topic 1 defining marketing for the 21st century

7/30/2019 Topic 1 Defining Marketing for the 21st Century

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X INTRODUCTION

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

IMPORTANCE OF MARKETING

To understand the importance of marketing, it is imperative to be exposed to thescope of marketing, company orientation towards the marketplace andfundamental marketing concepts.

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X DefiningMarketingfor the 21stCentury

LEARNING OUTCOMES

By end of this topic, you should be able to:

1. Discuss the scope of marketing;

2. Discuss competing concepts organizations conducted marketingactivities; and

3. Describe fundamental marketing concepts.


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TOPIC 1 DEFINING MARKETING FOR THE 21ST

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When an agreement is reached, a transaction takes place. A transaction is a tradeof values between two or more parties. Dimensions of transaction:

(i) At least two things of value;

(ii) 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 theproduction of services. The U.S. economy today consists of a 7030 servicesto goods mix.

(c) Events: Marketers promote time-based events such as trade shows, artisticperformances, and the Olympics.

(d) Experiences: By orchestrating several services and goods, a firm can createand 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 attracttourists, factories, and new residents.

(g) Properties: Are intangible rights of ownership of either real property (realestate) or financial property (stocks and bonds).

(h) Organizations: Actively work to build a strong, favourable, and uniqueimage 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 marketersand prospects. A marketer is someone seeking a response (attention, purchase,vote, donation, etc.) from another party called the prospect. Marketers areresponsible for stimulating demand for a companys product. Eight demandstates are possible:


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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) The seller sends goods and services, and communications (throughadvertisements and direct mail) to the market.

(b) In return, they receive money and information (in terms of consumerattitudes and sales data).

(c) 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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X TOPIC 1 DEFINING MARKETING FOR THE 21ST CENTURY6

There are four key customer markets described as follows:

(a) Consumer Markets: Companies selling mass consumer goods and servicessuch as soft drinks and cosmetics, spend a great deal of time trying to

establish a superior brand image. The companies focus on developing asuperior product and packaging, ensuring its availability, and backing itwith engaging communications and reliable service.

(b) Business Markets: Companies selling business goods and services often facewell-trained and well-informed professional buyers who are skilled inevaluating competitive offerings. Business marketers must demonstratehow their products will help the business buyers achieve higher revenue orlower costs through the active role of advertising, sales force, competitiveprice and the companys reputation for reliability and quality.

(c) Global Markets: Companies selling business goods and services in theglobal marketplace face challenges and decisions regarding which countriesto enter, how to enter the country, how to adapt their products/services tothe country, and how to price their products. They have to face differentrequirements for buying, negotiating, owning, and disposing of property;different culture, language, and legal and political systems and a fluctuatecurrency value.

(d) Non-profit and Governmental Markets: Companies selling business goodsand services to non-profit organizations such as, universities, churches,mosques, charitable organizations, or government agencies need to pricecarefully because these organizations have limited purchasing power. Muchgovernment purchasing calls for bids, with the lowest bid being favoured.

COMPANY ORIENTATION TOWARDS THEMARKETPLACE

The competing concepts under which organizations have conducted marketingactivities include; the production concept, product concept, selling concept,marketing concept, and holistic marketing concept.

(a) Production ConceptConsumers will prefer products that are widely available and inexpensive.Managers of production-oriented businesses concentrate on achieving highproduction efficiency, low costs, and mass distribution.

(b) Product ConceptConsumers will favour those products that offer the most quality,performance, or innovative features. Managers focus on making superiorproducts and improving them over time.

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(c) Selling ConceptConsumers and businesses, will ordinarily not buy enough of theorganizations products, therefore, the organization must undertake

aggressive selling and promotion efforts.(d) Marketing Concept

The company is being more effective than competitors in creating,delivering, and communicating superior customer value to its chosen targetmarkets in order to achieve organizational goals.

There are three market orientations:

(i) Reactive market orientationunderstanding and meeting consumersexpressed needs.

(ii) Proactive marketing orientationresearching or imagining latentconsumers needs through a probe-and-learn process.

(iii) Total market orientations companies that practise both a reactiveand proactive marketing orientations.

(e) Holistic Marketing ConceptThis concept is based on the development, design, and implementation ofmarketing programs, processes, and activities that recognise the breath andinterdependencies of their efforts. Holistic marketing recognises thateverything matters with marketing - the consumer, employees, othercompanies, 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 MarketingRelationship marketing has the aim of building mutually satisfyinglong-term relationships with key parties customers, suppliers,

distributors, and other marketing partners

in order to earn andretain their business. Relationship marketing builds strong economic,technical, and social ties among the parties.

Relationship marketing involves cultivating the right kind ofrelationships with the right constituent groups. Marketing must notonly do customer relationship management (CRM), but also partnerrelationship management (PRM). Four key constituents for marketingare 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 aunique company asset called a marketing network. A marketingnetwork consists of the company and its supporting stakeholders(customers, employees, suppliers, distributors, retailers, ad agencies,university scientists, and others) with whom it has built mutuallyprofitable business relationships.

(ii) Integrated MarketingThe marketer's task is to devise marketing activities and assemble

fully integrated marketing programs to create, communicate, anddeliver value for consumers. The marketing program consists ofnumerous decisions on value-enhancing marketing activities to use.Marketing activities come in all forms. One traditional depiction ofmarketing activities is in terms of the marketing mix.

The particular marketing variables under each of the four Ps ofmarketing: product, price, place, and promotion are shown in Figure1.4. Figure 1.5 shows the company preparing an offering mix ofproducts, 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 andthe 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 MarketingInternal marketing is the task of hiring, training, and motivating able

employees who want to serve customers well. Smart marketersrecognise that marketing activities within the company can be asimportant as, or even more so than, marketing activities directedoutside the company.

