Marketing

From Wikipedia, the free encyclopedia

Marketing is a social and managerial function that attempts to create, expand and maintain a collection of customers. It attempts to deliver demand satisfying output through profitable exchanges.

Definitions

• Marketing (traditional), as suggested by the American Marketing Association is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

• Marketing, as suggested by the American Marketing Association, is "an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders".^[1]

• Philip Kotler, in his earlier books, defines marketing as: "human activity directed at satisfying needs and wants through exchange processes".

• Still another marketing definition, coined by Brian Norris: "The process of repeatedly moving people closer to making a decision to purchase, use, follow, refer, upload, download, obey, reject, conform, become complacent to another person's, society's or organization's value. Simply, if it doesn't facilitate a "sale" then it's not marketing."^[2]

• Identifying needs/wants and finding and implimenting solutions that satisfy those needs and wants.^[3]

• Add to Kotler's and Norris' definitions, a response from the Chartered Institute of Marketing (CIM). The association's definition claims marketing to be the "management process of anticipating, identifying and satisfying customer requirements profitably". Thus, operative marketing involves the processes of market research, market segmentation, new product development, product life cycle management, pricing, channel management as well as promotion.

• Marketing-"taking actions to create, grow, maintain, defend and own markets".

• An approach to business that seeks to identify, anticipate and satisfy customers needs.^[4]

• Al Ries and Jack Trout defined marketing as simply "war" between competitors.

• Any activity that connects producers with consumers.

• At a macro level, marketing is the process of raising the standards of living, by identifying the existing problems and unsatisfied needs of people and then satisfying that need with a product/service that delivers value to the customer.

History

The practice of marketing is almost as old as humanity itself. Whenever a person has an item or is capable of performing a service, and he or she seeks another person who might want that item or service, that person is involved in marketing. A Market was originally simply a gathering place where people with a supply of items or capacity to perform a service could meet with those who might desire the items or services, perhaps at a pre-arranged time.

Such meetings embodied all the aspects of today's marketing methods, although in an informal way. Sellers and buyers sought to understand each other's needs, capacities, and psychology, all with the goal of getting the exchange of items or services to take place. Open air markets throughout the world, with buyers and sellers freely mingling, are today's example of this basic activity. Today's New York Stock Exchange had its humble beginnings as an open air market located at Wall Street in New York City.

The rise of Agriculture undoubtedly influenced markets as the earliest means of 'mass production' of an item, namely foodstuffs. As agriculture allowed one to grow more food than could be eaten by the grower alone, and most food is perishable, there was likely motivation to seek out others who could use the excess food, before it spoiled, in exchange for other items.

Introduction

Prior to the advent of market research, most companies were product-focused, employing teams of salespeople to push their products into or onto the market, regardless of market desire. A market-focused, or customer-focused, organization instead first determines what its potential customers desire, and then builds the product or service. Marketing theory and practice is justified on the belief that customers use a product/service because they have a need, or because a product/service has a perceived benefit.

Two major factors of marketing are the recruitment of new customers (acquisition) and the retention and expansion of relationships with existing customers (base management).

Once a marketer has converted the prospective buyer, base management marketing takes over. The process for base management shifts the marketer to building a relationship, nurturing the links, enhancing the benefits that sold the buyer in the first place, and improving the product/service continuously to protect her business from competitive encroachments.

Marketing methods are informed by many of the social sciences, particularly psychology, sociology, and economics. Anthropology is also a small, but growing, influence. Market research underpins these activities. Through advertising, it is also related to many of the creative arts.

For a marketing plan to be successful, the mix of the four "Ps" must reflect the wants and desires of the consumers in the target market. Trying to convince a market segment to buy something they don't want is extremely expensive and seldom successful. Marketers depend on marketing research, both formal and informal, to determine what consumers want and what they are willing to pay for. Marketers hope that this process will give them a sustainable competitive advantage. Marketing management is the practical application of this process. The offer is also an important addition to the 4P's theory.

Within most organizations, the activities encompassed by the marketing function are led by a Vice President or Director of Marketing. A growing number of organizations, especially large US companies, have a Chief Marketing Officer position, reporting to the Chief Executive Officer.

Transactional Marketing

First assumption

• There is a large number of potential customers

Second assumption

• Customers and their needs are fairly homogenous

Third assumption

• It is rather easy to replace lost customers with new ones

The 3 Levels of Marketing Strategy

To understand what marketing is one must understand that marketing operates on 3 different levels.

