Topic

Defining Marketing for the 21st Century

LEARNING OUTCOMES
By end of this topic, you should be able to: 1. p 2. 3. Discuss the scope of marketing; Discuss competing concepts organizations conducted marketing activities; and Describe fundamental marketing concepts.

X INTRODUCTION
People and organizations engage in a vast number of activities that could be called marketing as it is the vital ingredient for business success in the real world. This topic describes marketing practices in the 21st century.

1.1

IMPORTANCE OF MARKETING

To understand the importance of marketing, it is imperative to be exposed to the scope of marketing, company orientation towards the marketplace and fundamental marketing concepts.

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1.2

SCOPE OF MARKETING

The scope of marketing covers what marketing is, how it works, what is marketed and who does the marketing.

1.2.1
(a)

What is Marketing?

There are several definitions of marketing as described below: The American Marketing Association offers the following formal definition: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketing management is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value. A social definition of marketing is that marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering and freely exchanging products and services of value with others .

(b)

(c)

ACTIVITY 1.1
Define in your own words what is marketing from the: (a) Social perspective; and (b) Managerial perspective.

1.2.2

Exchange and Transactions

Exchange is the process of obtaining a desired product from someone by offering something in return. Exchange is a value-creating process because it normally leaves both parties better off. Conditions for exchange: (i) (ii) There are at least two parties; Each party has something that might be of value to the other party;

(iii) Each party is capable of communication and delivery; (iv) Each party is free to accept or reject the exchange offer; and (v) Each party believes it is appropriate or desirable to deal with the other party.

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When an agreement is reached, a transaction takes place. A transaction is a trade of values between two or more parties. Dimensions of transaction: (i) (ii) At least two things of value; Agreed-upon conditions;

(iii) A time of agreement; and (iv) A place of agreement.

1.2.3

What Is Marketed?

There are 10 types of entities in marketing: (a) Goods: Physical goods constitute the bulk of production and marketing efforts. (b) Services: A growing portion of business activities are focused on the production of services. The U.S. economy today consists of a 70 30 services to goods mix. (c) Events: Marketers promote time-based events such as trade shows, artistic performances, and the Olympics. (d) Experiences: By orchestrating several services and goods, a firm can create and market experiences such as Walt Disney Worlds Magic Kingdom. (e) Persons: Celebrity marketing is a major business. (f) Places: Cities, states, regions, and whole nations compete actively to attract tourists, factories, and new residents. (g) Properties: Are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). (h) Organizations: Actively work to build a strong, favourable, and unique image in the minds of their target public. (i) Information: Can be produced and marketed as a product. Schools, universities, and others produce information and then market it. (j) Ideas: Every market offering includes a basic idea. Products and services are platforms for delivering some idea or benefit.

1.2.4

Who Markets?

The 10 types of entities are marketed by skilled individuals known as marketers and prospects. A marketer is someone seeking a response (attention, purchase, vote, donation, etc.) from another party called the prospect. Marketers are responsible for stimulating demand for a companys product. Eight demand states are possible:

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(i) (ii)

Negative demand: consumers dislike the product and may even pay a price to avoid it. Non-existent demand: consumers may be unaware or uninterested in the product.

(iii) Latent demand: consumers may share a strong need that cannot be satisfied by an existing product. (iv) Declining demand: consumers begin to buy the product less frequently or not at all. (v) Irregular demand: consumer purchases vary on a seasonal, monthly, daily, or even an hourly basis.

(vi) Full demand: consumers are adequately buying all products put in the marketplace. (vii) Overfull demand: too many consumers would like to buy the product that can be satisfied. (viii) Unwholesome demand: consumers may be attracted to products that have undesirable social consequences. According to Kotler and Keller (2006), economists describe a market as a collection of buyers and sellers who transact over a particular product or product class. Marketplace is described as a physical place to shop for products in a store. Marketspace is described as a digital place to shop for products on the Internet. Metamarket is described as a cluster of complementary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries. Marketers use the term market to cover various groups of customers. The five basic markets and the connecting flows of the basic markets are shown in Figure 1.1. It states that manufacturers go to resource markets (raw material markets, labour markets, money markets), buy resources and turn them into goods and services, and then sell finished products to intermediaries, who sell them to consumers. Consumers sell their labour and receive money with which they pay for goods and services. The government collects tax revenues to buy goods from resource, manufacturer, and intermediary markets and uses these goods and services to provide public services.

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Figure 1.1: Structure of Flows in a Modern Exchange Economy

Figure 1.2 illustrates the relationship between the industry (a collection of sellers) and the market (a collection of buyers). Sellers and buyers are connected by four flows:

(a) (b) (c)

The seller sends goods and services, and communications (through advertisements and direct mail) to the market. In return, they receive money and information (in terms of consumer attitudes and sales data). The inner loops show there is an exchange of money for goods and services.

(d) The outer loops show there is an exchange of information.

