The Scope of Marketing (not owned)

8/13/2019 The Scope of Marketing (not owned)

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The Scope of Marketing

(This portion is lifted from the book Marketing Management, 14th Edition by Philip Kotler)

The Scope of Marketing

To prepare to be a marketer, you need to understand what marketing is, how it works, who does it, and what ismarketed.

What Is Marketing?

Marketing is about identifying and meeting human and social needs. One of the shortest good definitions ofmarketing is meeting needs profitably. When e!ay recogni"ed that people were unable to locate some of theitems they desired most, it created an online auction clearinghouse. When I#$% noticed that people wantedgood furnishings at substantially lower prices, it created knockdown furniture. These two firms demonstratedmarketing sa&&y and turned a pri&ate or social need into a profitable business opportunity.

The %merican Marketing %ssociation offers the following formal definition'Marketing is the activity, set ofinstitutions, and processes for creating, communicating, delivering, and exchanging offerings that have value

for customers, clients, partners, and society at large.( )oping with these e*change processes calls for a

considerable amount of work and skill.Marketing management takes place when at least one party to a potentiale*change thinks about the means of achie&ing desired responses from other parties. Thus we see marketingmanagement as the art and science of choosing target markets and getting, keeping, and growing customersthrough creating, delivering, and communicating superior customer value.

We can distinguish between a social and a managerial definition of marketing. % social definition shows the rolemarketing plays in society+ for e*ample, one marketer has said that marketings role is to deli&er a higherstandard of li&ing. -ere is a social definition that ser&es our purpose'Marketing is a societal process by whichindividuals and groups obtain what they need and want through creating, offering, and freely exchanging

products and services of value with others.

Managers sometimes think of marketing as the art of selling products, but many people are surprised whenthey hear that selling is not the most important part of marketing /elling is only the tip of the marketingiceberg. 0eter 1rucker, a leading management theorist, puts it this way' There will always, one can assume, beneed for some selling. !ut the aim of marketing is to make selling superfluous. The aim of marketing is to knowand understand the customer so well that the product or ser&ice fits him and sells itself. Ideally, marketingshould result in a customer who is ready to buy. %ll that should be needed then is to make the product or ser&icea&ailable.2

When 3intendo designed its Wii game system, when )anon launched its $40- digital camera line, and whenToyota introduced its 0rius hybrid automobile, these manufacturers were swamped with orders because they haddesigned the right product, based on doing careful marketing homework.

What Is Marketed?


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Marketers market 56 main types of entities' goods, ser&ices, e&ents, e*periences, persons, places, properties,organi"ations, information, and ideas. 4ets take a 7uick look at these categories.

8OO1/ 0hysical goods constitute the bulk of most countries production and marketing efforts. $ach year, 9./companies market billions of fresh, canned, bagged, and fro"en food products and millions of cars, refrigeratorstele&isions, machines, and other mainstays of a modern economy.

/$:;I)$/ %s economies ad&ance, a growing proportion of their acti&ities focuses on the production ofser&ices. The 9./. economy today produces a (6to>goods mi*. /er&ices include the work ofairlines, hotels, car rental firms, barbers and beauticians, maintenance and repair people, and accountants,bankers, lawyers, engineers, doctors, software programmers, and management consultants. Many marketofferings mi* goods and ser&ices, such as a fast>food meal.

$;$3T/ Marketers promote time>based e&ents, such as maor trade shows, artistic performances, and company

anni&ersaries. 8lobal sporting e&ents such as the Olympics and the World )up are promoted aggressi&ely toboth companies and fans.

$@0$:I$3)$/ !y orchestrating se&eral ser&ices and goods, a firm can create, stage, and market e*periences.Walt 1isney Worlds Magic #ingdom allows customers to &isit a fairy kingdom, a pirate ship, or a hauntedhouse. There is also a market for customi"ed e*periences, such as a week at a baseball camp with retiredbaseball greats, a four>day rock and roll fantasy camp, or a climb up Mount $&erest.A

0$:/O3/ %rtists, musicians, )$Os, physicians, high>profile lawyers and financiers, and other professionals allget help from celebrity marketers.56 /ome people ha&e done a masterful ob of marketing themsel&esB1a&id!eckham, Oprah Winfrey, and the :olling /tones. Management consultant Tom 0eters, a master at self>branding, has ad&ised each person to become a brand.

04%)$/ )ities, states, regions, and whole nations compete to attract tourists, residents, factories, and companyhead7uarters.55 0lace marketers include economic de&elopment specialists, real estate agents, commercialbanks, local business associations, and ad&ertising and public relations agencies. The 4as ;egas )on&ention C

;isitors %uthority succeeded with its pro&ocati&e ad campaign, What -appens -ere, /tays -ere, portraying4as ;egas as an adult playground. In the recession of D662, howe&er, con&ention attendance declined.)oncerned about its potentially out>of>step racy reputation, the %uthority took out a full>pageBusinessWeek adto defend its ability to host serious business meetings. 9nfortunately, the D66A summer bo* office blockbusterTXangover, set in a debauched 4as ;egas, likely did not help the city position itself as a choice business andtourist destination.5D

0:O0$:TI$/ 0roperties are intangible rights of ownership to either real property Ereal estateF or financialproperty Estocks and bondsF. They are bought and sold, and these e*changes re7uire marketing. :eal estate


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agents work for property owners or sellers, or they buy and sell residential or commercial real estate.In&estment companies and banks market securities to both institutional and indi&idual in&estors.