Corporate Level Marketing

Marketing at the corporate levels asks this question as 'What business should we be in and what opportunities should we pursue?' This is marketing before we even have a business, idea or product. This is what is known as entreprenuership. This level of marketing strategy is where the Ted Turners, Bill Gates' and Michael Dells of the world make market changing decisions. This level is also where corporate management of existing companies decide to branch off into new uncharted territories and opportunities.

Business Level Marketing

Marketing at the business level asks this question as 'How are we going to compete against the competition?'. When Jack Trout says that marketing is 'the war between competitors' and 'the conflict between companies' what he is really doing is defining marketing at the business level. Business level marketing deals with high level strategic marketing concerns. This level deals with long term sustainable advantages and business models.

Functional Level Marketing

Marketing at the functional level (also known as the operating level) ask this question as 'How do we create and keep customers?' This level deals with marketing tactics and the '4ps' of the marketing mix. This level of marketing defines and develops products, prices them, promotes them and then distributes them in a way that helps a company create and sustain demand for their products.

Smaller companies with one owner or Chief Executive Officer usually makes the decisions on all 3 levels.

Four Ps

Main article: marketing mix

In popular usage, "marketing" is the promotion of products, especially advertising and branding. However, in professional usage the term has a wider meaning which recognizes that marketing is customer centered. Products are often developed to meet the desires of groups of customers or even, in some cases, for specific customers. E. Jerome McCarthy divided marketing into four general sets of activities. His typology has become so universally recognized that his four activity sets, the Four Ps, have passed into the language.

The four Ps are:

• Product: The Product management and Product marketing aspects of marketing deal with the specifications of the actual good or service, and how it relates to the end-user's needs and wants.
• Pricing: This refers to the process of setting a price for a product, including discounts.
• Promotion: This includes advertising, sales promotion, publicity, and personal selling, and refers to the various methods of promoting the product, brand, or company.
• Placement or distribution refers to how the product gets to the customer; for example, point of sale placement or retailing. This fourth P has also sometimes been called Place, referring to the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc.

These four elements are often referred to as the marketing mix.^[5] A marketer can use these variables to craft a marketing plan. The four Ps model is most useful when marketing low value consumer products. Industrial products, services, high value consumer products require adjustments to this model. Services marketing must account for the unique nature of services. Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions.^[6]

As a counter to this, Morgan, in Riding the Waves of Change (Jossey-Bass, 1988), adds "Perhaps the most significant criticism of the 4 Ps approach, which you should be aware of, is that it unconsciously emphasizes the inside–out view (looking from the company outwards), whereas the essence of marketing should be the outside–in approach". Even so, having made this important caveat, the 4 Ps offer a memorable and quite workable guide to the major categories of marketing activity, as well as a framework within which these can be used.

Seven Ps

As well as the standard four Ps (Product, Pricing, Promotion and Place), services marketing calls upon an extra three, totalling seven and known together as the extended marketing mix. These are:

• People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service. As a result of this, they must be appropriately trained, well motivated and the right type of person. Fellow customers are also sometimes referred to under 'people', as they too can affect the customer's service experience, (e.g., at a sporting event).
• Process: This is the process(es) involved in providing a service and the behaviour of people, which can be crucial to customer satisfaction.
• Physical evidence: Unlike a product, a service cannot be experienced before it is delivered, which makes it intangible. This, therefore, means that potential customers could perceive greater risk when deciding whether or not to use a service. To reduce the feeling of risk, thus improving the chance for success, it is often vital to offer potential customers the chance to see what a service would be like. This is done by providing physical evidence, such as case studies, or testimonials.

Eight P's

As well as the other 7 Packaging has been added to this list by some people. The rationale is that it is very important how the product is presented to the customer, and the packaging is often the first contact that a customer has with a product. Although some disagree because packaging is seen as a subfield of promotion.

"PHILOSOPHY" is the potential 8th P of marketing. Products (or services) should reflect the underlying philosophy or ethos of the organization. It should also be clear what the philosophy behind the introduction of the particular product is, as well. In his book, "Meeting Need", Ian Bruce explains this concept as it relates to marketing for charities. It also applies to other products and services

Beyond the 4 Ps

Resources, Relationships, Offerings and Business Models

Marketing in the past focused mainly on basic concepts like the 4 Ps, and primarily on the psychological and sociological aspects of marketing. Competitive advantage was created by directly appealing to the needs, wants and behaviors of customers, better than the competition. Successful marketing was based on who could create the better brand or the lowest price or the most hype. Marketing in the future will be based on a more strategic approach to competitive marketing success. ^[7] Marketers will consciously build and allocate resources, relationships, offerings and business models that other companies find hard to match.

