CONCEPTS OF MARKETING

Transcription

1 CONCEPTS OF MARKETING Management must think of itself not as producing products, but as providing customercreating value satisfactions. It must push this idea (and everything it means and requires) into every nook and cranny of the organisation. It has to do this continuously and with the kind of flair that excites and stimulates the people in it THEODORE LEVITT WHAT IS MARKETING? Many people think marketing is only advertising and selling. Every day we are bombarded with TV commercials, direct-mail offers, sales calls, offers etc. However, advertising and selling are only the tip of the marketing iceberg. Today, marketing must be understood not in the old sense of making a sale: telling and selling, but in the sense of identifying and satisfying customer needs. If the marketer understands consumer needs; develops products that provides superior customer value; and prices, distributes and promotes them effectively, these products will sell easily. For business, marketing is how to satisfy and delight the customers and build long-term relationships. This relationship must bring benefits to both, value for the customer, profit for the business. Thus, the two fold goal of marketing is to attract customers by promising and delivering superior value and to retain and grow existing customers by delivering satisfaction and delighting them. DEFINITIONS OF MARKETING The most widely used definitions of marketing are as follows: DEFINITION 1 Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. (Phillip Kotler/Gary Armstrong) DEFINITION 2 Marketing is the management process responsible for identifying, anticipating and satisfying customers requirements profitably. (Chartered Institute of Marketing U.K) DEFINITION 3 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. (American Marketing Association)

2 Marketing is not a science: there is no single universally adopted definition of marketing. The commonly cited definitions illustrate this variation. However, certain core ingredients of the various definitions collectively indicate the key roles and functions and activities of marketing: MARKETING S ROLE IN BUSINESS Create and retain customer s Finding new markets Providing relevant information, offering convenience, creating an association and adding value. Create brand value Create and maintain brand and stakeholder value Identify market trends and inform business decision making Monitor the environment and act to remain competitive KEY FUNCTIONS OF MARKETING Bridge between the customer and the organisation Impact on company performance link to strategic planning Developing the appropriate marketing mix 7P s Cross functional working working and liaising with other departments Collecting and analyzing information Understanding and championing customers. Differentiating a product or service from competitors Identifying favorable emerging market opportunities Developing and Implementing the marketing plan DEVELOPMENT OF MARKETING Marketing can be viewed in several different ways, according to its role and status within the organisation Marketing as an Exchange Process Marketing occurs when people decide to satisfy needs and wants through exchange. Exchange is the act of obtaining a desired object from someone by offering something in return. In the broadest sense, the marketer tries to bring about a response to its market offerings Managing the exchange process means that each party will be better off than they were before: if this were not the case, trade would be impossible. An exchange should be satisfying to both the buyer and the seller.

3 Marketing as a Managerial Function Marketing is said to be a function of management as it uses management techniques in satisfying customer requirements. In a typical marketing department one will find marketing managers, product managers, sales managers, market research managers, etc. As a function, marketing performs several activities: Identifying customer requirements through market research. Anticipate customer requirements into the future by way of innovation & forecasting. Work with other functions in the organisation and develop products to satisfy and delight customers. Work out associated costs, understand customer perceptions and set prices, organize channels of distribution to distribute the products. Analysis, Planning, Implementation and Control of all marketing activities. Marketing as a Business Philosophy Marketing is considered as an overall business philosophy, a way of thinking about business and a way of working which runs through every aspect of the firm's activities. Hence marketing is viewed not as a separate function but rather as a profit-oriented approach to business that combines not just the marketing department but also the entire business. In this regard marketing is seen as an attitude of mind or an approach to business rather than a specific discipline. It is a philosophy that puts customer satisfaction at the center of management thinking throughout the organisation that would distinguish a marketing oriented firm from others. As a summary, marketing is viewed as a philosophy when marketing is considered A way of business thinking A way of working which runs through every aspect of the firms activities An approach to business that combines and integrates the entire organisation MARKETING MANAGEMENT ORIENTATIONS Given below alternative concepts or business philosophies under which organisations design and implement their marketing strategies: PRODUCTION CONCEPT The Idea that consumers will favor products that are available and highly affordable and the organisation should therefore focus on improving production and distribution efficiency. (Philip Kotler -12 th Edition) This concept is one of the oldest business orientations and the organisations that follow this philosophy/orientation are said to be production oriented organisations. Production orientation had its beginnings at the start of the Industrial Revolution. Up until the nineteenth century, almost everything was hand-made and made to measure. When machines

