What Is Marketing?

Marketing refers to activities undertaken by a company to promote the buying or selling of a

product or service. Marketing includes the advertising, selling and delivering of products to
consumers or other businesses.

Professionals who work in a corporation's marketing and promotion departments seek to get the
attention of key potential audiences through advertising. Promotions are targeted to certain
audiences and may involve celebrity endorsements, catchy phrases or slogans, memorable
packaging or graphic designs and overall media exposure.

Understanding Marketing

Marketing as a discipline involves all the actions a company undertakes to draw in customers
and maintain relationships with them. Networking with potential or past clients is part of the
work too, including writing thank you emails, playing golf with a prospective client, returning
calls and emails quickly and meeting with clients for coffee or a meal.

At its most basic, marketing seeks to match a company's products and services to customers who
want access to those products. The matching of product to customer ultimately ensures
profitability.

[Important: Marketing refers to any activities undertaken by a company to promote the

buying or selling of a service].

How Marketing Works

Product, price, place, and promotion are the four Ps of marketing. The Four P's collectively make
up the essential mix a company needs to market a product or service. Neil Borden popularized
the idea of the marketing mix and the concept of the four Ps in the 1950s.

Product refers to an item or items the business plans to offer to customers. The product should
seek to fulfill an absence in the market, or fulfill consumer demand for a greater amount of a
product already available. Before they can prepare an appropriate campaign, marketers need to
understand what product is being sold, how it stands out from its competitors, whether the
product can also be paired with a secondary product or product line and whether there are
substitute products in the market.

Price refers to how much the company will sell the product for. When establishing price,
companies must give considerations to the unit cost price, marketing costs and distribution
expenses. Companies must also consider the price of competing products in the marketplace and
whether their proposed price point is sufficient to represent a reasonable alternative for
consumers. Place refers to the distribution of the product. Key considerations include whether
the company will sell the product through a physical storefront, online, or through both
distribution channels. When it's sold in a storefront, what kind of product placement does it get?
When it's sold online, what kind of digital product placement of sorts does it get?
Promotion, the fourth P, refers to the integrated marketing communications campaign.
Promotion includes a variety of activities, such as advertising, selling, sales promotions, public
relations, direct marketing, sponsorship, and guerrilla marketing. Promotions will vary
depending on what stage of product life cycle the product is in. Marketers understand that
consumers associate a product’s price and distribution with its quality, and take this into account
when devising the overall marketing strategy.

Special Considerations

As of 2017, approximately 40 percent of U.S. internet users buy several items online per month.
Experts expect online sales in the U.S. to increase from $504 billion in 2018 to over $735 billion
by 2023.

Taking these statistics into consideration, it is vital for marketers to use online tools such as
social media and digital advertising, both on website and mobile device applications, and internet
forums. Considering an appropriate distribution channel for products purchased online is also an
important step. Online marketing is a critical element of a complete marketing strategy.

Key Takeaways

 Marketing refers to all activities a company takes to promote and sell products or
services to consumers.
 Marketing makes use of the "marketing mix," also known as the four Ps—Product, Price,
Place, and Promotion.
 At its core, marketing seeks to take a product or service, identify its ideal customers, and
draw the customers' attention to the product or service available.

MARKETING CONCEPTS.

Marketing concepts relate to the philosophy a business use to identify and fulfill the needs of its
customers, benefiting both the customer and the company. Same philosophy cannot result in a
gain to every business, hence different businesses use different marketing concepts (also called
marketing management philosophies).

The ‘marketing concept’ proposes that in order to satisfy the organizational objectives, an
organization should anticipate the needs and wants of consumers and satisfy these more
effectively than competitors. This concept originated from Adam Smith’s book The Wealth of
Nations, but would not become widely used until nearly 200 years later.

Marketing and marketing concepts are directly related.

Given the importance of customer needs and wants in marketing, we have to understand them
correctly. They have been defined long time ago as this:
  Needs: Something necessary for people to live a healthy, stable and safe life. When needs
remain unfulfilled, there is a clear adverse outcome: a dysfunction or death. Needs can be
objective and physical, such as the need for food, water and shelter; or subjective and
psychological, such as the need to belong to a family or social group and the need for
self-esteem.
 Wants: Something that is desired, wished for or aspired to. Wants are not essential for
basic survival and are often shaped by culture.
 Demands: When needs and wants are backed by the ability to pay, they have the
potential to become economic demands.

