Basic concepts of marketing and the marketing mix

Welcome to Marketing Basics!

Hello future CPAs! Welcome to one of the most practical and interesting chapters in your Business Management studies. Many people think marketing is just "selling" or "advertising," but it is actually much bigger than that. In this chapter, we will learn how businesses identify what people want and how they deliver it to them. Understanding these concepts is vital because even the best accountant needs to understand how their firm or clients generate value and attract customers.

Don't worry if you’ve never studied business before. We’ll take this step-by-step, using everyday examples to make everything crystal clear.

1. Core Concepts: Needs, Wants, and Demands

Before a company can sell anything, it must understand the customer. We categorize customer desires into three levels:

Needs: These are basic human requirements. You cannot survive without them. Example: Food, water, shelter, and safety.

Wants: These are needs that are shaped by our culture and personality. You need food, but you want a Dim Sum lunch or a burger. Example: A person in Hong Kong might want a bowl of wonton noodles when they are hungry.

Demands: These are wants backed by buying power. Many people want a luxury Ferrari, but only those who can afford it create a "demand" for it.

Quick Review: Marketing starts with a human need, turns it into a specific want, and succeeds when the customer has the money to create demand.

2. Evolution of Marketing Orientations

Over the years, how businesses approach the market has changed. You can think of this as the "personality" of the company.

1. The Production Orientation: These companies focus on efficiency and mass production. They believe consumers prefer products that are cheap and easy to find. Analogy: A basic fast-food stall that only makes one type of fish ball very cheaply and quickly.

2. The Product Orientation: These companies focus on making the "best" product with the most features. They believe quality is everything. Common Mistake: Sometimes these companies forget what the customer actually needs and just focus on "cool" features (this is called Marketing Myopia).

3. The Selling Orientation: These companies focus on aggressive selling and promotion. They assume customers won't buy enough unless they are "pushed." Example: Door-to-door insurance sales or high-pressure gym memberships.

4. The Marketing Orientation: This is the "Customer First" approach. The company finds out what the customer wants first, then creates a product to satisfy that want better than competitors do. This is the modern standard.

5. The Societal Marketing Orientation: This goes one step further. It considers the customer’s wants, the company’s profits, AND the long-term well-being of society. Example: A company using eco-friendly packaging to reduce plastic waste in Hong Kong.

Key Takeaway: Modern marketing is about "sensing and responding" to the customer, rather than "telling and selling" to them.

3. The Marketing Mix: The 4Ps

Once a company understands its target market, it needs a "recipe" for success. This recipe is called the Marketing Mix or the 4Ps. Think of these as four buttons a manager can push to influence sales.

1. Product: This is what the company offers. It includes the physical object, the packaging, the brand name, and the after-sales service. Ask: What problem does this solve for the customer?

2. Price: This is the amount the customer pays. It’s the only part of the mix that generates revenue (the others cost money!). Example: Does the price reflect "luxury" or "value for money"?

3. Place: This is also called Distribution. It’s about getting the product to the right location at the right time. Example: Selling via a physical store in Central, an online shop, or through a vending machine at an MTR station.

4. Promotion: This is how the company communicates with the customer. It includes advertising, social media, discounts, and public relations. Goal: To make the customer aware of the product and persuade them to buy it.

Memory Aid: Just remember the 4Ps – Product, Price, Place, Promotion. They must all work together. You wouldn't sell a luxury diamond ring (Product) at a high price (Price) in a cheap street market (Place) with a "Buy 1 Get 1 Free" flyer (Promotion)!

4. The Extended Marketing Mix: The 7Ps (for Services)

If you are selling a service (like accounting, banking, or a haircut) rather than a physical product, the 4Ps aren't quite enough. Because services are "intangible" (you can't touch them), we add three more Ps:

5. People: Since services are usually delivered by humans, the staff's attitude and skills are crucial. Example: A rude accountant will lose clients even if they are great at math!

6. Process: This is the "flow" of the service. How long do I wait? Is the booking system easy? Example: The step-by-step process of opening a bank account in Hong Kong.

7. Physical Evidence: Since the service is invisible, customers look for "clues" that it's high quality. Example: A clean, modern-looking office makes a law firm look more professional and trustworthy.

Did you know? Most of Hong Kong’s economy is service-based, so the 7Ps are often more relevant here than the basic 4Ps!

5. Customer Relationship Management (CRM)

Marketing isn't just about the first sale; it's about keeping the customer for life. This is where Customer Relationship Management (CRM) comes in.

CRM is the process of building and maintaining profitable customer relationships by delivering superior value and satisfaction. It costs much more to find a new customer than to keep an existing one.

Why focus on CRM?
1. Increased customer loyalty.
2. Customers spend more over their "lifetime" with the brand.
3. Happy customers tell their friends (Word of Mouth).

Quick Tip: Think of your favorite coffee shop's loyalty card or app. That is a basic form of CRM!

Summary of Key Terms to Remember

Marketing Myopia: Focusing too much on the product and losing sight of the underlying customer need.
Target Market: The specific group of people a company wants to sell to.
Value Proposition: The set of benefits or values a brand promises to deliver to customers to satisfy their needs.

Don't worry if these terms seem a bit formal. Just remember the core theme: Marketing is about creating value for customers so that the company can capture value back from them in return.

You’ve just completed the basics of Marketing! In the next chapter, we will look at how companies analyze the environment around them to make these marketing decisions.