1.1: Introduction to Marketing
1.1.1: Defining Marketing
Marketing is the creation, communication, and delivery of value, as well as the management of customer relationships for a lifetime.
Define marketing, its role within a firm, and the competitive advantages it offers.
- The set of engagements necessary for successful marketing management includes capturing marketing insights, connecting with customers, building strong brands, shaping market offerings, delivering and communicating value, creating long-term growth, and developing marketing strategies and plans.
- Marketing is one of several functional areas in a business that must be guided by a core company philosophy, while focusing on the exchanges that take place in external markets to maximize performance.
- The specific role of marketing is to provide assistance in identifying, satisfying, and retaining customers. If marketing consistently highlights a company’s competitive advantage over other alternatives, consumers may become loyal to the point of selecting the brand by default.
- competitive advantage
Something that places a company or a person above the competition.
Marketing is the act of facilitating the exchange of a given commodity for goods, services, and/or money to deliver maximum value to the consumer. From a societal point of view, marketing is the link between a society’s material requirements and its economic patterns of response. Marketing satisfies these needs and wants through both the exchange processes and building long-term relationships.
Marketing can be viewed as an organizational function and a set of processes for creating, delivering, and communicating value to customers, and managing customer relationships in ways that benefit the organization and its shareholders. Marketing is the science of choosing target markets through market analysis and market segmentation, as well as understanding consumer buying behavior and providing superior customer value.
The set of engagements necessary for successful marketing management include capturing marketing insights, connecting with customers, building strong brands, shaping the market offerings, delivering and communicating value, creating long-term growth, and developing marketing strategies and plans.
The Role of Marketing within A Firm
The official American Marketing Association definition published in July 2013 defines marketing 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. “
While this definition can help us better comprehend the parameters of marketing, it does not provide a full picture. Definitions of marketing cannot flesh out specific transactions and other relationships among these elements. The following propositions are offered to supplement this definition:
- The overall directive for any organization is the mission statement or an equivalent expression of organizational goals. It reflects the inherent business philosophy of the organization.
- Every organization has a set of functional areas (e.g., accounting, production, finance, data processing, marketing) in which tasks pertinent to the success of the organization are performed. These functional areas must be managed if they are to achieve maximum performance.
- Every functional area is guided by a philosophy (derived from the mission statement or company goals) that governs its approach toward its ultimate set of tasks.
- Marketing differs from the other functional areas, because its primary concern is exchanges that take place in markets outside the organization.
- Marketing is most successful when the philosophy, tasks, and implementation of available technology are coordinated and complementary to the rest of the business.
Marketing is often a critical part of a firm’s success, but its importance must be kept in perspective. For many large manufacturers such as Proctor & Gamble, Microsoft, Toyota, and Sanyo, marketing represents a major expenditure, as these businesses depend on the effectiveness of their marketing effort. Conversely, for regulated industries (such as utilities, social services, medical care, or small businesses providing a one-of-a-kind product) marketing may be little more than a few informative brochures.
Marketing Metrics Continuum
The Marketing Metrics Continuum provides a framework to categorize metrics from the tactical to the strategic.
A framework that shows how to categorize metrics – activity-based, operational, outcome-based, leading indicators, and predictive.
Marketing as a Source of Competitive Advantage
The specific role of marketing is to provide assistance in identifying, satisfying, and retaining customers. Noted Harvard Business Professor Theodore Levitt claimed the purpose of all business is to “find and keep customers. ”
The only way to achieve this objective is to create a competitive advantage. That is, you must convince buyers (potential customers) that what you have to offer satisfies their particular need or want. Hopefully, you will be able to provide this advantage consistently, so eventually the customer will purchase your product without considering alternatives. This loyal behavior is exhibited by people who drive only Fords, brush their teeth only with Crest, and buy only Dell computers.
Creating this blind commitment – without consideration of alternatives – to a particular brand, store, person, or idea is the dream of all businesses. It is unlikely to occur, however, without the support of an effective marketing program.
1.1.2: Customer Wants and Needs
Consumer wants and needs should drive marketing decisions, and no strategy should be pursued until it passes the test of consumer research.
Identify how customers fulfill their wants and needs from a marketing perspective
- A need is a consumer’s desire for a product’s or service’s specific benefit, whether that be functional or emotional. A want is the desire for products or services that are not necessary, but which consumers wish for.
