Topic 1 Defining Marketing for the 21st Century

Under topic one, we will compare between the Old and New Economy and look at some of the major changes that has come about in the way marketing is being carried out and its impact on consumers as well as business practices. Comparisons in; 

• The Digital Revolution & New Capabilities
• Marketing Tasks
• Scope of Marketing
• Marketing Decisions
• Marketing Concepts & Tools
• Marketing Orientation towards the Market place
• How Business & Marketing are changing
• Marketing Management

Introduction

“The future is not ahead of us. It has already happened. Unfortunately, it is unequally distributed among companies, industries, and nations.”  Philip Kotler on Marketing

Marketing have evolved over the years with changes in ways business and marketing is being conducted and marketers in the age of technology have to keep pace with the changes that is taking place.

Let us look at the Old Economy and the New Economy and see the changes and trends.

The Old Economy

In the old economy marketing seem so simple based on the Industrial Revolution and on managing industries. Certain principles and practices were applied such as;

• Products were standardized in order to bring down costs - Manufacturers aim was to sell as many product as they can and expand their markets. There were mass productions and marketers have to sell regardless of customers preferences and views.

• Markets were continually expanded to achieve economies of scale

• Policies and procedures were replicated in every geographical market

The New Economy

The new economy is based on the digital revolution. Businesses are operating in a globalized economy where technology is bringing changes and based on the Digital Revolution;

• Things moving at a nanosecond pace,
• Markets are characterized by hyper competition,
• New technologies challenging businesses
• Management of Information
• Consumer empowerment adopted by businesses

The Digital revolution has placed new capabilities in the hands of consumers and business. Today’s CONSUMERS have the following;

A substantial increase in buying power - With the availability of information and easy accessibility to market information on production information, consumers can easily purchase products any time and anywhere with the use of modern technology and the digital revolution.

A greater variety of available goods and services - Consumer can access and find any product with the use of technology by using search engines online.

A greater amount of information about practically anything

Today’s COMPANIES have the following new set of capabilities;

Operate powerful new information and sales channel with augmented geographical reach to inform and promote their business & products.

• Collect fuller and richer information about markets, customers, prospects, and competitors.
• Facilitate and speed up internal communication among their employees.
• Have two-way communication with customers and prospects
• Able to send ads, coupons, samples, and information to customers.
• Customize offerings and services to individual customers.
• Improve purchasing, recruiting, training, and internal and external communication.

• Substantially improve logistics and operations for substantial cost savings while improving accuracy and service quality.

How will Marketing Impact Under the New Forces?

“Will e-commerce change everything – or just add another small sales channel? The Internet is not just another sales channel. It will transform your business. The future company will operate with a digital nervous system.” Bill Gates, Chairman of Microsoft.

The Marketing Tasks

Effective Marketing can take many forms. There will be a constant tension between the formulated side of marketing and the creative side. It is easier to learn the formulated side, which will occupy most of our attention but we will also describe how real creativity and passion operate in many companies.

Three Stages through which Marketing Practice might pass;

1. Entrepreneurial Marketing – Companies started by individuals who live by their wits. They visualize and opportunity and knock on every door to gain attention. e.g. Jim Koch, founder of Boston Beer Company.
2. Formulated Marketing – Small companies achieve success and inevitably move toward a more formulated marketing. Boston Beer now spend considerable sum on TV advertising.
3. Intrepreneurial Marketing – Companies get stuck in formulated marketing. These companies lack creativity & passion as those from entrepreneurial stage.

The Scope of Marketing

Marketing is typically seen as the task of creating, promoting, and delivering goods and services to consumers and businesses. Marketers should be skilled in stimulating demand for company’s products, demand management, level, timing & composition to meet organization’s objectives. Marketing people are involved in marketing ten types of entities;

1. Goods - Physical goods
2. Services - Production of Services, e.g. hotels, barber etc.
3. Experiences - A firm create stage & market experience
4. Events - Promotion of time-based events e.g. Olympics. In Papua New Guinea, the South Pacific Games have been promoted extensively by the Government of PNG through the relevant government agency and just look around the city of Port Moresby and you can see advertisements, billboards, flags, posters put up to promote the games.
5. Persons - Celebrity marketing is a major business. Have you ever wonder how certain actor or sport personality getting all the front page news and stories in the media? Someone is doing a good job of keeping them in public view. That is marketing. You can think of other ways that marketers promote or market certain people.
6. Places - (Places, Cities, Region, or whole nation)
7. Properties - (Intangible rights of ownership e.g. property/stocks
8. Organizations - (Favourable images of an organization)
9. Information - (Information produced & marketed as products
10. Ideas - (Ideas for new products/invention)

 

The Decisions Marketers make:

Marketing Managers face a host of decisions from major ones to minor ones

Major Decisions;

• What product features to design on new product?
• How many sales people to hire?
• How much to spend on advertising?

