One - What Is Marketing?

ONE - WHAT IS MARKETING? __________________________________________________________________________ AIMS AND OBJECTIVES OF THE CHAPTER There is much misunderstanding about what marketing is. Many people equate it with promotion, or "trying to sell things that people don’t really want". The aim of this chapter is to set out the foundations of marketing and to distinguish between marketing as a fundamental philosophy and as a set of techniques. Students should appreciate that while the techniques have now been widely adopted, many organisations still have a long way to go in developing a true customer focus which is at the heart of the marketing philosophy. After reading this chapter, students should have an awareness of the relationship of marketing to other organisation functions and be familiar with current debates about the nature of marketing. This is essentially a foundation chapter and many themes discussed will be returned to in more detail in later chapters. CHAPTER SYNOPSIS • Marketing defined • Marketing as a fundamental business philosophy • The science and art of marketing • Foundations for success in business • Key marketing concepts • The marketing management process • Introduction to the marketing mix ANNOTATED LECTURE OUTLINE Point 1 - Marketing defined Marketing is essentially about marshalling the resources of an organisation so that they meet the changing needs of customers on whom the organisation depends. As a verb, marketing is all about how an organisation addresses its markets. The Chartered Institute of Marketing provides a typical definition of marketing:

"The management process which identifies, anticipates and supplies customer requirements efficiently and profitably" Most private sector organisations operate with some kind of profit related objectives, and if an adequate level of profits cannot be earned from a particular group of customers, a firm will not normally wish to meet the needs of that group. Where an organisation is able to meet its customers’ needs effectively and efficiently, its ability to gain an advantage over its competitors will be increased (for example by allowing it to sell a higher volume and/or at a higher price than its competitors). It is consequently also more likely to be able to meet its profit objectives. Point 2 - Marketing as a fundamental business philosophy As a business philosophy, marketing puts customers at the centre of all the organisation’s considerations. This is reflected in basic values such as the requirement to understand and respond to customer needs and the necessity to constantly search for new market opportunities. In a truly marketing oriented organisation, these values are instilled in all employees and should influence their behaviour without any need for prompting. To many people, marketing is simply associated with a set of techniques. As an example, market research is a technique for finding out about customers’ needs and advertising is a technique to communicate the benefits of a product offer to potential customers. However, these techniques can be of little value if they are undertaken by an organisation which has not fully taken on board the philosophy of marketing. Discussion topic: Undertake an informal audit of some organisations with which you are familiar. Assess how well these organisations perform on some simple indicators of market orientation, e.g., are opening hours designed to be convenient for staff rather than customers; are the "best" car parking spaces reserved for customers, or for senior staff?; do staff seem to be more concerned for the customer, or with following fixed procedures?; does the company make it easy to buy its products?; does advertising appeal more to managers’ egos, rather than consumers? How well does a university perform in terms of being truly marketing oriented? There have been many attempts to define just what is meant by marketing orientation. Among empirical attempts to measure marketing orientation, a study by Narver and Slater (1990)

identified three important components: customer orientation; competitor orientation; and inter-fucntional co-ordination (Figure 1.1, p6). Point 3 - Is marketing a science or an art? Attempts to empirically study marketing using scientific frameworks of the natural sciences have found favour with followers of the positivist school. On this basis, models have been developed to predict consumer behaviour, the profitability of retail locations and pricevolume relationships, among others. The great merit of the scientific approach is its claim to great objectivity. To many people, marketing has no credibility if it does not take a rigorous, scientific method of enquiry. This implies that research should be carried out in a systematic manner and results should be replicable. To counter this view, it is argued that marketing cannot possibly emulate the natural sciences in its methodologies. Positivist approaches have frequently been accused of seeking meaning from quantitative data sets in an essentially subjective manner which is at variance with the scientific principles on which positivist approaches are based. The argument of post-positivist researchers is that while positivist approaches enhance reliability and replicability, they do so at the expense of validity, that is to say, the findings are not a mirror image of reality. Postpositivists hold that the "real" truth will never emerge in a research framework which is constrained by the need to operationalise variables in a watertight manner. In real life marketing, the world cannot be divided into clearly defined variables which are capable of objective measurement. Post-positivists place greater emphasis on exploring in depth the meaning of individual case studies rather than seeking objectivity and replicability through large sample sizes. The scientific approach to marketing planning has a tendency to minimise risks, yet many major business successes have been based on entrepreneurs using their own judgement in preference to that of their professional advisers. Point 4 - Is marketing an academic discipline? Marketing has borrowed heavily from other discipline areas. Its antecedents can be traced back to industrial economics, but in the process of growth, it has drawn on the following discipline areas: • Psychology - e.g. in the study of human motivation and perception