There are numerous marketing concepts which are used by marketers as a reference in the
marketing field. Some of these marketing concepts exist to date, while some others are outdated
and have been taken over by other marketing concepts.

The five marketing concepts

The five marketing concepts are:

1. Production concept
2. Product
3. Selling concept
4. Marketing concept
5. Societal marketing concept

Image source
The production concept
When the production concept was defined, a production oriented business dominated the market.
This was from the beginning of capitalism to the mid 1850’s. During the era of the production
concept, businesses were concerned primarily with production, manufacturing, and efficiency
issues. Companies that use the production concept have the belief that customers primarily want
products that are affordable and accessible.

The production concept is based on the approach that a company can increase supply as it
decreases its costs. Moreover, the production concept highlights that a business can lower costs
via mass production. A company oriented towards production believes in economies of scale
(decreased production cost per unit), wherein mass production can decrease cost and maximize
profits. As a whole, the production concept is oriented towards operations.

The product concept

This concept works on an assumption that customers prefer products of greater quality and
price and availability doesn’t influence their purchase decision. And so company develops a
product of greater quality which usually turns out to be expensive.

One of the best modern examples would be IT companies, who are always improving and
updating their products, to differentiate themselves from the competition. Since the main focus
of the marketers is the product quality, they often lose or fail to appeal to customers whose
demands are driven by other factors like price, availability, usability, etc.

The selling concept

Production and product concept both focus on production but selling concept focuses on making
an actual sale of the product. Selling concept focuses on making every possible sale of the
product, regardless of the quality of the product or the need of the customer.

The selling concept highlights that customers would buy a company’s products only if the
company were to sell these products aggressively. This philosophy doesn’t include building
relations with the customers. This means that repeated sales are rare, and customer satisfaction
is not great.
The marketing concept
A company that believes in the marketing concept places the consumer at the center of the
organization. All activities are geared towards the consumer. A business,aims to understand the
needs and wants of a customer. It executes the marketing strategy according to market research
beginning from product conception to sales.

By focusing on the needs and wants of a target market, a company can deliver more value than
its competitors. The marketing concept emphasizes the “pull” strategy”. This means that a brand
is so strong that customers would always prefer your brand to others’.

The societal marketing concept

This is a relatively new marketing concept. While the societal marketing concept highlights the
needs and wants of a target market and the delivery of better value than its competitors, it also
emphasizes the importance of the well-being of customers and society as a whole (consumer
welfare or societal welfare).

The societal marketing concept calls upon marketers to build social and ethical considerations
into their marketing practices. They must balance and juggle the often conflicting criteria of
company profits, consumer want satisfaction, and public interest.

Conclusion
The five marketing concepts are a good example of how marketing has changed throughout the
years. It has shifted its focus from products to users.

Modern companies have to put users first, and build not only a good product (or service), but
also a good experience around it.

What Is Market Segmentation

Market segmentation is a marketing term that refers to aggregating prospective buyers into
groups or segments with common needs and who respond similarly to a marketing action.
Market segmentation enables companies to target different categories of consumers who
perceive the full value of certain products and services differently from one another.
Market Segmentation

Understanding Market Segmentation

Companies can generally use three criteria to identify different market segments:

1. Homogeneity or common needs within a segment

2. Distinction or being unique from other groups
3. Reaction or a similar response to the market

For example, an athletic footwear company might have market segments for basketball players
and long-distance runners. As distinct groups, basketball players and long-distance runners
respond to very different advertisements.

Market segmentation is an extension of market research that seeks to identify targeted groups of
consumers to tailor products and branding in a way that is attractive to the group. The objective
of market segmentation is to minimize risk by determining which products have the best chances
for gaining a share of a target market and determining the best way to deliver the products to the
market. This allows the company to increase its overall efficiency by focusing limited resources
on efforts that produce the best return on investment (ROI).

Companies can segment markets in several ways:

 Geographically by region or area

 Demographically by age, gender, family size, income, or life cycle
 Psychographically by social class, lifestyle, or personality
 Behaviorally by benefit, use, or response

The objective is to enable the company to differentiate its products or message according to the
common dimensions of the market segment.

