Lecture 1 defining marketing for the 21st century

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  • 1. Lecture 1 Defining marketing for the 21st centuryEssential ReadingTextbook: Kotler et al. (2009), chapter 1Optional Readings:Reading 1.1: Levitt, T. (1960). Marketing Myopia. Best of HBR 1960. Retrieved June20, 2009, from, http://www.dallascap.com/pdfs/MarketingMyopia.pdfReading 1.2: Gummesson, E. (1991). Marketing Orientation revisited: The crucialrole of the part-time marketer. European Journal of Marketing, 25(2), 60 75.ObjectivesAt the completion of this lecture, you should be able to: • Understand the nature of marketing, and the marketing concept • Recognize marketing’s applications beyond physical goods – including to services, ideas, and experiences; • Identify the basic tasks performed by marketing managers; • Distinguish the differences between the various orientations to the marketplace and • Appreciate and the role of marketing in today’s business environment.CommentaryWhat makes a business idea work? Does it only take money? Why are someproducts a huge success and similar products a dismal failure? How was Apple, acomputer company, able to create and launch the wildly successful iPod, yetMicrosoft’s first foray into MP3 players was a total disaster? If the size of thecompany and the money behind a product’s launch were the difference, Microsoftwould have won. But for Microsoft to have won, it would have needed somethingit’s not had in a while—good marketing so it can produce and sell products thatconsumers want.So how does marketing get done? Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 1|Page
  • 2. What is marketing?Mention the term ‘marketing’ and everyone has an opinion due to its pervasiveinfluence in modern society. If you asked someone walking down the street aboutmarketing, you most likely would hear terms such as advertising and selling. Whilemarketing includes these activities, it is much broader than this. The breadth ofmarketing is clear when you realize it draws heavily on disciplines such aseconomics, psychology, sociology, and management, and to a lesser extent,information technology, anthropology, and geography.Marketing is an activity that can be adapted to many different types oforganizations, including profit-based organizations, and not-for-profit institutionssuch as government departments, educational institutions, charities, lobby groups,sporting teams and even political parties. The common element linking profitsbased organizations and non-profit based institutions is the need to define whatproducts, services and ‘idea’ need to be developed in order to satisfy the majorityof an organization’s stakeholders.In a profit-based business, the marketing function attempts to build a profitablemarket share with customers who want to continue purchasing products from yourather than your competitor (s).Not-for-profit organizations are increasingly required to take a marketing-drivenapproach to their activities in order to service and communicate with their variousstakeholders. For example, you can imagine that it is important for a community-focused organization like a public library to identify people’s needs andperformances and develop their services (and promotions) to match them.Therefore, irrespective of the particular organizational context, marketing is adynamic strategic process that attempts to match the organization’s strengths andresources to potential opportunities that exist within the marketing environment.According to AMA, ““Marketing is an organizational function and a set of processesfor creating, communicating, and delivering value to customers and for managingcustomer relationships in ways that benefit the organization and its stakeholders.”(Kotler et al., 2009, p.6). READ the example of two Indian girls in page 3 (Kotler, 2009). Marketing is everywhere. Good marketing is not accident, but a result of careful planning and execution. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 2|Page
  • 3. The Importance of marketing • Financial success often depends on marketing ability. • Marketers create demand for product. • Many companies have Chief Marketing Officer (CMO) position. • Both ‘sustained and steady line growth’ and ‘customer loyalty/retention’ heavily depend on marketing. • Marketing builds brands and a loyal customer base, intangible assets. • Big companies, such as, Levis, General Motors, Kodak, Sony etc. all have confronted newly empowered customers and competitors. • CEO of GE warned his company “Change or Die.” READ the example of Nirma Washing Powder (Kotler et al. P. 5) . Better products. Better value. Better Living. Nirma’s TV advertisement, with memorable jignle “Doodh ki safedi Nirma se aaye, rangeen kapde bhi khil khil jaaye, sabki pasand Nirma.” has helped the brand become one of the most powerful brands in the country.The Scope of Marketing • Many people are surprised when they hear that selling is not the most important part of marketing. • The aim of marketing is to make selling superfluous. • The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself. • Marketing should result in a customer who is ready to buy. • When Apple launched its iPhone, it was swamped with orders because Apple had designed the ‘right’ product. READ the example of Tata Ace in page 6 (Kotler, 2009). This example describes how Tata Motors introduced a one ton truck based on customer needs.What is marketed?Marketer market 10 types of entities: goods, services, events, experiences,persons, places, properties, organizations, information and ideas. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 3|Page