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Sociology - as an example, social-psychologists have contributed an understanding of the processes by which inter-personal trust develops which has been applied to the study of long-term buyer-seller relationships In its claim to be a science, marketers are constantly borrowing (and developing new) statistical techniques The law represents an embodiment of a society’s values and legal frameworks are becoming increasingly important to the study of marketing Economics remains an important discipline area which marketing draws on (e.g. in respect of pricing strategy)

As marketing has developed, the flow of theory has become more two-way. Point 5 - Foundations for success in business In fact, marketing is not appropriate to all firms at all times and in all places. Essentially, marketing assumes greatest importance where the main factor constraining a firm’s survival and growth is the shortage of customers for its products. If a firm can be assured of selling all that it produces; it may consider marketing to be the least of its worries. Alternative frameworks have been used to analyse business behaviour: • Production orientation: Where products are scarce and much demand remains unfulfilled, production planning may be more important for business success than marketing orientation based on understanding customers’ needs. • Selling orientation: when markets become more competitive, the first reaction of many companies has not been to take on board the full philosophy of marketing, but only the selling function. Eventually, firms have realised that rather than trying to sell products that buyers do not really want, it would be better to take on board the full philosophy of marketing which puts customers at the centre of all business planning. Discussion topic: Peter Drucker once said: "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. Ideally, marketing should result in a customer who is ready to buy. All that should be needed is to make the product or service available...". Is this statement realistic? Why then, do so many companies need to resort to aggressive selling techniques? Point 6 - What organisations undertake marketing?

Marketing developed in competitive fast moving goods sectors, followed by private sector services. More recently, marketing has been adopted by various public sector and not-forprofit organisations, reflecting the increasingly competitive environments in which they now operate. If an organisation has a market which it needs to win over, then marketing has a role. But without markets, can marketing ever be a reality? Many organisations claim to have introduced marketing when in fact their customers are captive, with no marketplace within which they can choose competing goods or services. Within the public/ not-for-profit sectors, financial objectives are often qualified by non-financial social objectives. Discussion topic: Can you realistically apply the principles of marketing in a situation where there is no market? When providers of statutory services (e.g. the police and social services) talk about marketing, can they really take on board the full philosophy of marketing? Point 7 - Key marketing concepts The philosophy of marketing can be developed further by defining a number of key concepts which go to the heart of the philosophy. The concepts of needs, exchange, value, customers and markets are briefly introduced, but returned to in following chapters. • Customers - these can be described by many terms, including client, passenger, subscriber, reader, guest and student. They provide payment to an organisation in return for the delivery of goods and services and therefore form a focal point for an organisation’s marketing activity. • Needs - Consumers are motivated by the desire to satisfy complex needs, and these should be the starting point for all marketing activity. • Value - For suppliers of goods and services, value is usually represented by payment received. For customers, value is represented by the ratio of perceived benefits to price paid. Customers will evaluate benefits according to the extent to which a product allows their needs to be satisfied. • Exchange - In modern market based economies, goods and services are acquired on the basis of exchange. Exchange implies that one party makes some sacrifice to another party in return for receiving something which it values. The other party similarly makes a sacrifice and receives something that it values.

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Markets - Markets are defined with reference to space and time. Various measures of the market are commonly used, including sales volumes, sales values, growth rate and level of competitiveness.

Discussion topic: As a hospital patient, would you cringe at being referred to as a customer? Some universities now refer to their paying students as customers. Does this terminology sharpen minds within an organisation, or does it demean a professional relationship? Is the use of the term a double-edged sword, raising consumers’ expectations about standards of service which may be undeliverable? Point 7 - Marketing management Successful marketing does not generally come about by accident -it needs to be managed effectively. Three fundamental aspects of marketing management can be identified: processes, structures and outcomes. Central to marketing management is the concept of the marketing mix. In this section, these are briefly introduced, but are returned to in more detail in following chapters. • The marketing management process - It is usual to identify four principal stages of the marketing management process which involve asking the following questions: Analysis (Where are we now?): Planning (where do we want to be?); Implementation (How do we get there?) and Control (Did we get there?) • Marketing management structures - Internally, the structure and politics of an organisation affect the manner in which it can respond to changing customer needs. There are two aspects of management structures that particularly affect the role of marketers: firstly, the internal structure and processes of the marketing department itself (where one actually exists), and secondly, the relationship of the marketing functions to other business functions affects the marketing effectiveness of an organisation. • Outcomes of the marketing management process - Ultimately, the aim of good marketing management is to allow a company to survive and produce an acceptable level of profits. In leading to this, a tangible outcome of the management process is the marketing plan. A plan should be distinguished from the process of planning - a plan is a statement fixed at one point in time, while planning refers to an ongoing process, of which the plan is just one outcome. Point 8 - The marketing mix The marketing mix is not a theory of management, but a conceptual framework which highlights the principal decisions marketing managers make in configuring their offerings to

