Marketing is the study and management of exchange relationships. 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."
Marketing includes virtually all customer related activities a business carries out, from developing a product consumers will enjoy, to attracting customers, to maintaining a customer base, to serving and satisfying the customer.
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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." The term developed from the original meaning which referred literally to going to market with goods for sale. From a Sales process engineering perspective, marketing is "a set of processes that are interconnected and interdependent with other functions" of a business aimed at achieving customer interest and satisfaction.
The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably." A similar concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value. 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."
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, allowing numerous universities to offer Master-of-Science (MSc) programs.
The process of marketing is that of bringing a product to market. As such, the steps include, broad market research; market targeting and market segmentation; determining distribution, pricing and promotion strategies; developing a communications strategy; budgeting; and visioning long-term market development goals. Many parts of the marketing process (e.g. product design, Art direction, Brand management, advertising, Copywriting etc.) involve use of the creative arts.
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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.
These four elements are often referred to as the marketing mix, 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):
- Industrial or B2B marketing would need to 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.
- Services marketing would need to account for the unique nature of services. In order to recognize the different aspects of selling services, as opposed to Products, some authors advocate Seven Ps for service industries: Process - the way in which orders are handled, customers are satisfied and the service is delivered. Physical Evidence - is tangible evidence of the service customers will receive (for example a holiday brochure). People - the people meeting and dealing with the customers.
- Some authors cite a further P - Packaging - this is thought by many to be part of Product, but in certain markets (Japan, China for example) and with certain products (perfume, cosmetics) the packaging of a product has a greater importance - maybe even than the product itself.
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, over which a firm holds little control
- The micro-environment, over which a firm holds a greater amount (though not necessarily total) control
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:
- Customers/consumers
- Employees
- Suppliers
- The Media
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.
The Marketing Research Process
Marketing research spans a number of stages, including:
- Define the problem
- Develop a research plan
- Collect the data
- Interpret data into information
- Disseminate information formally in the form of a report
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.
The purposes of market segmentation
Market segmentation is conducted for two main purposes, including:
- - A better allocation of a firm's finite resources
- - To better serve the more diversified tastes of contemporary Western consumers
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
The steps of segmentation are Segment, Target, Position (abbreviated STP).
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:
- Geographical (a country, region, city, town, etc.)
- Psychographic (e.g. personality traits or character traits which influence consumer behaviour)
- Demographic (e.g. age, gender, socio-economic class, education, etc.)
- Behavioural (e.g. brand loyalty, usage rate, etc.)
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:
- - Discernable - how a segment can be differentiated from other segments.
- - Accessible - how a segment can be accessed via Marketing Communications produced by a firm
- - Measurable - can the segment be quantified and its size determined?
- - Profitable - can a sufficient return on investment be attained from a segment's servicing?
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:
- Undifferentiated - where a company produces a like product for all of a market segment
- Differentiated - in which a firm produced slight modifications of a product within a segment
- Niche - in which an organisation forges a product to satisfy a specialised target market
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:
- Live, interactive relationship
- Personal interest
- Attention and response
- Interesting presentation
- Clear and thorough.
Sales promotion
Short-term incentives to encourage buying of products:
- Instant appeal
- Anxiety to sell
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:
- Interviews
- Speeches/Presentations
- Corporate literature, such as financial statements, brochures, etc.
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:
- Mission Statement
- Corporate Objectives
- Marketing Audit
- SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis
- Assumptions arising from the Audit and SWOT analysis
- Marketing objectives derived from the assumptions
- An estimation of the expected results of the objectives
- Identification of alternative plans/mixes
- Budgeting for the marketing plan
- A first-year implementation program
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 (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 use 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.
A formal approach to this customer-focused marketing is known as SIVA (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 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.
- 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, desktop advertising or online marketing. It 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, custom media and reality marketing.
- The use of herd behavior in marketing.
Marketing is also used to promote business' products and is a great way to promote the business.
Source of the article : Wikipedia
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