4 were introduced to speed up the manufacturing process, costs dropped dramatically, so much so that prices could also be cut provided the goods could be sold rapidly. The emphasis of Production Orientation is: Efficiency of production: A focus on manufacturing and improving the process so as to reduce costs and increase efficiency. Efficiency of distribution: Mass distribution, thus making the product available at all possible outlets. Economies of Scale: By this try to achieve lower unit costs and also increasing the supply. Profitability through production efficiency. The production concept is still a useful philosophy in some situations. For example, computer maker Lenovo dominates the highly competitive, price-sensitive Chinese PC market through low labor costs, high production efficiency, and mass distribution. Organisations adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objectives satisfying and delighting customers and building long term customer relationships. PRODUCT CONCEPT The idea that consumers will favour products that offer the most quality, performance and features and that the organization should therefore devote its energy to making continuous product improvements. (Philip Kotler -12 th edition) Product concept holds that consumers will favor products that offer the most in quality, performance and innovative features. Under this concept, the marketing strategy focuses on making continuous product improvements. Organisations which follow this concept are said to be product oriented. Product orientation tends to lead to ever more complex products at everincreasing prices; customers are being asked to pay for features which they may not need, or which may even be regarded as drawbacks. The emphasis of Product Orientation is: Quality and features: making products designed to incorporate a large number of an attempt to please everybody. Profitability through product quality features in Theodore Levitt often calls organisations that follow the product concept are suffering from Marketing Myopia. The word myopia means short sightedness. What he means is that these organisations are focused on the products rather than on the consumer s needs. For example, most people who buy electric drills do not really want an electric drill at all: what they want is

5 holes! If there were some easier, safer way of making holes than by using an electric drill, the electric drill market would disappear. Selling Concept The idea that consumers will not buy enough of the firm s products unless it undertakes large-scale selling and promotion effort. (Philip Kotler 12 th edition) Organisation s that follow the selling concept, holds that consumers will not buy enough of the firm s products unless it takes large scale selling and promotion effort. The belief, that if customers are left alone, they will not buy enough of the organisations products. The aim often is to sell what the organisation makes rather than making what customer wants. Organisations that follow this concept are said to be sales oriented. Underlying this philosophy is a belief that a good sales force can sell just about anything to anybody. Sales orientation should not be confused with personal selling: sales forces do not operate on the basis of persuasion, but rather on identifying and meeting customer needs. The emphasis with Sales Orientation is: Aggressive selling and promotional efforts: It assumes that people will not buy anything unless they are persuaded to do so. Profitability through sales volume Marketing Concept The Marketing management philosophy that achieving organisational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do. (Philip Kotler -12 th edition) The marketing concept is not a second definition of marketing. The marketing concept is a customer-centered sense and respond philosophy. It is a way of thinking a management philosophy guiding an organisation s overall activities. The philosophy affects all the efforts of the organisation not just marketing activities. The philosophy of placing customers at the center of everything the company does is basic to marketing thought: this idea of customer centrality is the key concept in marketing. Defining what customers want and ensuring that the company s activities are arranged in a way which will achieve customer satisfaction. An organisation with this approach is said to be marketing-oriented (Thinking Customers).

6 To apply this concept three conditions should be met as follows: Key Components of Marketing Concept Marketing Concept The achievement of corporate goals through meeting and exceeding customer needs better than competition Customer Orientation Corporate activities are focused upon providing customer satisfaction/delight Integrated Effort All staff should accept the responsibility for creating customer satisfaction/delight Goal Achievement The belief that corporate goals can be achieved through customer satisfaction/delight CUSTOMER ORIENTATION: All corporate activities of the organisation should be focused upon providing customer satisfaction/delight, rather than, for example, producer convenience. Identifying customer requirements and then satisfying them with appropriate match customer requirements. The process does not end there, it must continue to alter, adapt, and develop keep in pace with customers changing desires and preferences. products to products to INTEGRATED EFFORT: All staff should accept personal responsibility for creating customer satisfaction/delight. The responsibility for the implementation of the marketing concept lies not just within the marketing Department. The belief that customer needs are central to the operations of an organisation and should run through production, finance, R&D, and all other departments. All departments should coordinate in providing customer satisfaction/delight. GOAL ACHIEVEMENT: The belief that corporate goals can be achieved through customer satisfaction/delight. If customers are satisfied and delighted they will buy more of your products, thus increased profits for the organisation.

