Marketing is part of all of our lives and touches us in some way every day. Most people think that marketing is only about the advertising and/or personal selling of goods and services. Advertising and selling, however, are just two of the many marketing activities.
In general, marketing activities are all those associated with identifying the particular wants and needs of a target market of customers, and then going about satisfying those customers better than the competitors. This involves doing market research on customers, analyzing their needs, and then making strategic decisions about product design, pricing, promotion and distribution.
Philip Kotler says, Marketing is managing profitable customer relationships. The twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction.
Broadly defined, marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others. Narrowly defined marketing involves building profitable, value-laden exchange relationships with customers.
In short, it has been defined as the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.
The new definition given by American Marketing Association reads, “Marketing is 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.”
Create value for customers and build customer relationships Capture value from customers in return
In the first four steps, companies work to understand consumers, create customer value and build strong customer relationships. In the final step, companies reap the rewards of creating superior customer value. By creating value for customers, they in turn capture value from customers in the form of sales, profits and long term customer equity.
A marketer can rarely satisfy everyone in a market. Everyone in the market has different taste, likeliness, income and spending habit. Not everyone likes the same soft drink, automobile, college, and movie. Therefore, marketers start with market segmentation. They identify and profile distinct groups of buyers who might prefer or require varying products and marketing mixes. Market segments can be identified by examining demographic, psychographic, and behavioral differences among buyers. The firm then decides which segments present the greatest opportunity—whose needs the firm can meet in a superior fashion. The lucrative segment/s are selected or targeted for offering/selling the product. For each chosen target market, the firm develops a market offering. The offering is positioned in the minds of the target buyers as delivering some central benefit(s). For example, Volvo develops its cars for the target market of buyers for whom auto- mobile safety is a major concern. Volvo, therefore, positions its car as the safest car a customer can buy.
Needs are the basic human requirements. People need food, air, water, clothing, and shelter to survive. People also have strong needs for creation, education, and entertainment.
The above needs become wants when they are directed to specific objects that might satisfy the need. An American needs food but may want a hamburger, French fries, and a soft drink. A person in Mauritius needs food but may want a mango, rice, lentils, and beans. Wants are shaped by one’s society.
Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are able to buy one. Companies must measure not only how many people want their product but also how many would actually be willing and able to buy it.
Customers’ needs and wants are fulfilled through a marketing offer or product. A product is any offering that can satisfy a need or want, such as one of the 10 basic offerings of goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
A brand is an offering from a known source. A brand name such as McDonald’s carries many associations in the minds of people: hamburgers, fun, children, fast food, and golden arches. These associations make up the brand image. All companies strive to build a strong, favorable brand image.
In terms of marketing, the product or offering will be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings on the basis of which is perceived to deliver the most value. We define value as a ratio between what the customer gets and what he gives. The customer gets benefits and assumes costs, as shown in this equation:
Based on this equation, the marketer can increase the value of the customer offering by (1) raising benefits, (2) reducing costs, (3) raising benefits and reducing costs, (4) raising benefits by more than the raise in costs, or (5) lowering benefits by less than the reduction in costs.
Exchange, the core of marketing, involves obtaining a desired product from someone by offering something in return. For exchange potential to exist, five conditions must be satisfied:
Whether exchange actually takes place depends upon whether the two parties can agree on terms that will leave them both better off (or at least not worse off) than before. Exchange is a value-creating process because it normally leaves both parties better off.
Marketers use numerous tools to elicit the desired responses from their target markets. These tools constitute a marketing mix. Marketing mix is the set of marketing tools that the firm uses to pursue its marketing objectives in the target market. McCarthy classified these tools into four broad groups that he called the four Ps of marketing: Product, Price, Place, and Promotion.
Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’ four Cs.
Winning companies are those that meet customer needs economically and conveniently and with effective communication.
There are five competing concepts under which organizations conduct marketing activities: produc- tion concept, product concept, selling concept, marketing concept, and societal mar- keting concept.
The production concept, one of the oldest in business, holds that consumers prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. This orientation makes sense in developing countries, where consumers are more interested in obtaining the product than in its features. It is also used when a company wants to expand the market. Texas Instruments is a leading exponent of this concept. It concentrates on building production volume and upgrading technology in order to bring costs down, leading to lower prices and expansion of the market. This orientation has also been a key strategy of many Japanese companies.
Other businesses are guided by the product concept, which holds that consumers favor those products that offer the most quality, performance, or innovative features. Managers in these organizations focus on making superior products and improving them over time, assuming that buyers can appraise quality and performance.
Product-oriented companies often design their products with little or no customer input, trusting that their engineers can design exceptional products. A General Motors executive said years ago: “How can the public know what kind of car they want until they see what is availablefi” GM today asks customers what they value in a car and includes marketing people in the very beginning stages of design.
The selling concept, another common business orientation, holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization’s products. The organization must, therefore, undertake an aggressive selling and promotion effort. This concept assumes that consumers must be coaxed into buying, so the company has a battery of selling and promotion tools to stimulate buying.
The selling concept is practiced most aggressively with unsought goods—goods that buyers normally do not think of buying, such as insurance and funeral plots. The selling concept is also practiced in the nonprofit area by fund-raisers, college admissions offices, and political parties.
Most firms practice the selling concept when they have overcapacity. Their aim is to sell what they make rather than make what the market wants.
The marketing concept, in the mid-1950s, challenges the three business orientations we just discussed. The marketing concept holds that the key to achieving organizational goals consists of the company being more effective than its competitors in creating, delivering, and communicating customer value to its chosen target markets.
The marketing concept focuses on the needs of the buyer. Marketing is preoccupied with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.”
The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and profitability. The marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses on customer needs, coordinates activities that affect customers, and produces profits by satisfying customers.