suit customers’ needs. The tools can be used both to develop long term strategies and short term tactical programmes. A marketing manager can be seen as somebody who mixes a set of ingredients to achieve a desired outcome. The concept of the marketing mix was first given prominence by Borden (1965) who described the marketing manager as: "...a mixer of ingredients, one who is constantly engaged in fashioning creatively a mix of marketing procedures and policies in his efforts to produce a profitable enterprise". The traditional marketing mix has comprised the four elements of Product, Price, Promotion and Place. A number of authors have additionally suggested adding People, Process and Physical evidence decisions. There is overlap between each of these headings and their precise definition is not particularly important. What matters is that marketing managers can identify the actions they can take which will produce a favourable response from customers. Point 9 - Marketing and its relationship to other business functions In a truly marketing oriented company, marketing responsibilities cannot be confined to something called a marketing department. In the words of Drucker (1973): " Marketing is so basic that it cannot be considered to be a separate function. It is the whole business seen from the point of view of its final result, that is, from the customer’s point of view". In marketing oriented organisations, the customer should be the concern not just of the marketing department, but also all of the production and administrative personnel whose actions may directly or indirectly create value in the mind of customers. Point 10 - Marketing and social responsibility Traditional definitions of marketing have stressed the supremacy of customers, but this is increasingly being challenged by the requirement to satisfy the needs of wider stakeholders in society. There have been many recent cases where companies have neglected the interests of this wider group with disastrous consequences. There are segments within most markets which place high priority on ensuring that the companies which they buy from are "good citizens". Wider issues are raised about the effects of marketing practices on the values of a society. It has been argued that by promoting greater consumption, marketing is responsible for creating a greater feeling of isolation among those members of society who cannot afford to join the

consumer society where an individual’s status is judged by what they own, rather than their contribution to family and community life. Point 11 - What makes a good marketer? Are good marketers bred or born? To answer this question, it is necessary to have a clear understanding of just what marketing is about. The ability to identify, anticipate and respond to customer needs puts a lot of onus on skills of observation and analysis. Outdated ideas that marketing is all about selling harder by shouting more loudly were probably never appropriate to even the most aggressive sales personnel, for whom listening to customers’ needs has always been crucial to developing a winning sales pitch. Can marketers be trained? There is a feeling among many employers that a little marketing knowledge by incoming employees may be quite dangerous. This idea holds that it may be better to take on staff who have an ability to think critically, communicate effectively and show creativity. CASE STUDY DISCUSSION The case study discusses a company which proudly proclaimed that it could manage without marketing theory. After enjoying many years of success, The Body Shop’s fortunes deteriorated and many blamed this on the founder’s unwillingness to develop strategic marketing plans. Three questions are posed in the text: 1. In what ways could Anita Roddick have maintained her identification with social and environmental causes as a unique positioning feature? The problem which the case discusses is how to stay ahead in order to keep this positioning advantage. Issues such as animal testing have now been adopted by many of Body Shop’s competitors. Distinctive social causes have become increasingly esoteric in the eyes of many people (e.g. few people may identify with the cause of Appalachian miners). Body Shop must maintain social ideals that are relevant to the growing segment of consumers who hold moderate views about social issues. It must also ensure that its products perform as well as those of competitors. 2. To what extent are the pursuit of profit and meeting the needs of wider groups of stakeholders incompatible? Which companies, if any, have managed to sustainably reconcile these two aims?

It might be easier to start answering this by identifying cases of organisations who have ignored social responsibility and subsequently tarnished their image and lost customers. The Shell oil company following the Brent Spar incident is a good example. Many companies have proactively taken a social stance and gained a distinctive and profitable position in their market place. The Co-operative bank, for example has managed to profitably serve a market segment on the basis of value for money services, augmented by claims of ethical business practices. Such claims must be capable of substantiation; otherwise accusations of hypocrisy may undermine trust in a brand. 3. What are the basic lessons in marketing that the Body Shop might have taken on board in its early years in order to improve its chances of long-term success? A clear message of the case study is that the company should have had a clearer idea about how its market and position would be likely to evolve in the future. Issues of leadership, and how environmental change should be addressed were not adequately resolved. However, it would have been difficult in the early stages to take on board the processes and structures of a conventional marketing organisation, while still retaining its missionary zeal. It should however have recognised the point at which transformation to such an organisation was needed, in terms of structures, processes and leadership.