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marketingmania.net
Marketing
(For beginners…..)
Marketing is a societal process
which discerns consumers' wants, focusing on a product or service to fulfil those wants, attempting to move the consumers
toward the products or services offered. Marketing is fundamental to any
businesses growth. The marketing teams (marketers) are tasked to create
consumer awareness of the products or services through marketing techniques.
Unless it pays due attention to its products and services and consumers'
demographics and desires, a business will not usually prosper over time.
Marketing tends to be seen as a
creative industry, which includes advertising, distribution and selling. It
is also concerned with anticipating the customers' future needs and wants,
which are often discovered through market research.
Essentially, marketing is the
process of creating or directing an organization to be successful in selling
a product or service that people not only desire, but are willing to buy.
Therefore good marketing must
be able to create a "proposition" or set of benefits for the end
customer that delivers value through products or services.
Its specialist areas include:
• Advertising and Branding
• Communications
• Database Marketing
• Direct Marketing
• Event organization
• Global Marketing
• International Marketing
• Internet Marketing
• Industrial Marketing
• Market Research
• Public Relations
• Retailing
• Search Engine Marketing
• Marketing Strategy
• Marketing Plan
• Strategic Management
Introduction
A market-focused, or
customer-focused, organization first determines what its potential customers desire, and then builds the product or service.
Marketing theory and practice is justified in the belief that customers use a
product or service because they have a need, or because it provides a
perceived benefit.
Two major factors of marketing
are the recruitment of new customers (acquisition) and the retention and
expansion of relationships with existing customers (base management). Once a
marketer has converted the prospective buyer, base management marketing takes
over. The process for base management shifts the marketer to building a
relationship, nurturing the links, enhancing the benefits that sold the buyer
in the first place, and improving the product/service continuously to protect
the business from competitive encroachments.
For a marketing plan to be
successful, the mix of the four "Ps" must reflect the wants and
desires of the consumers or Shoppers in the target market. Trying to convince
a market segment to buy something they don't want is extremely expensive and
seldom successful. Marketers depend on insights from marketing research, both
formal and informal, to determine what consumers want and what they are willing
to pay for. Marketers hope that this process will give them a sustainable
competitive advantage. Marketing management is the practical application of
this process. The offer is also an important addition to the 4P's theory.
Within most organizations, the activities
encompassed by the marketing function are led by a Vice President or Director
of Marketing. A growing number of organizations, especially large US
companies, have a Chief Marketing Officer position, reporting to the Chief
Executive Officer.
The American Marketing
Association (AMA) states, “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.".
Marketing methods are informed
by many of the social sciences, particularly psychology, sociology, and
economics. Anthropology is also a small, but growing influence. Market
research underpins these activities. Through advertising, it is also related
to many of the creative arts. Marketing is a wide and heavily interconnected
subject with extensive publications. It is also an area of activity infamous
for re-inventing itself and its vocabulary according to the times and the
culture.
Two levels of
marketing
Strategic marketing attempts to determine how an
organization competes against its competitors in a market place. In
particular, it aims at generating a competitive advantage relative to its
competitors.
Operational marketing executes marketing functions to attract
and keep customers and to maximize the value derived for them, as well as to
satisfy the customer with prompt services and meeting the customer
expectations. Operational Marketing includes the determination of the
marketing mix (4 Ps).
Four Ps
In the early 1960's, 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, also at the Harvard
Business School
in the early 1960s, suggested that the Marketing Mix contained 4 elements:
product, price, place and promotion.
In popular usage,
"marketing" is the promotion of products, especially advertising
and branding. However, in professional usage the term has a wider meaning
which recognizes that marketing is customer-centered. Products are often
developed to meet the desires of groups of customers or even, in some cases,
for specific customers. E. Jerome McCarthy divided marketing into four
general sets of activities. His typology has become so universally recognized
that his four activity sets, the Four Ps, have passed into the language.
The four Ps are:
• Product: The product aspects of
marketing deal with the specifications of the actual goods or services, and
how it relates to the end-user's needs and wants. The scope of a product
generally includes supporting elements such as warranties, guarantees, and
support.
• Pricing: This refers to the process
of setting a price for a product, including discounts. The price need not be
monetary - it can simply be what is exchanged for the product or services,
e.g. time, energy, psychology or attention.