  • 4. Who Markets?Marketers are responsible for demand management. Mangers seek to influence thelevel, timing, and compositions of demand to meet the organization’s objectives.Eight demand states are possible: 1. Negative Demand: Customers dislike the product and even pay a price to avoid it. 2. Non-existent Demand: customers may be unaware of or uninterested in the product. 3. Latent Demand: Customers may share a strong need that can not be satisfied by an existing product. 4. Declining Demand: consumers begin to buy the product less frequently or not at all. 5. Irregular Demand: Consumers purchases vary on a seasonal, monthly, weekly, daily or even hourly basis. 6. Full Demand: consumers are adequately buying all products put into the marketplace. 7. Overfull Demand: More consumers would like to buy the product than can be satisfied. 8. Unwholesome Demand: Consumers may be attracted to products that have undesirable social consequences.After identifying the demand state, marketers determine a plan of action to shiftthe demand to a more desired state.Markets • ‘Market’ is a collection of buyers and sellers who transact over a particular product or product class. • Five basic markets: Resource, consumer, intermediary, manufacturer and government market. • Figure 1.1 (page 10) describes five basic markets and their connecting flows. • Marketers often use the term ‘markets’ to cover various groupings of customers. • They view sellers as ‘Industry’ and buyers as ‘market’. Example: need markets (the diet-seeking market), product market (shoe market), demographic markets (the youth market), geographic market (the French market), etc. • Figure 1.2 (Page 10) show the relationship between the industry and the market. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 4|Page
  • 5. Key Consumer Market: • Consumer Market: selling consumer goods and services. Example: soft drinks, cosmetics, shoes, etc. Companies try to establish a superior brand image. • Business Markets: Companies face well-trained and well-informed professional buyers who are skilled at evaluating competitive offerings. Business marketers must demonstrate how their products will help these buyers achieve higher revenue or lower costs. • Global Markets: Companies face additional decisions and challenges when they sell product in the global marketplace. Which countries to enter, how to enter, how to adapt product in each country, how to price, what kind of communication to fit different cultures, etc. • Government and Non-profit Markets: These buyers have limited purchasing power. Lower selling prices affect the features and quality of products. Government purchasing calls for BIDs.Marketplaces and Market-spaces:The market place is physical, such as shoe store and market space is digital, aswhen you buy shoe online.Meta-Markets:A cluster of complementary products that are closely related in the minds ofconsumers, but spread across a diverse and industries. The automobile metamarket consists of car manufacturers, new car and used car dealers, bank,insurance companies, mechanics, spare parts dealers, service shops, automagazines, classified auto ads in newspapers, and auto car websites.Tasks for the MarketerMarketing covers every aspects of the customer experience and is the responsibilitynot just of the marketing department but of the whole organization. Marketingtasks include the obvious such as pricing, promotion, placement/distributing andproduct decisions. Those four areas are referred to as the ‘marketing mix’ or the‘4Ps’.Under the four broad categories of the marketing mix are a huge range of areas.For example product decisions include product design, features, package decisions,packaging design, colours, size, materials and innovations. Distributions includeaspect such as retail design, online offerings, location, shipping and logisticsmethods. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 5|Page
  • 6. The use of the label ‘4Ps’ to summarize marketing activities has recently fallen outof favour with some authors considering it too simplistic and narrow. Sometimes,the 4Ps is replaces with the 7Ps, also know as the extended marketing mix. It isclaimed that the extended marketing mix captures marketing tools related toservices and business markets better than the 4Ps.Arguably the 3 extra Ps in the model can be catered for within the traditional 4 Psmodel as part of the ‘product’ tool, but separating them out makes the applicabilityof the marketing mix to services more obvious.However, the 4Ps or 7Ps do not capture all the tools employed in marketing. Thereis also marketing research to identify consumer needs/wants; marketinginformation systems to monitor the marketing environment’ market segmentationto identify useful groups of consumers; and various tasks involved in marketingstrategy and planning, including selecting a target market, and deciding onpositioning and competitive advantage.There are other variants on the marketing mix also. The various frameworks allcapture basically the same major marketing tools, but group them under differentheadings or bring some to more prominence.Another way to summarise the role of marketing is to look at the key functions ofstaff perform a marketing role. Kotler et al. (2009, p.12) discuss the increasingimportance of the Chief Marketing Officer (CMO) role and identify five key functionsof the CMO: 1. Strengthening the brand 2. Measuring marketing effectiveness 3. Driving new product development based on customer needs. 4. Gathering meaningful customer insights. 5. Utilizing new marketing technologies.(see Kotler, Page 12 ‘Marketing in Practice’)We will cover each of these areas in more detail over the next 11 lectures.Core Marketing Concepts • Needs, Wants and Demands: People have need for air, food, water, clothing and shelter to survive. Apart from that people have a strong need for recreation, education and entertainment. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 6|Page
