Definition & Nature of Marketing

• People have different needs & wants. Marketing exist to address

people’s needs & wants.
• It is about making customers want to buy the products of a
particular business.
• It looks at reasons behind people’s decisions, such as the price & the
product’s features.
• Making the needs & wants of customers is particularly important for
businesses aiming to make a profit.
 The marketing department of an organization tends to have four
main or generic objectives;
1. Ensure that the right products are supplied to fulfill the needs &
wants of customers.
2. Set the correct price so that customers can afford to buy the
products (and to ensure that they don’t buy from rival business).
3. Distribute (or place) the products conveniently for customers to
buy the product.
4. Ensure that there is adequate & effective promotion to convince
customers to buy the firm’s products.
• There is no single universally accepted definition of the term
marketing because it is a complex process & differs from one type
of organization to another.
• For example, the marketing objectives & strategies of charitable &
non-profit organizations differ from those of large multinational
companies.
• A widely used and accepted definition of marketing is: The
management process involved in identifying, anticipating &
satisfying consumer requirements profitably.
 This definition is commonly used as it covers the various roles of
marketing;
1. Marketing is a management process, so it requires people to take
responsibility for decision-making.
2. Marketing involves identifying the needs & wants of customers. This can
be done through marketing research & data analysis.
3. Marketing involves anticipating or predicting what customers might
want in the future.
4. Price, availability & quality are essential factors that customers consider
when assessing the value for money.
5. Marketing is about earning profit. Prices must cover the costs of
production.
 All organizations must ensure that the benefits of their marketing
outweigh the costs.
• Marketing is fundamental to the success of a business as it affects
the sales & profits of the organization.
• However, marketing alone does not ensure success, it’s
relationship with other business functions should be considered;
1) Operations management. The production department works
closely with the marketers in using sales forecasts (from market
research) to prepare their production schedules.
These departments also work directly with each other to research,
develop and launch products to meet the changing needs of
customers.
 There may, however be some conflict between the two
departments as production managers may prefer a longer time
period in which to test and develop products whereas marketing
managers may urge for a quick launch to maximize sales revenues.
 Delays in launching a product not only means lost sales but can also
be damaging to the organization’s corporate image.
2) Finance and accounts. The marketing department works closely
with the finance department to set appropriate budgets.
Again, there can be conflict between these departments.
Marketers might wish to exceed their budget to get maximum marketing
exposure. However the finance team wants all departments to work
within their allocated budgets.
The finance department would want prices to cover costs of production to
generate a profit for the organization. However, marketers might feel that
low prices (that do not necessarily cover all costs) are necessary for some
products in the short term to get established in the market.
Marketers might also use extended credit facilities (interest-free
repayment plans) to entice customers. However, the finance department
will be aware that extended credit can lead to liquidity problems.
Hence, both departments need to work collaboratively to strike a balance
between their potentially conflicting interests.
3) Human resources (HR). Marketing data can help the HR
department to identify staffing needs.
 For example, the introduction of a new product might require
hiring extra production staff & sales personnel.
 The HR department’s role is to ensure the business has the right
quantity & quality of workers through effective workforce
planning to meet the wants and needs of its customers.
Marketing Goods & Services
• There are similarities & differences in the marketing of goods &
services.
• For example, both use promotion to build brand recognition, brand
awareness and trust.
The differences between the marketing of goods & services include
the following characteristics:
1) Intangibility: Whilst goods are tangible (physical), services are
intangible.
• Marketers face a challenge to communicate the benefits of the
service, e.g why should customers use a particular hair salon? The
choice is based largely on trust.
• By contrast, marketers tend to have less challenges selling a
physical product with tangible attributes that customers can
inspect before buying.
2) Inseparability: Services are consumed at the time of purchase, e.g
bus ride or watching a movie at the cinema.
• Inseparability means it is not possible to separate the production
& consumption of a service.
• Marketers strive to ensure the staff are well trained at providing
outstanding & consistent customer services.
3) Heterogeneity: It is common to mass produce standardized
(homogenous) goods such as smartphones, books or soft drinks.