O:8%3IG%TIO3/ Organi"ations work to build a strong, fa&orable, and uni7ue image in the minds of theirtarget publics. In the 9nited #ingdom, Tescos $&ery 4ittle -elps marketing program reflects the foodmarketers attention to detail in e&erything it does, within the store and in the community and en&ironment. The

campaign has &aulted Tesco to the top of the 9# supermarket chain industry. 9ni&ersities, museums,performing arts organi"ations, corporations, and nonprofits all use marketing to boost their public images andcompete for audiences and funds.

I3HO:M%TIO3 The production, packaging, and distribution of information are maor industries.5=Information is essentially what books, schools, and uni&ersities produce, market, and distribute at a price toparents, students, and communities. The former )$O of /iemens Medical /olutions 9/%, Tom Mc)ausland,says, our productJ is not necessarily an @>ray or an M:I, but information. Our business is really health careinformation technology, and our end product is really an electronic patient record' information on lab tests,pathology, and drugs as well as &oice dictation.5K

I1$%/ $&ery market offering includes a basic idea. )harles :e&son of :e&lon once obser&ed' In the factorywe make cosmetics+ in the drugstore we sell hope. 0roducts and ser&ices are platforms for deli&ering some ideaor benefit. /ocial marketers are busy promoting such ideas as Hriends 1ont 4et Hriends 1ri&e 1runk and %Mind Is a Terrible Thing to Waste.

Who Markets?

M%:#$T$:/ %31 0:O/0$)T/ % marketer is someone who seeks a responseBattention, a purchase, a&ote, a donationBfrom another party, called the prospect. If two parties are seeking to sell something to eachother, we call them both marketers.

Marketers are skilled at stimulating demand for their products, but thats a limited &iew of what they do. Lust asproduction and logistics professionals are responsible for supply management, marketers are responsible fordemand management. They seek to influence the le&el, timing, and composition of demand to meet theorgani"ations obecti&es. $ight demand states are possible'

5 1 Negative demandB)onsumers dislike the product and may e&en pay to a&oid it.D ! Nonexistent demandB)onsumers may be unaware of or uninterested in the product.= " Latent demandB)onsumers may share a strong need that cannot be satisfied by an e*istingproduct.K 4 Declining demandB)onsumers begin to buy the product less fre7uently or not at all. # Irregular demandB)onsumer purchases &ary on a seasonal, monthly, weekly, daily, or e&en hourlybasis.N $ Full demandB)onsumers are ade7uately buying all products put into the marketplace.


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( % Overfull demandBMore consumers would like to buy the product than can be satisfied.2 & Unwholesome demandB)onsumers may be attracted to products that ha&e undesirable socialconse7uences.

In each case, marketers must identify the underlying causeEsF of the demand state and determine a plan of actionto shift demand to a more desired state.

M%:#$T/ Traditionally, a market was a physical place where buyers and sellers gathered to buy and sellgoods. $conomists describe a market as a collection of buyers and sellers who transact o&er a particular productor product class Esuch as the housing market or the grain marketF.

Hi&e basic markets and their connecting flows are shown in Higure 5.5.Manufacturers go to resource marketsEraw material markets, labor markets, money marketsF, buy resources and turn them into goods and ser&ices,and sell finished products to intermediaries, who sell them to consumers. )onsumers sell their labor and recei&emoney with which they pay for goods and ser&ices. The go&ernment collects ta* re&enues to buy goods from

resource,manufacturer, and intermediary markets and uses these goods and ser&ices to pro&ide public ser&ices.$ach nations economy, and the global economy, consists of interacting sets of markets linked through e*changeprocesses.

Marketers use the term market to co&er &arious groupings of customers. They &iew sellers as constituting theindustry and buyers as constituting the market. They talk about need markets Ethe diet>seeking marketF, productmarkets Ethe shoe marketF, demographic markets Ethe youth marketF, and geographic markets Ethe )hinesemarketF+ or they e*tend the concept to co&er &oter markets, labor markets, and donor markets, for instance.

Higure 5.D shows the relationship between the industry and the market. /ellers and buyers are connected by fourflows. /ellers send goods and ser&ices and communications such as ads and direct mail to the market+ in returnthey recei&e money and information such as customer attitudes and sales data. The inner loop shows ane*change of money for goods and ser&ices+ the outer loop shows an e*change of information.


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#$ )9/TOM$: M%:#$T/ )onsider the following key customer markets' consumer, business, global, andnonprofit.

Consumer Markets )ompanies selling mass consumer goods and ser&ices such as uices, cosmetics, athleticshoes, and air tra&el spend a great deal of time establishing a strong brand image by de&eloping a superiorproduct and packaging, ensuring its a&ailability, and backing it with engaging communications and reliableser&ice.

Business Markets )ompanies selling business goods and ser&ices often face well>informed professional buyersskilled at e&aluating competiti&e offerings. !usiness buyers buy goods to make or resell a product to others at aprofit. !usiness marketers must demonstrate how their products will help achie&e higher re&enue or lower costs%d&ertising can play a role, but the sales force, the price, and the companys reputation may play a greater one.

lo!al Markets )ompanies in the global marketplace must decide which countries to enter+ how to enter eachEas an e*porter, licenser, oint &enture partner, contract manufacturer, or solo manufacturerF+ how to adaptproduct and ser&ice features to each country+ how to price products in different countries+ and how to designcommunications for different cultures. They face different re7uirements for buying and disposing of property+cultural, language, legal and political differences+ and currency fluctuations. et, the payoff can be huge.

Non"rofit and overnmental Markets )ompanies selling to nonprofit organi"ations with limited purchasing


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power such as churches, uni&ersities, charitable organi"ations, and go&ernment agencies need to price carefully.4ower selling prices affect the features and 7uality the seller can build into the offering. Much go&ernmentpurchasing calls for bids, and buyers often focus on practical solutions and fa&or the lowest bid in the absenceof e*tenuating factors.5

M%:#$T04%)$/, M%:#$T/0%)$/, %31 M$T%M%:#$T/ The marketplace is physical, such as a store

you shop in+ the marketspace is digital, as when you shop on the Internet.5N 3orthwestern 9ni&ersitys Mohan/awhney has proposed the concept of a metamarket to describe a cluster of complementary products andser&ices closely related in the minds of consumers, but spread across a di&erse set of industries.