- The five step consumer decision process includes need identification, information search and processing, identification and evaluation of alternatives, the purchase decision, and post-purchase behavior.
- Consumers process information through exposure to a stimulus, actively paying attention to it, assigning meaning to the stimulus, retaining that meaning, and retrieving and applying that information to solve a problem or need they have in the future.
- Customer focus should be treated as a subset of the corporate strategy rather than the sole driving factor. This means looking beyond current-state customer focus to predict what customers will demand in the future, even if they themselves discount the prediction.
- customer retention
An assessment of the product or service quality provided by a business that measures how loyal its customers are.
A state of disagreement or conflict.
The desire to purchase goods and services.
Demand is the economic principle that describes a consumer’s desire, willingness and ability to pay a price for a specific good or service. A firm in the market economy survives by producing goods that are in demand by consumers. Consequently, ascertaining consumer demand is vital for a firm’s future viability. Many companies today have a customer focus. In this approach, consumer wants and needs 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 and wants of potential consumers.
A need is a consumer’s desire for a product’s or service’s specific benefit, whether that be functional or emotional. The emotional benefit tends to be a stronger driver for consumers, as functional benefits can be easily copied by competitors. On the other hand, a consumer want is the desire for products or services that are not necessary, but which consumers wish for. For example, food is considered a consumer need. However, a steak dinner or dessert is considered a consumer want, as these things are not necessary in order to live.
Customer Decision Process
There is a five step process that consumers can go through in making a purchase decision. These steps include:
- Need recognition
- Information search
- Evaluation of Alternatives
The customer decision process begins with need identification. Whether we act to resolve a particular problem depends upon two factors: the magnitude of the discrepancy between what we have and what we need, and the importance of the problem. This involves the concept of consumer motivation, which is the internal drive consumers experience to fulfill conscious and unconscious wants and needs. Once the problem is recognized, it must be defined in such a way that the consumer can actually initiate the action that will bring about a relevant solution.
The next step is information search and processing. After a need is recognized, the prospective consumer may seek information from family, friends, personal observation, consumer reports, salespeople, or mass media. The promotional component of the marketer’s offering is aimed at providing information to assist the consumer in their problem-solving process. If the buyer can retrieve relevant information about a product, brand, or store, he or she will apply it to solve a problem or meet a need.
The criteria used in the evaluation of alternatives vary from consumer to consumer. One consumer may consider price the most important factor while another may put more weight upon quality or convenience. The search for alternatives is influenced by such factors as time and money costs, how much information the consumer already has, the amount of the perceived risk if a wrong selection is made, and the consumer’s disposition toward particular choices.
During the purchase phase of the decision-making process, the consumer may form an intention to buy the most preferred brand because he has evaluated all the alternatives and identified the value that it will bring him. Anything marketers can do to simplify purchasing will attract buyers. Providing basic product, price, and location information through labels, advertising, personal selling, and public relations is an obvious starting point. Product sampling, coupons, and rebates may also provide an extra incentive to buy.
A consumer’s feelings and evaluations after the sale come into play during the post-purchase phase. These feelings can influence customer retention and influence what the customer tells others about the product or brand. The marketer may take specific steps to reduce post-purchase dissonance. Advertising that stresses the many positive attributes or confirms the popularity of the product can be helpful.
Focusing on Customers
What cellphone customers wanted in 1997 is likely very different than what smartphone users want today.
A cell phone from 1997 next to a smartphone.
Caveats of a Customer Focus
Customer focus should be treated as a subset of the corporate strategy rather than the sole driving factor. This means looking beyond current-state customer focus to predict what customers will demand in the future, even if they themselves discount the prediction.
Companies should pay attention to the extent to which what customers say they want does not match their purchasing decisions. Surveys of customers might claim that 70% of a restaurant’s customers want healthier choices on the menu, but only 10% of them actually buy the new items once they are offered. Truly understanding customers sometimes means understanding them better than they understand themselves.
Customers can be currently ignorant of what a company might argue they should want. IT hardware and software capabilities and automobile features are examples. Customers who in 1997 said that they would not place any value on Internet browsing capability on a mobile phone, or 6% better fuel efficiency in their vehicle, might say something different today, because the value proposition of those opportunities has changed .
1.1.3: Product, Placement, Promotion, and Price
Product, placement, promotion, and price are four elements of the marketing mix crucial to determining a brand’s unique selling proposition.
