Marketing – Understanding the Basics
Understanding the Basics of Marketing is a sure way of becoming a great marketer. With the basics well grasped, marketers are better able to make quality decisions and thus make a lot from their marketing. Often the academia doesn't devote much time on making students understand the basics. This piece therefore intends to achieve that purpose.
What is Marketing:
Marketing is typically seen as the task of creating, promoting and delivering goods and services to consumers and businesses. Marketers are skilled in stimulating demand for a company's products, but this is too limited a view of the tasks marketers perform. Just as production and logistics professionals are responsible for supply management, marketers are responsible for demand management. Marketing managers seek to influence the level, timing and composition of demand to meet the organization's objectives.
Types of Demand
1. Negative Demand: A major part of the market dislikes the product and may even pay a price to avoid it. E.g vaccinations, dental work, gall bladder operations etc. The marketing task is to analyze why the market dislikes the product and whether a marketing programme consisting of product redesign, lower prices and more positive promotion can change beliefs and attitudes.
2. No Demand: Target customers may be unaware of or uninterested in the product. E.g Farmers may not be interested in new farming methods and university students may not be interested in foreign language courses. The marketing task is to find ways to connect the benefits of the products with people's natural needs and interests.
3. Latent Demand: Consumers may share a strong need that cannot be satisfied by any existing product. E.g a strong demand for harmless cigarettes and more safer neighbourhoods. The marketing task is to measure the size of potential market and develop goods and services to satisfy the demand.
4. Declining Demand: Demand for the organization's products decline. E.g a decline in membership of a church or a decline in school enrolment. The marketing task is to reverse declining demand through creative remarketing.
5. Irregular Demand: Where demand varies on a seasonal, daily or even hourly basis. E.g beaches are undervisited on weekdays and crowded on weekends and holidays. The marketing task, called synchromarketing, is to find ways to alter the pattern of demand through flexible pricing, promotion and other incentives.
6. Full Demand: Organizations face full demand when they are pleased with their volume of business. The marketing task is to maintain the current level of demand in the face of changing consumer preferences and increasing competition. The organization must maintain or improve its quality and continually measure consumer satisfaction.
7. Overfull demand: Where demand is far higher than the organization can handle. The marketing task, called demarketing, requires finding ways to reduce demand temporarily or permanently. General demarketing seeks to discourage overall demand and includes such steps as raising prices, reducing promotion and service. Selective demarketing consist of trying to reduce demand from those parts of the market that are less profitable.
8. Unwholesome demand: Unwholesome products will attract organized efforts to discourage their consumption. Unselling campaigns have been conducted against cigarettes, alcohol, hard drugs, hand guns, x-rated movies and large families. The marketing task is to get people who like something to give it up, using such tools as fear messages, price hikes, and reduced availability.
Marketing people are involved in 10 types of entities: goods, services, experiences, events, persons, places, properties, organizations, information, and ideas.
Experiences: By orchestrating several services and goods, a firm can create, stage and market experiences. Walt Disney World's Magic Kingdom represents experiential marketing. Customers visit a fairy kingdom, a pirate ship, or a haunted house. So does the Hard Rock Café. There is also a market for customized experiences such as spending a week at a baseball camp playing with some retired baseball greats, paying to conduct the Chicago symphony orchestra for five minutes or climbing mount everest.
Events: Marketers promote time-based events such as the Olympics, company anniversaries, major trade shows, sports events and artistic performances. There is a whole profession of meeting planners who out the details of an event and make sure it comes off perfectly.
Persons: Celebrity Marketing is a major business. Years ago, someone seeking fame would hire a press agent to plant stories in newspapers and magazines. Today every major film star has an agent, a personal manager, and ties to a public relations agency. Various professionals such as lawyers, artists etc are also getting help from celebrity marketers.
Places: cities, states, regions and whole nations compete actively to attract tourists, factories, company headquarters and new residents. E.g easter at the mountains. Place marketers include economic development specialists, real estate agents, commercial banks, local business associations, and advertising and public relations agencies.
Properties: Properties are intangible rights of ownership of either real property (real estate) or financial property (stocks and bonds). Properties are bought and sold and this requires marketing. Real estate agents work for property owners or sellers or buy residential or commercial real estate. Investment companies and banks are involved in marketing securities to both institutional and individual investors.
Organizations: organizations actively work to build a strong, favorable image in the minds of their target publics. Companies spend money on corporate identity ads. Philips, the dutch electronic s company puts out ads with the tag “ Let's make Things Better”. Universities, museums, and performing arts organizations all use marketing to boost their public images and to compete for audiences and funds.
Information: information can be produced and marketed as a product . this is essentially what schools and universities produce and distribute at a price to parents, students and communities. Encyclopaedias and most nonfiction books market information. The production, packaging, and distribution of information is one of our society's major industries.