Metamarkets are the result of marketers packaging a system that simplifies carrying out these relatedproductPser&ice acti&ities. The automobile metamarket consists of automobile manufacturers, new and used cardealers, financing companies, insurance companies, mechanics, spare parts dealers, ser&ice shops, automaga"ines, classified auto ads in newspapers, and auto sites on the Internet.

% car buyer will engage many parts of this metamarket, creating an opportunity formetamediaries to assist himor her in mo&ing seamlessly through them. $dmunds Ewww.edmunds.comF lets a car buyer find the statedfeatures and prices of different automobiles and easily click to other sites to search for the lowest>price dealerfor financing, accessories, and used cars. Metamediaries also ser&e other metamarkets, such as home ownershipparenting and baby care, and weddings.5(

'ore Marketing 'oncepts

To understand the marketing function, we need to understand the following core set of concepts.

3eeds, Wants, and 1emands

eeds are the basic human re7uirements such as for air, food, water, clothing, and shelter. -umans also ha&estrong needs for recreation, education, and entertainment. These needs become wants when they are directed tospecific obects that might satisfy the need. % 9./. consumer needs food but may want a 0hilly cheesesteak andan iced tea. % person in %fghanistan needs food but may want rice, lamb, and carrots.Wants are shaped by oursociety.

!emands are wants for specific products backed by an ability to pay. Many people want a Mercedes+ only a feware able to buy one. )ompanies must measure not only how many people want their product, but also how manyare willing and able to buy it.

These distinctions shed light on the fre7uent criticism that marketers create needs or marketers get people tobuy things they dont want. Marketers do not create needs' 3eeds pre>e*ist marketers. Marketers, along withother societal factors, influence wants. They might promote the idea that a Mercedes would satisfy a persons


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need for social status. They do not, howe&er, create the need for social status.

/ome customers ha&e needs of which they are not fully conscious or that they cannot articulate. What does itmean when the customer asks for a powerful lawn mower or a peaceful hotel? The marketer must probefurther. We can distinguish fi&e types of needs'

A 1 /tated needs EThe customer wants an ine*pensi&e car.F56 ! :eal needs EThe customer wants a car whose operating cost, not initial price, is low.F55 " 9nstated needs EThe customer e*pects good ser&ice from the dealer.F5D 4 1elight needs EThe customer would like the dealer to include an on board 80/ na&igation system.F5= # /ecret needs EThe customer wants friends to see him or her as a sa&&y consumer.F

:esponding only to the stated need may short change the customer.52 )onsumers did not know much aboutcellular phones when they were first introduced, and 3okia and $ricsson fought to shape consumer perceptionsof them. To gain an edge, companies must help customers learn what they want.

Target Markets, 0ositioning, and /egmentation

3ot e&eryone likes the same cereal, restaurant, college, or mo&ie. Therefore, marketers start by di&iding themarket into segments. They identify and profile distinct groups of buyers who might prefer or re7uire &aryingproduct and ser&ice mi*es by e*amining demographic, psychographic, and beha&ioral differences amongbuyers.

%fter identifying market segments, the marketer decides which present the greatest opportunitiesB which areits target markets. Hor each, the firm de&elops a market offeringthat itpositions in the minds of the target buyersas deli&ering some central benefitEsF. ;ol&o de&elops its cars for buyers to whom safety is a maor concern,positioning its &ehicles as the safest a customer can buy.

Offerings and !rands

)ompanies address customer needs by putting forth a ale proposition, a set of benefits that satisfy thoseneeds. The intangible &alue proposition is made physical by an offering,which can be a combination ofproducts, ser&ices, information, and e*periences.

% brand is an offering from a known source. % brand name such as Mc1onalds carries many associations inpeoples minds that make up its image' hamburgers, cleanliness, con&enience, courteous ser&ice, and goldenarches. %ll companies stri&e to build a brand image with as many strong, fa&orable, and uni7ue brandassociations as possible.


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;alue and /atisfaction

The buyer chooses the offerings he or she percei&es to deli&er the most value, the sum of the tangible andintangible benefits and costs to her. ;alue, a central marketing concept, is primarily a combination of 7uality,ser&ice, and price E7spF, called the customer value triad. ;alue perceptions increase with 7uality and ser&ice butdecrease with price.

We can think of marketing as the identification, creation, communication, deli&ery, and monitoring of customer&alue. "atisfaction reflects a persons udgment of a products percei&ed performance in relationship toe*pectations. If the performance falls short of e*pectations, the customer is disappointed. If it matchese*pectations, the customer is satisfied. If it e*ceeds them, the customer is delighted.

Marketing )hannels

To reach a target market, the marketer uses three kinds of marketing channels.#ommunication channels deli&erand recei&e messages from target buyers and include newspapers, maga"ines, radio, tele&ision, mail, telephone,billboards, posters, fliers, )1s, audiotapes, and the Internet. !eyond these, firms communicate through the lookof their retail stores and Web sites and other media. Marketers are increasingly adding dialogue channels such ase>mail, blogs, and toll>free numbers to familiar monologue channels such as ads.

The marketer uses distribution channels to display, sell, or deli&er the physical product or ser&iceEsF to the

buyer or user. These channels may be direct &ia the Internet, mail, or mobile phone or telephone, or indirectwith distributors, wholesalers, retailers, and agents as intermediaries.

