• People have different needs & wants. Marketing exist to address
people’s needs & wants. • It is about making customers want to buy the products of a particular business. • It looks at reasons behind people’s decisions, such as the price & the product’s features. • Making the needs & wants of customers is particularly important for businesses aiming to make a profit. The marketing department of an organization tends to have four main or generic objectives; 1. Ensure that the right products are supplied to fulfill the needs & wants of customers. 2. Set the correct price so that customers can afford to buy the products (and to ensure that they don’t buy from rival business). 3. Distribute (or place) the products conveniently for customers to buy the product. 4. Ensure that there is adequate & effective promotion to convince customers to buy the firm’s products. • There is no single universally accepted definition of the term marketing because it is a complex process & differs from one type of organization to another. • For example, the marketing objectives & strategies of charitable & non-profit organizations differ from those of large multinational companies. • A widely used and accepted definition of marketing is: The management process involved in identifying, anticipating & satisfying consumer requirements profitably. This definition is commonly used as it covers the various roles of marketing; 1. Marketing is a management process, so it requires people to take responsibility for decision-making. 2. Marketing involves identifying the needs & wants of customers. This can be done through marketing research & data analysis. 3. Marketing involves anticipating or predicting what customers might want in the future. 4. Price, availability & quality are essential factors that customers consider when assessing the value for money. 5. Marketing is about earning profit. Prices must cover the costs of production. All organizations must ensure that the benefits of their marketing outweigh the costs. • Marketing is fundamental to the success of a business as it affects the sales & profits of the organization. • However, marketing alone does not ensure success, it’s relationship with other business functions should be considered; 1) Operations management. The production department works closely with the marketers in using sales forecasts (from market research) to prepare their production schedules. These departments also work directly with each other to research, develop and launch products to meet the changing needs of customers. There may, however be some conflict between the two departments as production managers may prefer a longer time period in which to test and develop products whereas marketing managers may urge for a quick launch to maximize sales revenues. Delays in launching a product not only means lost sales but can also be damaging to the organization’s corporate image. 2) Finance and accounts. The marketing department works closely with the finance department to set appropriate budgets. Again, there can be conflict between these departments. Marketers might wish to exceed their budget to get maximum marketing exposure. However the finance team wants all departments to work within their allocated budgets. The finance department would want prices to cover costs of production to generate a profit for the organization. However, marketers might feel that low prices (that do not necessarily cover all costs) are necessary for some products in the short term to get established in the market. Marketers might also use extended credit facilities (interest-free repayment plans) to entice customers. However, the finance department will be aware that extended credit can lead to liquidity problems. Hence, both departments need to work collaboratively to strike a balance between their potentially conflicting interests. 3) Human resources (HR). Marketing data can help the HR department to identify staffing needs. For example, the introduction of a new product might require hiring extra production staff & sales personnel. The HR department’s role is to ensure the business has the right quantity & quality of workers through effective workforce planning to meet the wants and needs of its customers. Marketing Goods & Services • There are similarities & differences in the marketing of goods & services. • For example, both use promotion to build brand recognition, brand awareness and trust. The differences between the marketing of goods & services include the following characteristics: 1) Intangibility: Whilst goods are tangible (physical), services are intangible. • Marketers face a challenge to communicate the benefits of the service, e.g why should customers use a particular hair salon? The choice is based largely on trust. • By contrast, marketers tend to have less challenges selling a physical product with tangible attributes that customers can inspect before buying. 2) Inseparability: Services are consumed at the time of purchase, e.g bus ride or watching a movie at the cinema. • Inseparability means it is not possible to separate the production & consumption of a service. • Marketers strive to ensure the staff are well trained at providing outstanding & consistent customer services. 3) Heterogeneity: It is common to mass produce standardized (homogenous) goods such as smartphones, books or soft drinks. • However, services are heterogenous because the experience is different for different customers. • It customers experience poor customer service, they are likely to opt to use the services provided by other providers. 4) Perishability: Unlike goods, services cannot be stored. • Each bus or cinema seat that is empty means a loss in potential revenues to the businesses. • Coca-Cola is mass produced & stored in warehouses before distribution to wholesalers & retailers so can be marketed using international marketing strategies. 5) Product Strategy: Many businesses provide value-added services to attract customers. • Supermarkets and fast food restaurants in many parts of the world offer a free delivery service. • Service companies also have to decide on whether their offerings will be standardized or customized. 6) Price Strategy: As people are a fundamental aspect of marketing services, the cost and hence the price can be quite high. • A challenge for marketers is to get the right pricing strategy for a service that appeals to customers, cover costs of production & generates profit for the business. • The pricing decision depends on the source of value to customers, e.g lawyers & surgeons provide highly specialized services that would be reflected in the price. • Some service providers base their pricing strategy on time spent on providing the service whilst others base it on the level of skills required to provide the service. 7) Promotional Strategy: Promoting a service can be a challenge for marketers as it is intangible. • Businesses often use the physical environment to promote their services (hotels, gyms, schools) so that customers can visualize the quality of the service being provided. • Other common promotional strategies include the use of branding, slogans, logos & celebrity endorsements. 