Ideas: every market offering includes a basic idea. Charles Revson of Revlon observed: “ In the factory, we make cosmetics; in the store we sell hope”. Products and services are platforms for delivering some idea or benefit. Social marketers are busy promoting such as ideas as Say no to drugs, Save the rain forest, exercise daily or avoid fatty foods.
The Decisions Marketers Make: Marketing managers face a host of decisions from major ones such as what product features to design into a new product, how many sales people to hire, or how much to spend on advertising etc.
Types of Markets:
1. Consumer Markets: Companies selling mass consumer goods and services such as soft drinks, tooth paste, television sets and air travel form the consumer market. They thus spend a great deal of time trying to establish a superior brand. Consumer marketers decide on the features, quality level, distribution coverage, and promotion expenditures that will help their brand achieve a number –one or –two positon in their target market.
2. Business Markets: Companies selling business goods and services face well trained and well-informed professional buyers who are skilled in evaluating competitive offerings. Business buyers buy goods for their utility in enabling them to make or resell a product to others, and they purchase products to make profits. Business marketers must demonstrate how their product s will help customers achieve higher revenue or lower costs. Advertising plays a role, but a stronger role is played by sales force, price and the company's reputation for reliability and quality.
3. Global Markets: Companies selling goods and services in the global market place face additional decisions and challenges. They must decide which countries to enter, how to enter each country (as an exporter, licenser, joint venture partner, contract manufacturer, ); how to adapt their product and service features to each country, how to price their products in different countries in a narrow enough brand to avoid creating a gray market for their goods, and how to adapt their communications to different legal system, different styles of negotiation, different requirements for buying, owning, and disposing of property, a currency that might fluctuate in value, a different language and conditions of corruption or political favoritism.
Core Marketing Concepts:
Marketing can further be understood by defining several of its core concepts:
Target Markets and Segmentation:
A market is defined as a collection of buyers and sellers who transact over a particular product or product class.
A marketer can rarely satisfy everyone in a market. Not everyone likes the same softdrink, hotel room, restaurant, college and movie. Therefore marketers start by dividing up the markets. They identify and profile distinct groups of buyers who might prefer or require varying product and services mixes. These are called market segments. Market segments can be identified by examining demographic, psycholographic, and behavioural differences among buyers. The marketer then decides which segments present the greatest opportunity. This becomes his target markets. For each chosen target market, the marketer of firm develops a market offering. The offering is positioned in the minds of target buyers as delivering some benefits. For example, Volvo develops its cars as the safest a customer can buy.
Distinguishing between Marketplace, Marketspace and Meta market
Market place is physical; ie when shopping goes on in a store. Market space is digital ie when shopping goes on on the internet. Metamarket refers to a cluster of complimentary products and services that are closely related in the minds of consumers but are spread across a diverse set of industries.
Marketers and Prospects: A marketer is someone seeking a response (attention, a purchase, a vote, a donation) from another party called the prospects. If two parties are seeking to sell something to each other, we call them both marketers.
Product, Offering and Brand: Companies address needs by putting forward a value proposition, a set of benefits they offer to customers to satisfy their needs. The intangible value proposition is made physical by an offering, which can be a combination of products, services, information and experience.
A Brand is an offering from a known source. A Brand name such as mcdonald's carries many associations in the minds of people; hamburgers, fun, children, fast food, Golden Arches. These associations make up the brand image. All companies strive to build brand strength. That is a strong, favourable, brand image.
Value and Satisfaction: The offering will be successful if it delivers value and satisfaction to the target buyer. The buyer chooses between different offerings on the basis of which is perceived to deliver the most value. Value can be seen as primarily a combination of quality and service and decreases with price. A marketer can increase the value of the customer offering in several ways:
1. Raise benefits
2. Reduce costs
3. Raise benefits and reduce costs
4. Raise benefits by more than the raise in costs
5. Lower benefits by less than the reduction in costs
Distinguishing between Exchange and Transaction
Exchange, a core concept of marketing is the process of obtaining a desired product from someone by offering something in return. For exchange potential to exist, five conditions must be satisfied:
1. There should be at least two parties
2. Each party has something that might be of value to the other party
3. Each party is capable of communication and delivery
4. Each party is free to accept or reject the exchange offer
5. Each party believes is appropriate or desirable to deal with the other party.
A transaction is a trade of values between two or more parties. A gives x to B and receives Y in return. E.g Smith sells Jones a TV set and Jones pays 400GHC.