• Promotion: This includes advertising,
sales promotion, publicity, and personal selling, branding and refers to the
various methods of promoting the product, brand, or company.
• Placement (or distribution): refers
to how the product gets to the customer; for example, point of sale placement
or retailing. This fourth P has also sometimes been called Place, referring
to the channel by which a product or services is sold (e.g. online vs.
retail), which geographic region or industry, to which segment (young adults,
families, business people), etc.
These four elements are often
referred to as the marketing mix,[1] which a
marketer can use to craft a marketing plan. The four Ps model is most useful
when marketing low value consumer products. Industrial products, services,
high value consumer products require adjustments to this model. Services
marketing must account for the unique nature of services. Industrial or B2B
marketing must 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.
As a counter to this, 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". Nevertheless, the 4 Ps offer a memorable and workable guide
to the major categories of marketing activity, as well as a framework within
which these can be used.
Seven Ps
As well as the
standard four P's (Product, Pricing, Promotion and Place), services marketing
calls upon an extra three, totaling seven and known together as the extended
marketing mix. These are:
• People: Any person
coming into contact with customers can have an impact on overall
satisfaction. Whether as part of a supporting service to a product or
involved in a total service, people are particularly important because, in
the customer's eyes, they are generally inseparable from the total service . As a result of this, they must be appropriately
trained, well motivated and the right type of person. Fellow customers are
also sometimes referred to under 'people', as they too can affect the
customer's service experience, (e.g., at a sporting event).
• Process: This is the process(es) involved in
providing a service and the behaviour of people,
which can be crucial to customer satisfaction.
• Physical evidence:
Unlike a product, a service cannot be experienced before it is delivered,
which makes it intangible. This, therefore, means that potential customers
could perceive greater risk when deciding whether to use a service. To reduce
the feeling of risk, thus improving the chance for success, it is often vital
to offer potential customers the chance to see what a service would be like.
This is done by providing physical evidence, such as case studies, testimonials
or demonstrations.
Four New P's
- Personalization: It is here refered
customization of products and services through the use of the Internet.
Early examples include Dell on-line and Amazon.com, but this concept is
further extended with emerging social media and advanced algorithms.
Emerging technologies will continue to push this idea forward.
- Participation: This is to allow customer to participate
in what the brand should stand for; what should be the product
directions and even which ads to run. This concept is laying the
foundation for disruptive change through democratization of information.
- Peer-to-Peer: This refers to customer networks and
communities where advocacy happens. The historical problem with
marketing is that it is “interruptive” in nature, trying to impose a
brand on the customer. This is most apparent in TV advertising. These
“passive customer bases” will ultimately be replaced by the “active
customer communities”. Brand engagement happens within those
conversations. P2P is now being referred as Social Computing and will
likely to be the most disruptive force in the future of marketing.
- Predictive modeling: This refers to neural network
algorithms that are being successfully applied in marketing problems
(both a regression as well as a classification problem).
-
Product
Scope
- Breadth -- number of product lines in a
range.
- Depth -- number of product items in a
product line.
Steps in product design
- Design and development of product ideas.
- Selection of and sifting through product
ideas.
- Design and testing of product concept.
- Analysis of profitability of product
concept.
- Design and testing of physical product.
Packaging
Requirements of good packaging
- Functional - effectively contain and
protect the contents
- Provide convenience during distribution,
sale, opening, use, reuse, etc.
- Be environmentally responsible
- Be cost effective
- Appropriately designed for target market
- Eye-catching (particularly for
retail/consumer sales)
- Communicate attributes and recommended use
of the product and package
- Compliant with retailers' requirements
- Promotes image of enterprise
- Distinguishable from competitors' products
- Meet legal requirements for product and
packaging
- Point of difference in service and supply
of product.
- For a perfect product, perfect colour.