[Important: This allows the company to increase its overall efficiency by focusing limited
resources on efforts that produce the best return on investment (ROI).]

Examples of Market Segmentation

Market segmentation is evident in the products, marketing, and advertising that people use every
day. Auto manufacturers thrive on their ability to identify market segments correctly and create
products and advertising campaigns that appeal to those segments. Cereal producers market
actively to three or four market segments at a time, pushing traditional brands that appeal to
older consumers and healthy brands to health-conscious consumers, while building brand loyalty
among the youngest consumers by tying their products to, say, popular children's movie themes.

A sports-shoe manufacturer might define several market segments that include elite athletes,
frequent gym-goers, fashion-conscious women, and middle-aged men who want quality and
comfort in their shoes. In all cases, the manufacturer's marketing intelligence about each segment
enables it to develop and advertise products with a high appeal more efficiently than trying to
appeal to the broader masses.

Fast Facts

 Market segmentation seeks to identify targeted groups of consumers to tailor products

and branding in a way that is attractive to the group.
 Markets can be segmented in several ways such as geographically, demographically, or
behaviorally.
 Market segmentation allows a company to focus its resources on efforts that can be the
most profitable.

What is Market Research

Market research is the process of assessing the viability of a new good or service through
research conducted directly with the consumer. This practice allows a company to discover the
target market and record opinions and other input from consumers regarding interest in the
product. Market research may be conducted by the company itself or by a third-party company
that specializes in the market research field. It can be done through surveys, product testing and
focus groups. Test subjects are usually compensated with product samples and/or paid a small
stipend for their time.

BREAKING DOWN Market Research

The purpose of market research is to examine the market associated with a particular good or
service to determine how the audience will receive it. This can include information gathering for
the purpose of market segmentation and product differentiation, which can be used to tailor
advertising efforts or determine which features are seen as a priority to the consumer.

Market Research Process

A business must engage in a variety of tasks to complete the market research process. It needs to
gather information based on the market sector being examined. The business must analyze and
interpret the resulting data to determine the presence of any patterns or relevant data points that it
can use in the decision-making process.

Market Research: Primary and Secondary Information

Primary information is the data that the company has collected directly or that has been collected
by a person or business hired to conduct the research. This type of information generally falls
into two categories: Exploratory research is a less structured option and functions via more open-
ended questions, and it results in questions or issues being presented that the company may need
to address. Specific research obtains answers to previously identified issues that are often
brought to attention through exploratory research.
Secondary information is data that an outside entity has already gathered. This can include
population information from government census data, trade association reports or presented
research from another business operating within the same market sector.

Use of Market Research Results in Business

A company that was considering going into business might conduct market research to test the
viability of its product or service. If the market research confirms consumer interest, the business
can proceed confidently with the business plan. If not, the company should use the results of the
market research to make adjustments to the product to bring it in line with customer desires.

The History of Market Research and Where It Is Today

Market research was first put into place in the United States in the 1920s, and originated during
the advertising boom during the Golden Age of Radio. Companies that advertised on the radio
began to understand the demographics that were revealed by how different radio shows were
sponsored. From there, companies were developed that would interview people on the street
about publications that they read and whether they recognized any ads that were published in the
magazines or newspapers the interviewer showed them. Data collected from these interviews
were compared to the circulation of the publication in order to see how effective those ads were.
Market research and surveys were adapted from these early techniques.

Data collection then shifted to the telephone, making face-to-face contact unnecessary. A
telephone operator could collect information or organize focus groups — and do so quickly and
in a more organized and orderly fashion. This method improved the market research model
greatly.

Within the last 10-15 years, market research started to make a shift online. While the platform
may have changed, data collection is still mainly done in a survey-style form. But instead of
companies actively seeking participants by finding them on the street or by cold calling them on
the phone, people can choose to sign up and take surveys and offer opinions at their leisure. This
makes the process far less intrusive and less rushed, since people can do so on their own time
and by their own volition.

What Is a Marketing Mix?

A marketing mix includes multiple areas of focus as part of a comprehensive marketing plan.
The term often refers to a common classification that began as the four Ps: product, price,
placement, and promotion.

