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Introduction to Marketing Presentation and Discussion Charles Blankson, Ph.D., Department of Marketing & Logistics Introduction Marketing is simple, yet complex. We are all involved in marketing and: “the enigma of marketing is that it is one of man’s oldest activities and yet it is regarded as the most recent of the business disciplines (Baker, 1976). Charles Blankson, Ph.D., Department of Marketing & Logistics Introduction contd. Marketing came into existence with the first barter exchange (e.g. the barter trade in ancient Egypt, Songhai, and Ghana empires in Africa etc.) when someone realized that exchanges add value for both parties. This was the first real step forward in economic development. Marketing has evolved (like other practices such as architecture, medicine, engineering) over the centuries to where it is today (Michael Baker). Charles Blankson, Ph.D., Department of Marketing & Logistics Introduction contd. According to Peter Drucker, the first test of any business is not the maximization of profit but the achievement of sufficient profit to cover the risks of economic activity and thus avoid loss. Customers are the foundation of a business and their purpose of existence. In other words, customers are the mainstay of the business. Charles Blankson, Ph.D., Department of Marketing & Logistics Introduction contd. As Peter Drucker puts it: There is only one valid definition of business purpose: to create a customer. It is the customer who determines what business is… What the business thinks it produces is not of first importance, especially not to the future of the business and to its success in the market place. The customer determines what a business is, what it produces and whether it will prosper. Charles Blankson, Ph.D., Department of Marketing & Logistics What is Marketing? It is the most interesting, dynamic, versatile of all academic disciplines. It is both theoretical and practical in nature. It yields real results in the form of profits and/or satisfaction of business aims/objectives. Charles Blankson, Ph.D., Department of Marketing & Logistics What is Marketing? contd. It is a multidisciplinary (economics, psychology, sociology, history, statistics…) management process of identifying and satisfying consumer and organizational needs profitably. The aim of marketing is to make profit and/or satisfy business objectives. Thus, overall, it enhances human and national economic development/progress. Marketing can be applied in all economies (e.g., advanced countries and underdeveloped countries), and all types of businesses (small, medium and large) however, the impact on business performance will differ. Charles Blankson, Ph.D., Department of Marketing & Logistics Definition of Marketing Marketing is broadly defined as: “what the whole company does (HR, finance, production, R & D, management, marketing departments) to achieve customer preference and, thereby, its own goals (profits, market share, improvement of customer perception, global brand leadership, good citizen) (Webster, 1992; Ambler et al., 2004). Ambler, T., Kokkinaki, F. and Puntoni, S. (2004), Assessing Marketing Performance: Reasons for Metrics Selection, Journal of Marketing Management, Vol.20, No.3-4 (April), pp.475-498. Charles Blankson, Ph.D., Department of Marketing & Logistics 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. Source: The American Marketing Association (AMA) (see www.ama.org). Charles Blankson, Ph.D., Department of Marketing & Logistics Updated Definition from AMA Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders (2004). Source: American Marketing Association, 2004 Charles Blankson, Ph.D., Department of Marketing & Logistics More recent definition from AMA “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.” (2007). Charles Blankson, Ph.D., Department of Marketing & Logistics Definition Marketing is the management process responsible for identifying, anticipating, and satisfying customer requirements profitably. Source: The Chartered Institute of Marketing (CIM) (UK) (see www.cim.co.uk) Charles Blankson, Ph.D., Department of Marketing & Logistics More recent definition by CIM in 2007 “Marketing is the strategic business function that creates value by stimulating, facilitating and fulfilling customer demand.” – It does this by “building brands, foreseeing market behavior long term, nurturing innovation, developing relationships, creating good customer service and communicating benefits.” – “By operating customer-centrically, marketing brings positive return on investment, satisfies shareholders and stakeholders from business and the community, and contributes to positive behavioral change and a sustainable business future.” – A suggestion to the second paragraph is offered as – “It does this by building brands, foreseeing market behavior long term, nurturing innovation, developing relationships, creating good customer service and demonstrating economic value to customers.” Charles Blankson, Ph.D., Department of Marketing & Logistics Analytical definition of marketing It is a “management function” It “organizes and directs” It has a function of “assessing” information/data It has a function of “conversion” (NPD) It deals with “consumer purchasing power” It deals with “consumers or users” in the real world (unlike say, economics, which must make assumptions to build models of the world – unreal assumptions about behavior of humans) It deals with “moving product or service (offering) to the final consumer or user” Marketing is not an end in itself, but exists to achieve the overall objectives of the organization. Thus, marketing objectives are dependent upon the establishment of overall organization objectives. Note that the organization may have objectives other than profit (e.g., charities, not-for-profit, government, institutions). Charles Blankson, Ph.D., Department of Marketing & Logistics Marketing goals and effect/impact of the application of strategies and tactics Customer attitudes: awareness, perceptions, customer satisfaction Consumer behavior: consumer purchasing habits, number of customers, customer loyalty Trade customer: distribution/availability, customer satisfaction, number of customer complaints Relative to competitor: relative customer satisfaction, perceived quality and value, share of the market Innovation: number of new products/services, profit margin of new products/services Accounting/finance: sales, gross margins, profitability. Charles Blankson, Ph.D., Department of Marketing & Logistics The ultimate purpose of marketing scholarship Descriptive or Prescriptive (i.e., normative guidelines), or both Brown, S. (2004), Writing Marketing: The Clause That Refreshes, Journal of Marketing Management, Vol.20, No.3-4 (April), pp.321-342. Charles Blankson, Ph.D., Department of Marketing & Logistics Role of Marketing Organizational Resources Effective match Specification of Target Market Customer Satisfaction Organizational Aims/objectives Charles Blankson, Ph.D., Department of Marketing & Logistics The Concept of Marketing The marketing concept is a business philosophy or business culture. It is not a system of marketing or an organizational structure. It is founded on the belief that sales and profits and satisfactory return on business actions/policies can only be achieved by identifying, anticipating and satisfying customer needs, wants, desires/aspirations .. And in that order. It is an attitude of (business) mind which places the customer at the very center of a business activity. Charles Blankson, Ph.D., Department of Marketing & Logistics The Marketing Concept The Marketing Concept states that if a business or organization is to achieve profitability, and sustained growth, then the entire organization must be oriented towards satisfying consumer needs, wants and aspirations, profitably. Charles Blankson, Ph.D., Department of Marketing & Logistics The Marketing Concept contd. In other words, The Marketing Concept holds that the key to success is through determining the needs/wants/aspirations of target markets and delivering these more effectively and efficiently than competitors. Charles Blankson, Ph.D., Department of Marketing & Logistics Marketing concept Marketing involves the following: – organisational culture: set of values and beliefs for the organisation to serve customers needs – strategy: develop effective responses to changing market environments by defining market segments, and developing and positioning product offerings for targets – tactics: concerned activities of product management, pricing, distribution and communications such as advertising, personal selling, publicity and sales promotion 6-21 The Marketing Concept (key issues) Organizations must concentrate on the customer and not the product or the company. Organizations should revolve round the customer and not the other way around. The purpose of a business is to create and keep a customer (Theodore Levitt). Charles Blankson, Ph.D., Department of Marketing & Logistics Elements of the Marketing Concept Consumer/customer Orientation Total Organization effort Profitability/sustained growth and achievement of objectives. Charles Blankson, Ph.D., Department of Marketing & Logistics Criticisms of the Marketing Concept Do customers really know their needs/wants/aspirations? The choice of either consumer or competitive orientation. Adapting to change (rigidity,inflexibility of the concept). Conflict with social responsibility. Limits in the applicability of the concept (e.g. the arts, ideology such as political parties, environmentalists – “greenpeace”, religions – churches/synagogues etc, etc.…… Charles Blankson, Ph.D., Department of Marketing & Logistics Some Criticisms of Marketing in general Too many advertisements are annoying, misleading, or both. There are too many unnecessary products. Middlemen raise prices but don’t add value. Marketing makes people materialistic. Most of the criticisms result from misunderstandings about marketing & McCarthy, 1999). Charles Blankson, Ph.D., Department of Marketing & Logistics (Perreault Do you know your market? What is the product or service being offered? What are the market trends in the industry? What is the market? Who are your customers? And what are they looking for? Who are your competitors? And how do they operate/react/behave? Why do (should) your customers buy your product/service rather than that of your competitors? Charles Blankson, Ph.D., Department of Marketing & Logistics Marketing objectives “if you don’t know where you are going any road will take you there” (Levitt) – – – – Where the company has been, What its competence and strengths are, What the competition is doing, What is happening out there in society (marketplace), and – What is happening in the consumer’s enigmatic mind (note: consumers’ attitudes/demands are stochastic and fickle). Charles Blankson, Ph.D., Department of Marketing & Logistics Three types of objectives Basic: those which define organization’s long term purposes. They are usually broad, and may be linked with corporate objectives. Goals (or specific objectives): are the first components of corporate or functional plans. They could be marketing objectives and must be supportive of corporate objectives Specific Targets: seen as the objectives of a sub-unit (sales targets, advertising objectives, logistics objectives) and must be consistent with the organization’s goals. Charles Blankson, Ph.D., Department of Marketing & Logistics What is a Market ? According to Kotler (2004), “a market consist of all the potential customers sharing a particular need or want who might be willing and able (i.e., propensity to) to engage in exchange to satisfy that need or want”. Source: Kotler, P. (2004), Marketing Management, Prentice-Hall, Englewood Cliff, NJ. Charles Blankson, Ph.D., Department of Marketing & Logistics Market Types 1) Consumer Markets. 