8) Place Strategy: The location decision is vital for the marketing of services – customers are unlikely to visit restaurants or banks in highly inconvenient or remote locations. • By contrast, most goods can be ordered online so the location decision is less important provided there are effective distribution channels to deliver the products to customers. Market & Product Orientation A. Market orientation is a marketing approach used by businesses that are outward looking. • They focus on making products that they can sell, rather than selling products that they can make. • Market orientation focuses on the customer in order to identify, design, develop & supply products that meet their needs & wants. • Such information can be gathered from market research.(setting price) • Market research & analyses are therefore central to a market orientation approach. If the needs & wants of customers are ignored, businesses are likely to become uncompetitive, with devastating results in the long term. Market orientation means that businesses do not worry about the costs of doing things for the customer; instead, they consider the costs of not doing these things. The two main advantages to a business in being market oriented are: 1) Greater flexibility. Businesses can respond quickly to changes in the market as they have access to relevant data & information about customers. Market oriented businesses are also more able to anticipate changing market trends & hence prepare for such changes. 2) Lower risk. Market oriented businesses can be more confident that their products will sell & be more successful. Without proper market research & analysis, the cost of marketing a product is much more likely to be a gamble. The main disadvantage of market orientation is that market research can be expensive. In addition, given the dynamic nature of the business environment & the uncertainty of the future, there is no guarantee that this approach will work. Whether a business adopts a product orientated or market orientated approach depends on several factors including: 1) The market. Producers of hi-tech products, such as smartphones, tend to start of as product orientated businesses. In mass consumer markets, a more market orientated approach tends to be adopted. 2) Organizational culture. Businesses that believe customers are the key stakeholder (i.e the customers are always right) are more likely to be market orientated. 3) Barriers to entry. Businesses without much competition tend to be less focused. Such organizations have market power in pricing & distribution decisions so can be more product orientated. B. Product orientation is a marketing approach adopted by businesses that are inward looking. • They focus on selling products that they make, rather than making products that they can sell. • Many hi-tech products that are used in daily life were created using product orientation. • Creative & innovative products are launched onto the market & customers will be tempted to buy these. • Not all products are successful. The usual result is that product orientation is hit-and-miss, i.e producers are not really sure if the products will sell. • Many product oriented businesses today concentrate on producing high quality products. • The belief is that customers are willing to pay a higher price for exclusivity & luxury products. • Product orientated businesses generally supply products that they specialize in (Ferrari sports cars). The main advantages of product orientation are that quality can be assured & the business has more control over its operations. Also by being innovative, product orientation can give organizations a competitive advantage or a unique selling point (USP). However, since the needs of the market are ignored, there is a high failure rate of businesses that use this marketing approach. Hence, the strategy tends to be high risk, especially due to frequent changes in fashion & tastes. The money spent on research and development of products without taking the customer into consideration, often proves costly. Commercial Marketing & Social Marketing • Commercial marketing is the use of marketing strategies to meet the needs & wants of customers in a profitable way. • Unlike social marketing, commercial marketing is largely value free, i.e ethics play a small role, if any at all. • Commercial marketing is about providing what customers want, when they want it and where they want it. • Commercial marketing aims to reap the private benefits of marketing such products (increased revenues & market share). • The Social Marketing Institute defines social marketing as “the planning & implementation of programs designed to bring about social change using concepts from commercial marketing”. • Social marketing is therefore the use of mainstream marketing methods to achieve the benefits of social change, such as informing the public about the dangers of under-age drinking. • Social marketing is similar to commercial marketing in that all forms of marketing aim to influence action. • Philip Kotler defined social marketing as any activity that seeks to influence social behavior to benefit the target audience & society as a whole. • The challenge facing social marketers is getting people to change their customary behavior. • The clients of social marketing agencies tend to be non-profit organizations & government organizations. • However, companies that believe in corporate social responsibility also use social marketing such as sponsoring events in the local community. • NPOs tend to focus on promoting the image or cause of the organization for its long-term survival. • Market research has an important role in social marketing. For example, to change people’s behavior, marketers must discover people’s perceptions of the issue or problem in question. • This helps to determine the actions that might be taken to deal with the social problem. • Process is also an important part of social marketing. For example, it must be convenient for people to donate money to charity, perhaps by credit card or online payments. • Charities and pressure groups in many countries have also managed to persuade governments to give tax benefits to those who donate money to charitable organizations. • When considering pricing decisions in social marketing, marketers tend to refer to the net benefits (the difference between the benefits & the costs of taking action). • If people believe that the benefits are greater than the costs, then social marketers are more likely to achieve their objectives. The main differences between social marketing & commercial marketing include: 1) Purpose. The intention of commercial marketing is selling physical goods & intangible services for a profit. Social marketing aims to influence or persuade a desired change in social behavior or attitudes. 