Show the characteristics of each of the four elements, or “Four Ps” that make up the “marketing mix.
- The term “product” is defined as anything, either tangible or intangible (such as a service), offered by the firm; a solution to the needs and wants of the consumer; profitable or potentially profitable; and as meeting the requirements of the various governing offices or society.
- Placement, or product distribution, is the process of making a product or service accessible for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.
- The three basic objectives of promotion are to 1) present information to consumers and others, 2) to increase demand, and 3) to differentiate a branded product or service – through advertising, public relations, personal selling, direct marketing, and sales promotion.
- The price is the amount a customer pays for the product. A well chosen price should (a) ensure survival (b) increase profit (c) generate sales (d) gain market share, and (e) establish an appropriate image.
- Value is what a customer receives from a product.
Anything, either tangible or intangible, offered by the firm as a solution to the needs and wants of the consumer; something that is profitable or potentially profitable; goods or a service that meets the requirements of the various governing offices or society.
The process of making a product or service accessible for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.
The cost required to gain possession of something.
- Examples of fully integrated, long-term, large-scale promotions are My Coke Rewards and Pepsi Stuff. These promotions present information to consumers, increase demand by rewarding purchases, and differentiate the product.
Product, placement, promotion and price are the four elements of the marketing mix.
The term “product” is defined as anything, either tangible or intangible, offered by the firm; as a solution to the needs and wants of the consumer; something that is profitable or potentially profitable; and a goods or service that meets the requirements of the various governing offices or society. The two most common ways that products can differentiated are:
- Consumer goods versus industrial goods, and
- Goods products (i.e. durables and non-durables) versus service products
Intangible products are service-based, such as the tourism industry, the hotel industry, and the financial industry. Tangible products are those that have an independent physical existence. Typical examples of mass-produced, tangible objects are automobiles and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system.
Tangible Luxury Good
A 1932 Horch 670 V12 is an example of a tangible product. Its price should reflect its image as a classic automotive collectible.
Every product is subject to a life-cycle that starts with its introduction and is followed by a growth phase, a maturity phase, and finally a period of decline as sales falls. Marketers must do careful research on the length of the product’s life-cycle and focus their attention on different challenges that arise as the product moves through each stage.
4Ps in Action
Coca Cola’s marketing strategy includes elements of all four Ps.
A Coca-Cola soda machine.
The marketer must also consider the product mix, which includes factors such as product depth and breadth. Product depth refers to the number of sub-categories of products a company offers under its broad spectrum category. For example, Ford Motor Company’s product category is automobiles. It’s product depth includes sub-categories such as passenger vehicles, commercial vehicles, transport vehicles, et cetera. This broad spectrum category is also known as a product line. Product breadth, on the other hand, refers to the number of product lines a company offers.
Marketers should consider how to position the product, how to exploit the brand, how to exploit the company’s resources, and how to configure the product mix so that each product complements the other. Failure to do so can result in brand dilution, which is a situation in which a product loses its branded identity, resulting in decreased sales and perceived quality. The marketer must also consider product development strategies.
Product distribution (or placement) is the process of making a product or service accessible for use or consumption by a consumer or business user, using direct means, or using indirect means with intermediaries.
- Intensive distribution means the producer’s products are stocked in the majority of outlets. This strategy is common for basic supplies, snack foods, magazines and soft drink beverages.
- Selective distribution means that the producer relies on a few intermediaries to carry their product. This strategy is commonly observed for more specialized goods that are carried through specialist dealers, for example, brands of craft tools, or large appliances.
- Exclusive distribution means that the producer selects only very few intermediaries. Exclusive distribution is often characterized by exclusive dealing where the re-seller carries only that producer’s products to the exclusion of all others. This strategy is typical of luxury goods retailers such as Gucci.
The decision regarding how to distribute a product has, as its foundation, basic economic concepts, such as utility. Utility represents the advantage or fulfillment a customer receives from consuming a good or service. Understanding the utility a consumer expects to receive from a product being offered can lead marketers to the correct distribution strategy.
The three basic objectives of promotion are :
- To present product information to targeted consumers and business customers.
- To increase demand among the target market.
- To differentiate a product and create a brand identity.
A marketer may use advertising, public relations, personal selling, direct marketing, and sales promotion to achieve these objectives. A promotional mix specifies how much attention to give each of the five subcategories, and how much money to budget for each. A promotional plan can have a wide range of objectives, including: sales increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or creation of a corporate image.