Minor Decisions;

• The exact wording to use.
• The type of colour for new packaging

Questions & Decisions vary in importance to different marketplace. Consider the four markets;

Consumer Markets - Companies selling mass consumer goods & services such as soft drinks, toothpaste, television & airlines who spend a great deal of time trying to establish a superior brand image.

Decisions – Features, Quality level, distribution coverage, promotion expenditures etc. to be number 1 or 2 in their target market. 

Business Markets - Companies selling business goods and services face well-trained and well informed professional buyers who are skilled in evaluating competitive offering.

Decisions – The usefulness of the products to their consumers, What type of advertisements to be used, reliability & quality features etc.

Global Markets - Companies selling goods and services in the global marketplace face additional decisions and challenges.

Decisions – Decide which country to enter, How to enter a country, How to adapt their product and services features to each country, How to price their products, How to adapt their communication to suit the country cultural practices etc. of a particular country, Political & economic environment of a country.

Non Profit or Government Markets - Companies selling their goods to non profit organizations such as church, charitable organizations, universities or government agencies.

 

Decision – Decide on pricing given the purchasing power of these organizations, lower price affects quality and features of products etc.

The Marketing Concepts and Tools

Definition: Marketing is concerned with the notion of exchange relationships between two or more parties where one party desires something and the other party desires something else the first party has.

Marketing deals with identifying and meeting human and social needs. (Meeting needs profitably).

American Marketing Association offers the following definition:

“Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals”

Core Marketing Concepts

1. Target Markets and Segmentation
2. Marketplace, Market space & Meta market
3. Marketers and Prospects
4. Needs, Wants, and Demands
5. Product, Offering, and Brand
6. Value and Satisfaction
7. Exchange and Transactions
8. Relationships and Networks
9. Marketing Channels
10. Supply Chain
11. Competition
12. Marketing Environment
13. Marketing Program

 

Target Markets and Segmentation - Market segmentation can be identified by examining demographic, psychographic, and behavioural differences among buyers.

The marketer then decides which segments present the greatest opportunity – which are its target markets. From the target market the firm develops a market offering.

Marketplace, Market space and Meta market:

Markets cover various grouping of customers;

Need markets, Product markets,

Demographic markets, Geographic markets, Labour markets, Donor markets etc.

Marketers and Prospects - A marketer is someone seeking a response from another party called the prospect. If two parties are seeking to sell something to each other, we call them both marketers.

Needs, Wants, and Demands - A need occurs when there is a difference between a consumer’s current state and his/her desired state. Needs are the driving force behind all purchases whereby needs are translated into wants.

Wants are desires for specific satisfiers of needs whereas needs can be satisfied through a wide range of wants. A want becomes demand when a consumer has not only the inclination, but also the financial resources to make a purchase. Kotler argues that Needs, Wants and Demand are at the heart of any exchange.

Product, Offering and Brand - Product is anything (goods, services and ideas) offered for sale or exchange which may satisfy a need or a want. Offering is a intangible value proposition made physical by an offering and can be a combination of products, services, information and experiences. Brand is an offering from a known source.

Value and Satisfaction - The offering will be successful if it delivers value and satisfaction to the target buyer. Value is the consumer’s estimate of the product’s overall ability to satisfy his/her needs. High Value leads to high satisfaction and vice versa, therefore if the consumers are satisfied an exchange takes place.

Exchange and Transactions - Exchange is the core concept of marketing and it is the process of obtaining a desired product from someone by offering something in return. Transaction – Trade of values between two or more parties. Remember; there are at least 2 parties and each party has something of value to the other party.

Relationships and Networks - Aim at building mutually satisfying long-term relationship with key parties (customers, suppliers, distributors) in order to earn and retain their business.