2) Industrial/Business to Business Markets. 3) Reseller (Retailers, Distributors) Markets. 4) Publics (Government agencies/departments/institutions). 5) International/global Markets. Charles Blankson, Ph.D., Department of Marketing & Logistics What is Market(ing) Orientation? The process of applying the marketing concept in the market place. Maintaining a customer orientation. All departments work together guided by customer needs/wants/aspirations. Focus on profits/objectives. Source: Kohli and Jaworski (1990); Narver and Slater (1990). Charles Blankson, Ph.D., Department of Marketing & Logistics Market orientation Philosophy of marketing into reality Definition from Kohli and Jaworski (1990): – Market orientation are activities toward developing an understanding of customers’ current and future needs. 6-32 Antecedents (beginnings) of market orientation Industrial revolution – Western Europe Great Britain Adam Smith – “the wealth of nations” and the birth of capitalism Industrialization – division of labor Wealth creation – small business ownership, ownership of property Jobs in factories, ship yards, cities… Charles Blankson, Ph.D., Department of Marketing & Logistics Market Orientation Production Orientation --1850s -> 1930s Sales Orientation -- 1930s -> 1950s Time Marketing Orientation -- 1960s -> ?? Consumer Relationship Marketing (CRM) -- 1990s -> ?? Charles Blankson, Ph.D., Department of Marketing & Logistics Production Orientation Focus on the means of production, and assumes customers will want the product/service. Charles Blankson, Ph.D., Department of Marketing & Logistics Product Orientation Focus on the technical perfection of the product/service seen through the producer’s (firm) eyes. Assumes customers will perceive product/service in the same way and thus buy. Charles Blankson, Ph.D., Department of Marketing & Logistics Selling Orientation Focus on persuading (usually aggressive) customers to buy products which do not usually match their requirements. This is unlikely to lead to repeat buy/business. Charles Blankson, Ph.D., Department of Marketing & Logistics Customer Orientation Focus on discovering customer needs (basic survey/question & answer type) and satisfying them. However, this is unlikely to make best uses of production and other organizational resources. Charles Blankson, Ph.D., Department of Marketing & Logistics Marketing Orientation Focus on the identification of customers needs, organizational resources and objectives. Achieve effective match through market segmentation, targeting, positioning and resource development (see also Role of Marketing). Charles Blankson, Ph.D., Department of Marketing & Logistics So how do you actually define Market(ing) Orientation? Market orientation is the organization-wide generation of market intelligence (information) pertaining to current and future customer needs, dissemination of the intelligence across all departments/sections of the organization, and organizationwide responsiveness (appreciation of it) to it. Charles Blankson, Ph.D., Department of Marketing & Logistics Measuring or determining Market Orientation According to Narver and Slater (1990), Market orientation comprises three factors or constructs: Customer orientation Competitor orientation and Inter-functional co-ordination. Charles Blankson, Ph.D., Department of Marketing & Logistics Factors or constructs underpinning (i.e., measuring) Market Orientation Top Management Interdepartmental Dynamics Organizational Systems Market (customer) Orientation Employees Environment Business Performance. Source: Kohli and Jaworski (1990) Charles Blankson, Ph.D., Department of Marketing & Logistics Measuring Market Orientation construct contd. Customer Orientation Customer commitment activities Creation of customer value Understanding customer needs Measuring customer satisfaction Offering after sales service Competitor Orientation Salespeople share competitor information Responding rapidly to competitors’ actions Top managers discuss competitors’ strategies Targeting opportunities for competitive advantage Interfunctional Coordination Engaging in interfunctional customer calls Sharing information among functions Integrating all functions in strategy Contribution of all functions to customer value Sharing resources with other functions. Source: Narver and Slater (1990) Charles Blankson, Ph.D., Department of Marketing & Logistics Resource based view of marketing Focus on ‘core competencies’ Performance is driven by the resource profile of the organization Possession and deployment of distinctive, hard to imitate or protected resources Three alternative approaches are apparent 6-44 Product push marketing Activities on existing products and services and look for ways to encourage, or persuade customers to buy. The key is to make customer want what we are good at. 6-45 Customer-led marketing Under this approach organisations chase their customers at all costs. The retailers react by giving customers more choice, heavy promotions and deals to stimulate purchases, and aggressive sales force targets. Customers get confused because of the over complex promotions. 