Figure 1.2: A Simple Marketing System

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There are four key customer markets described as follows: (a) Consumer Markets: Companies selling mass consumer goods and services such as soft drinks and cosmetics, spend a great deal of time trying to establish a superior brand image. The companies focus on developing a superior product and packaging, ensuring its availability, and backing it with engaging communications and reliable service. Business Markets: Companies selling business goods and services often face well-trained and well-informed professional buyers who are skilled in evaluating competitive offerings. Business marketers must demonstrate how their products will help the business buyers achieve higher revenue or lower costs through the active role of advertising, sales force, competitive price and the companys reputation for reliability and quality. Global Markets: Companies selling business goods and services in the global marketplace face challenges and decisions regarding which countries to enter, how to enter the country, how to adapt their products/services to the country, and how to price their products. They have to face different requirements for buying, negotiating, owning, and disposing of property; different culture, language, and legal and political systems and a fluctuate currency value. Non-profit and Governmental Markets: Companies selling business goods and services to non-profit organizations such as, universities, churches, mosques, charitable organizations, or government agencies need to price carefully because these organizations have limited purchasing power. Much government purchasing calls for bids, with the lowest bid being favoured.

(b)

(c)

(d)

1.3

COMPANY ORIENTATION TOWARDS THE MARKETPLACE

The competing concepts under which organizations have conducted marketing activities include; the production concept, product concept, selling concept, marketing concept, and holistic marketing concept. (a) Production Concept Consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. Product Concept Consumers will favour those products that offer the most quality, performance, or innovative features. Managers focus on making superior products and improving them over time.

(b)

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(c)

Selling Concept Consumers and businesses, will ordinarily not buy enough of the organizations products, therefore, the organization must undertake aggressive selling and promotion efforts. Marketing Concept The company is being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets in order to achieve organizational goals. There are three market orientations: (i) (ii) Reactive market orientationunderstanding and meeting consumers expressed needs. Proactive marketing orientationresearching or imagining latent consumers needs through a probe-and-learn process.

(d)

(iii) Total market orientations companies that practise both a reactive and proactive marketing orientations. (e) Holistic Marketing Concept This concept is based on the development, design, and implementation of marketing programs, processes, and activities that recognise the breath and interdependencies of their efforts. Holistic marketing recognises that everything matters with marketing - the consumer, employees, other companies, competition, as well as society as a whole. Figure 1.3 provides a schematic overview of four broad themes characterizing holistic marketing.

Figure 1.3: Holistic Marketing Dimensions

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(i)

Relationship Marketing Relationship marketing has the aim of building mutually satisfying long-term relationships with key parties customers, suppliers, distributors, and other marketing partners in order to earn and retain their business. Relationship marketing builds strong economic, technical, and social ties among the parties. Relationship marketing involves cultivating the right kind of relationships with the right constituent groups. Marketing must not only do customer relationship management (CRM), but also partner relationship management (PRM). Four key constituents for marketing are customers, employees, marketing partners (channels, suppliers, distributors, dealers, agencies), and members of the financial community (shareholders, investors, analysts). The ultimate outcome of relationship marketing is the building of a unique company asset called a marketing network. A marketing network consists of the company and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies, university scientists, and others) with whom it has built mutually profitable business relationships.

(ii)

Integrated Marketing The marketer's task is to devise marketing activities and assemble fully integrated marketing programs to create, communicate, and deliver value for consumers. The marketing program consists of numerous decisions on value-enhancing marketing activities to use. Marketing activities come in all forms. One traditional depiction of marketing activities is in terms of the marketing mix. The particular marketing variables under each of the four Ps of marketing: product, price, place, and promotion are shown in Figure 1.4. Figure 1.5 shows the company preparing an offering mix of products, services, and prices, and utilizing a communications mix of advertising, sales promotion, events and experiences, public relations, direct marketing, and personal selling to reach the trade channels and the target customers. The four components of the marketing mix (Figure 1.4):

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Figure 1.4: Marketing Mix Components

Figure 1.5: Marketing-mix Strategy

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(iii) Internal Marketing Internal marketing is the task of hiring, training, and motivating able employees who want to serve customers well. Smart marketers recognise that marketing activities within the company can be as important as, or even more so than, marketing activities directed outside the company. Internal marketing must take place on two levels. At one level, the various marketing functions sales force, advertising, customer service, product management, marketing research must work together. At another level, marketing must be embraced by the other departments; they must also think customer. (iv) Social Responsibility Marketing Holistic marketing incorporates social responsibility marketing and understanding broader concerns and the ethical, environmental, legal, and social contexts of marketing activities and programs. Marketers carefully consider the role they are playing and could play in terms of social welfare.

ACTIVITY 1.2
(a) (b) Use your own words to explain in detail the concepts under which organizations have conducted marketing activities. Using examples, explain in your own words each element in the marketing mix and how these elements might affect what you do in business.