7 The marketing orientation is contrasted with the other orientations by which organisations conceive, conduct and coordinate their marketing activities as shown in the table below: Focus Means Emphasis/Aims Production Assumed customer demand for Improving production Profitability through Orientation product availability and and distribution production efficiency affordability efficiency Product Assumed customer demand for Continuous product Profitability through Orientation product quality, performance and improvements product quality Features Selling Existing products made by the Energetic selling and Profitability through Orientation firm; creating sales transactions promotion sales Volume Marketing Customer needs and wants; long- Integrated marketing Profitability through Orientation term customer relationship activities customer satisfaction & delight The Societal Marketing Concept Societal Marketing Concept holds that the organisation 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 consumers and society s well-being. (Philip Kotler 10 th edition) 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. Today number of organisations has achieved notable sales and profit gains by adopting and practicing the societal marketing concept. The concepts of ethics and social responsibility are often used interchangeably, although each has a distinct meaning. Social responsibility in marketing refers to an organizations obligation to maximize its positive impact and minimize its negative impact on society. Ethics relate to individual decisions. What is Marketing Ethics? Marketing Ethics are moral philosophies/principles that define right or wrong behavior in marketing. The most basic ethical issues have been formalized through laws and regulations to conform to the standards of society. At the very least, marketers are expected to obey these laws and regulations. However, it is important to realise that marketing ethics go beyond legal issues; ethical marketing decisions foster mutual trust among individuals and in marketing relationships.

8 Ethics are individually defined and may vary from one person to another. Although individual marketers often act in their own self-interest, there must be standards of acceptable behavior to guide all marketing decisions. In marketing, many different ethical issues arise, with regard to product, price, promotion and distribution. Corporate Social Responsibility Corporate Social Responsibility (CSR) is a management concept whereby organisations integrate social, economic and environmental concerns in their business operations and interactions with their stakeholders. Corporate social responsibility suggests that organisations consider not only their customers and profits, but also the good and well-being of the society. MARKETING ORIENTATION Organisations which follow the marketing concept are said to be marketing-oriented. Marketing orientation means driven by customer needs. An organisation which adopts this concept puts the customer at the center of all business decision-making and planning and examines their product offerings from the customer s viewpoint and not from a technical perspective (being customercentric or customer focused). This means that customer needs are the driving force throughout the organisation. A customer-centric approach can add value to an organisation by enabling it to differentiate itself from competitors who do not offer the same experience. Thus, corporate success is based on the ability to deliver the desired levels of satisfaction that exceed those provided by competitors. Customer Value Customer value is dependent on how the customer perceives the benefits of an offering and the sacrifice that is associated with its purchase. Therefore: Customer Value = Perceived benefits Perceived sacrifice Customer Satisfaction Customer satisfaction occurs when perceived performance matches or exceeds expectations. Once a product has been purchased, customer satisfaction depends upon its perceived performance compared to the buyer s expectations. Competitive Advantage An advantage gained over competitors by offering a superior performance through differentiation to provide superior customer value, or by managing to achieve lowest delivered cost. Establishing a competitive advantage means that the firm, in effect, builds a wall around its position in the market. When the wall is high, it will be hard for competitors outside the wall to contact customers inside.

9 Benefits of Implementing the Marketing Concept Several benefits will emerge as result of implementing the marketing concept philosophy within an organisation. The benefits are as follows: Customer Centric: customer needs are the driving force throughout the organisation Customer satisfaction and delight thus profits to the organisation. Enhanced image and reputation. (organisation/product) Leads to customer loyalty thus provides competitive edge Customer retention is high. (cost savings) Staff are motivated (staff turnover is low thus cost savings) Responding quickly to changing needs of the customers Increased revenue through customer satisfaction and delight Value created to both the customer and the organisation Effective utilization of resources Positive word of mouth Difficulties in Implementing the Marketing Concept Even though marketers might feel that a market orientation is the obvious way for the organisation to be successful, in practice there are likely to be barriers in developing such an orientation. Possible barriers or difficulties are as follows: Lack of committed leadership and vision Managers fail to realise or understand the true concept. Conflict between marketing and other functions - The power struggle between different departments within an organisation can hinder the process. Lack of customer knowledge The structure of the organisation may require changing and this can lead to other managers resistance and costs. Employees are frightened and reluctant to change. Autocratic leadership - is one who wants to make all the decisions him or herself. Lack of infrastructure - The required technology to record and track customer RELATIONSHIP MARKETING behaviour. "Customer retention has become increasingly recognised as the key to long-term survival. In the past, most companies have operated on a 'leaky bucket' basis, seeking to refill the bucket with new customers while ignoring the ones leaking away through the bottom...a one percent improvement in customer retention will lead to a five percent improvement in the firm's value. (JIM BLYTHE 2006)