Forms of packaging
- Specialty packaging — emphasizes the elegant character
of the product
- Packaging for double-use
- Combination packaging two or more products packaged in
the same container
- Kaleidoscopic packaging — packaging changes continually to
reflect a series or particular theme
- Packaging for immediate consumption — to be thrown away after use
- Packaging for resale — packed, into appropriate
quantities, for the retailer or wholesaler
Trademarks
Significance of
a trademark
- Distinguishes one company's goods from
those of another
- Serves as advertisement for quality
- Protects both consumers and manufacturers
- Used in displays and advertising campaigns
- Used to market new products
Requirements of a good trademark
- Reflects products' advantages
- Good, simple language
- Easily pronounced and remembered
- Distinct from names of other products
- Easily added to an existing range
- Easily registered for legal protection
Brands
A brand is a name, term,
design, symbol, or other feature that distinguishes products and services
from competitive offerings. A brand represents the consumers' experience with
an organization, product, or service.
Pricing
Pricing refers to the amount of
money exchanged for a product. This value is determined by utility to the
consumer in terms of money and/or sacrifice that he is prepared to give for
it.
Objectives
- Definite sales volume
- Achieve profit
- Larger market share
- Maintain market share
- Eliminate competition
- Advantages of mass production
Factors influencing price-determination
- Production and distribution costs
- Substitute goods available
- Normal trade practices
- Fixed prices
- Reaction of distributors
- Reaction of consumers
- Nature of demand:
- Form of market:
- Perfect competition
- Monopolistic competition
- Monopoly
- Oligopoly
- philosophy
Steps to determine price
- Determine market share to be captured
- Set up price strategy
- Estimate demand
- Evaluate competitors' reactions
Distribution
Channels
- Manufacturer to consumer (most direct)
- Manufacturer to wholesaler to retailer to
consumer (traditional)
- Manufacturer to agent to retailer to
consumer (current)
- Manufacturer to agent to wholesaler to
retailer to consumer
- Manufacturer to agent to customer (
ex : AMWAY )
Manufacturers
Reasons for
direct selling methods
- Manufacturer wants to demonstrate goods.
- Wholesalers, retailers and agents not
actively selling.
- Manufacturer unable to convince wholesalers
or retailers to stock product.
- High profit margin added to goods by
wholesalers and retailers.
- Middlemen unable to transport.
Reasons
for indirect selling methods
- Manufacturer does not have the financial
resources to distribute goods.
- Distribution channels already established.
- Manufacturer has no knowledge of efficient
distribution.
- Manufacturer wishes to use capital for
further production.
- Too many consumers in a large area;
difficult to reach.
- Manufacturer does not have a wide
assortment of goods to enable efficient marketing.
Wholesalers
Reasons
for using wholesalers
- Bear risk of selling goods to retailer or
consumer
- Storage space
- Decrease transport costs
- Grant credit to retailers
- Able to sell for the manufacturers
- Give advice to manufacturers
- Break down products into smaller quantities
Reasons
for bypassing wholesalers
- Limited storage facilities
- Retailers' preferences
- Wholesaler cannot promote products
successfully
- Development of wholesalers' own brands
- Desire for closer market contact
- Position of power
- Cost of wholesalers' services
- Price stabilisation
- Need for rapid distribution
- Make more money
Ways of
bypassing wholesalers
- Sales offices or branches
- Mail orders
- Direct sales to retailers
- Travelling agents
- Direct Orders
Agents
- Commission agents work for anyone who needs their services.
They do not acquire ownership of goods but receive del
credere commission.
- Selling agents act on an extended contractual basis,
selling all of the products of the manufacturer. They have full
authority regarding price and terms of sale.
- Buying agents buy goods on behalf of producers and
retailers. They have an expert knowledge of the purchasing function.
- Brokers specialize in the sale of one specific
product. They receive a brokerage.
- Factory representatives represent more than one
manufacturer. They operate within a specific area and sell related lines
of goods but have limited authority regarding price and sales terms.
Marketing
communications
Marketing communications breaks
down the strategies involved with marketing messages into categories based on
the goals of each message. There are distinct stages in converting strangers
to customers that govern the communication medium that should be used.
Advertising
- Paid form of public presentation and
expressive promotion of ideas
- Aimed at masses
- Manufacturer may determine what goes into
advertisement
- Pervasive and impersonal medium
Functions and advantages of successful advertising
- Task of the salesman made easier
- Forces manufacturer to live up to conveyed
image
- Protects and warns customers against false
claims and inferior products
- Enables manufacturer to mass-produce
product
- Continuous reminder
- Uninterrupted production a possibility
- Increases goodwill
- Raises standards of living (or perceptions
thereof)
- Prices decrease with increased popularity
- Educates manufacturer and wholesaler about
competitors' offerings as well as shortcomings in their own.