1.4

FUNDAMENTAL MARKETING CONCEPTS

A core set of concepts, which creates the foundation for marketing management and a holistic marketing orientation, is described below:

(a)

Needs, wants, and demands Needs are basic human requirements. People need food, air, water, clothing, and shelter to survive. People also have strong needs for recreation, education, and entertainment. These needs become wants when they are directed to specific objects that might satisfy the need. Wants are shaped by society.

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Demands are wants for specific products backed by an ability to pay. Many people want a Mercedes; only a few are willing and able to buy one. There are five types of needs: (i) (ii) Stated needs (the customer wants an inexpensive car). Real needs (the customer wants a car whose operating cost, not its initial price, is low).

(iii) Unstated needs (the customer expects good service from the dealer). (iv) Delight needs (the customer would like the dealer to include an onboard navigation system). (v) Secret needs (the customer wants to be seen by friends as a savvy consumer).

(b)

Target markets, Positioning and Segmentation Every product or service contains features that a marketer must translate into benefits for a target market. The consumer perceives these benefits to be available in a product and directly impacts the perceived ability to meet the consumer needs or wants. Marketers break down the market into multiple segments. Segments are groups of customers with similar needs. Marketers select which segments they will market to, that is which segments they will target. Companies cannot be all things to all segments and thus must choose which segments to target. Marketers focus on specific products or service features for each segment based on the segments needs i.e. they position their features as benefits to match the specific need.

(c)

Offering and Brands (i) (ii) Value proposition: a set of benefits they offer to customers to satisfy their needs. Brand: is an offering from a known source.

(d) Value and Satisfaction

Value reflects the perceived tangible and intangible benefits and costs to customers. Value can be seen as primarily a combination of quality, service, and price, called the "customer value triad." Value increases with quality and service and decreases with price, although other factors can also play an important role. Satisfaction reflects a person's comparative judgments resulting from a product's perceived performance (or outcome) in relation to his or her expectations. If the performance falls short of expectations, the customer is

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dissatisfied and disappointed. If the performance matches the expectations, the customer is satisfied. If the performance exceeds expectations, the customer is highly satisfied or delighted.

(e)

Marketing Channels To reach a target market, the marketer uses three kinds of marketing channels. (i) Communication channels: to deliver and receive messages from target buyers, and include newspapers, magazines, radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the Internet. Distribution channels: to display, sell, or deliver the physical product or service(s) to the buyer or user. They include distributors, wholesalers, retailers, and agents.

(ii)

(iii) Service channels: to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks, and insurance companies that facilitate transactions.

(f)

Supply chain The supply chain describes a longer channel stretching from raw materials to components to final products that are carried to final buyers. The supply chain represents a value delivery system. Each company captures only a certain percentage of the total value generated by the supply chain. Competition Competition includes all the actual and potential rival offerings and substitutes that a buyer might consider. A broad view of competition assists the marketer to recognise the levels of competition based on substitutability: brand, industry, form, and generic Marketing environment Competition represents only one force in the environment in which the marketer operates. The marketing environment consists of: (i) The task environment includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are the company, suppliers, distributors, dealers, and the target customers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation companies, and telecommunications companies. Included with distributors and dealers are agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers.

(g)

(h)

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(ii)

The broad environment consists of six components: demographic environment, economic environment, physical environment, technological environment, political-legal environment, and socialcultural environment. These environments contain forces that can have a major impact on the actors in the task environment.

SELF-CHECK 1.1
(a) (b) (c) (d) Explain ten types of marketing entities. Elaborate with example eight demand states. List five basic markets. Discuss eight core marketing concepts.

Marketing can be defined from the social and managerial perspective. From the social perspective, marketing is as societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others. From the managerial perspective, marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, services to create exchanges that satisfy individual and organizational goals. There are six alternative concepts that guide organizations in their efforts to carry out their marketing goals. These concepts are production concept, product concept, selling concept, marketing concept, and holistic marketing concept. Holistic marketing is divided into four components: Internal marketing, Socially responsible marketing, Integrated marketing, and Relationship marketing.

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Customer concept Marketing Marketing channels Marketing concept Needs, wants, and demands Offering and brands Production concept

Product concept Selling concept Societal marketing concept Supply chain Target markets, positioning and segmentation Value and satisfaction

American Marketing Association (2004). Gummesson, E. (1999). Total relationship marketing. Boston: ButterworthHeinemann. Kotler, P., & Keller, K. (2006). Marketing management. Upper Saddle River, NJ: Merrill Prentice Hall. McCarthy, E. J., & Perreault, W. D. (2002). Basic Marketing : A Global-Managerial Approach. 14ed. Homewood, IL: McGraw-Hill Irwin. Narver , J. C., Slater, S. F., & MacLachlan, D. L. (2004). (Responsive and proactive market orientation and new-product success.) Journal of Product Innovation Management, 21(5), pp. 334-347. Rayport, J., & Sviokla, J. (1995). Exploring the Virtual Value Chain. Harvard Business Review, November December. Sawhney, M. (2001). Seven Steps to Nirvana. New York: McGraw-Hill.