10 BUSINESS UNITS OF AN ORGANISATION A business unit is a division, department or functional area within a company responsible for a specific corporate activity. A typical business organisation may consist of the following business units or business functions: Marketing (including the selling function) Finance Research and Development (R&D) Production/operations Human Resource Management Information Technology MARKETING S CROSS-FUNCTIONAL ROLE In a Marketing oriented organisation, the marketing division will have a role in coordinating all the activities of the firm at every level. Each department, and indeed each individual, should be carrying out his or her role with the customer s welfare in mind. The importance of internal relationships and information sharing Information is shared between departments, and interdepartmental relationships are facilitated. The setting and achievement of common realistic goals Common goal setting: Since everything is driven by customer need, the firm can set goals that are measured according to customer-based outcomes. Establishing clear company policies in relation to products, branding etc Clear company policies can be established regarding products, branding, production, delivery and so forth. All of these impinge on customer satisfaction. Role of marketing as an internal service provider for other departments The marketing department should be offering services to all departments, for example providing information about the market to engineers to develop new products, advising the finance department on the best way to approach slow payers, talking to the delivery staff about providing a better service for customers so forth. Marketing should collaborate with the HR department in developing job descriptions, screening candidates and designing training programs and incentive systems. Contribution of marketing to the development of the business strategy Marketing contributes to strategic planning. Strategy in business is about developing competitive advantage. Marketing offers the opportunity to develop competitive advantage through superior customer value.

11 What is Relationship Marketing? Relationship Marketing is the process of creating, building up and managing long-term relationships with customers, distributors and suppliers. It aims to change the focus from getting customers to keeping customers. Traditional marketing is concerned with the exchanges between organisations and their customers. The emphasis has always been on producing products that will satisfy customer needs, and the focus has tended to be on the single transaction. This has led to an over-emphasis on acquiring new customers, at the expense of ensuring that the firm keeps its old ones. Relationship marketing, on the other hand, tries to establish and build a longer-term, more intimate bond between an organisation and its individual customers. Relationship marketing is concerned with the lifetime value of the customer rather than their value in the single transaction. Effective Relationship marketing connects people, processes, and technology to increase profitability and reduce operational costs. Benefits of Relationship Marketing Relationship marketing has the following benefits: Retaining customers is cheaper than recruiting new ones. It has been estimated that the cost of attracting a new customer may be five times the cost of keeping an existing customer. Regular customers tend to be less expensive to service because they are familiar with the process and require less "education". Loyal customers are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share. Customer loyalty leads to long-term stability and growth: If we have a core of loyal customers, it is much easier to predict revenues, and retaining them will lead to growth and survival. In addition loyal and satisfied customers can be an important source of referrals. They also would recommend your business to others, thus expanding your business. Increased customer retention and loyalty makes the employees jobs easier and more satisfying. In turn, happy employees provide a better customer service. Ability to develop customized marketing offers to suit specific needs of customers

12 INTERNAL MARKETING Internal Marketing (IM) is a process that occurs within an organisation whereby the functional process motivates, aligns, and empowers employees at all management levels to deliver a satisfying customer experience and molding the corporate culture. According to Kotler, Internal Marketing is: Orienting and motivating customer-contact employees and supporting service people to work as a team to provide customer satisfaction. Key Concepts of internal marketing include the following: Alignment of the organisations purpose with employee behavior. Employees internalizing the core values of the organisation. Motivation, reframing and empowerment of employee attitude. Internal Marketing tools Internal Marketing tools are as follows: Internal Newsletters: these can take the form of s, notice boards, or A4 documents with the latest company information Staff magazines: magazines with relevant articles about employees, promotions, achievements, about family, and articles of general interest Staff meetings: between staff and management to discuss issues, to celebrate success and this could be done in an informal way Team-building exercises: these can be particularly important when inducting new employees into the organisation Awards for employees: Employee recognitions and rewards such as employee of the month, gifts for exceptional performance, incentive trips, etc.

13 List of References Kotler, Philip and Gray, Armstrong, (2008) Principles of Marketing Prentice Hall Kotler, Philip and Gray, Armstrong, and Y, Agnihotri, Prafulla and ul Haque, Eshan (2013) Principles of Marketing A south Asian Perspective Prentice Hall Sylvester, GS, (2014) Preliminary Certificate in Marketing Study text