Effective marketing touches on a broad range of areas as opposed to fixating on one message.
Doing so helps reach a wider audience, and by keeping the four Ps in mind, marketing
professionals are better able to maintain focus on the things that really matter. Focusing on a
marketing mix helps organizations make strategic decisions when launching new products or
revising existing products.
Key Takeaways

 A marketing mix often refers to E. Jerome McCarthy's four Ps: product, price, placement,
and promotion.
 The different elements of a marketing mix work in conjunction with one another.
 Consumer-centric marketing mixes incorporate a focus on customers into their
approaches.

Understanding Marketing Mix

The four Ps classification for developing an effective marketing strategy was first introduced in
1960 by marketing professor and author E. Jerome McCarthy. Depending on the industry and the
target of the marketing plan, marketing managers may take various approaches to each of the
four Ps. Each element can be examined independently, but in practice, they often are often
dependent on one another.

Product

This represents an item or service designed to satisfy customer needs and wants. To effectively
market a product or service, it's important to identify what differentiates it from competing
products or services. It's also important to determine if other products or services can be
marketed in conjunction with it.

Price

The sale price of the product reflects what consumers are willing to pay for it. Marketing
professionals need to consider costs related to research and development, manufacturing,
marketing, and distribution—otherwise known as cost-based pricing. Pricing based primarily on
consumers' perceived quality or value is known as value-based pricing.

Place

The type of product sold is important to consider when determining areas of distribution. Basic
consumer products, such as paper goods, often are readily available in many stores. Premium
consumer products, however, typically are available only in select stores. Another consideration
is whether to place a product in a physical store, online, or both.

Promotion

Joint marketing campaigns also are called a promotional mix. Activities might include
advertising, sales promotion, personal selling, and public relations. A key consideration should
be for the budget assigned to the marketing mix. Marketing professionals carefully construct a
message that often incorporates details from the other three Ps when trying to reach their target
audience. Determination of the best mediums to communicate the message and decisions about
the frequency of the communication also are important.

Value-based pricing plays a key role in products that are considered to be status symbols.

Special Considerations

Not all marketing is product-focused. Customer service businesses are fundamentally different
than those based primarily on physical products, so they often will take a consumer-centric
approach that incorporates additional elements to address their unique needs.

Three additional Ps tied to this type of marketing mix might include people, process, and
physical evidence. People refer to employees who represent a company as they interact with
clients or customers. Process represents the method or flow of providing service to the clients
and often incorporates monitoring service performance for customer satisfaction. Physical
evidence relates to an area or space where company representatives and customers interact.
Considerations include furniture, signage, and layout.

Additionally, marketers often study consumers who frequently will influence strategies related to
service or products. This also requires a strategy for communicating with consumers in terms of
obtaining feedback and defining the type of feedback being sought.

Traditionally, marketing commences with identifying consumers' needs and ceases with the
delivery and promotion of a final product or service. Consumer-centric marketing is more
cyclical. Reassessing the customers' needs, communicating frequently, and developing strategies
to build customer loyalty are the goals.

What Is Financing?

Financing is the process of providing funds for business activities, making purchases or
investing. Financial institutions such as banks are in the business of providing capital to
businesses, consumers, and investors to help them achieve their goals. The use of financing is
vital in any economic system, as it allows companies to purchase products out of their immediate
reach.

Put differently, financing is a way to leverage the time value of money (TVM) to put future
expected money flows to use for projects started today. Financing also takes advantage of the
fact that some will have a surplus of money that they wish to put to work to generate returns,
while others demand money to undertake investment (also with the hope of generating returns),
creating a market for money.
While equity and debt financing are the most common, there are other ways to finance a business
—such as informal financing from friends or family. Most recently, blockchain-based token
financing has been one alternative avenue to raise capital.

Understanding Financing

There are two main types of financing available for companies: debt and equity. Debt is a loan
that must be paid back often with interest, but it is typically cheaper than raising capital because
of tax deduction considerations. Equity does not need to be paid back, but it relinquishes
ownership stakes to the shareholder. Both debt and equity have their advantages and
disadvantages. Most companies use a combination of both to finance operations.