To carry out transactions with potential buyers, the marketer also usesservice channels that include warehousestransportation companies, banks, and insurance companies. Marketers clearly face a design challenge inchoosing the best mi* of communication, distribution, and ser&ice channels for their offerings.

/upply )hain

The supply chain is a longer channel stretching from raw materials to components to finished products carriedto final buyers. The supply chain for coffee may start with $thiopian farmers who plant, tend, and pick thecoffee beans, selling their har&est to wholesalers or perhaps a Hair Trade cooperati&e. If sold through thecooperati&e, the coffee is washed, dried, and packaged for shipment by an %lternati&e Trading Organi"ationE%TOF that pays a minimum of Q5.DN a pound. The %TO transports the coffee to the de&eloping world where itcan sell it directly or &ia retail channels. $ach company captures only a certain percentage of the total &aluegenerated by the supply chains &alue deli&ery system. When a company ac7uires competitors or e*pandsupstream or downstream, its aim is to capture a higher percentage of supply chain &alue.


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)ompetition

)ompetition includes all the actual and potential ri&al offerings and substitutes a buyer might consider. %nautomobile manufacturer can buy steel from 9./. /teel in the 9nited /tates, from a foreign firm in Lapan or#orea, or from a minimill such as 3ucor at a cost sa&ings, or it can buy aluminium for certain parts from %lcoato reduce the cars weight, or engineered plastics from /audi !asic Industries )orporation E/%!I)F instead ofsteel. )learly, 9./. /teel would be thinking too narrowly about its competition if it thought only of otherintegrated steel companies. In the long run, 9./. /teel is more likely to be hurt by substitute products than byother steel companies.

Marketing $n&ironment

The marketing en&ironment consists of the task en&ironment and the broad en&ironment. The task environment

includes the actors engaged in producing, distributing, and promoting the offering. These are the company,suppliers, distributors, dealers, and target customers. In the supplier group are material suppliers and ser&icesuppliers, such as marketing research agencies, ad&ertising agencies, banking and insurance companies,transportation companies, and telecommunications companies. 1istributors and dealers include agents, brokers,manufacturer representati&es, and others who facilitate finding and selling to customers.

The broad environment consists of si* components' demographic en&ironment, economic en&ironment, social>cultural en&ironment, natural en&ironment, technological en&ironment, and political>legal en&ironment.Marketers must pay close attention to the trends and de&elopments in these and adust their marketing strategies

as needed. 3ew opportunities are constantly emerging that await the right marketing sa&&y and ingenuity.

The *e+ Marketing ealities

We can say with some confidence that the marketplace isnt what it used to be. It is dramatically different

from what it was e&en 56 years ago.

Maor /ocietal Horces

Today, maor, and sometimes interlinking, societal forces ha&e created new marketing beha&iors, opportunities,and challenges. -ere are 5D key ones.

o Network information technolog#$ The digital re&olution has created an Information %ge that promises


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to lead to more accurate le&els of production, more targeted communications, and more rele&ant pricing.o lo!ali%ation$ Technological ad&ances in transportation, shipping, and communication ha&e made iteasier for companies to market in, and consumers to buy from, almost any country in the world.International tra&el has continued to grow as more people work and play in other countries.o Deregulation$ Many countries ha&e deregulated industries to create greater competition and growthopportunities. In the 9nited /tates, laws restricting financial ser&ices, telecommunications, and electricutilities ha&e all been loosened in the spirit of greater competition.o &rivati%ation$ Many countries ha&e con&erted public companies to pri&ate ownership and management

to increase their efficiency, such as the massi&e telecom company TelefRnica )T) in )hile and theinternational airline !ritish %irways in the 9nited #ingdom.o 'eightened com"etition$ Intense competition among domestic and foreign brands raises marketing costsand shrinks profit margins. !rand manufacturers are further buffeted by powerful retailers that market theirown store brands. Many strong brands ha&e become megabrands and e*tended into a wide &ariety of relatedproduct categories, presenting a significant competiti&e threat.o Industr# convergence$ Industry boundaries are blurring as companies recogni"e new opportunities at theintersection of two or more industries. The computing and consumer electronics industries are con&erging,for e*ample, as %pple, /ony, and /amsung release a stream of entertainment de&ices from M0= players toplasma T;s and camcorders. 1igital technology fuels this massi&e con&ergence.D5o (etail transformation$ /tore>based retailers face competition from catalog houses+ direct mail firms+

newspaper, maga"ine, and T; direct>to>customer ads+ home shopping T;+ and e>commerce. In response,entrepreneurial retailers are building entertainment into their stores with coffee bars, demonstrations, andperformances, marketing an e*perience rather than a product assortment. 1icks /porting 8oods hasgrown from a single bait>and>tackle store in !inghamton, 3ew ork, into a =66>store sporting goods retailerin =6 states. 0art of its success springs from the interacti&e features of its stores. )ustomers can test golfclubs in indoor ranges, sample shoes on its footwear track, and shoot bows in its archery range.DDo Disintermediation$ The ama"ing success of early dot>coms such as %O4, %ma"on.com, ahoo, e!ay,$ST:%1$, and others created disintermediation in the deli&ery of products and ser&ices by inter&ening inthe traditional flow of goods through distribution channels. These firms struck terror into the hearts ofestablished manufacturers and retailers. In response, traditional companies engaged inreintermediation andbecame brick>and>click retailers, adding online ser&ices to their offerings. /ome became stronger

