Internal Environment:

- Internal environment = parts of the org. the people and processes used to create,
communicate, deliver and exchange offerings that have value.
- Main parts inc. senior management, middle management, functional departments,
employees and external vendors.
- Successful orgs. Understand marketing as an umbrella that covers every single aspect of
that org. Not something that only originates from the marketing environment.
Internal Marketing

- Aims to achieve alignment between marketing strategy and front-line staff.

- Informs, educates, develops and motivates staff to serve external clients more effectively.
- Any organisation performs more effectively if staff know what they have to do and why.
Internal marketing is a two-way communications process. Staff also have valuable
information for marketers on the external environment such as perceptions of the market,
products and clients. Internal marketing allows the collection and collation of this material.
It includes internal communications, internal research and training.
- strengths and weaknesses are internal factors that positively and negatively affect the
organisation’s ability to compete in the marketplace. Typically marketers seek to minimise
weaknesses and maximise strengths.

External Environment:

- The external environment is concerned with things that are outside of the organisation. The
external environment encompasses the people and processes that the organisation cannot
directly control. Marketers can only seek to influence the external environment
- For example, movie studios cannot prevent people from copying DVDs for their friends.
They do, however, lobby governments to introduce legal penalties for doing so, and they
include warnings about piracy on DVD packaging and on the DVD itself. Hence, they cannot
control the factors in their external environment, but they do seek to influence them. The
process of outsourcing involves transferring an internal function to an external provider. It
represents a blurring of the line between the internal and external environment
- A thorough understanding of the external environment ensures that marketers understand
the opportunities and threats that may arise. Opportunities and threats are external factors
that positively and negatively affect the organisation’s current and future ability to
successfully serve the market. Typically, marketers seek to make the most of the
opportunities identified and minimise the threats arising in the external environment. The
external environment includes the micro-environment and macro-environment.

[3.3 List the factors at work in the organisation’s internal environment.]

- the people and the processes used to create, communicate, deliver and exchange offerings
that have value. The internal environment is directly controllable by the organisation.
- A thorough understanding of the internal environment ensures that marketers understand
the organisation’s strengths and weaknesses.
- Strengths and weaknesses are internal factors that positively and negatively affect the
organisation’s ability to compete in the marketplace. Typically marketers seek to minimise
weaknesses and maximise strengths.
Marketers need to understand the parts of the organisation and the processes that are in place. The
main parts of a typical organisation include:
● senior management — responsible for making decisions about the overall objectives and
strategy of the organisation.
● middle management — typically responsible for a department or a geographic region.
Middle management makes decisions about the overall objectives and strategy of the
department or geographic region for which they have responsibility. Their aim is to make
 sure the objectives for their department or region are aligned with the objectives of the
organisation as a whole.
● functional departments — organisations can be structured around functional departments
and/or regions. If you are a business student you will study many of these functions during
your degree. Functional departments may include:
– marketing
– sales
– research and development
– customer service
– distribution/logistics
– manufacturing
– finance
– human resources
– administration.
Functional department managers make decisions about the overall objectives and strategy
of their department. Their aim is to make sure the objectives for their department are
aligned with the broader objectives of the organisation and to manage their departments to
ensure the departmental objectives are achieved.
● employees — employees are responsible for carrying out the work required to meet
departmental objectives. Most corporations talk about their people being ‘their most
important asset’. Employees are also the ‘face’ of the organisation and marketers need to
understand and manage the attitudes and behaviours of employees who come into contact
with customers and clients.
● external vendors (outsourcing) — organisations often outsource functions and roles if they
can be done more efficiently by specialist external providers. This represents a shift of the
function from the internal environment to the micro environment and thus reduces the
level of control. The organisation doing the outsourcing must, however, manage the service
relationship with the external provider, and so outsourced functions still very much affect
the organisation’s internal environment. An organisation needs to ensure that the
outsourced services remain consistent with its own objectives and do not adversely affect
its market perception. This does not always occur, however, as Telstra discovered when one
of its offshore information technology vendors, Satyam, was engulfed in a corporate fraud
scandal. The India-based company overstated its cash reserves by $1 billion. The scandal,
along with performance issues, led to the cancellation of Telstra’s $32 million contract with
the company

3.6 The Micro-environment

[3.4 Outline the importance of the different micro-environmental factors.]
The micro-environment includes the forces within an organisation’s industry that affect its ability
to serve its customers and clients, being target markets, partners and competitors. The micro-
environment consists of customers, clients, partners and competitors. Unlike the internal
environment, the micro-environment is not directly controllable by the organisation. However, the
organisation can exert some influence on the customers, clients, partners, competitors and other
parties that make up its industry.

● For example, the Heart Foundation, which can be considered part of the health industry
and the food industry, cannot compel people to eat healthily, or force food businesses to
provide only healthy menu items. However, it can publicise the health risks associated
with a poor diet, build a reputation around its ‘Tick’ program that endorses better food
 options, and bring pressure to bear on food businesses to be responsible in the
marketing of their products.