The price is the amount a customer pays for the product. The concept of price is in contrast to the concept of value, which is the perceived utility a customer will receive from a product. Adjusting the price has a profound impact on the marketing strategy, and depending on the price elasticity of the product, often it will affect the demand and sales as well. The marketer should set a price that complements the other elements of the marketing mix. A well chosen price should (a) ensure survival (b) increase profit (c) generate sales (d) gain market share, and (e) establish an appropriate image.
From the marketer’s point of view, an efficient price is a price that is very close to the maximum that customers are prepared to pay. In economic terms, it is a price that shifts most of the consumer surplus to the producer. A good pricing strategy would be the one which could balance between the price floor and the price ceiling and take into account the customer’s perceived value. Common pricing strategies include cost-plus pricing, skimming, penetration pricing, value-based pricing, and many more. A more detailed discussion of these strategies can be found in chapter 8.
1.1.4: SIVA: Solution, Incentive/Information, Value, and Access
Customer-focused marketing is known as SIVA which provides a demand-centric alternative to the four P’s supply side of marketing management.
Reconstruct the “Four Ps” supply side model (product, price, placement and promotion ) to create “SIVA” (solution, information/incentives, value and access), a customer centric alternative
- The product is no longer a one-size fits all offering, but rather a solution created to solve a problem for the customer.
- Information can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer. The “I” also stands for “Incentives,” such as trade promotions.
- Value can be defined as the extent to which goods or services are perceived by customers to to meet their needs or wants.
- Access takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors.
- viral advertising
a marketing technique that uses social networks and other technologies to produce increases in brand awareness or sales. It can be delivered by word of mouth or enhanced by the network effects of Internet and mobile networks. Viral marketing may take the form of video clips, interactive games, ebooks, images, text messages, email or web pages.
- Opportunity cost
The cost of an opportunity forgone (and the loss of the benefits that could be received from that opportunity); the most valuable forgone alternative
SIVA is a formal approach to customer-focused marketing. It stands for Solution, Information, Value, and Access. This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand and customer-centric alternative to the well-known four Ps supply side model (product, price, placement, promotion) of marketing management.
SIVA Customer-Focused Approach
Guitars are not a 1 size suits all product. Guitar companies must be aware of what their customers need and want.
Solution → Product The “Product” in the four Ps model is replaced by “Solution” in order to shift focus to satisfying the consumer needs. The product is no longer a one-size fits all offering, but rather a solution created to solve a problem for the customer. The customer-centric focus allows customers to feel cared for because they are offered a custom solution.
Information/Incentives → Promotion The “Promotion” in the four Ps model is replaced by “Information,” which represents a broader focus. Information can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer. The “I” also stands for “Incentives,” such as trade promotions. A trade promotion is a marketing technique aimed at increasing demand for products based on special pricing, display fixtures, demonstrations, value-added bonuses, no-obligation gifts, et cetera.
Value → Price The “Price” in the four Ps model is replaced by “Value,” reflecting the total value gained through purchasing the product. Value can be defined as the extent to which goods or services are perceived by customers to to meet their needs or wants. It refers to the benefits a buyer receives when their needs are met. Value is measured in terms of a customer’s willingness to pay for a product, and often depends more upon the customer’s perception of a product’s worth rather than its intrinsic value. These perceptions can be in regard to tangible and intangible benefits that a product offers. Many factors affect value, including the customer’s cost to change or implement the new product or service and the customer’s cost for not selecting a competitor’s product or service. Cost in these cases can be defined in any terms applicable to the customer: it can be a monetary, time, effort, opportunity cost, or some combination of those.
Access → Place (Distribution) The “Place” in the four Ps model is replaced by “Access. ” With the rise of the Internet and hybrid models of purchasing, geography is becoming less relevant. Access takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors. Access also refers to the channels of distribution associated with a product. Distribution channels move products and services from businesses to consumers and to other businesses. These channels typically are composed of a set of interdependent organizations, such as wholesalers, retailers, and sales agents.
1.1.5: The Marketing Exchange
The act of obtaining a desired object from someone by offering something of value in return is called the exchange process.
Examine the significant elements of the marketing exchange, when a product or service is offered by a company to a customer in a sales transaction
- The exchange process allows the parties to assess the relative trade-offs they must make to satisfy their respective needs and wants.