Types of Financing: Equity Financing

"Equity" is another word for ownership in a company. For example, the owner of a grocery store
chain needs to grow operations. Instead of debt, the owner would like to sell a 10% stake in the
company for $100,000, valuing the firm at $1 million. Companies like to sell equity because the
investor bears all the risk; if the business fails, the investor gets nothing.

At the same time, giving up equity is giving up some control. Equity investors want to have a say
in how the company is operated, especially in difficult times, and are often entitled to votes
based on the number of shares held. So, in exchange for ownership, an investor gives his money
to a company and receives some claim on future earnings.

Some investors are happy with growth in the form of share price appreciation; they want the
share price to go up. Other investors are looking for principal protection and income in the form
of regular dividends.

Advantages of Equity Financing

Funding your business through investors has several advantages, including the following:

 The biggest advantage is that you do not have to pay back the money. If your business
enters bankruptcy, your investor or investors are not creditors. They are part-owners in
your company, and because of that, their money is lost along with your company.
 You do not have to make monthly payments, so there is often more liquid cash on hand
for operating expenses.
 Investors understand that it takes time to build a business. You will get the money you
need without the pressure of having to see your product or business thriving within a
short amount of time.
Disadvantages of Equity Financing

Similarly, there are a number of disadvantages that come with equity financing, including the
following:

 How do you feel about having a new partner? When you raise equity financing, it
involves giving up ownership of a portion of your company. The smaller and riskier the
investment, the more of a stake the investor will want. You might have to give up 50% or
more of your company, and unless you later construct a deal to buy the investor's stake,
that partner will take 50% of your profits indefinitely.
 You will also have to consult with your investors before making decisions. Your
company is no longer solely yours, and if the investor has more than 50% of your
company, you have a boss to whom you have to answer.

Types of Financing: Debt Financing

Most people are familiar with debt as a form of financing because they have car loans
or mortgages. Debt is also a common form of financing for new businesses. Debt financing must
be repaid, and lenders want to be paid a rate of interest in exchange for the use of their money.

Some lenders require collateral. For example, assume the owner of the grocery store also decides
that she needs a new truck and must take out a loan for $40,000. The truck can serve as collateral
against the loan, and the grocery store owner agrees to pay 8% interest to the lender until the
loan is paid off in five years.

Debt is easier to obtain for small amounts of cash needed for specific assets, especially if the
asset can be used as collateral. While debt must be paid back even in difficult times, the
company retains ownership and control over business operations.

Advantages of Debt Financing

There are several advantages to financing your business through debt:

 The lending institution has no control over how you run your company, and it has no
ownership.
 Once you pay back the loan, your relationship with the lender ends. That is especially
important as your business becomes more valuable.
 The interest you pay on debt financing is tax deductible as a business expense.
 The monthly payment, as well as the breakdown of the payments, is a known expense
that can be accurately included in your forecasting models.
Disadvantages of Debt Financing

Debt financing for your business does come with some downsides:

 Adding a debt payment to your monthly expenses assumes that you will always have the
capital inflow to meet all business expenses, including the debt payment. For small or
early-stage companies that are often far from certain.
 Small business lending can be slowed substantially during recessions. In tougher times
for the economy, it's more difficult to receive debt financing unless you are
overwhelmingly qualified.

If a company fails to generate enough cash, the fixed-cost nature of debt can prove too
burdensome. This basic idea represents the risk associated with debt financing.

Key Takeaways

 The main advantage of equity financing is that there is no obligation to repay the money
acquired through it.
 Equity financing places no additional financial burden on the company, though the
downside is quite large.
 Debt financing tends to be cheaper and comes with tax breaks. However, large debt
burdens can lead to default and credit risk.

What is Working Capital?

Working capital, also known as net working capital (NWC), is the difference between a
company’s current assets, such as cash, accounts receivable (customers’ unpaid bills) and
inventories of raw materials and finished goods, and its current liabilities, such as accounts
payable.

Working capital is a measure of a company's liquidity, operational efficiency and its short-term
financial health. If a company has substantial working capital, then it should have the potential to
invest and grow. If a company's current assets do not exceed its current liabilities, then it may
have trouble growing or paying back creditors, or even go bankrupt.