  • 7. A need become wants when they are directed to specific objects that might satisfy the need. A person in Australia needs food but may want a hamburger, French fires and a soft drink. But a person in Bangladesh needs food buy may want rooti, rice, biriyani, borhani or soft drink. Wants are shaped by out society or culture. Demands are wants for specific products backed by an ability to pay. Many people want a BMW, only few are willing and able to buy a BMW. Companies are concern about demand not want. Why? Criticism about: ‘Marketers create needs’ or ‘Marketers get people to buy things they don’t want,’ Which one is true? Example: Marketers might promote the idea that a BMW would satisfy a person’s need for social status. They do not create the need for social status. Five types of needs: 1. Stated needs: The customer wants an inexpensive car. 2. Real needs: The customer wants a car whose operating cost is low. 3. Unstated needs: The customer expects good service from the dealer. 4. Delight needs: The customer would like the dealer to include an on-board navigation system. 5. Secret needs: The customer wants friends to see him as a savvy consumer.• Target Markets, Positioning, and Segmentation Marketers first identify market segments by examining demographic, psychographic and behavioural differences among buyers. Not everyone like the same product. Targeting Market: After segmenting the market, marketer decided which segment represent greater opportunity. Marketer may have several target market for a specific product. For each target market, marketer develops market offering that it positions in the minds of target market. Example: Volvo positions its car as the safest car. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 7|Page
  • 8. READ the example of Grameen Bank in page 15. This example explains how to target markets and position the product in the market. They targeted poor women for their micro finance product. These poor women are not able to borrow money from commercial banks as they can’t offer collateral securities to the banks. Therefore, they positioned ‘micro credit ‘for poor people.• Brands An offering can be a combination of products, services, information and experiences. A brand is an offering from a known source. When we think about KFC, we think fried chicken drumsticks, fun, children, fast food, convenience, superior customer service, unique store decoration, etc.• Value and Satisfaction Value is primarily a combination of quality, services, and price (qsp), called the ‘Customer value triad’. Value increases quality and service and decreases with price. Satisfaction reflects buyer’s judgment of a product’s performance (or outcome) in relationship to expectations. If satisfaction matches with expectations, the customer is satisfied.• Marketing Channels Marketers reach target market through three type of channels: 1. Communication channel, Example: TV, Radio, newspaper, magazine, billboards, posters, fliers, CDs, audiotapes, the internet, etc. 2. Distribution channel; Example: distributors, wholesalers, retailers and agents. 3. Service channel; Example: warehouse, transportation companies, banks, insurance companies, etc. Marketers try to choose the best mix of these channels.• Competition Competition includes all the actual and potential rival offerings (ex:tea) and substitutes (ex: Coffee) a buyer might consider. Read the example of steel companies in India in page 17.• Marketing Environment Two types of environments: 1. Task environment: includes suppliers (material and service), distributors, dealers, target customers. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 8|Page
  • 9. 2. Broad environment: Includes six components, such as, demographic, economic, physical, technological, political-legal, and cultural environment. Marketers must pay close attention to the trends and developments in these environments and make timely adjustment to their marketing strategies.