• However, services are heterogenous because the experience is
different for different customers.
• It customers experience poor customer service, they are likely to
opt to use the services provided by other providers.
4) Perishability: Unlike goods, services cannot be stored.
• Each bus or cinema seat that is empty means a loss in potential
revenues to the businesses.
• Coca-Cola is mass produced & stored in warehouses before
distribution to wholesalers & retailers so can be marketed using
international marketing strategies.
5) Product Strategy: Many businesses provide value-added services
to attract customers.
• Supermarkets and fast food restaurants in many parts of the world
offer a free delivery service.
• Service companies also have to decide on whether their offerings
will be standardized or customized.
6) Price Strategy: As people are a fundamental aspect of marketing
services, the cost and hence the price can be quite high.
• A challenge for marketers is to get the right pricing strategy for a
service that appeals to customers, cover costs of production &
generates profit for the business.
• The pricing decision depends on the source of value to customers,
e.g lawyers & surgeons provide highly specialized services that
would be reflected in the price.
• Some service providers base their pricing strategy on time spent
on providing the service whilst others base it on the level of skills
required to provide the service.
7) Promotional Strategy: Promoting a service can be a challenge for
marketers as it is intangible.
• Businesses often use the physical environment to promote their
services (hotels, gyms, schools) so that customers can visualize the
quality of the service being provided.
• Other common promotional strategies include the use of
branding, slogans, logos & celebrity endorsements.
8) Place Strategy: The location decision is vital for the marketing of
services – customers are unlikely to visit restaurants or banks in
highly inconvenient or remote locations.
• By contrast, most goods can be ordered online so the location
decision is less important provided there are effective distribution
channels to deliver the products to customers.
Market & Product Orientation
A. Market orientation is a marketing approach used by businesses that are
outward looking.
• They focus on making products that they can sell, rather than selling
products that they can make.
• Market orientation focuses on the customer in order to identify, design,
develop & supply products that meet their needs & wants.
• Such information can be gathered from market research.(setting price)
• Market research & analyses are therefore central to a market orientation
approach.
 If the needs & wants of customers are ignored, businesses are likely
to become uncompetitive, with devastating results in the long term.
 Market orientation means that businesses do not worry about the
costs of doing things for the customer; instead, they consider the
costs of not doing these things.
The two main advantages to a business in being market oriented
are:
1) Greater flexibility. Businesses can respond quickly to changes in
the market as they have access to relevant data & information
about customers.
 Market oriented businesses are also more able to anticipate
changing market trends & hence prepare for such changes.
2) Lower risk. Market oriented businesses can be more confident
that their products will sell & be more successful. Without proper
market research & analysis, the cost of marketing a product is
much more likely to be a gamble.
 The main disadvantage of market orientation is that market
research can be expensive.
 In addition, given the dynamic nature of the business environment
& the uncertainty of the future, there is no guarantee that this
approach will work.
Whether a business adopts a product orientated or market
orientated approach depends on several factors including:
1) The market. Producers of hi-tech products, such as smartphones,
tend to start of as product orientated businesses. In mass
consumer markets, a more market orientated approach tends to
be adopted.
2) Organizational culture. Businesses that believe customers are the
key stakeholder (i.e the customers are always right) are more likely
to be market orientated.
3) Barriers to entry. Businesses without much competition tend to be
less focused. Such organizations have market power in pricing &
distribution decisions so can be more product orientated.
B. Product orientation is a marketing approach adopted by
businesses that are inward looking.
• They focus on selling products that they make, rather than making
products that they can sell.
• Many hi-tech products that are used in daily life were created using
product orientation.
• Creative & innovative products are launched onto the market &
customers will be tempted to buy these.
• Not all products are successful. The usual result is that product
orientation is hit-and-miss, i.e producers are not really sure if the
products will sell.
• Many product oriented businesses today concentrate on producing
high quality products.
• The belief is that customers are willing to pay a higher price for
exclusivity & luxury products.
