Marketing

Marketing is the study and management of exchange relationships.[1][2] The American Marketing Association has defined marketing as "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." [3]

Marketing is used to create, keep and satisfy the customer. With the customer as the focus of its activities, it can be concluded that Marketing is one of the premier components of Business Management - the other being Innovation.[4] Other services and management activities such as Operations (or Production), Human Resources, Accounting, Law and Legal aspects can be "bought in" or "contracted out".

Definition

Marketing is defined by the American Marketing Association as "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."[5] The term developed from the original meaning which referred literally to going to a market to buy or sell goods or services. Sales process engineering views marketing as "a set of processes that are interconnected and interdependent with other functions,[6] whose methods can be improved using a variety of relatively new approaches."

The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably."[7] A similar concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value.[8] In this context, marketing can be defined as "the management process that seeks to maximise returns to shareholders by developing relationships with valued customers and creating a competitive advantage."[8]

Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science,[9] allowing numerous universities to offer Master-of-Science (MSc) programmes. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at re-inventing itself and its vocabulary according to the times and the culture.

The marketing concept

The term 'marketing concept' pertains to the fundamental premise of modern marketing. This 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. Marketing and marketing concepts are directly related.

Marketing orientations

An orientation, in the marketing context, relates to a perception or attitude a firm holds towards its product or service, essentially concerning consumers and end-users. There exist several common orientations:

Product orientation

A firm employing a product orientation is mainly concerned with the quality of its own product. A firm would also assume that as long as its product was of a high standard, people would buy and consume the product.

This works most effectively when the firm has good insights about customers and their needs and desires, as for example in the case of Sony Walkman or Apple iPod, whether these derive from intuitions or research.

Sales orientation

A firm using a sales orientation focuses primarily on the selling/promotion of a particular product, and not determining new consumer desires as such. Consequently, this entails simply selling an already existing product, and using promotion techniques to attain the highest sales possible.

Such an orientation may suit scenarios in which a firm holds dead stock, or otherwise sells a product that is in high demand, with little likelihood of changes in consumer tastes diminishing demand.

Production orientation

A firm focusing on a production orientation specializes in producing as much as possible of a given product or service. Thus, this signifies a firm exploiting economies of scale, until the minimum efficient scale is reached.

A production orientation may be deployed when a high demand for a product or service exists, coupled with a good certainty that consumer tastes do not rapidly alter (similar to the sales orientation).

Marketing orientation

The marketing orientation is perhaps the most common orientation used in contemporary marketing. It involves a firm essentially basing its marketing plans around the marketing concept, and thus supplying products to suit new consumer tastes.

As an example, a firm would employ market research to gauge consumer desires, use R&D to develop a product attuned to the revealed information, and then utilize promotion techniques to ensure persons know the product exists. The marketing orientation often has three prime facets, which are:

Customer orientation

A firm in the market economy can survive by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern.

Organizational orientation

In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization.

Information from an organization's marketing department would be used to guide the actions of other department's within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.

The production department would then start to manufacture the product, while the marketing department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a firm's finance department would be consulted, with respect to securing appropriate funding for the development, production and promotion of the product.

Inter-departmental conflicts may occur, should a firm adhere to the marketing orientation. Production may oppose the installation, support and servicing of new capital stock, which may be needed to manufacture a new product. Finance may oppose the required capital expenditure, since it could undermine a healthy cash flow for the organization.

Mutually beneficial exchange

In a transaction in the market economy, a firm gains revenue, which thus leads to more profits/market share/sales. A consumer on the other hand gains the satisfaction of a need/want, utility, reliability and value for money from the purchase of a product or service. As no one has to buy goods from any one supplier in the market economy, firms must entice consumers to buy goods with contemporary marketing ideals.

The Four Ps

In the early 1960s, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, at the Michigan State University in the early 1960s, suggested that the Marketing Mix contained 4 elements: product, price, place and promotion.

Product
The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
Pricing
This refers to the process of setting a price for a product, including discounts. The price need not be monetary; it can simply be what is exchanged for the product or services, e.g. time, energy, or attention. Methods of setting prices optimally are in the domain of pricing science.
Placement (or distribution)
This refers to how the product gets to the customer; for example, point-of-sale placement or retailing. This third 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. also referring to how the environment in which the product is sold in can affect sales.
Promotion
This includes advertising, sales promotion, including promotional education, publicity, and personal selling. Branding refers to the various methods of promoting the product, brand, or company.

These four elements are often referred to as the marketing mix,[10] which a marketer can use to craft a marketing plan.

Criticism of the Four P-Model

Morgan, in Riding the Waves of Change (Jossey-Bass, 1988), suggests that one of the greatest limitations of the 4 Ps approach "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".