6-46 Resource based marketing Companies base their marketing strategies on equal consideration of the requirements of the market and their abilities to serve it. Resource based marketing seeks a long term fit between the requirements of the markets and the abilities of the organisation to compete in it. 6-47 Marketing approaches Market needs Customer-led marketing Customer-led marketing Customer-led marketing Organizational capabilities 6-48 Organizational stakeholders Customers Shareholdrs Distributors Focal Organizat ion Managers Suppliers Employees 6-49 Contribution of marketing to stakeholders objectives Firms that do well in marketplace also do well financially Adding value of firm for shareholders Firm adopting market-oriented culture perform better financially than those that do not 6-50 Marketing and performance outcomes Marketoriented culture Marketing resources Market performance Assets Customer satisfaction & loyalty capabilit ies Financial performance Sales volume & market share 6-51 Marketing fundamentals Set of basic and pragmatic marketing principles that guide marketing thought and action Follow logic of value-based processes described by webster Their applications can revolutionize how organizations respond to, interact with, their customers 6-52 Principle 1: Focus on the customer High degree of customer focus-But not blind focus! Market-led approach – What business are we in? – What business could we be in? – What business do we want to be in? – What must we do to get into or consolidate in that business? 6-53 Principle 2: Only compete in markets where you can establish a competitive advantage Choosing where to compete and where to commit its resources How attractive the market appears Do we have the competencies and skills to compete here? 6-54 Principle 3: Customers do not buy products Customers do not buy products , they buy what the product can do for them – the problem it solves 6-55 Principle 4: Marketing is too important to leave to the marketing department (even if there still is one) Marketing is everyone’s job in the organisation 6-56 Principle 5: Markets are heterogeneous Different customers, sub-markets and segments; buy a car for cheap transport from a to b or for comfortable or save travel; different benefits requirements 6-57 Principle 6: Markets and customers are constantly changing Markets are dynamic and products have a limited life; need product and service improvement; customer expectations change Two main processes of improvement; innovation and changes in technology (which is a continuous process) 6-58 The role of marketing in the organization Identify and communicate customer wants and needs throughout the organization Determine the competitive positioning to match the needs of the customers with company capabilities Marshal all relevent organizational resources to deliver customer satisfaction 6-59 Identification of customer requirements Identify and communicate customers wants and needs throughout the organisation Identify the requirements of customers and communicate them effectively; who the customers are and what will give them satisfaction or create “customer delight” Customers expectations, wants and need must be understood and communicated 6-60 Deciding on the competitive positioning to be adopted Which target markets or markets the organisation will seek to serve Two main set of factors; – First, how attractive the alternative potential targets are – Second, how well the company can hope to serve potential target relative to the competition 6-61 Implementing the marketing strategy Marshal all relevant organisational resources to deliver customer satisfaction Implement the marketing strategy; no gaps between offer, design, production and delivery; 6-62 Social Responsibility and Marketing Ethics Social responsibility concerns a firm’s obligation to improve its positive effects on society and reduce its negative effects. Marketing ethics are the moral standards that guide marketing decisions and actions. Charles Blankson, Ph.D., Department of Marketing & Logistics Final comments on Market Orientation An organization’s success in a dynamic business environment is more dependent on adaptation to changing and evolving customer needs/wants. Higher degree of market orientation emanates from a changing and dynamic market environment. Lower degree of market orientation can be evidenced in a market with a fixed set of customers whose preferences are stable. Here, few changes are expected in the marketing mix deliberation. Source: Kohli and Jaworski (1990) Charles Blankson, Ph.D., Department of Marketing & Logistics Future of Marketing Theory and Practice In the present “network-centric” business environment, marketing must be re-thought in ways “dramatically different from the traditional bureaucratic, functional, self-contained corporate forms” (Robert Lusch and Frederick Webster, Jr. – University of Arizona – In MSI, Fall 2010) The customer’s definition of value changes continuously, and therefore marketing must be a learning process. Charles Blankson, Ph.D., Department of Marketing & Logistics Future of Marketing Theory and Practice contd. – from USP to ROI Recent marketing activities have concentrated on creating a Unique Selling Proposition (which evolved later into the “value proposition”) to distinguish firms from their competitors. The shareholder and ROI became important. Management concentrated on market growth, market share, average unit price, units sold, and cost control. What suffered was the “long term view of the firm”, positioning, innovation, employee development, brand loyalty, sustainable return on assets and so forth. Important revision questions Distinguish between marketing and selling. What does the term “marketing concept” mean? What are the differences between market orientation, product orientation, selling orientation and CRM? Explain why you think companies should be interested in the application of marketing concept. How could a company be market oriented? The definition of marketing has been said to be too narrow and does not reflect the way marketing is currently conducted in modern business environment; how would you define marketing to alleviate this problem? Charles Blankson, Ph.D., Department of Marketing & Logistics