BASIC CONCEPTS OF MARKETING

The Marketing Orientation

The way in which an organisation approaches its business and markets may vary according to the views, beliefs or ethics of the executive body involved.

There are basically four different types of orientation or concepts:

 Production – assumes that customers are interested in the availability of products and low prices. Manufacturers concentrate on mass production, believing that little or no marketing is necessary. The company makes what it is good at.

 Product – manufacturers believe that the customers can recognise, and will favour, a good product when it is offered. They concentrate on offering their own idea of a "good product" and then are mystified when the customers do not take to it immediately.

 Selling – believes that customers will only buy enough if they are "coaxed".

This involves heavy activity on the personal selling front and can mean massive

promotional campaigns to move stock. Companies which adopt the selling concept are aiming to sell what they make, rather than make what they can sell.

 Marketing – believes that the customer is the key to successful business. It can be defined as the presence of a culture within an organisation, which is focused towards the understanding of customers and competitors and so can create superior value for consumers.

For an organisation to be following the marketing concept it must show three characteristics:

(a) Customer orientation

The organisation must define customer needs from the point of view of the customer and not its own. It will need to seek information actively from the marketplace in order

to assess whether the offerings are meeting customer requirements and, if not, why not.

(b) Organisational integration

All functions, sections or departments of the organisation must work together to meet the overall objectives of the organisation – which must be to satisfy customer

requirements. When individual sections of a company do not fit in with the total effort there may be friction or problems which can result in lost opportunities or dissatisfied customers.

(c) Mutually profitable exchange

The organisation is entitled to a reasonable profit for a reasonable product.

The customer is entitled to a reasonable product for a reasonable price. In other words – both should be satisfied. This satisfaction may well be the result of negotiation where the customer has accepted an alternative product or where the organisation has had to accept a lower profit – but they must be satisfied with the exchange. If it is not a mutually accepted exchange, it is not marketing.

Decision-Making Units and the Decision-Making Process

Marketers are concerned to identify the decision-making unit (DMU) and the decision-making process (DMP) that underlie each decision within each target market.

 A DMU describes the different functions which are usually involved in making purchase decisions. In formal organisations, these functions are often carried out by different people in different parts of the organisation.

The functions are often given different descriptions by different academics, but perhaps the easiest to remember is that proposed by Maxwell – Starter, Purchaser, Adviser(s), Decider and End-user. It is helpless without Finance to complete the transaction.

(As a mnemonic remember a SPADE stuck into a heap of Fertiliser.)

All purchase decisions are underpinned by the elements of a DMU, so we can illustrate the concept by reference to the impulse decision to buy a bar of chocolate. The buyer will have, at least mentally, passed through all six elements – something will have triggered the need, advice will have been taken (from experience if not externally), the needs of the end-user will have been considered, a decision to buy taken, a purchase process commenced, finance considered and a purchase completed.) The element of feedback (evaluation) is critical since attitudes formed by the product in use will affect future buying decisions (as "advice").

 The DMP is far more complex than the DMU because it models the interactions over time that take place before the decision is made and the purchase negotiated.

For a capital-intensive project a DMP can last several years and involve levels of management spread across the globe.

The need for both the DMU and DMP to be identified and understood is to allow functional marketing to target each element with the most beneficial tools at the most appropriate time(s). Considerable marketing research resources are devoted to these on-going tasks.

The Concept of Benefit

Customers do not buy products, they buy the benefit – i.e. what the product (or service) will do for them. Consider whether you actually want a computer or the ability to process

documents, calculate with spreadsheets, communicate globally, play games. The decision to buy firstly a computer, then a type of computer and finally a specific model is based upon personal judgment as to which best meets the needs that you personally have identified.

(For an organisational decision the needs may be collectively decided, but the eventual purchase will be made by a designated individual.)

So, organisations need to produce not products per se, but "bundles of benefits" that are then "packaged" to meet the identified needs of individual customers. Given that benefit packaging is the focus of activity, it becomes apparent that marketing is applicable to any activity that is persuasive in nature. Some of the best work has been on behalf of concepts – the Greenpeace and famine relief campaigns are typical.

The Marketing Mix

Companies who follow the marketing concept will use the marketing mix to conduct their dealings with customers.

The "mix", as it is affectionately known, is really a combination of factors which can be amended or adapted to suit the requirements of individual, or groups of, customers. It is the

"tool-box" of the marketer.