Some authors suggest extensions of the 4P model (not widely shared by academic researchers and in need of further verification):

The marketing environment

The term "marketing environment" relates to all of the factors (whether internal, external, direct or indirect) that affect a firm's marketing decision-making/planning. A firm's marketing environment consists of three main areas, which are:

The macro-environment

A firm's marketing macro-environment consists of a variety of external factors that manifest on a large (or macro) scale. These are typically economic, social, political or technological phenomena. A common method of assessing a firm's macro-environment is via a PESTLE (Political, Economic, Social, Technological, Legal, Ecological) analysis. Within a PESTLE analysis, a firm would analyze national political issues, culture and climate, key macroeconomic conditions, health and indicators (such as economic growth, inflation, unemployment, etc.), social trends/attitudes, and the nature of technology's impact on its society and the business processes within the society.

The micro-environment

A firm's micro-environment comprises factors pertinent to the firm itself, or stakeholders closely connected with the firm or company.

A firm's micro-environment typically spans:

By contrast to the macro-environment, an organization holds a greater degree of control over these factors.

Marketing research

Marketing research is a systematic process of analyzing data which involves conducting research to support marketing activities, and the statistical interpretation of data into information. This information is then used by managers to plan marketing activities, gauge the nature of a firm's marketing environment and to attain information from suppliers.

A distinction should be made between marketing research and market research. Market research pertains to research in a given market. As an example, a firm may conduct research in a target market, after selecting a suitable market segment. In contrast, marketing research relates to all research conducted within marketing. Market research is a subset of marketing research.

Marketing researchers use statistical methods (such as quantitative research, qualitative research, hypothesis tests, Chi-square tests, linear regression, correlation coefficients, frequency distributions, Poisson and binomial distributions, etc.) to interpret their findings and convert data into information.[12]

The Marketing Research Process

Marketing research spans a number of stages,[13] including:

Market segmentation

Market segmentation consists of taking the total heterogeneous market for a product and dividing it into several sub-markets or segments, each of which tends to be homogeneous in all significant aspects.[14]

The purposes of market segmentation

Market segmentation is conducted for two main purposes, including:

A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers.

Moreover, with more diversity in the tastes of modern consumers, firms are taking noting the benefit of servicing a multiplicity of new markets.

Overview of segmentation process

Segmentation can be defined in terms of the STP acronym, meaning Segment, Target, Position.

Segment

Segmentation involves the initial splitting up of consumers into persons of like needs/wants/tastes.

Four commonly used criteria are used for segmentation, which include:

Target

Once a segment has been identified, a firm must ascertain whether the segment is beneficial for them to service.

The DAMP acronym (meaning Discernable, Accessible, Measurable and Profitable) are used as criteria to gauge the viability of a target market. DAMP is explained in further detail below:

The next step in the targeting process is the level of differentiation involved in a segment serving. Three modes of differentiation exist, which are commonly applied by firms. These are:

Position

Positioning concerns how to position a product in the minds of consumers.

A firm often performs this by producing a perceptual map, which denotes products produced in its industry according to how consumers perceive their price and quality. From a product's placing on the map, a firm would tailor its marketing communications to suit meld with the product's perception among consumers.

Marketing communications

Marketing communications is defined by actions a firm takes to communicate with end-users, consumers and external parties. Marketing communications encompasses four distinct subsets, which are:

Personal sales

Oral presentation given by a salesperson who approaches individuals or a group of potential customers:

Sales promotion

Short-term incentives to encourage buying of products:

An example is coupons or a sale. People are given an incentive to buy, but this does not build customer loyalty or encourage future repeat buys. A major drawback of sales promotion is that it is easily copied by competition. It cannot be used as a sustainable source of differentiation.

Public Relations

Public Relations (or PR, as an acronym) is the use of media tools by a firm in order to promote goodwill from an organization to a target market segment, or other consumers of a firm's good/service. PR stems from the fact that a firm cannot seek to antagonize or inflame its market base, due to incurring a lessened demand for its good/service. Organizations undertake PR in order to assure consumers, and to forestall negative perceptions towards it.

PR can span:

Publicity

Publicity involves attaining space in media, without having to pay directly for such coverage. As an example, an organization may have the launch of a new product covered by a newspaper or TV news segment. This benefits the firm in question since it is making consumers aware of its product, without necessarily paying a newspaper or television station to cover the event.

Advertising

Advertising occurs when a firm directly pays a media channel to publicize its product. Common examples of this include TV and radio adverts, billboards, branding, sponsorship, etc.

Marketing communications "mix"

Marketing communications is a "sub-mix" within the Promotion aspect of the marketing mix, as the exact nature of how to apply marketing communications depends on the nature of the product in question.

Accordingly, a given product would require a unique communications mix, in order to convey successfully information to consumers. Some products may require a stronger emphasis on personal sales, while others may need more focus on advertising.

Marketing Planning

The area of marketing planning involves forging a plan for a firm's marketing activities. A marketing plan can also pertain to a specific product, as well as to an organisation's overall marketing strategy.

Generally speaking, an organisation's marketing planning process is derived from its overall business strategy. Thus, when top management are devising the firm's strategic direction/mission, the intended marketing activities are incorporated into this plan.