However, others argue that the 4Ps are here to stay. "The 4 Ps aren't dead—not even close. Differentiation can still be squeezed from the marketing mix. To win in the marketplace, an intense and intimate knowledge of the customer is required in a way that no competitor can match. That understanding must then be applied in a relentless focus on the elements identified by the customer as most important."^[8]

Resources

Companies with a greater amount of resources than their competitors will have an easier time competing in the marketplace. Resources include: financial (cash and cash reserves), physical (plant and equipment), human (knowledge and skill), legal (trademarks and patents), organizational (structure, competencies, policies), and informational (knowledge of consumers and competitors). Small companies usually have a harder time competing with larger corporations because of their disadvantage in resource allocation.

Relationships

Success in business, as in life, is based on the relationships you have with people. Marketers must aggressively build relationships with consumers, customers, distributors, partners and even competitors if they want to have success in today's competitive marketplace.There are four type of relationships 1)win-win 2)win-lose 3)lose-lose 4)lose-win.(customer-vendor)

Offerings

Most companies sell a mix of products and/or services. Today's marketplace is often too competitive for "one-trick ponies". Companies that sell the right mix products and services can have a competitive advantage over companies that sell just one product or service.

Business Models

The concept of product vs. product in competitive marketing is dying. It's slowly becoming business model vs. business model. Business model innovation can make the competition's product superiority irrelevant. Business model innovation allows a marketer to change the game instead of competing on a level playing field.

Customer focus

Most companies today have a customer orientation (also called customer focus). This implies that the company focuses its activities and products on ever changing consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach. ^[9]

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.^[10]

The next big thing is a concept in marketing that refers to a product or idea that will allow for a high amount of sales for that product and related products. Marketers believe that by finding or creating the next big thing they will spark a cultural revolution that results in this sales increase.

Product focus

In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation. Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.

Other aspects

• An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding).

• Diffusion of innovations research explores how and why people adopt new products, services and ideas.

• A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing, affiliate marketing or online marketing. It typically tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.

• With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of Permission marketing such as Branded content and Reality marketing.

• The use of herd behavior in marketing.

In an article entititled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales," The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. ^[11] Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007.

Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon).

Criticism of marketing

Some aspects of marketing, especially promotion, are treated as the subject of criticism. It is especially problematic in classical economic theory, which is based on the assumption that supply and demand are independent. However, product promotion is an attempt coming from the supply side to influence demand. In this way producer market power is attained as measured by profits that would not be realized under a free market. Then the argument follows that non-free markets are imperfect and lead to production and consumption of suboptimal amounts of the product.

Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses, governments and criminals. Critics see a systemic social evil inherent in marketing (see No Logo, Bill Hicks, Marxism or Commercial Alert). Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume.

Most marketers believe that marketing, like any other technology, is amoral. It can be used for good or evil purposes, but the technique itself is ethically neutral.

The Observer’s survey among 1’206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating, identifying and satisfying customer needs profitably), mainly in consumer marketing. There are similar concerns in industrial markets, also known as business-to-business or B2B. Industrial market segmentation attempts to provide some answers.

Core marketing elements such as segmentation, targeting and positioning are still relevant in the modern (or post-modern) world. ^[12] However, they are complex topics that need a high level of effort, intelligent thinking as well as resources to be implemented successfully. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. Its relevance is very much situational and depends on many factors such as the product, the segment, time, location, political and economic conditions and the inner workings of a company.

However, some scholars such as Stephen Brown challenge the marketing concept in an extreme language. Their statements, though self-contradicting and sometimes unfair, are relevant, which is why Post Modern Marketing 2 was chosen as a key reference point for this chapter. ^[13]

On the one hand Brown makes positive statements about marketing, e.g. “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown, 1998:16); and “indeed, the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology, anthropology and history; far from being the second-hand rose of the scholarship, marketing is now something of a fashion leader” (p 17) ^[14]

On the other hand, he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” (p 17); and using quotes such as “mid-life crisis” (p 23); “in decline; failing; anachronistic; being abandoned; no longer appropriate; in an unprecedented state of crisis; delivered nothing of value; failure; confusion; misunderstanding; occasional inexplicable hitting of the jackpot” (p. 21).