Relationships and Networks
Relationship Marketing has the aim of building mutually satisfying long-term relations with key parties- customers, suppliers, distributors – in order to earn and retain their business. Marketers accomplish this by promising and delivering high-quality products and services at fair prices to the other parties over time. Relationship marketing builds strong economic, technical and social ties among the parties. It cuts down on transaction costs and time. In the most successful cases, transactions move from being negotiated each time to being a matter of routine. The outcome of relationship marketing is the building of a unique company asset called a marketing network. A marketing network consists of the company and its supporting stakeholders (customers, employees, suppliers, distributors, retailers, ad agencies etc) with whom it has built mutually profitable business relationships. Increasingly, competition is not between companies but between marketing networks, with the prize going to the company that has built the better network. The operating principle is simple: build an effective network of relationships with key stakeholders and profits will follow.
To reach a target market, the marketer uses three kinds of marketing channels. Communication channels deliver and receive messages from target buyers and include newspapers, magazines, radio, television, mail, telephone, billboards, posters, fliers, CDs, audiotapes, and the internet. Beyond these, communications are conveyed by facial expressions and clothing. Marketers are increasingly adding dialogue channels (e.g email and toll-free numbers) to counterbalance the more normal monologue channels such as ads.
The Marketer uses distribution channels to display, sell, or deliver the physical product or services to the buyer or user. They include distributors, wholesalers, retailers, and agents. The marketer uses service channels to carry out transactions with potential buyers. Service channels include warehouses, transportation companies, banks and insurance companies that facilitate transactions. Marketers clearly face a design problem in choosing the best mix of communication, distribution and service channels for their offerings.
Marketing Environment and Competition: The marketing Environment consists of the task environment and the broad environment. The task environment includes the immediate actors involved in producing, distributing, and promoting the offering. The main actors are the company, suppliers, distributors, dealers and the target customers. Included in the supplier group are material suppliers and service suppliers such as marketing research agencies, advertising agencies, banking and insurance companies, transportation and telecommunications companies. Included with distributors and dealers are agents, brokers, manufacturer representatives, and others who facilitate finding and selling to customers.
The broad environment consists of six components: demographic environment, economic environment, natural environment, technological environment, political-legal environment, and social-cultural environment. These environments contain forces that can have a major impact on the actors in the task environment. Market actors must pay close attention to the trends and developments in these environments and make timely adjustments to their marketing strategies.
Marketing Program: The Marketers task is to build a marketing program or plan to achieve the company's desired objectives. The marketing program consists of numerous decisions on the mix of marketing tools to use. The marketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. These tools have been classified into four broad groups called the 4Ps of marketing namely : Product ( Product variety, quality, design, features, brand name, packaging, sizes, services, warranties, returns), Price (Price List, Discounts, Allowances, Payment period, Credit Terms), Promotion (Sales Promotion, Advertizing, Sales Force, Public Relations, Direct marketing) and Place (Channels, Coverage, Assortments, Locations, inventory, transport). A mix of these is often used by a company to achieve its objectives. For example a company can use product quality mixed with discounts, public relations and a good location or market to meet its marketing objective of high sales.
From a buyer's point of view, each marketing tool is designed to deliver a customer benefit. Robert Lauterborn suggested that the sellers' four Ps correspond to the customers' four Cs as below:
Four Ps Four Cs
Product Customer Solution
Price Customer Cost
Concepts of Marketing
. Production Concept: The Production concept holds that consumers will prefer products that are widely available and inexpensive. Managers of production-oriented businesses concentrate on achieving high production efficiency, low costs, and mass distribution. They assume that consumers are primarily interested in product availability and low prices. This orientation makes sense in developing countries where consumers are more interested in obtaining a product than its features. It is also used when a company wants to expand the market.
Product Concept: Other businesses are guided by the product concept which holds that consumers will favour those products that offer the most quality, performance, or innovative features. Managers in these organizations focus on making superior products and can evaluate them over time. They assume that buyers admire well-made products and can evaluate quality and performance. However, these managers are sometimes caught up in a love affair with their products. Management might commit the 'better mouse trap' fallacy believing that a better mousetrap will lead people to beat a path to its door. Such was the case when Web TV was launched during Xmas 1996 to disappointing results.
Marketing Concept: The marketing concept holds that the key to achieving its organizational goals consists of the company being more effective than competitors in creating, delivering, and communicating superior customer value to its chosen target markets. It crystallized in the mid-1950s and has been expressed in many colorful ways:
• Meeting needs profitably
• Find wants and meet them
• Love the customer, not the product
• Have it your way (Burger king)
• You're the boss (United Airlines)
• Putting people first (British Airways)
• Partners for profit (Milliken & Company)
The Selling Concept
The selling concept is another common business orientation. The selling concept holds that consumers and businesses, if left alone, will ordinarily not buy enough of the organization's product. The organization must therefore undertake an aggressive selling and promotion effort. This concept assumes that consumers typically show buying inertia or resistance and must be coazed into buying. It also assumes that the company has a whole battery of effective selling and promotion tools to stimulate more buying. The selling concept is practiced most aggressively with unsought goods, goods that buyers normally do not think of buying such as insurance, encyclopaedia, and funeral plots.