Marketing Planning Process

Within the overall strategic marketing plan, the stages of the process are listed as thus:

Levels of marketing objectives within an organization

As stated previously, the senior management of a firm would formulate a general business strategy for a firm. However, this general business strategy would be interpreted and implemented in different contexts throughout the firm.

Corporate

Corporate marketing objectives are typically broad-based in nature, and pertain to the general vision of the firm in the short, medium or long-term.

As an example, if one pictures a group of companies (or a conglomerate), top management may state that sales for the group should increase by 25% over a ten-year period.

Strategic business unit

Strategic business unit (SBU), in this case, means strategic business unit. An SBU is a subsidiary within a firm, which participates within a given market/industry. The SBU would embrace the corporate strategy, and attune it to its own particular industry. For instance, an SBU may partake in the sports goods industry. It thus would ascertain how it would attain additional sales of sports goods, in order to satisfy the overall business strategy.

Functional

The functional level relates to departments within the SBUs, such as marketing, finance, HR, production, etc. The functional level would adopt the SBU's strategy and determine how to accomplish the SBU's own objectives in its market.

To use the example of the sports goods industry again, the marketing department would draw up marketing plans, strategies and communications to help the SBU achieve its marketing aims.

Product Life Cycle

The Product Life Cycle[15] (or PLC, for short) is a tool used by marketing managers to gauge the progress of a product, especially relating to sales/revenue accrued over time. The PLC is based on a few key assumptions, including:

- A given product would possess an Introduction, Growth, Maturity and Decline stage. - No product lasts perpetually on the market. - A firm must employ differing strategies, according to where a product is on the PLC.

Introduction

In this stage, a product is launched onto the market. To stimulate growth of sales/revenue, use of advertising may be high, in order to heighten awareness of the product in question.

Growth

The product's sales/revenue is increasing, which may stimulate more marketing communications to sustain sales. More entrants enter into the market, to reap the apparent high profits that the industry is producing.

Maturity

A product's sales start to level off, and an increasing number of entrants to a market produce price falls for the product. Firms may utilise sales promotions to raise sales.

Decline

Demand for a good begins to taper off, and the firm may opt to discontinue manufacture of the product. This is so, if revenue for the product comes from efficiency savings in production, over actual sales of a good/service. However, if a product services a niche market, or is complementary to another product, it may continue manufacture of the product, despite a low level of sales/revenue being accrued.

Customer focus

Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on 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.

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.[16]

A formal approach to this customer-focused marketing is known as SIVA[17] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.

The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.

Product → Solution
Promotion → Information
Price → Value
Placement → Access

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 profitable market segment(s) exist 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.

The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[18] It shared mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct." 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 Florida Institute of Technology researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts."

Marketing is also used to promote business' products and is a great way to promote the business.

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, eBay).

See also

Types of marketing

References

  1. ↑ Hunt, Shelby D. "The nature and scope of marketing." Journal of Marketing 40.3 (1976): 17-28.
  2. ↑ Bagozzi, Richard. "Marketing as Exchange."Journal of Marketing 39.4 (1975): 32-39.
  3. ↑ "Definition of Marketing". American marketing Association. 2013-08-15. Retrieved 2015-12-05.
  4. ↑ Drucker, Peter (1954). The practice of management. New York: Harper and Row Publishers.
  5. ↑ Marketing definition approved in October 2007 by the American Marketing Association: .
  6. ↑ Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI: ASQ Quality Press. p. 23.
  7. ↑ "Marketing library resources - content, knowledge databases - CIM". Retrieved 16 March 2017.
  8. 1 2 Paliwoda, Stanley J.; John K. Ryans (2008). "Back to first principles". International Marketing: Modern and Classic Papers (1st ed.). p. 25. Retrieved 2009-10-15.
  9. ↑ 2.0, Women. "The Science Of Marketing". Forbes. Retrieved 2017-06-16.
  10. ↑ "The Concept of the Marketing Mix" from the Journal of Advertising Research, June 1964 pp 2-7
  11. ↑ "Marketing plan". Retrieved 16 March 2017.
  12. ↑ "4 Principles Of Marketing As A Science". Search Engine Land. 2013-04-18. Retrieved 2017-06-16.
  13. ↑ http://www.polarismr.com/edctr_overview.html
  14. ↑ Stanton, William J (1984). Fundamentals of marketing. McGraw-Hill.
  15. ↑ "For marketing learners, teachers and professionals.". Retrieved 16 March 2017.
  16. ↑ "Marketing Management: Strategies and Programs", Guiltinan et al., McGraw Hill/Irwin, 1996
  17. ↑ "In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century". Chekitan S. Dev and Don E. Schultz, Marketing Management v.14 n.1 January/February 2005
  18. ↑ "Swarming the shelves: How shops can exploit people's herd mentality to increase sales?". The Economist. 2006-11-11. p. 90.

Bibliography

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