2) Benefits. Commercial marketing exists to satisfy individual needs & wants, and thus reaps for the business. Social marketing, if successful satisfies the needs & desires of the general public, & thus reaps benefits for communities. 3) Main users. Commercial marketing is used mainly by private sector businesses (although many social marketing campaigns use aspects of commercial marketing strategies). Social marketing is used mainly by the government & non-governmental organizations (NGOs). The Market • A market is a place or process whereby customers & suppliers trade. • A market exists where there is demand for a particular product (laptops) & where there is a willingness from businesses to supply these products. • Customers can be private individuals, other businesses or the government. • Markets that cater for private individuals (the general public) are known as consumer markets, while those that cater for organizations (businesses & governments) are known as industrial markets or producer markets. • Within any particular market, there is likely to be a number of substitute products & suppliers that can be used to satisfy the needs & wants of the consumer. Managers are interested in the characteristics of the market in which their business operates. These characteristics include: 1) Market size. Markets differ in their size as measured by sales revenue. • International trade & globalization has meant that the size of a market is not confined to the domestic market. 2) Customer base. As an alternative measure of market size, this refers to the total potential number of customers in a particular market. • The internet has also broadened the customer base for many businesses around the world. 3) Barriers to entry. These are obstacles that determine the number of suppliers in the market. 4) Competition. This refers to the degree of rivalry within a particular market. 5) Geographic characteristics. Some markets focus on a particular area, country, or region. 6) Demographic characteristics. Characteristics of consumers include differences in gender, age, ethnicity & religion. • Marketers can then target their promotional strategies towards these demographic groups. 7) Market growth rate. Market growth refers to an increase in the size of a market per period of time, usually a year. • It can be measured by an increase in the value or volume of sales in the market. • It is usually expressed as a percentage change to indicate the extent of market growth. • Market growth is likely to lead to more suppliers entering the market as they attracted by the potential profits. 8) Seasonal & cyclical characteristics. Some markets are constrained by seasonal factors. Market Share • Market share refers to the organization’s portion of the total value of sales revenue within a specific industry. • It is measured by expressing the organization’s sale revenue as a percentage of the total sales revenue in the industry, per time period. There is a positive relationship between market share & profits, although the business with the largest market share is not necessarily the most profitable. High market share has other benefits such as the status enjoyed from being a dominant market player & the ability to gain a range of economies of scale. Such businesses are known as market leaders. In general, businesses with high market share (market leaders) have better price-setting ability & are less threatened by competition. Hence, a common objective of established businesses is to increase their market share by: 1. Promotion of their brands. 2. Product development, improvements & innovation. 3. Motivation & training of the workforce to deliver better customer services. 4. Establishing property rights (the use of trademarks, patents & copyrights). 5. Use of more efficient channels of distribution. Market concentration measures the degree of competition that exists within a market by calculating the market share of the largest few firms in the industry, i.e those with market leadership. The sum of these market shares is known as the concentration ratio. Example: • An industry with a 3-firm concentration ratio of 98% means that the top three firms have a combined market share of 98%. • Hence, this would not be a very competitive industry, as all other businesses would account for just 2% of the total sales revenue of the industry. In reality, most industries within a country are dominated by a few large businesses with a market leadership. Each dominant firm accounts for a large proportion of the industry’s overall sales revenues. Some businesses grow so large that they are able to maintain market leadership on a global scale. However, calculating market share is not always a straightforward task (transport industry). Sales data are often out of date, so many market share information will represent a historical situation & not necessarily signify the current position. Marketing Objectives • Marketing objectives are the specific marketing goals of an organization. The marketing objectives of for-profit organizations include: 1. Increased sales revenue. 2. Higher market share. 3. Increased market leadership. 4. Improved product and brand awareness. 5. Developing new products. 6. Enhanced brand perception (product positioning). Most definitions of marketing apply to activities that aim to generate profit for a business. This does not necessarily apply to non-profit organizations (NPOs) such as charities & government departments. The objectives of social marketing is not primarily profit related, but include: 1) To build membership (support) & to connect with new donors. 2) To generate awareness of the NPO’s cause. 3) To improve brand recognition of the NPO. 4) To create positive attention to the NPO’s operations. 5) To demonstrate the value of the NPO to the local community or society in general. Marketing in NPOs tends to be more informative rather than being persuasive. Marketing Strategies & Changes in Customer Preferences • The most successful global businesses evolve their organization & marketing strategies to suit changes in customer preferences. • Market trends often change rapidly with some in decline & others enjoying high growth rates. • Even if market research reveals certain customer preferences, they can change without warning. • Nevertheless, having insight into their customers’ preferences & buying habits, & how those preferences & habits might change over time, is essential to remain competitive in the market. There are many variables that cause businesses to change their marketing strategies. Some of the changes are implemented due to ineffective marketing strategies that don’t appeal to changing customer preferences whilst others are caused by changes in the external business environment. Reasons why marketing strategies evolve include the following: 1) Changing consumer tastes. 2) Shorter product life cycles. 3) Internet & mobile technologies. 4) Competitive rivalry. 5) Globalization. Go over the role of marketing & CUEGIS concepts in the book!