Internal marketing must take place on two levels. At one level, thevarious marketing functions sales force, advertising, customerservice, product management, marketing research must worktogether. At another level, marketing must be embraced by the otherdepartments; they must also think customer.

(iv) Social Responsibility MarketingHolistic marketing incorporates social responsibility marketing andunderstanding broader concerns and the ethical, environmental, legal,and social contexts of marketing activities and programs. Marketerscarefully consider the role they are playing and could play in terms ofsocial welfare.

FUNDAMENTAL MARKETING CONCEPTS

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

(a) Needs, wants, and demandsNeeds 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 aredirected to specific objects that might satisfy the need.

Wants are shaped by society.

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(a) Use your own words to explain in detail the concepts under whichorganizations have conducted marketing activities.

(b) Using examples, explain in your own words each element in themarketing mix and how these elements might affect what you doin business.

ACTIVITY 1.2


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Demands are wants for specific products backed by an ability to pay. Manypeople want a Mercedes; only a few are willing and able to buy one.

There are five types of needs:

(i) Stated needs (the customer wants an inexpensive car).

(ii) Real needs (the customer wants a car whose operating cost, not itsinitial 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 anonboard navigation system).

(v) Secret needs (the customer wants to be seen by friends as a savvyconsumer).

(b) Target markets, Positioning and SegmentationEvery product or service contains features that a marketer must translateinto benefits for a target market. The consumer perceives these benefits to

be available in a product and directly impacts the perceived ability to meetthe consumer needs or wants.

Marketers break down the market into multiple segments. Segments aregroups of customers with similar needs. Marketers select which segmentsthey will market to, that is which segments they will target. Companies

cannot be all things to all segments and thus must choose which segmentsto target. Marketers focus on specific products or service features for eachsegment based on the segments needs i.e. they position their features as

benefits to match the specific need.

(c) Offering and Brands

(i) Value proposition: a set of benefits they offer to customers to satisfytheir needs.

(ii) Brand: is an offering from a known source.

(d) Value and SatisfactionValue reflects the perceived tangible and intangible benefits and costs tocustomers. Value can be seen as primarily a combination of quality, service,and price, called the "customer value triad." Value increases with qualityand service and decreases with price, although other factors can also playan important role.

Satisfaction reflects a person's comparative judgments resulting from aproduct's perceived performance (or outcome) in relation to his or herexpectations. 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, thecustomer is highly satisfied or delighted.

(e) Marketing ChannelsTo reach a target market, the marketer uses three kinds of marketingchannels.

(i) Communication channels: to deliver and receive messages from targetbuyers, and include newspapers, magazines, radio, television, mail,telephone, billboards, posters, fliers, CDs, audiotapes, and theInternet.

(ii) Distribution channels: to display, sell, or deliver the physical productor service(s) to the buyer or user. They include distributors,

wholesalers, retailers, and agents.

(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 chainThe supply chain describes a longer channel stretching from raw materialsto components to final products that are carried to final buyers. The supplychain represents a value delivery system. Each company captures only acertain percentage of the total value generated by the supply chain.

(g) CompetitionCompetition includes all the actual and potential rival offerings andsubstitutes that a buyer might consider. A broad view of competitionassists the marketer to recognise the levels of competition based onsubstitutability: brand, industry, form, and generic

(h) Marketing environmentCompetition represents only one force in the environment in which themarketer 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 arethe company, suppliers, distributors, dealers, and the target customers.Included in the supplier group are material suppliers and servicesuppliers such as marketing research agencies, advertising agencies,

banking and insurance companies, transportation companies, andtelecommunications companies. Included with distributors and dealersare agents, brokers, manufacturer representatives, and others whofacilitate finding and selling to customers.


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(ii) The broad environment consists of six components: demographicenvironment, economic environment, physical environment,technological environment, political-legal environment, and social-

cultural environment. These environments contain forces that canhave a major impact on the actors in the task environment.

x Marketing can be defined from the social and managerial perspective. Fromthe social perspective, marketing is as societal process by which individuals

and groups obtain what they need and want through creating, offering, andfreely exchanging products and services of value with others.

x From the managerial perspective, marketing is the process of planning andexecuting the conception, pricing, promotion, and distribution of ideas,goods, services to create exchanges that satisfy individual and organizationalgoals.

x There are six alternative concepts that guide organizations in their efforts tocarry out their marketing goals. These concepts are production concept,product concept, selling concept, marketing concept, and holistic marketing

concept.

x Holistic marketing is divided into four components: Internal marketing,Socially responsible marketing, Integrated marketing, and Relationshipmarketing.

SELF-CHECK 1.1

(a) Explain ten types of marketing entities.

(b) Elaborate with example eight demand states.

(c) List five basic markets.

(d) Discuss eight core marketing concepts.


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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 andsegmentation

Value and satisfaction

American Marketing Association (2004).

Gummesson, E. (1999). Total relationship marketing. Boston: Butterworth-Heinemann.

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-ManagerialApproach. 14ed. Homewood, IL: McGraw-Hill Irwin.

Narver , J. C., Slater, S. F., & MacLachlan, D. L. (2004). (Responsive and proactivemarket orientation and new-product success.)Journal of Product InnovationManagement, 21(5), pp. 334-347.

Rayport, J., & Sviokla, J. (1995). Exploring the Virtual Value Chain. HarvardBusiness Review, November December.

Sawhney, M. (2001). Seven Steps to Nirvana. New York: McGraw-Hill.

topic 1 defining marketing for the 21st century

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