- Individuals on both sides attempt to maximize rewards and minimize costs in their transactions so as to obtain the most profitable outcomes. Ideally, all parties achieve a satisfactory level of reward.
- Two of the key questions that a marketer needs to answer relative to buyer behavior are: How do potential buyers go about making purchase decisions? What factors influence their decision process and in what way?
- marketing exchange
the transaction process, facilitated and expedited by marketing, in which a desired object is obtained by offering something of value in return
the process of achieving agreement through discussion
A trade-off involves a sacrifice that must be made to obtain a certain product.
The Marketing Exchange
The exchange process is the act of obtaining a desired object from someone by offering something of value in return. The exchange between the person in need (i.e., someone who offers money or some other personal resource) and the organization selling the product, service, or idea results in a transaction. The top goal of any marketing organization is to facilitate and help increase sales transaction by convincing potential consumers and existing customers to buy their company’s product or service.
Online shopping and modern technology give consumers access to unlimited information and product choices.
With the emergence of the Internet and e-commerce during the 1990s, the nature of the marketing exchange for businesses and customers has changed drastically. Today’s consumers have access to far more and far better information. They also have many more choices. Businesses must provide personalized, relevant and high quality content that competes with a fast, ever-changing competitive landscape.
Simple Marketing Exchange
In marketing, there’s an exchange between the company and the consumer.
A chart that shows a simple marketing exchange – customer identifies a need, customer responds to marketing stimulus, currency is exchanged for the product, and mutual value is reached.
The exchange process allows the parties to assess the relative trade-offs they must make to satisfy their respective needs and wants. For the marketer, analysis of these trade-offs is guided by company policies and objectives. For example, a company may engage in exchanges only when the profit margin is 10% or greater. Buyers also have personal policies and objectives that guide their responses in an exchange. Unfortunately, buyers seldom write down their personal policies and objectives. Even more likely, they often do not understand what prompts them to behave in a particular manner. This is the mystery, or the “black box,” of buyer behavior that makes the exchange process so unpredictable and difficult for marketers to understand.
Marketers can, however, attempt to understand the qualities of their products and how consumers view these qualities in relation to their perceived benefit. One such technique to understand this consumer behavior is known as perceptual mapping, which is a technique that uses diagrams in an attempt to visually display the perceptions of consumers. These ideas will be explored in greater detail in later chapters.
There tends to be some negotiation between the parties in the exchange process. Individuals on both sides attempt to maximize rewards and minimize costs in their transactions so as to obtain the most profitable outcomes. Ideally, all parties achieve a satisfactory level of reward.
In each transaction, there is an underlying philosophy in respect to how the parties perceive the exchange. Sometimes deception and lying permeate the exchange. Other exchanges may be characterized as equitable, where each party receives about the same as the other—the customer’s need is satisfied and the business makes a reasonable profit.
Complex Marketing Exchange
In a complex marketing exchange, there are more dynamics that must be understood and met by the company.
A chart that shows a complex marketing exchange – customer identifies a need, customers makes an offer, an agreement is reached, currency is exchanged for the product, and mutual value is reached.
Understanding Buyer Behavior Will Jumpstart the Exchange Process
When we use the term “buyer”, we are referring to an individual, group, or organization that engages in market exchange. In fact, there are differences in the characteristics of these three entities and how they behave in an exchange. Therefore, individuals and groups are traditionally placed in the consumer category, while organizations are placed in the second category.
When potential buyers are not satisfied, the exchange falters and the goals of the marketer cannot be met. As long as buyers have free choice and competitive offerings from which to choose, they are ultimately in control of the marketplace.
The potential buyers, in commercial situations, “vote” (with their dollars) for the market offering that they feel best meets their needs. An understanding of how they arrive at a decision allows the marketer to build an offering that will attract buyers. Two of the key questions that a marketer needs to answer relative to buyer behavior are:
- How do potential buyers go about making purchase decisions?
- What factors influence their decision process and in what way?
The answers to these two questions form the basis for target market selection, and, ultimately, the design of a market offering.
In order to better understand the marketing exchange, it is important for marketers to grasp how consumers go about making purchase decisions. In general, the consumer decision process includes the following steps:
- Need recognition
- Information search
- Post-purchase behavior
As the consumer moves through these various phases, internal and external conditions are influencing the consumer’s actions throughout the purchasing process. Internal influences include beliefs, feelings, demographics, lifestyle, motivation, and personality. Psychological factors include an individual’s perception, attitude and belief, while personal factors include income level, personality, age, occupation and lifestyle. For example, a consumer may enter the purchase decision stage for a particular product, but decide to buy a different brand after receiving negative feedback from a trusted friend.