Objectives
- Maintain demand for well-known goods
- Introduce new and unknown goods
- Increase demand for well-known goods
Requirements
of a good advertisement
- Attract attention
- Stimulate interest
- Create a desire
- Bring about action
- Create Awareness
Eight steps in an advertising campaign
- Market research
- Setting out aims
- Budgeting
- Choice of media (TV,newspaper,radio)
- Choice of actors (New Trend)
- Design and wording
- Coordination
- Test results
Personal sales
Oral presentation given by a
salesman who approaches individuals or a group of potential customers:
- Live, interactive relationship
- Personal interest
- Attention and response
Sales promotion
Short-term incentives to
encourage buying of products:
- Instant appeal
- Anxiety to sell
Publicity
- Stimulation of demand through press release
giving a favourable report to a product
- Higher degree of credibility
- Effectively news
- Boosts enterprise's image
Customer focus
Many companies today have a
customer focus (or customer 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 -> Solution
Promotion -> Information
Price -> Value
Place ->Access
The four elements of the SIVA model are:
- Solution: How appropriate is the solution
to the customers problem/need?
- Information: Does the customer know about
the solution, and if so how, who from, do they know enough to let them
make a buying decision?
- Value: Does the
customer know the value of the transaction, what it will cost, what are
the benefits, what might they have to sacrifice, what will be their
reward?
- Access: Where can the customer find the solution?
How easily/locally/remotely can they buy it and take delivery?
This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management
Journal of the American Marketing Association, and presented by them in
Market Leader - the journal of the Marketing Society in the UK.
The model focuses heavily on
the customer and how they view the transaction.
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 a profitable market segment(s) exists 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 (Such
as Nintendo who constantly change the way Video games are played). 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 typically 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.
In an article
entitled "Swarming the shelves: How shops can exploit people's herd
mentality to increase sales", The Economist recently reported a recent
conference in Rome
on the subject of the simulation of adaptive human behavior. Mechanisms to
increase impulse buying and get people "to buy more by playing on the
herd instinct" were shared. The basic idea is that people will buy more
of products that are seen to be popular, and several feedback mechanisms to
get product popularity information to consumers are mentioned, including
smart-cart technology and the use of Radio Frequency Identification Tag
technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to
supermarkets because it can "increase sales without the need to give people
discounts." Large retailers Wal-Mart in the United
States and Tesco in Britain
plan to test the technology in spring 2007 .
Other recent
studies on the "power of social influence" include an
"artificial music market in which some 14,000 people downloaded
previously unknown songs" (Columbia University, New York); a Japanese
chain of convenience stores which orders its products based on "sales
data from department stores and research companies;" a Massachusetts
company exploiting knowledge of social networking to improve sales; and
online retailers who are increasingly informing consumers about "which
products are popular with like-minded consumers" (e.g., Amazon, eBay).
Criticism of
marketing
Some aspects of marketing,
especially promotion, are the subject of criticism. It is especially
problematic in classical economic theory, which is based on the assumption
that supply and demand are independent. However, product promotion is an
attempt coming from the supply side to influence demand. In this way producer
market power is attained as measured by profits that would not be realized
under a free market. Then the argument follows that non-free markets are
imperfect and lead to production and consumption of suboptimal amounts of the
product.
Critics acknowledge that
marketing has legitimate uses in connecting goods and services to the
consumers who want them. Critics also point out that marketing techniques
have been used to achieve morally dubious ends by businesses, governments and
criminals. Critics see a systemic social evil inherent in marketing (see No
Logo, Bill Hicks, Marxism or Commercial Alert). Marketing is accused of
creating ruthless exploitation of both consumers and workers by treating
people as commodities whose purpose is to consume. (see Fashion victim)
Most marketers believe that
marketing techniques themselves are amoral. While it is ethically neutral, it
can be used for negative purposes, such as selling unhealthy food to obese
people or selling SUVs in a time of global warming, but it can also have a
positive influence on consumer welfare.