Working Capital

The Formula for Working Capital

To calculate the working capital, compare a company's current assets to its current liabilities.
Current assets listed on a company's balance sheet include cash, accounts receivable, inventory
and other assets that are expected to be liquidated or turned into cash in less than one year.
Current liabilities include accounts payable, wages, taxes payable, and the current portion of
long-term debt. Current assets are available within 12 months. Current liabilities are due within
12 months.

Working capital that is in line with or higher than the industry average for a company of
comparable size is generally considered acceptable. Low working capital may indicate a risk of
distress or default.

Changes in Working Capital Affect a Company's Cash Flow

Most major new projects, such as an expansion in production or into new markets, require an
investment in working capital. That reduces cash flow. But cash will also fall if money is
collected too slowly, or if sales volumes are decreasing – which will lead to a fall in accounts
receivable. Companies that are using working capital inefficiently can boost cash flow by
squeezing suppliers and customers.

Things to Remember

 A company has negative working capital If the ratio of current assets to liabilities is less
than one.
 High working capital isn't always a good thing. It might indicate that the business has
too much inventory or is not investing its excess cash.

What is Insurance?

Term insurance is a type of life insurance policy that provides coverage for a certain period of
time, or a specified "term" of years. If the insured dies during the time period specified in the
policy and the policy is active - or in force - then a death benefit will be paid.

Term insurance is initially much less expensive when compared to permanent life insurance.
Unlike most types of permanent insurance, term insurance has no cash value.

There are many different types of term insurance policies available. Many policies offer level
premiums for the duration of the policy, such as 10, 20, or 30 years. These are often referred to
as "level term" policies.

While premiums for these level term policies remain level for a set number of years, after this
time period the premium increases significantly, making the policy cost prohibitive.

Most term policies have a built-in privilege to convert to a permanent policy regardless of any
changes in the insured's health.
What Is Assurance?

Assurance refers to financial coverage that provides remuneration for an event that is certain to
happen. Assurance is similar to insurance, with the terms often used interchangeably. However,
insurance refers to coverage over a limited time, whereas assurance applies to persistent
coverage for extended periods or until death. Assurance may also apply to validation services
provided by accountants and other professionals.

How Assurance Works

One of the best examples of assurance is whole life insurance as opposed to term life insurance.
(In the United Kingdom, "life assurance" is another name for life insurance.) The adverse event
that both whole life and term life insurance deal with is the death of the person the policy covers.
Since the death of the covered person is certain, a life assurance policy (whole life insurance)
results in payment to the beneficiary when the policyholder dies.

A term life insurance policy, however, covers a fixed period, such as 10, 20 or 30 years, from the
policy's purchase date. If the policyholder dies during that time, the beneficiary receives money,
but if the policyholder dies after the 30 years, no benefit is received. The assurance policy covers
an event that will happen no matter what, while the insurance policy covers an incident that
might occur (the policyholder might die within the next 30 years).

Key Takeaways

 Assurance refers to financial coverage that provides remuneration for an event that is certain to
happen.
 Unlike insurance, which covers hazards over a specific policy term, assurance is permanent
coverage over extended periods, often up to the insured's death.
 Assurance can also refer to professional services provided by accountants, lawyers, and other
professionals, known collectively as assurance services.

The following are common types of business risk.

 Competitive Risk.
 Economic Risk.
 Operational Risk.
 Legal Risk.
 Compliance Risk.
 Strategy Risk.
 Reputational Risk.
 Program Risk.
Insurable risk: Risks for which it is relatively easy to get insurance and that meet certain
criteria. These include being definable, accidental in nature, and part of a group of similar risks
large enough to make losses predictable. The insurance company also must be able to come up
with a reasonable price for the insurance.

A non-insurable risk is a risk an insurance company deems too hazardous or financially

impractical to take on. ... By not taking them on, insurers can curb losses, as non-insurable risks
usually have extremely high probabilities of loss for the insurance company. A non-insurable
risk is also known as an uninsurable risk. For example, a life insurance company may deem a
person who is 70 years old and has lung cancer a non-insurable risk because the likelihood of
their death ...

Insurance Policy. Formal contract-document issued by an insurance company to an insured.

A contract of insurance is a contract by which one party (the insurer) undertakes to indemnify
another party (the insured) against risk of loss, damage, or liability.