contenders than pure>click firms, because they had a larger pool of resources to work with and establishedbrand names.o Consumer !u#ing "ower$ In part, due to disintermediation &ia the Internet, consumers ha&e substantiallyincreased their buying power. Hrom the home, office, or mobile phone, they can compare product prices andfeatures and order goods online from anywhere in the world DK hours a day, ( days a week, bypassinglimited local offerings and reali"ing significant price sa&ings. $&en business buyers can run areverseauction in which sellers compete to capture their business. They can readily oin others to aggregate theirpurchases and achie&e deeper &olume discounts.o Consumer information$ )onsumers can collect information in as much breadth and depth as they wantabout practically anything. They can access online encyclopedias, dictionaries, medical information, mo&ieratings, consumer reports, newspapers, and other information sources in many languages from anywhere in

the world. 0ersonal connections and user>generated content thri&e on social media such as Hacebook, HlickrEphotosF, 1el.icio.us ElinksF, 1igg Enews storiesF, Wikipedia Eencyclopedia articlesF, and ouTube E&ideoF.D=/ocial networking sitesBsuch as 1ogster for dog lo&ers, Trip%d&isor for ardent tra&elers, and Moterus forbikersBbring together consumers with a common interest. %t )ar/pace.com auto enthusiasts talk aboutchrome rims, the latest !MW model, and where to find a great local mechanic.DKo Consumer "artici"ation$ )onsumers ha&e found an amplified &oice to influence peer and publicopinion. In recognition, companies are in&iting them to participate in designing and e&en marketingofferings to heighten their sense of connection and ownership. )onsumers see their fa&orite companies asworkshops from which they can draw out the offerings they want.o Consumer resistance$ Many customers today feel there are fewer real product differences, so they showless brand loyalty and become more price> and 7uality>sensiti&e in their search for &alue, and less tolerant


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about undesired marketing. % ankelo&ich study found record le&els of marketing resistance fromconsumers+ a maority reported negati&e opinions about marketing and ad&ertising and said they a&oidproducts they feel are o&er marketed. D

3ew )ompany )apabilities

These maor societal forces create comple* challenges for marketers, but they ha&e also generated a new set ofcapabilities to help companies cope and respond.

o Marketers can use the Internet as a "owerful information and sales channel$The Internet augmentsmarketers geographical reach to inform customers and promote products worldwide. % Web site can listproducts and ser&ices, history, business philosophy, ob opportunities, and other information of interest. InD66N, a Montgomery, %labama, flea market gained national popularity when owner /ammy /tephenss rap>style ad&ertisement spread &irally through the Internet. )reated for Q5,66, the ad&ertisement was &iewedmore than 566,666 times on ouTube and landed /tephens on The $llen !e%eneres "how. /tephens now

sells T>shirts, ring tones, and other branded merchandise through his Web site, ad&ises retailers aboutad&ertising, and hosts hundreds of &isitors from all o&er the world at his store each month.DNo Marketers can collect fuller and richer information a!out markets) customers) "ros"ects)andcom"etitors$ Marketers can conduct fresh marketing research by using the Internet to arrange focus groups,send out 7uestionnaires, and gather primary data in se&eral other ways. They can assemble informationabout indi&idual customers purchases, preferences, demographics, and profitability. The drugstore chain);/ uses loyalty>card data to better understand what consumers purchase, the fre7uency of store &isits, andother buying preferences. Its $*tra)are program netted an e*tra =6 million shoppers and Q5D billion a yearin re&enue across K,666 stores.D(o Marketers can ta" into social media to am"lif# their !rand message$Marketers can feed informationand updates to consumers &ia blogs and other postings, support online communities, and create their own

stops on the Internet superhighway. 1ell )orporations 1ellOutlet Twitter account has more than N66,666followers. !etween D66( and Lune D66A, 1ell took in more than QD million in re&enue from couponspro&ided through Twitter, and another Q5 million from people who started at Twitter and went on to buy anew computer on the companys Web site.D2o Marketers can facilitate and s"eed external communication among customers$ Marketers can alsocreate or benefit from online and offline bu"" through brand ad&ocates and user communities. Word>of>mouth marketing agency !""%gent has assembled a nationwide &olunteer army of N66,666 consumers whooin promotional programs for products and ser&ices they deem worth talking about.DA In D66, 1unkin1onuts hired !""%gent to help launch a new espresso be&erage, 4atte 4ite. Three thousand trained&olunteers Ecalled !""%gentsF in 5D test markets e*perienced the 4atte 4ite, formed their opinions, engagedin natural con&ersations about the product, and reported back to !""%gent &ia the companys reporting

interface. %fter four weeks, product sales had increased by more than 5 percent in test markets.=6o Marketers can send ads) cou"ons) sam"les) and information to customers who have re*uested themor given the com"an# "ermission to send them$Micro>target marketing and two>way communication areeasier thanks to the proliferation of special>interest maga"ines, T; channels, and Internet newsgroups.$*tranets linking suppliers and distributors let firms send and recei&e information, place orders, and makepayments more efficiently. The company can also interact with each customer indi&idually topersonali&emessages, ser&ices, and the relationship.o Marketers can reach consumers on the move with mo!ile marketing$ 9sing 80/ technology,marketers can pinpoint consumers e*act location and send them messages at the mall with coupons goodonly that day, a reminder of an item on their wish list, and a rele&ant perk Ebuy this book today and get afree coffee at the bookstores coffee shopF. 4ocation based ad&ertising is attracti&e because it reaches


