Further definitions
Marketing is defined by the American Marketing Association (AMA) as "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." [3] The term developed from the original meaning which referred literally to going to a market to buy or sell goods or services. Seen from a systems point of view, sales process engineering views marketing as "a set of processes that are interconnected and interdependent with other functions,[4] whose methods can be improved using a variety of relatively new approaches."
The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably." [5] A different concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value.[6] In this context, marketing is defined as "the management process that seeks to maximise returns to shareholders by developing relationships with valued customers and creating a competitive advantage." [6]
Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science, allowing numerous universities to offer Master-of-Science (MSc) programmes. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at re-inventing itself and its vocabulary according to the times and the culture.
Evolution of marketing
Main article: History of marketing
An orientation, in the marketing context, related to a perception or attitude a firm holds towards its product or service, essentially concerning consumers and end-users. Throughout history marketing has changed considerably as consumer tastes are changing faster.[7]
Earlier approaches
The marketing orientation evolved from earlier orientations namely the production orientation, the product orientation and the selling orientation.[7][8]
| Orientation | Profit driver | Western European timeframe | Description |
| Production[8] | Production methods | until the 1950s | A firm focusing on a production orientation specializes in producing as much as possible of a given product or service. Thus, this signifies a firm exploiting economies of scale, until the minimum efficient scale is reached. A production orientation may be deployed when a high demand for a product or service exists, coupled with a good certainty that consumer tastes do not rapidly alter (similar to the sales orientation). |
| Product[8] | Quality of the product | until the 1960s | A firm employing a product orientation is chiefly concerned with the quality of its own product. A firm would also assume that as long as its product was of a high standard, people would buy and consume the product. |
| Selling[8] | Selling methods | 1950s and 1960s | A firm using a sales orientation focuses primarily on the selling/promotion of a particular product, and not determining new consumer desires as such. Consequently, this entails simply selling an already existing product, and using promotion techniques to attain the highest sales possible. Such an orientation may suit scenarios in which a firm holds dead stock, or otherwise sells a product that is in high demand, with little likelihood of changes in consumer tastes diminishing demand. |
| Marketing[8] | Needs and wants of customers | 1970 to present day | The 'marketing orientation' is perhaps the most common orientation used in contemporary marketing. It involves a firm essentially basing its marketing plans around the marketing concept, and thus supplying products to suit new consumer tastes. As an example, a firm would employ market research to gauge consumer desires, use R&D to develop a product attuned to the revealed information, and then utilize promotion techniques to ensure persons know the product exists. |
Contemporary approaches
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Recent approaches in marketing is the relationship marketing with focus on the customer, the business marketing or industrial marketing with focus on an organization or institution and the social marketing with focus on benefits to the society.[9] New forms of marketing also use the internet and are therefore called internet marketing or more generally e-marketing, online marketing, search engine marketing, desktop advertising or affiliate marketing. It tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing. Internet marketing is sometimes considered to be broad in scope, because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media.
| Orientation | Profit driver | Western European timeframe | Description |
| Relationship marketing / Relationship management[9] | Building and keeping good customer relations | 1960s to present day | Emphasis is placed on the whole relationship between suppliers and customers. The aim is to give the best possible attention, customer services and therefore build customer loyalty. |
| Business marketing / Industrial marketing | Building and keeping relationships between organizations | 1980s to present day | In this context marketing takes place between businesses or organizations. The product focus lies on industrial goods or capital goods than consumer products or end products. A different form of marketing activities like promotion, advertising and communication to the customer is used. |
| Social marketing[9] | Benefit to society | 1990s to present day | Similar characteristics as marketing orientation but with the added proviso that there will be a curtailment on any harmful activities to society, in either product, production, or selling methods. |
| Branding | Brand value | 2000s to present day | In this context, "branding" is main company philosophy and marketing is considered an instrument of branding philosophy. |
Customer orientation
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A firm in the market economy survives by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.[10]
A formal approach to this customer-focused marketing is known as SIVA [11] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, placement, promotion) of marketing management.
| Product | → | Solution |
| Price | → | Value |
| Place | → | Access |
| Promotion | → | Information |
If any of the 4Ps had a problem or were not there in the marketing factor of the business, the business could be in trouble and so other companies may appear in the surroundings of the company, so the consumer demand on its products will become less.
Organizational orientation
In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization. Information from an organization's marketing department would be used to guide the actions of other departments within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.
The production department would then start to manufacture the product, while the marketing department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a firm's finance department would be consulted, with respect to securing appropriate funding for the development, production and promotion of the product. Inter-departmental conflicts may occur, should a firm adhere to the marketing orientation. Production may oppose the installation, support and servicing of new capital stock, which may be needed to manufacture a new product. Finance may oppose the required capital expenditure, since it could undermine a healthy cash flow for the organization.
Herd behavior
Herd behavior in marketing is used to explain the dependencies of customers' mutual behavior. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[12] It shared mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct." The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart card technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Florida Institute of Technology researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts."Other recent studies on the "power of social influence" include an "artificial music market in which some 19,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay).
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Further orientations
- An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers, see also employer branding.
- Diffusion of innovations research explores how and why people adopt new products, services and ideas.
- With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of permission marketing such as branded content, custom media and reality marketing.
Marketing research
Main article: Marketing research
Marketing research involves conducting research to support marketing activities, and the statistical interpretation of data into information. This information is then used by managers to plan marketing activities, gauge the nature of a firm's marketing environment and attain information from suppliers. Marketing researchers use statistical methods such as quantitative research, qualitative research, hypothesis tests, Chi-squared tests, linear regression, correlations, frequency distributions, poisson distributions, binomial distributions, etc. to interpret their findings and convert data into information. The marketing research process spans a number of stages including the definition of a problem, development of a research plan, collecting and interpretation of data and disseminating information formally in form of a report. The task of marketing research is to provide management with relevant, accurate, reliable, valid, and current information.
A distinction should be made between marketing research and market research. Market research pertains to research in a given market. As an example, a firm may conduct research in a target market, after selecting a suitable market segment. In contrast, marketing research relates to all research conducted within marketing. Thus, market research is a subset of marketing research.
Marketing environment
Main article: Marketing environment
Market segmentation
Main article: Market segmentation
Market segmentation pertains to the division of a market of consumers into persons with similar needs and wants. As an example, if using Kellogg's cereals in this instance, Frosties are marketed to children. Crunchy Nut Cornflakes are marketed to adults. Both goods aforementioned denote two products which are marketed to two distinct groups of persons, both with like needs, traits, and wants.
The purpose for market segmentation is conducted for two main issues. First, a segmentation allows a better allocation of a firm's finite resources. A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers. Furthermore the diversified tastes of the contemporary Western consumers can be served better. With more diversity in the tastes of modern consumers, firms are taking note of the benefit of servicing a multiplicity of new markets.
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Market segmentation can be defined in terms of the STP acronym, meaning S egment, T arget and P osition.