The Observer’s survey among
1,206 UK
adult consumers in 2001 highlighted some of the stark changes our society has
gone through in the last two decades. This raises a question on the
effectiveness of the CIM’s definition of marketing
(anticipating, identifying and satisfying customer needs profitably), mainly
in consumer marketing. There are similar concerns in industrial markets, also
known as business-to-business or B2B. Industrial market segmentation attempts
to provide some answers.
Core marketing elements such as
segmentation, targeting and positioning are still relevant in the modern (or
post-modern) world. However, they are complex topics that need a high level
of effort, intelligent thinking as well as resources to be implemented
successfully. A definitive statement cannot be made whether the conventional
marketing concept is applicable in today’s environment. Its relevance is very
much situational and depends on many factors such as the product, the
segment, time, location, political and economic conditions and the inner
workings of a company.
However, some scholars such as
Stephen Brown challenge the marketing concept in an extreme language. Their
statements, sometimes unfair, are relevant, which is why Post-Modern
Marketing 2 was chosen as a key reference point for this chapter.
On the one hand Brown makes
positive statements about marketing, e.g. “marketing is endowed with
considerable personal charm and has enjoyed more than its fair share of
conquests” (Brown, 1998:16); and “indeed, the increasing academic attention
that is being devoted to marketing and consumption-related phenomena by
non-business disciplines such as sociology, anthropology and history; far
from being the second-hand rose of the scholarship, marketing is now
something of a fashion leader” (p 17)
On the other hand, he condemns
marketing by saying “marketing has to decide whether to expose its
intellectual nakedness or press itself against the searing heat of
postmodernism” (p 17); and using phrases such as “mid-life crisis” (p 23);
“in decline; failing; anachronistic; being abandoned; no longer appropriate;
in an unprecedented state of crisis; delivered nothing of value; failure;
confusion; misunderstanding; occasional inexplicable hitting of the jackpot”
(p. 21).
This apparent love-hate
relationship is proof in itself that even a skeptics
find it difficult to deny the contribution that marketing has made and can
make to customer satisfaction and economic value. It has contributed to both
customers’ and suppliers’ quality of life by selecting profitable customer
satisfaction as its sole objective. The marketing concept, together with
other business disciplines, helped the UK to make the transition from a
19th-century manufacturing economy to a modern model of success in the
service industry, creating an economic growth period never seen before in the
United Kingdom.[citation needed]
Marketing has helped create
value through customized products, no-questions-asked refund policies,
comfortable cars, environmental attention, shopkeepers’ smile, and guaranteed
delivery dates. Even some government departments address the public not as
‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers.' Of
course all of the above is done for economic or political gain, for better or
worse. Despite all this achievement, to dismiss marketing as a failure is
unfair.
Marketing also helps companies
avoid unnecessary R&D, operational and sales costs by helping to develop
products because customers want them, not for the sake of innovation. Another
success is the now commonly implemented value-pricing principle, whereby a
product or service is sold for the price the customer is willing to pay, not
on a cost-plus basis. This way, both suppliers and customers get a fair deal.
In the context of segmentation,
Brown suggests that “the traditional, linear, step-by-step marketing model of
analysis, planning, implementation and control no longer seems applicable,
appropriate or even pertinent to what is actually happening on the ground”
(p. 23-24). If Mr. Brown had studied “the ground” before making his
statement, he would have realised that companies
are successful the world over precisely because they implement this model.
They segment their markets,
relate their products and services to them, define their value proposition
and serve their customers accordingly. Examples are General Electric, HSBC, PriceWaterhouseCoopers, Smiths Aerospace, BAE Systems,
BOC Edwards, Weir Group and the BT Group to name but a few. A brief visit to
their websites can make this point clear.
Stephen Brown also has a
constructive suggestion: “I reckon we need more passion in marketing, not
less; it is time we banished banishing passion from works of marketing
scholarship” (p. 256). This refers mainly to promotion, which is only one
element within the marketing concept. The truth is that marketing today leads
the way in segmentation, innovation, pricing, product management,
distribution, and last but not least, promotion.
Construction
marketing
Due to increased competition, privatisation and globalisation,
marketing and business development have become increasingly important
functions in all construction organisations.
Marketing research,branding
and public relations are increasingly being seen as vital in a marketplace
typified by sophisticated and demanding clients and customers, and a socially
and environmentally aware general public and media.
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