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consumers closer to the point of sale. Hirms can also ad&ertise on &ideo i0ods and reach consumers on theircell phones through mobile marketing.=5o Com"anies can make and sell individuall# differentiated goods$ Thanks to ad&ances in factorycustomi"ation, computer technology, and database marketing software, customers can buy MCM candies,T%!%/)O ugs, or Makers Mark bottles with their names on them+ Wheaties bo*es or Lones soda canswith their picture on the front+ and -ein" ketchup bottles with customi"ed messages.=D !MWs technologyallows buyers to design their own car models from among =6 &ariations, with 66 options, A6 e*teriorcolors, and 5(6 trims. The company claims that 26 percent of the cars bought in $urope and up to =6 percent

bought in the 9nited /tates are built to order.o Com"anies can im"rove "urchasing) recruiting) training) and internal and external communications$Hirms can recruit new employees online, and many ha&e Internet training products for their employees,dealers, and agents. :etailer 0atagonia has oined Walt 1isney, 8eneral Motors, and Mc1onalds inembracing corporate blogging to communicate with the public and employees. 0atagonias The )leanest4ine posts en&ironmental news, reports the results of its sponsored athletes, and posts pictures anddescriptions of employees fa&orite outdoor locations.==o Com"anies can facilitate and s"eed u" internal communication among their em"lo#ees !# using theInternet as a "rivate intranet$ $mployees can 7uery one another, seek ad&ice, and download or uploadneeded information from and to the companys main computer. /eeking a single online employee portal thattranscended business units, 8eneral Motors launched a platform called my/ocrates in D66N consisting of

announcements, news, links, and historical information. 8M credits the portal with Q5(.K million in costsa&ings to date.=Ko Com"anies can im"rove their cost efficienc# !# skillful use of the Internet$)orporate buyers canachie&e substantial sa&ings by using the Internet to compare sellers prices and purchase materials atauction, or by posting their own terms in re&erse auctions. )ompanies can impro&e logistics and operationsto reap substantial cost sa&ings while impro&ing accuracy and ser&ice 7uality.

Marketing in 0ractice

3ot surprisingly, these new marketing forces and capabilities ha&e profoundly changed marketing management.In theory, the marketingplanningprocess consists of analy"ing marketing opportunities, selecting targetmarkets, designing marketing strategies, de&eloping marketing programs, and managing the marketing effort. Inpractice, howe&er, in the highly competiti&e marketplaces that are more often the norm, marketing planning ismore fluid and is continually refreshed.

)ompanies must always be mo&ing forward with marketing programs, inno&ating products and ser&ices,staying in touch with customer needs, and seeking new ad&antages rather than relying on past strengths. This isespecially true of incorporating the Internet into marketing plans. Marketers must try to balance increased

spending on search ad&ertising, social media, direct e>mail, and te*tP/M/ marketing efforts with appropriatespending on traditional marketing communications. !ut they must do so in tough economic times, whenaccountability has become a top priority and returns on in&estment are e*pected from e&ery marketing acti&ity.Marketing Insight' Marketing in an %ge of Turbulence offers some recommendations for adusting to newmarketing realities.

'ompany -rientation To+ard the Marketplace


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8i&en these new marketing realities, what philosophy should guide a companys marketing efforts?Increasingly, marketers operate consistent with the holistic marketing concept. 4ets first re&iew the e&olutionof earlier marketing ideas.

The 0roduction )oncept

The prodction concept is one of the oldest concepts in business. It holds that consumers prefer products thatare widely a&ailable and ine*pensi&e. Managers of production>oriented businesses concentrate on achie&inghigh production efficiency, low costs, and mass distribution. This orientation makes sense in de&elopingcountries such as )hina, where the largest 0) manufacturer, 4egend Eprincipal owner of 4eno&o 8roupF, anddomestic appliances giant -aier take ad&antage of the countrys huge and ine*pensi&e labor pool to dominatethe market. Marketers also use the production concept when they want to e*pand the market.K6

The 0roduct )oncept

The prodct conceptproposes that consumers fa&or products offering the most 7uality, performance, orinno&ati&e features. -owe&er, managers are sometimes caught in a lo&e affair with their products. They mightcommit the better>mousetrap fallacy, belie&ing a better product will by itself lead people to beat a path to theirdoor. % new or impro&ed product will not necessarily be successful unless its priced, distributed, ad&ertised,and sold properly.

The /elling )oncept

The selling concept holds that consumers and businesses, if left alone, wont buy enough of the organi"ationsproducts. It is practiced most aggressi&ely with unsought goodsBgoods buyers dont normally think of buyingsuch as insurance and cemetery plotsBand when firms with o&ercapacity aim to sell what they make, ratherthan make what the market wants. Marketing based on hard selling is risky. It assumes customers coa*ed intobuying a product not only wont return or bad>mouth it or complain to consumer organi"ations but might e&enbuy it again.

The Marketing )oncept

The marketing concept emerged in the mid>5A6sK5 as a customer>centered, sense>and>respond philosophy.The ob is to find not the right customers for your products, but the right products for your customers. 1elldoesnt prepare a perfect computer for its target market. :ather, it pro&ides product platforms on which eachperson customi"es the features he or she desires in the computer.

The marketing concept holds that the key to achie&ing organi"ational goals is being more effecti&e than


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competitors in creating, deli&ering, and communicating superior customer &alue to your target markets.-ar&ards Theodore 4e&itt drew a percepti&e contrast between the selling and marketing concepts'

/elling focuses on the needs of the seller+ marketing on the needs of the buyer. /elling is preoccupied with thesellers need to con&ert his product into cash+ marketing with the idea of satisfying the needs of the customer bymeans of the product and the whole cluster of things associated with creating, deli&ering, and finally consuming

it.KD

/e&eral scholars found that companies embracing the marketing concept at that time achie&ed superiorperformance.K=

The -olistic Marketing )oncept

Without 7uestion, the trends and forces that ha&e defined the first decade of the D5st century are leadingbusiness firms to a new set of beliefs and practices. Marketing Memo' Marketing :ight and Wrong suggestswhere companies go wrongBand how they can get it rightBin their marketing.