• The Global Digital Economy The modern economy is one where technology-enabled globalization has become part of everyday life. Now consumers can practically have what they wan when they want, form wherever they want, and all it takes is the click of a mouse button or a telephone call. As Kotler et al. point out in the section on New Consumer Capabilities (2009, p. 19-20), consumers now have substantially greater buying power and much greater access to information. This is a two-way street, however and companies can also benefit from globalization and the internet (see kotler et al., 2009, p. 19-20). The internet combined with broadband connections and with the promise of 3G mobile communications is creating an explosion in connectivity that is changing almost all aspects of business. The advent of intranets has facilitated information sharing within the organization that poses significant challenges to hierarchical organizations as well as changes to how an organization can design, produce, market, deliver and support their products. Use of extranets has radically changed how business work with their suppliers and distributors. Together with Just in Time (JIT) inventory management systems, extranets help partners reduce their supply chain costs to the ultimate benefits of consumers. Finally, information technology has the potential to reduce or even totally eliminate intermediaries or agents between the supplier and the consumer. Probably the biggest advantage in the simplification of the distribution channel is the potential to develop Customer Relationship Management (CRM) databases where the individual perferences and buying behaviours of customers are recorded thereby allowing sellere to create additional value buy tailoring messages and products for individual consumers (Whitwell, et al., 2003).• The Marketing Concept Emerged in the mid-1950s. The concept is not to find the right customers for your products, but to find the right products for your customers. Dell provides a platform where each customer can customizes their PCs. According to this concept, companies should be more effective than its competitors in creating, delivering and communicating superior customer value to the target market. Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 9|Page
  • 10. • The Holistic Marketing Concept The concept is based on the development, design, and implementation of marketing programs, processes, and activities. The concept recognizes that ‘everything matters’ in marketing. A broad integrated perspective is often necessary. Figure 1.4 (page 22) provides an overview of four components of holistic marketing: Relationship marketing, integrated marketing, internal marketing and performance marketing. READ ‘Marketing Memo’ in page 22. It suggests where companies go wrong and how they can get it right in their marketing. Figure 1.4: Holistic Marketing Dimensions (Kotler, 2009, p. 22) Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 10 | P a g e
  • 11. OPTIONAL READINGS This BOX is only for those students who want to acquire further knowledge about marketing. Reading 1.1: Levitt’s 1960 article is a marketing classic. It clearly outlines the limitations of a ‘product orientation’ and had a major influence on marketing theory and practice. Reading 1.2: Gummesson’s article is another seminal one in the development of marketing thought. Gummesson argues that all members of the organization, even if they are not formally attached to the marketing department, have a role in delivering customer values. Every interaction between a customer or supplier and your organization impacts on how the organization is perceived. Given this, it is important that staff members have good access to knowledge and information about the organization so that they can deliver effective and timely service. Thus the ‘internal market orientation’ of an organization can have a big impact on its external success. LEARNING EXERCISES Assessing which company departments are customer minded. Have a look at Table 1.1 on page 26 of your textbook. Conduct a similar assessment of your own organization. If you are not working right now, then this table will give you idea how a company should act to provide superior customer service.ConclusionMarketing is the process of facilitating exchanges between buyers and sellers insuch a way that both parties are better off as a result of the exchange. The role ofmarketing is to facilitate the achievement of an organization’s objectives.Depending on the type and nature of the organization, these objectives may coverareas such as long term shareholder value, development and maintenance of long-term customer relationships, successful advocacy of environmental initiatives oreven promotion of road safety messages.It is useful to look at the evolution of marketing as a business philosophy. However,as with all frameworks, it is important to appreciate that the differences betweeneach stage may not be as clear-cut as shown in these notes and your textbook!Also, that some organizations and some managers have not made the transitionfrom earlier phases and that new enterprises may well decide that strategically,they want to go to the end position of close relationships with customers and Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 11 | P a g e
  • 12. suppliers and distributors right from the outset. Equally, it is possible if we lookclosely at how organizations structure and support their marketing activities, thatwe may well find a lack of alignment with the espoused marketing aims of theorganization and how they practically implement their marketing activities.ReferencesKotler, P., Keller, K. L., Koshy, A. & Jha, M. (2009). Marketing Mangement: A SouthAsian Perspective (13th ed.). Pearson Education, Delhi.Whitwell, G., Lukas, B. A., & Doyle, P. (2003). Marketing Management: A StrategicValue-based Approach. John Wiley & Sons, Brisbane.Prepared byZaved MannanAdjunct Faculty MemberUniversity of Liberty Arts Bangladesh Lecture 1: Defining Marketing For The 21st Century; Prepared by Zaved Mannan 12 | P a g e