• Product orientated businesses generally supply products that they
specialize in (Ferrari sports cars).
 The main advantages of product orientation are that quality can be
assured & the business has more control over its operations.
 Also by being innovative, product orientation can give organizations
a competitive advantage or a unique selling point (USP).
However, since the needs of the market are ignored, there is a high
failure rate of businesses that use this marketing approach.
Hence, the strategy tends to be high risk, especially due to frequent
changes in fashion & tastes.
 The money spent on research and development of products
without taking the customer into consideration, often proves costly.
Commercial Marketing & Social Marketing
• Commercial marketing is the use of marketing strategies to meet the
needs & wants of customers in a profitable way.
• Unlike social marketing, commercial marketing is largely value free,
i.e ethics play a small role, if any at all.
• Commercial marketing is about providing what customers want,
when they want it and where they want it.
• Commercial marketing aims to reap the private benefits of
marketing such products (increased revenues & market share).
• The Social Marketing Institute defines social marketing as “the
planning & implementation of programs designed to bring about
social change using concepts from commercial marketing”.
• Social marketing is therefore the use of mainstream marketing
methods to achieve the benefits of social change, such as informing
the public about the dangers of under-age drinking.
• Social marketing is similar to commercial marketing in that all forms
of marketing aim to influence action.
• Philip Kotler defined social marketing as any activity that seeks to
influence social behavior to benefit the target audience & society as
a whole.
• The challenge facing social marketers is getting people to change
their customary behavior.
• The clients of social marketing agencies tend to be non-profit
organizations & government organizations.
• However, companies that believe in corporate social responsibility
also use social marketing such as sponsoring events in the local
community.
• NPOs tend to focus on promoting the image or cause of the
organization for its long-term survival.
• Market research has an important role in social marketing. For
example, to change people’s behavior, marketers must discover
people’s perceptions of the issue or problem in question.
• This helps to determine the actions that might be taken to deal with
the social problem.
• Process is also an important part of social marketing. For example, it
must be convenient for people to donate money to charity, perhaps
by credit card or online payments.
• Charities and pressure groups in many countries have also managed
to persuade governments to give tax benefits to those who donate
money to charitable organizations.
• When considering pricing decisions in social marketing, marketers
tend to refer to the net benefits (the difference between the
benefits & the costs of taking action).
• If people believe that the benefits are greater than the costs, then
social marketers are more likely to achieve their objectives.
The main differences between social marketing & commercial
marketing include:
1) Purpose. The intention of commercial marketing is selling physical
goods & intangible services for a profit. Social marketing aims to
influence or persuade a desired change in social behavior or
attitudes.
2) Benefits. Commercial marketing exists to satisfy individual needs &
wants, and thus reaps for the business. Social marketing, if
successful satisfies the needs & desires of the general public, &
thus reaps benefits for communities.
3) Main users. Commercial marketing is used mainly by private sector
businesses (although many social marketing campaigns use
aspects of commercial marketing strategies). Social marketing is
used mainly by the government & non-governmental
organizations (NGOs).
The Market
• A market is a place or process whereby customers & suppliers trade.
• A market exists where there is demand for a particular product
(laptops) & where there is a willingness from businesses to supply
these products.
• Customers can be private individuals, other businesses or the
government.
• Markets that cater for private individuals (the general public) are
known as consumer markets, while those that cater for
organizations (businesses & governments) are known as industrial
markets or producer markets.
• Within any particular market, there is likely to be a number of
substitute products & suppliers that can be used to satisfy the needs
& wants of the consumer.
Managers are interested in the characteristics of the market in
which their business operates. These characteristics include:
1) Market size. Markets differ in their size as measured by sales
revenue.
• International trade & globalization has meant that the size of a
market is not confined to the domestic market.
2) Customer base. As an alternative measure of market size, this
refers to the total potential number of customers in a particular
market.
• The internet has also broadened the customer base for many
businesses around the world.
3) Barriers to entry. These are obstacles that determine the number
of suppliers in the market.
4) Competition. This refers to the degree of rivalry within a particular
market.