The holistic marketing concept is based on the de&elopment, design, and implementation of marketingprograms, processes, and acti&ities that recogni"e their breadth and interdependencies. -olistic marketingacknowledges that e&erything matters in marketingBand that a broad, integrated perspecti&e is often necessary.

-olistic marketing thus recogni"es and reconciles the scope and comple*ities of marketing acti&ities. Higure 5.=pro&ides a schematic o&er&iew of four broad components characteri"ing holistic marketing' relationshipmarketing, integrated marketing, internal marketing, and performance marketing. Well e*amine these maorthemes throughout this book. /uccessful companies keep their marketing changing with the changes in theirmarketplaceBand market space.


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:elationship Marketing

Increasingly, a key goal of marketing is to de&elop deep, enduring relationships with people and organi"ationsthat directly or indirectly affect the success of the firms marketing acti&ities.

elationship marketing aims to build mutually satisfying long>term relationships with key constituents inorder to earn and retain their business. Hour key constituents for relationship marketing are customers,employees, marketing partners Echannels, suppliers, distributors, dealers, agenciesF, and members of thefinancial community Eshareholders, in&estors, analystsF. Marketers must create prosperity among all theseconstituents and balance the returns to all key stakeholders. To de&elop strong relationships with them re7uiresunderstanding their capabilities and resources, needs, goals, and desires.

The ultimate outcome of relationship marketing is a uni7ue company asset called amarketing net+ork,consisting of the company and its supporting stakeholdersBcustomers, employees, suppliers, distributors,retailers, and othersBwith whom it has built mutually profitable business relationships. The operating principleis simple' build an effecti&e network of relationships with key stakeholders, and profits will follow. Thus morecompanies are choosing to own brands rather than physical assets and are subcontracting acti&ities to firms thatcan do them better and more cheaply, while retaining core acti&ities at home.


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)ompanies are also shaping separate offers, ser&ices, and messages to individual customers,based oninformation about past transactions, demographics, psychographics, and media and distribution preferences. !yfocusing on their most profitable customers, products, and channels, these firms hope to achie&e profitablegrowth, capturing a larger share of each customers e*penditures by building high customer loyalty. Theyestimate indi&idual customer lifetime &alue and design their market offerings and prices to make a profit o&erthe customers lifetime.

These acti&ities fall under what )olumbia !usiness /chool professor 4arry /elden and his wife and businessconsulting partner, oko /ugiura /elden, call customer centricity.

!ecause attracting a new customer may cost fi&e times as much as retaining an e*isting one, relationshipmarketing also emphasi"es customer retention. )ompanies build customer share by offering a larger &ariety ofgoods to e*isting customers, training employees in cross>selling and upselling. Marketing must skilfullyconduct not only customer relationship management E):MF, but partner relationship management E0:MF aswell. )ompanies are deepening their partnering arrangements with key suppliers and distributors, seeing themas partners in deli&ering &alue to final customers so e&erybody benefits.

Integrated Marketing

Integrated marketing occurs when the marketer de&ises marketing acti&ities and assembles marketing programsto create, communicate, and deli&er &alue for consumers such that the whole is greater than the sum of itsparts. Two key themes are that E5F many different marketing acti&ities can create, communicate, and deli&er&alue and EDF marketers should design and implement any one marketing acti&ity with all other acti&ities inmind. When a hospital buys an M:I from 8eneral $lectrics Medical /ystems di&ision, for instance, it e*pects

good installation, maintenance, and training ser&ices to go with the purchase.

%ll company communications also must be integrated. 9sing an integrated communication strategy meanschoosing communication options that reinforce and complement each other. % marketer might selecti&elyemploy tele&ision, radio, and print ad&ertising, public relations and e&ents, and 0: and Web sitecommunications so each contributes on its own as well as impro&ing the effecti&eness of the others. $ach mustalso deli&er a consistent brand message at e&ery contact.

When !MW launched the moderni"ed MI3I )ooper in D66D, it employed an integrated marketing strategy inthe 9nited /tates that included a broad mi* of media' billboards, posters, Internet, print, 0:, product placement,and grassroots campaigns. Many were linked to a cle&erly designed Web site with product and dealerinformation. The car was placed atop Hord $*cursion /9;s at D5 auto shows across the 9nited /tates, was usedas seats in a sports stadium, and appeared in'layboy maga"ine as a centerfold. The imaginati&e integratedcampaign built a si*>month waiting list for the MI3I )ooper.

The company must also de&elop an integrated channel strategy. It should assess each channel option for itsdirect effect on product sales and brand e7uity, as well as its indirect effect through interactions with other


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channel options. Marketers must weigh the trade>off between ha&ing too many channels Eleading to conflictamong channel members andPor a lack of supportF and too few Eresulting in market opportunities beingo&erlookedF.

Online marketing acti&ities are increasingly prominent in building brands and sales. )reated for Q=66,666 andno additional promotional e*pense, the )arni&al )onnections site made it easy for cruise fans to compare notes

on destinations and on board entertainment from casinos to conga lines. In a few short months, D,666 of thesites 5=,666 registered users planned trips aboard )arni&als DD ships, generating an estimated Q5.N million inre&enue for the company.K(

Internal Marketing

.nternal marketing, an element of holistic marketing, is the task of hiring, training, and moti&ating ableemployees who want to ser&e customers well. It ensures that e&eryone in the organi"ation embraces appropriate

marketing principles, especially senior management. /mart marketers recogni"e that marketing acti&ities withinthe company can be as importantBor e&en more importantBthan those directed outside the company. It makesno sense to promise e*cellent ser&ice before the companys staff is ready to pro&ide it.