In analysing the micro-environment, marketers need to consider customers and clients, partners
(including suppliers) and competitors. Use the following interactive diagram to refresh your
memory on the essential terms and key learning concepts when considering factors within the
micro-environment.

THE MICRO ENVIRONMENT

The micro environment is an essential component in any marketer's analysis of an organisation.
This interactive activity will explore the relationship an organisation has with different entities that
have a direct impact on the success of a business. The relationships within the micro environment
of an organisation are not directly controllable by the organisation itself, so it is essential
businesses identify and cultivate these partnerships to ensure future business success.

Customers and consumers

Marketers must understand the current and future needs and wants of their target market:
● understand what their customers value now
● identity changes in customer preferences
● be willing and able to respond to changes
● anticipate how needs and wants might change
● be able to influence customer preferences.
Although the micro environment focuses on a number of different entities, the two most important
of these are customers and consumers. To create an effective marketing campaign or strategy a
clear distinction between customers and consumers is necessary.

Partners
Marketers need to understand their partners, how each partner's processes work and how their
partnerships benefit each party. For instance, a manufacturer of a product relies heavily on
retailers. Retailers, in turn, need the manufacturer to be consistent in their approach to fulfill the
needs of our target market. Wholesalers and suppliers are important partners in the creation,
communication and delivery phases of the marketing process.
Partners can include:
● logistics firms – storage and transport
● financiers – banking, loans, insurance and electronic payment infrastructure
● advertising agencies
● retailers and wholesalers – storage and distribution.

Competitors
Organisations need to have systems that monitor competitors' activities to ensure that their brand
is delivered with a higher value to the target market than their competition. Marketers seek to
understand their competitors' marketing mix, sales volumes, sales trends, market share, staffing,
sales per employee and employment trends. While marketers often think in terms of brand
competition, a broader definition of competition can place marketers in a better position to create,
communicate, deliver and exchange offerings that have value.
Competition needs to be seen from a broader perspective to understand the nature of the
competition in the market. There are two types of competition.
● Pure competition where there are numerous competitors that offer undifferentiated
products. Hence, no buyer or seller can exercise market power.
● Monopolistic competition involves numerous competitors offering products that are
similar, prompting the competitors to strive to differentiate their product offering from
others.
Competition can also be viewed in different types of competitive markets, which include:
● Oligopoly - a small number of competitors offer similar, but somewhat differentiated,
products. There are significant barriers to new competitors entering the market. E.g. the
mobile telecommunications industry is an example, with Telstra, Optus, Vodafone, Virgin
and 3 offering fairly similar services.
● Monopoly - there is only one supplier and there are substantial, potentially insurmountable,
barriers to new entrants. E.g. many government services are essentially monopoly
industries, such as the provision of roads and rail.
● Monopsony - the market situation where there is only one buyer. E.g. the federal
government is the only buyer of fighter jets in Australia.

3.7 The Macro-Environment

The macro-environment encompasses the factors outside of the industry that influence the survival
of an organisation—these are factors that are not directly controllable by the organisation. The
macro-environment can be considered at a local, state, country or regional geographic level. It is
possible for marketers to influence macro-environmental factors. However, these factors will
always remain beyond a marketer’s control.

[3.5 List the different types of macro-environmental forces]

Political Forces
Politics can have an influence on marketing decisions. Politics is directly relevant through:
- lobbying for favourable treatment at the hands of the government
- lobbying for favourable regulation
- the very large market that the government and its bureaucracy comprise
- the effect of political issues on international marketing.

Economic Forces
- 'Economic forces' refer to all of those factors that affect how much money people and
organisations can spend and how they choose to spend it. The obvious components of this
are income, prices, the level of savings, the level of debt and the availability of credit.
- Economic forces and conditions can change quickly and dramatically, and marketers can
find themselves facing a very different economic environment within a short period of time.
- For example, as the global economic crisis began to undermine business investment in
2009, the demand for commodities such as coal and iron ore fell away dramatically. The
economic slowdown in China, in particular, reduced demand for Australian mineral exports
 and thus the price began to drop, with many predicting it would halve over two years. This
sort of change makes operations unprofitable, and therefore unsustainable, almost
overnight. With reduced profits, less taxes are paid, which in turn affects what services the
government can provide to its citizens. Furthermore, the lower demand for Australian
exports triggered a massive fall in demand for Australian currency and hence the Australian
dollar lost about 30 percent of its value in a period of months. This makes exports cheaper
and imports more expensive, which can help local producers.
Sociocultural forces
- 'Sociocultural forces' is a term used to describe the social and cultural factors that affect
people’s attitudes, beliefs, behaviours, preferences, customs and lifestyles. They
comprehensively and pervasively influence the value people put on different product
offerings.
- ‘Demographics’ describe characteristics of population groups. A population can be
characterised by its demographic characteristics, including age, gender, race, ethnicity,
educational attainment, marital status, parental status and so on. These characteristics
influence the behaviour of society as a whole, and the individuals within it. Changes in
demographic characteristics should be expected to result in changes in the behaviour of
individual consumers and society generally.
- One of the sociocultural themes to become a key issue for marketing organisations over the
past couple of decades is the natural environment. Society (and particularly its younger
members) has become more and more concerned about the sustainability of humankind’s
lifestyle—the effect our activities have on the world that supports us.