5) Geographic characteristics. Some markets focus on a particular
area, country, or region.
6) Demographic characteristics. Characteristics of consumers include
differences in gender, age, ethnicity & religion.
• Marketers can then target their promotional strategies towards
these demographic groups.
7) Market growth rate. Market growth refers to an increase in the
size of a market per period of time, usually a year.
• It can be measured by an increase in the value or volume of sales
in the market.
• It is usually expressed as a percentage change to indicate the
extent of market growth.
• Market growth is likely to lead to more suppliers entering the
market as they attracted by the potential profits.
8) Seasonal & cyclical characteristics. Some markets are constrained
by seasonal factors.
Market Share
• Market share refers to the organization’s portion of the total value of
sales revenue within a specific industry.
• It is measured by expressing the organization’s sale revenue as a
percentage of the total sales revenue in the industry, per time
period.
There is a positive relationship between market share & profits,
although the business with the largest market share is not
necessarily the most profitable.
 High market share has other benefits such as the status enjoyed
from being a dominant market player & the ability to gain a range of
economies of scale.
 Such businesses are known as market leaders.
In general, businesses with high market share (market leaders) have
better price-setting ability & are less threatened by competition.
Hence, a common objective of established businesses is to increase
their market share by:
1. Promotion of their brands.
2. Product development, improvements & innovation.
3. Motivation & training of the workforce to deliver better customer services.
4. Establishing property rights (the use of trademarks, patents & copyrights).
5. Use of more efficient channels of distribution.
Market concentration measures the degree of competition that
exists within a market by calculating the market share of the largest
few firms in the industry, i.e those with market leadership.
The sum of these market shares is known as the concentration ratio.
Example:
• An industry with a 3-firm concentration ratio of 98% means that the
top three firms have a combined market share of 98%.
• Hence, this would not be a very competitive industry, as all other
businesses would account for just 2% of the total sales revenue of
the industry.
In reality, most industries within a country are dominated by a few
large businesses with a market leadership. Each dominant firm
accounts for a large proportion of the industry’s overall sales
revenues.
Some businesses grow so large that they are able to maintain
market leadership on a global scale.
However, calculating market share is not always a straightforward
task (transport industry).
Sales data are often out of date, so many market share information
will represent a historical situation & not necessarily signify the
current position.
Marketing Objectives
• Marketing objectives are the specific marketing goals of an
organization. The marketing objectives of for-profit organizations
include:
1. Increased sales revenue.
2. Higher market share.
3. Increased market leadership.
4. Improved product and brand awareness.
5. Developing new products.
6. Enhanced brand perception (product positioning).
Most definitions of marketing apply to activities that aim to generate
profit for a business. This does not necessarily apply to non-profit
organizations (NPOs) such as charities & government departments.
The objectives of social marketing is not primarily profit related, but
include:
1) To build membership (support) & to connect with new donors.
2) To generate awareness of the NPO’s cause.
3) To improve brand recognition of the NPO.
4) To create positive attention to the NPO’s operations.
5) To demonstrate the value of the NPO to the local community or society
in general.
 Marketing in NPOs tends to be more informative rather than being
persuasive.
Marketing Strategies & Changes in
Customer Preferences
• The most successful global businesses evolve their organization &
marketing strategies to suit changes in customer preferences.
• Market trends often change rapidly with some in decline & others
enjoying high growth rates.
• Even if market research reveals certain customer preferences, they can
change without warning.
• Nevertheless, having insight into their customers’ preferences & buying
habits, & how those preferences & habits might change over time, is
essential to remain competitive in the market.
There are many variables that cause businesses to change their
marketing strategies.
Some of the changes are implemented due to ineffective marketing
strategies that don’t appeal to changing customer preferences whilst
others are caused by changes in the external business environment.
Reasons why marketing strategies evolve include the following:
1) Changing consumer tastes.
2) Shorter product life cycles.
3) Internet & mobile technologies.
4) Competitive rivalry.
5) Globalization.
Go over the role of marketing & CUEGIS concepts in the book!