Marketing Network – Consists of the company and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies, university scientists and others) with whom a company has built mutually profitable business relationships. Note: Profit follows an effective network of relationship.

Marketing Channels  - Three Types

Communication Channels – Deliver and receive messages from target buyers (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 services to the buyer or user. (Distributors, wholesalers, retailers and agents).

Service Channels – To carry out transactions with potential buyers (warehouse, transportation companies, banks, insurance etc.).

Supply Chain - Describes a longer channel stretching from raw materials to components to final product that are carried to final buyers. The Supply Chain represents a value delivery system.

Competition (4 level of Competition) – Includes all the actual and potential rival offerings and substitutes that a buyer might consider. Brand Competition; Industry Competition; Form Competition and Generic Competition.

 

Marketing Environment ( Task Environment and Broad Environment)

Task Environment – Includes the immediate actors involved in producing, distributing, and promoting the offering. Main actors are the company, suppliers, distributors, dealers and the target customers.

Broad Environment – Consist of six components; Demographic environment, Economic environment, Natural environment, Technological environment, political-legal environment, and Social-cultural environment.

Marketing Program - Marketer’s task is to build a marketing program or plan to achieve the company desired objectives. Marketing program consists of marketing Mix – Product, Price, Promotion and Place (4 Ps).

 

Market Orientation Towards The Market Place.

What philosophy should guide a company's marketing effort?

There are six competing concepts under which organizations conduct marketing activities and these are; 1. Production concept; 2. Product concept; 3. Selling concept; 4. Marketing concept; 5. Customer concept; 6. Social marketing concept.

The Production Concept – (Make lots of them and sell them cheaply). The production concept holds that consumers will prefer products that are widely available and inexpensive.

The Product Concept – Quality Products. (If we built it, customers will buy it from us). The product concept holds that consumers will favour those products that offer the most quality, performance, or innovative features.

Selling Concept – The selling concept holds that consumers and businesses if left alone, will ordinarily not buy enough of the organization’s product. (If we shout loudly & aggressively, customer will buy from us).

Marketing Concept – The marketing concept holds that the key to achieving its organizational goals consist of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. (Right product for your customers).

The Customer Concept – The ability of a company to deal with customers.  Customer relationship marketing. (Value the customer).

The Societal Marketing Concept

–Potential conflicts among consumer wants, consumer interests and long run societal welfare.  (Environment deterioration, resource shortage, population growth, poverty etc.).

 

How Business and Marketing are Changing;

Customers – Expect higher quality and service and some customization

Brand Manufacturers – Facing intense competition from domestic and foreign brand

Retailers – Small retailers are succumbing to the growing power of giant retailers.

Company Responses and Adjustments

• Re engineering – reorganizing by key processes
• Outsourcing – others doing the job for you
• E-Commerce – making products available on the internet
• Benchmarking – Studying world class performers
• Alliances – forming networks of partner firms
• Partner-suppliers – using few and reliable suppliers
• Market-centred – organizing by market segment
• Global & Local – from local to both (local & global)
• Decentralized – encouraging initiatives at local levels
• Customer Relationship Marketing – long term relationship
• Customer lifetime value – making profit by managing lifetime customer
• Customer Share – building customer share
• Target Marketing – Serving well defined target markets
• Customization – individualized and customized offering
• Customer Database – Building a rich database on individual customers
• Integrated Marketing Communication – Blending several tools of communication
• Channels as Partners – Delivering value to final customer

Marketing Management

Marketing Management encapsulates the activities undertaken by marketing managers and that is to build a marketing program or plan to achieve the company’s desired objectives. Organizations must first identify the target markets, determine their needs and wants, and then be more effective than their competitors in combining the elements of Product, Price, Place and Promotion (The four P’s) to satisfy the needs and wants of their customers. The four P’s represents a sellers view of the marketing tools available for influencing buyers.

Marketing Management is the process of;

• planning and executing the conception,
• pricing,
• promotion and distribution of ideas,
• goods and services to create exchanges
• satisfy individual and organisational goals

Summary

With major societal forces such as technological advances, globalization, and deregulation, new behavior and challenges are being faced by marketers and company’s are responding and adjusting to these challenges.

Successful  companies will be those who can keep their marketing changing with the changes in their marketplace and market space.

The End

Source: Philip Kotler (2003) Marketing Management 11th Edition