Technological Forces
- Technology is a broad concept based on developing better ways to do things. For example,
the electronic gadgetry of a sat-nav device is not really the technology; the technology is
that a sat-nav is a better way (than a map) to navigate to your destination.
- Technology is advancing at an unprecedented rate. Never before have marketers been able
to interact with the market as often, as intimately, and as extensively as they can today.
Technology does not just change the expectations and behaviours of customers and clients
—technological change can also have huge effects on how suppliers work. Today,
manufacturers, suppliers and distributors are likely to be in constant electronic exchange
with marketing organisations, ensuring stock levels are automatically monitored and
maintained, and tracking goods in transit down to the nearest kilometre.
- Increasingly, the customer can see stock levels or how long they will have to wait to have an
item delivered.
- Technology, while enabling many advances, can also pose a threat to marketers. Kodak,
long-established as a leading photography brand, suffered massive downsizing and its
business was severely threatened by the advent of digital cameras in the 1990s. The mass
market for photographic film disappeared in a few short years.
Environmental Forces
'Environment' here includes the impacts of natural disasters, significant weather events—droughts
and floods—and the broader climate change phenomena. However, this element also includes the
social changes, and political or legal changes, surrounding environmental matters. This might
include higher insurance premiums, carbon taxes, and public expectations that companies will act
in an environmentally sustainable and ethical way. Examples include:

● changing social attitudes against the testing of drugs or cosmetics on animals

● battery farming
● driftnet fishing
● deep sea oil exploration.

Legal Forces
- Laws and regulations are intimately tied to politics.
- Elected officials and the bureaucracy that works for them are ultimately responsible for
making legislation—that is, for creating and changing laws. Regulations are made under
conditions established by legislation and tend to deal with more minor or more specific
issues than legislation.
- Laws and regulations govern what marketing organisations can and cannot legally do. They
spell out their obligations to consumers, partners, suppliers, government authorities and
society as a whole.
- The most significant laws and regulations fall into the following categories: privacy, fair
trading, consumer safety, prices, contract terms and intellectual property.
3.8 Situation analysis, organisational objectives and the marketing plan
A key aspect of marketing is to understand the market today and be able to predict the key changes
which will redefine it tomorrow. The organisation must then ensure the right offering is placed
where and when it will be best received.
George Day (The Capabilities of Market Driven Organisations 1994) describes an 'outside in'
analysis, which asks:

● How do the clients perceive the organisation, what are their needs?
● How do these needs change over time?
● What must we do to satisfy those needs better than our competitors today, tomorrow,
and in the years ahead as the market changes?

Marketing planning
[3.6 List the components of marketing planning]

- Before marketers can create an offering for exchange, they must understand their current
position or situation. They must know how the organisation is perceived by clients and
potential clients. They must understand what clients need or what would make an offering
more competitive.
- The situational analysis involves assessing the current situation in order to clearly state
where the company is now. Together with organisational objectives, situational analysis is
used as a platform for marketing planning.
- A marketing plan communicates how marketers plan to get from where the organisation is
to where the organisation could be. It is based on sound knowledge of today’s market, and
through careful analysis, predictions are made for the future. The marketing plan describes
what the firm must do, when and how, in order to meet current and projected needs. (VIdeo
explanation on Canvas)

3.9 Marketing planning: Situational Analysis

[3.6 List the components of marketing planning]
Marketing planning overview
- Marketing planning is a concept that combines situational analysis and organisational
objectives to move the organisation from where it currently is to where management wants
to be. Situational analysis leads to an assessment of where the organisation is now. In
addition to understanding past performance, marketers must consider trends in the
internal and external marketing environment. Being an iterative process, senior managers
make their decisions based on information delivered by marketers; in turn the marketers
must determine how those decisions will be driven and implemented to achieve
organisational objectives.
Situational analysis
- A situational analysis is based on considerable research and careful consideration of that
research material. This includes research on the internal and external environments that
affect the firm or company, such as an analysis of the company itself (internal), the market
(micro), competitors (micro) and the environment (macro). The organisation that does this
best has a significant advantage over its rival.

SWOT analysis
- An analysis that identifies the internal strengths and weaknesses, and the external
opportunities and threats in relation to an organisation. SWOT is short for strengths,
weaknesses, opportunities and threats. When marketers conduct a situational analysis, they
will always find that there are more factors that need attention than they can possibly
address within the constraints of the available time, money and other resources. Marketers
need to be able to isolate the key (most important) factors that need to be addressed. (Video
explanation on canvas + how to apply swot analysis)