Some have questioned whether the marketing concept is an appropriate philosophy in an age of environmental deterioration, resource shortages, explosive population growth, world hunger and poverty, and neglected social services. Are companies that successfully satisfy consumer wants necessarily acting in the best, long-run interests of consumers and societyfi The marketing concept sidesteps the potential conflicts among consumer wants, consumer interests, and long-run societal welfare.
Yet some firms and industries are criticized for satisfying consumer wants at society’s expense. Such situations call for a new term that enlarges the marketing concept. We propose calling it the societal marketing concept, which holds that the organization’s task is to determine the needs, wants, and interests of target markets and to deliver the desired satisfactions more effectively and efficiently than competitors in a way that preserves or enhances the consumer’s and the society’s well-being.
The societal marketing concept calls upon marketers to build social and ethical considerations into their marketing practices. They must balance and juggle the often confiicting criteria of company profits, consumer want satisfaction, and public interest. Yet a number of companies have achieved notable sales and profit gains by adopting and practicing the societal marketing concept.
Oftentimes, marketing and sales are perceived interchangeably. But in actuality, these are two different things. Selling is a small portion of the entire marketing scheme. Selling is the transaction where a product is transferred from the business owner to a buyer for a price. In contrast, marketing is a process that involves several steps ranging from the generation of a product idea to the delivery of that product to the customer.
Even after delivery of the product to the customer, the marketing process continues with direct communication with the customer to obtain feedback about the product.
Theodore Levitt of Harvard drew a perceptive contrast between the selling and marketing concepts: “Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and finally consuming it.”
The marketing concept rests on four pillars: target market, customer needs, integrated marketing, and profitability. The selling concept takes an inside-out perspective. It starts with the factory, focuses on existing products, and calls for heavy selling and promoting to produce profitable sales. The marketing concept takes an outside-in perspective. It starts with a well-defined market, focuses on customer needs, coordinates activities that affect customers, and produces profits by satisfying customers.
In order to correctly identify opportunities and monitor threats, the company must begin with a thorough understanding of the marketing environment in which the firm operates. The marketing environment consists of all the actors and forces outside marketing that affect the marketing management’s ability to develop and maintain successful relationships with target customers.
“A company’s marketing environment consists of the actors and forces outside marketing that affect marketing management’s ability to develop and maintain successful relationships with its target customers”
The micro environment consists of six forces (actors) close to the company that affect its ability to serve its customers:
The first actor is the company itself and the role it plays in the microenvironment.
Suppliers are firms and individuals that provide the resources needed by the company and its competitors to produce goods and services. They are an important link in the company’s overall customer “value delivery system.”
Marketing intermediaries are firms that help the company to promote, sell, and distribute its goods to final buyers.
Physical distribution firms help the company to stock and move goods from their points of origin to their destinations. Examples would be warehouses (that store and protect goods before they move to the next destination).
Marketing services agencies (such as marketing research firms, advertising agencies, media firms, etc.) help the company target and promote its products to the right markets.
Financial intermediaries (such as banks, credit companies, insurance companies, etc.) help finance transactions and insure against risks associated with buying and selling goods.
The company must study its customer markets closely because each market has its own special characteristics. These markets normally include:
Every company faces a wide range of competitors. A company must secure a strategic advantage over competitors to be successful in the marketplace. No single competitive strategy is best for all companies .
A public is any group that has an actual or potential interest in or impact on an organization’s ability to achieve its objectives. A company should prepare a marketing plan for all of its major publics as well as its customer markets.
Generally, publics can be identified as being:
The macroenvironment consists of the larger societal forces that affect the microenvironment:
The company and all of the other actors operate in a larger macroenvironment of forces that shape opportunities and pose threats to the company. Major forces in the company’s macroenvironment include:
Demography is the study of human populations in terms of size, density, location, age, sex, race, occupation, and other statistics. It is of major interest to marketers because it involves people, and people make up markets.
Demographic trends are constantly changing. Some of the more interesting trends are:
The economic environment includes those factors that affect consumer buying power and spending patterns. Major economic trends include:
The natural environment involves natural resources that are needed as inputs by marketers or that are affected by marketing activities. During the past two decades environmental concerns have steadily grown. Some trend analysts labeled the 1990s as the “Earth Decade,” where protection of the natural environment became a major worldwide issue facing business and the public.
The technological environment includes forces that create new technologies, creating new product and market opportunities.
The political environment includes laws, government agencies, and pressure groups that influence and limit various organizations and individuals in a given society. Business is regulated by various forms of legislation.
The cultural environment is made up of institutions and other forces that affect society’s basic values, perceptions, and behaviors. Certain cultural characteristics can affect marketing decision-making. Among the most dynamic cultural char- acterisitics are:
It is the process of dividing a market into distinct group of buyers who have distinct needs, characteristics or behavior and who might require separate product or marketing mixes.
A group of consumers who respond in a similar way to a given set of marketing efforts.
For Example: In the car market, consumers who want the biggest, most comfortable car regardless of the price make up one market segment. Consumers who care mainly about price and operating economy make up another segment.
In addition to having different needs, for segments to be practical they should be evaluated against the following criteria:
A good market segmentation will result in segment members that are internally homogenous and externally heterogeneous; that is, as similar as possible within the segment, and as different as possible between segments.
Consumer markets can be segmented on the following customer characteristics.
The following are some examples of geographic variables often used in segmentation.
Some demographic segmentation variables include:
Many of these variables have standard categories for their values. For example, family lifecycle often is expressed as bachelor, married with no children (DINKS: Double Income, No Kids), full-nest, empty-nest, or solitary survivor. Some of these categories have several stages, for example, full-nest I, II, or III depending on the age of the c
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