Marketing also plays a role in how consumers perceive brand messaging through lenses such as culture, lifestyle and personality. For instance, brands can ensure that content and other messaging align with the individual consumer’s personality profile and motives.
Marketers use a variety of promotional tools to “nudge” consumers who intend to buy but decide to purchase at a later time due to internal or external factors (e.g., loss of job, retail store closing, etc.). To successfully guide consumers through the buying process, marketers attempt to make products and services more appealing by offering credit or payment terms, sales promotions, rebates, and other premiums to convince consumers to buy now rather than later. Complimentary perks and services such as add-on features and lifetime warranties are other tactics used by brands to sell product and service benefits to consumers.
1.1.6: Relationship Building with Various Stakeholders
The key to building a strong stakeholder relationship is communicating effectively with all stakeholders.
Diagram the relationship of stakeholders, both internal and external, to a company including proper methods of communication
- Stakeholders are involved in and/or affected (negatively or positively) by the outcome and impact of an action, project or program.
- Internal stakeholders include stockholders, customers, suppliers, creditors, employees, etc. External stakeholders include the general public, communities, activist groups, the media, etc.
- Marketing communication can be divided into internal flows and external flows directed at different target audiences. This necessitates different yet compatible communication strategies.
- Preparing a communication plan involves five key points: defining the audience, defining its requirements, building a communications schedule, defining a medium of communication, and preparing the content.
- It is important to create a written report after any stakeholder discussion.
- direct mail
Alternative expression for junk mail. Direct mail practices are often refined into “targeted mailing,” where mail is sent to select recipients considered most likely to respond positively.
a person or organization with a legitimate interest in a given situation, action, or enterprise
Stakeholders are involved in and/or affected (negatively or positively) by the outcome and impact of an action, project or program. Stakeholders can be divided into two main categories:
Internal Stakeholders are engaged in economic transactions with the business. (For example, stockholders, customers, suppliers, creditors, and employees)
External Stakeholders are affected by or can affect a business’s actions without being directly engaged in the business. (For example, the general public, communities, activist groups, business support groups, and the media)
Types of Stakeholders
- People who influence an endeavor but are not directly involved with doing the work. Examples include managers, suppliers, or the financial department of an organization.
- People who are affected by any action taken by an organization or group. Examples are parents, children, customers, owners, and employees.
- An individual or group with an interest in an organization’s success. These stakeholders influence programs, products and services. An example of such a stakeholder is one who owns stock in the organization.
- Any organization, governmental entity, or individual that has a stake in or may be impacted by a given approach to environmental regulation, pollution prevention, energy conservation, etc. The environmental organization Greenpeace would be an example of such a stakeholder.
- A participant in a community mobilization effort representing a particular segment of society. Examples include school board members, environmental organizations, elected officials and chamber of commerce representatives.
Communicating with Internal & External Stakeholders
Marketing communication can be divided into two flows directed at different target audiences. This necessitates different yet compatible communication strategies. A company cannot be telling a customer one story and stockholders another.
Marketing communication uses different yet compatible communication strategies based on the target audience.
A chart that shows marketing communication based on external flow (customers, resellers, companies, and publics) and internal flow (employees, stockholders, and functions).
Preparing a communication plan involves five key points:
Defining the audience: List the key stakeholders needing information about the course of events in the project.
Defining the requirements: Answer the question, “What do key stakeholders want to know?” This question should be answered according to the audience’s level of knowledge.
Building a communications schedule: A flexible yet consistent schedule should be prepared and verified by the audience.
Defining the medium of communication: Presenting the information smoothly is important, especially for stakeholders. While they are not involved in the project, they need to know what is going on. An appropriate medium should be selected to ensure the information is delivered successfully.
Preparing the content: The content should include the purpose company, the steps involved in meeting company goals, and the roles and responsibilities of team members.
Tools & Techniques
Communication can be in different forms including:
- Direct mail or online informational output
- To management in the form of e-mail or discussion forums
- To stakeholders in form of advertisement or public relations
The key to building a strong stakeholder relationship is communicating with all members of the company. Stakeholders should have a clear idea of a company’s strategy. After any stakeholder discussions, it is important to create a written report of what was discussed. The report can have information on various projects, goals or new initiatives. The report should be detailed yet concise:
- It should show the structure and analysis of the budget.