The term "marketing mix" covers the seven controllable variables of:

 Product – A set of characteristics which satisfy the requirements of consumers and provide the benefits claimed

 Price – Set in accordance with market levels and reflecting the characteristics and quality of the product

 Place – Available in multiple outlets and by order from suppliers, providing full coverage of the market area

 Promotion – Information provided about the product (characteristics and benefits) including advertisements and point of sale material

 People – Technical advice given by manufacturers and outlet staff which is knowledgeable and helpful

 Processes – Buying and support processes which are easy to accomplish.

 Physical evidence – This element of the marketing mix was originally introduced for services, but it is equally relevant to the marketing of physical products. If you think of this as anything which improves the perception of the buyer you will not go far wrong so it could include the appearance of the outlet (especially if it was owned by the manufacturer) or the quality of the leaflets provided.

The Marketing Environment

This term covers the "uncontrollable variables" which are generally beyond the control of the organisation and, as such, must be given due consideration, such as:

 Economic development

 Technological development

 Social/cultural aspects

 Political/legal restraints

 Business practices/institutions

 Competitors, etc.

The marketing concept, marketing mix and marketing environment apply irrespective of whether an organisation is operating solely in its home markets or in international markets.

Although we are not dealing specifically with international markets, you must always be aware of them and of additional factors to be considered when dealing internationally, e.g. distance, payment, language, control, religion etc., all of which can present additional problems.

The Marketing Function

The marketing function as being only one of several – each with its own importance.

Although this is true, it is necessary to appreciate the role which marketing plays in the integration of activities throughout an organisation.

We know that any organisation has multiple problem areas and, as such, it must operate professionally and be structured so that value exchanges taking place both in and out of the company are ultimately of benefit, rather than detriment, to the organisation as a whole.

The marketing personnel, because of their understanding of customer needs, as well as their awareness of events in both external and internal environments, are best placed to act as agents for liaison and change. They should act as facilitators for organisational integration.

It is the marketing function which, above all others, assists in the achievement of corporate objectives.

In the main, however, marketing's power is seated in the organisation's adoption of the marketing concept, and therefore the acceptance that the lead must come from the market.

As we've said, marketing is the bridge over which such information flows, and knowledge is power.

(a) The organisation and marketing ideology

Mintzberg describes organisational ideology as having three stages of development:

 Rooting: A single prime mover identifies a mission – some product or service need – and gathers a group around him or her to accomplish it. Even when an organisation is founded by another agency there will usually be a prime mover at its focus. The individuals do not come together at random (or if they do, some then move on fairly smartly). Those who remain do so because they coalesce around shared values associated with the organisation.

 Development: As time passes a set of beliefs form about the nature of the organisation and those who work within it. Decisions are taken which initiate actions that serve as commitments and establish precedents. Behaviours

reinforce themselves over time, and actions become infused with value. A unique sense of history is developed.

 Reinforcement: The organisation is a living system and individuals join a collective rather than a random set of individuals. Organisational culture will heavily affect individual beliefs and behaviour. Identification with and loyalty to an organisation can be very strong.

An organisation with a marketing ideology will hold certain key values:

 The purpose of production is to serve the consumers (profits come from consumer satisfaction)

 Success comes from close identification with buyers, users and distributors

 Innovation and new ideas are encouraged and rewarded

 An aggressive, competitive will to succeed is essential.

It follows that an organisation wishing to change from, say, a production or bureaucratic ideology will have a long-term programme of behavioural change to undertake.

(b) Strategic role

Referring to the marketing function as being "one of many functions" may, at times, detract from the strategic importance of the activity itself and its relationship or "fit" with corporate planning. Strategic marketing implies that marketing planning is carried out at a high level and is a major influence on corporate planning itself.

This upward shift of emphasis has really developed because of changes which have taken place in the competitive environment. It is no longer possible simply to say "We'll do it". Competitive forces are severe and markets are being fragmented daily due to ever more sophisticated requirements on the part of customers. Because of the changes, planning needs to be undertaken with great care and every aspect of the environment should be taken into account.

Whereas marketing often used to be regarded as simply "an activity to help selling", it has now been elevated to a position of greater prominence. However, it must be pointed out that still too few organisations are represented at Board level by qualified marketers.

Where there is high-level recognition there tends to be much better planning with the add-on effect of marketing itself becoming increasingly sophisticated. Those

organisations who do not give due credence to marketing as a strategic activity are likely to fall behind in the race for market share and shareholder value as they fail to see the long-term picture both in terms of objective setting and achievement.

"Short-termism", as the lack of a strategic perspective is known, is one of the main reasons why companies fail to survive. To accept marketing planning as being of strategic importance is one way to overcome this.