Marketing is no longer the responsibility of a single departmentBit is a company>wide undertaking that dri&esthe companys &ision, mission, and strategic planning.KA It succeeds only when all departments work togetherto achie&e customer goals Esee Table 5.5F' when engineering designs the right products, finance furnishes theright amount of funding, purchasing buys the right materials, production makes the right products in the righttime hori"on, and accounting measures profitability in the right ways. /uch interdepartmental harmony can onlytruly coalesce, howe&er, when management clearly communicates a &ision of how the companys marketing

orientation and philosophy ser&e customers. The following e*ample highlights some of the potential challengein integrating marketing'

The marketing &ice president of a maor $uropean airline wants to increase the airlines traffic share. -isstrategy is to build up customer satisfaction by pro&iding better food, cleaner cabins, better>trained cabin crews,and lower fares, yet he has no authority in these matters. The catering department chooses food that keeps foodcosts down+ the maintenance department uses ine*pensi&e cleaning ser&ices+ the human resources departmenthires people without regard to whether they are naturally friendly+ the finance department sets the fares.!ecause these departments generally take a cost or production point of &iew, the &ice president of marketing isstymied in his efforts to create an integrated marketing program.

Internal marketing re7uires &ertical alignment with senior management and hori"ontal alignment with otherdepartments, so e&eryone understands, appreciates, and supports the marketing effort.

0erformance Marketing


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Performance marketing re7uires understanding the financial and nonfinancial returns to business and societyfrom marketing acti&ities and programs. Top marketers are increasingly going beyond sales re&enue to e*aminethe marketing scorecard and interpret what is happening to market share, customer loss rate, customersatisfaction, product 7uality, and other measures. They are also considering the legal, ethical, social, anden&ironmental effects of marketing acti&ities and programs.

HI3%3)I%4 %))O93T%!I4IT Marketers are increasingly asked to ustify their in&estments in financialand profitability terms, as well as in terms of building the brand and growing the customer base.6 Theyreemploying a broader &ariety of financial measures to assess the direct and indirect &alue their marketing effortscreate and recogni"ing that much of their firms market &alue comes from intangible assets, particularly brands,customer base, employees, distributor and supplier relations, and intellectual capital. Marketing metrics canhelp firms 7uantify and compare their marketing performance along a broad set of dimensions. Marketingresearch and statistical analysis assess the financial efficiency and effecti&eness of different marketing acti&itiesHinally, firms can employ processes and systems to make sure they ma*imi"e the &alue from analy"ing thesedifferent metrics.

/O)I%4 :$/0O3/I!I4IT M%:#$TI38 !ecause the effects of marketing e*tend beyond the company andthe customer to society as a whole, marketers must consider the ethical, en&ironmental, legal, and social conte*tof their role and acti&ities. The organi"ations task is thus to determine the needs, wants, and interests of targetmarkets and satisfy them more effecti&ely and efficiently than competitors while preser&ing or enhancingconsumers and societys long>term well>being. 48 $lectronics, Toshiba, and 3$) 1isplay /olutions offerelectronic recycling programs, for instance, often pro&iding consumers with prepaid postage to return old items.:etailers such as Office 1epot, !est !uy, and %TCT offer similar programs in their stores.

%s goods become more commoditi"ed, and consumers grow more socially conscious, some companiesBincluding The !ody /hop, Timberland, and 0atagoniaBincorporate social responsibility as a way todifferentiate themsel&es from competitors, build consumer preference, and achie&e notable sales and profitgains. When they founded !en C Lerrys, !en )ohen and Lerry 8reenfield embraced the performance marketingconcept by di&iding the traditional financial bottom line into a double bottom line that also measured theen&ironmental impact of their products and processes. That later e*panded into a triple bottom line, torepresent the social impacts, negati&e and positi&e, of the firms entire range of business acti&ities.

/pdating The 0or Ps

Mc)arthy classified &arious marketing acti&ities into marketing(mix tools of four broad kinds, which he calledthe four 's of marketing' product, price, place, and promotion. The marketing &ariables under each 0 areshown in Higure 5.K.

8i&en the breadth, comple*ity, and richness of marketing, howe&erBas e*emplified by holistic marketingBclearly these four 0s are not the whole story anymore. If we update them to reflect the holistic marketingconcept, we arri&e at a more representati&e set that encompasses modern marketing realities' people, processes,


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programs, and performance, as in Higure 5..

'eople reflects, in part, internal marketing and the fact that employees are critical to marketing success.Marketing will only be as good as the people inside the organi"ation. It also reflects the fact that marketers must&iew consumers as people to understand their li&es more broadly, and not ust as they shop for and consumeproducts and ser&ices.

'rocesses reflects all the creati&ity, discipline, and structure brought to marketing management. Marketers musta&oid ad hoc planning and decision making and ensure that state>of>the>art marketing ideas and concepts playan appropriate role in all they do. Only by instituting the right set of processes to guide acti&ities and programscan a firm engage in mutually beneficial long>term relationships. %nother important set of processes guides thefirm in imaginati&ely generating insights and breakthrough products, ser&ices, and marketing acti&ities.

'rograms reflects all the firms consumer>directed acti&ities. It encompasses the old four 0s as well as a range

of other marketing acti&ities that might not fit as neatly into the old &iew of marketing. :egardless of whetherthey are online or offline, traditional or non>traditional, these acti&ities must be integrated such that their wholeis greater than the sum of their parts and they accomplish multiple obecti&es for the firm.

We defineperformance as in holistic marketing, to capture the range of possible outcome measures that ha&efinancial and nonfinancial implications Eprofitability as well as brand and customer e7uityF, and implicationsbeyond the company itself Esocial responsibility, legal, ethical, and community relatedF. Hinally, these new four0s actually apply to all disciplines within the company, and by thinking this way, managers grow more closelyaligned with the rest of the company.


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The Scope of Marketing (not owned)

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