This apparent love-hate relationship is proof in itself that even a sceptic Mr Brown cannot deny the contribution that marketing has made and can make to customer satisfaction and economic value. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. The marketing concept, together with other business disciplines, helped the UK to make the transition from a 19th-century manufacturing economy to a modern model of success in the service industry, creating an economic growth period never seen in UK history before.

It is marketing that has helped create value through customised products, no-questions-asked refund policies, comfortable cars, environmental attention, shopkeepers’ smile, and guaranteed delivery dates. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers’. Of course all of the above is done for economic or political gain, for better or worse. Despite all this achievement, to dismiss marketing as a failure is unfair.

Marketing also helps companies avoid unnecessary R&D, operational and sales costs by helping to develop products because customers want them, not for the sake of innovation. Another success is the now commonly implemented value-pricing principle, whereby a product or service is sold for the price the customer is willing to pay, not on a cost-plus basis. This way, both suppliers and customers get a fair deal.

In the context of segmentation, Brown suggests that “the traditional, linear, step-by-step marketing model of analysis, planning, implementation and control no longer seems applicable, appropriate or even pertinent to what is actually happening on the ground” (p. 23-24). If Mr. Brown had studied “the ground” before making his statement, he would have realised that companies are successful the world over precisely because they implement this model.

They segment their markets, relate their products and services to them, define their value proposition and serve their customers accordingly. ^[15] Examples are GE, HSBC, PriceWaterhouseCoopers, Smiths Aerospace, BAE Systems, BOC Edwards, Weir Group and BT to name but a few. A brief visit to their websites can make this point clear.

Brown also has a constructive suggestion: “I reckon we need more passion in marketing, not less; it is time we banished banishing passion from works of marketing scholarship” (p. 256). This refers mainly to promotion, which is only one element within the marketing concept. The truth is that marketing today leads the way in segmentation, innovation, pricing, product management, distribution, and last but not least, promotion.

After all the contribution as well as further potential, to deny its successes and try to reduce it to only promotion is a great injustice to the marketing profession as well as to academic insight. Contrary to Brown’s suggestion in his final paragraph (p. 257), we need objectivity, rigour, quantification, models, relationships, paradigm shifts and (some application of) science.

Marketing is not full of holes, but a management process that has helped generate wealth and satisfied millions of customers for the most part of the 20th century. It can do even better in the 21st provided practitioners and scholars do not loose faith and focus. Kotler is not dead, but very much alive, and still kicking.

References

1. ^ "Dictionary of Marketing Terms" from marketingpower.com[1] Last accessed 30 November 2006.
2. ^ "What is Marketing?" from briannorris.com[2] Last accessed 30 November 2006.
3. ^ "A Marketing Definition in Six Words" from marketingprofs.com [3]
4. ^ "What Is Marketing?" from marketingprofs.com [4]
5. ^ "The Concept of the Marketing Mix" from the Journal of Advertising Research, June 1964 pp 2-7
6. ^ "Updating the Standard Four Ps of Marketing" from marketingprofs.com [5]
7. ^ "Passionate & Profitable: Why Customer Strategies Fail and 10 Steps to Do Them Right!", Lior Arussy, John Wiley & Sons, 2005
8. ^ "The Demise of the Four Ps Has Been Greatly Exxagerated" from marketingprofs.com [6]
9. ^ "Customer Focus, Not Product Focus" from clickz.com [7]
10. ^ "Marketing Management: Strategies and Programs", Guiltinan et al, McGraw Hill/Irwin, 1996
11. ^ "Swarming the shelves: How shops can exploit people's herd mentality to increase sales?", The Economist, 2006-11-11, p. 90.
12. ^ "The Customer Driven Company: Moving From Talk to Action" R.C. Whiteley, Pfeiffer & Company, 2000
13. ^ Brown, Stephen (1993), „Postmodern Marketing?“, European Journal of Marketing Vol. 27 No. 4, pp. 19-34
14. ^ Brown, Stephen (1998), „Post Modern Marketing 2 – Telling Tales“, Thomson Business Press.
15. ^ "Segment Your Markets: Three Steps to Maximize Profits" from marketingprofs.com [8]

See also

Related lists

See list of marketing topics for an extensive list of the marketing articles

• List of management topics
• List of human resource management topics
• List of economics topics
• List of finance topics
• List of accounting topics
• List of information technology management topics
• List of production topics
• List of business law topics
• List of international trade topics
• List of business ethics, political economy, and philosophy of business topics
• List of business theorists
• List of economists
• List of corporate leaders
• List of companies