- Profit/loss analysis and direction of the company should be summarized.
- The knowledge of all these steps are important for stakeholders to understand their involvement in the process.
1.1.7: The Dynamic Environment
Since the business environment is constantly changing and customer preferences keep evolving, marketers are required to adapt rapidly.
Contrast the ever-evolving characteristics of a micro and macro marketing environments and how they apply to the proactivity, profitability and viability of a company
- The micro-environment includes the company itself, its suppliers, marketing intermediaries, customer markets, and competitors. It also includes consumers, collaborators, and centers of influence.
- The macro-environment includes concepts such as demography, economy, natural forces, technology, politics, and culture.
- Proactive attention to the environment allows marketers to prosper by efficiently marketing in areas with the greatest customer potential. It is important to place equal emphasis on both the macro and micro-environment and to react accordingly to changes within them.
- Reactive attention to the environment by marketers can lead to a disconnect with potential customers and can allow competitors to gain advantages that will win them a higher market share.
- micro environment
Small forces that are close to the company that affect its ability to serve its customers.
- macro environment
Larger societal forces that affect the micro-environment.
- marketing environment
The factors and forces that affect a firm’s ability to build and maintain successful relationships with customers.
the study of human populations, and how they change
The Dynamic Environment
A successful marketing campaign increases a company’s profits and helps it reach its strategic goals. However, there are challenges to marketing because the business environment is constantly changing. Customer preferences and attitudes keep evolving and require managers to adapt rapidly. Another challenge involves reaching different target markets with culturally relevant propositions. McDonald’s is said to be a good example of a company that can effectively reach a diverse audience.
McDonald’s in Seoul, South Korea
McDonald’s marketing takes cultural factors into consideration when creating products and campaigns.
Proactive attention to the environment allows marketers to prosper by efficiently marketing in areas with the greatest customer potential. It is important to place equal emphasis on both the macro and micro-environment and to react accordingly to changes within them. Reactive attention to the environment by marketers can lead to a disconnect with potential customers and can allow competitors to gain advantages that will win them a higher market share.
The Marketing Environment
Two key levels of the marketing environment are the micro-environment and the macro-environment.
The micro-environment includes the company itself, its suppliers, marketing intermediaries, customer markets, and competitors. It also includes consumers, collaborators, and centers of influence.
The company aspect of micro-environment refers to the internal environment of the company. Each internal department has an impact on marketing decisions. For example, Research and Development (R & D) has input on the features a product can have, and accounting approves the financial side of marketing plans and budgets.
The suppliers of a company are also a part of the micro-environment because even the slightest delay in receiving supplies can result in customer dissatisfaction. Examples of suppliers for such companies as automobile manufacturers would include providers of steel, aluminum, leather, and even audio system manufacturers.
Marketing intermediaries refer to the people that help the company promote, sell, and distribute its products to final buyers. Examples include wholesalers, and retailers such as Wal-Mart, Target, and Best Buy. Physical distribution firms are places that store and transport the company’s product from its origin to its destination. Examples include food distributors, such as Food Services of America.
Customer markets can include consumer markets, business markets, government markets, international markets, and reseller markets. The consumer market is made up of individuals who buy goods and services for their own personal use. Business markets include those that buy goods and services for use in producing their own products.
Competitors include companies with similar offerings for goods and services. To remain competitive, a company must consider who their biggest competitors are and simultaneously consider its own size and position in the industry. The company should aim to develop a strategic advantage over their competitors.
Collaborators are key marketing partners that lead to higher efficiency. Examples of collaborators include shipping providers, credit card processors, or online shopping cart providers. Centers of influence are also key to successful marketing relationships. These are well-established business people who are good networkers that can lead you to other successful marketing relationships.
The macro-environment includes concepts such as demography, economy, natural forces, technology, politics, and culture.
Demography refers to studying human populations in terms of size, density, location, age, gender, race, and occupation. This helps to divide the population into market segments which can be beneficial to a marketer in deciding how to tailor their marketing plan to attract that demographic.
The economic environment refers to the purchasing power of potential customers and the ways in which people spend their money. Within this area are subsistence economies and industrialized economies. Subsistence economies are based on agriculture and consume their own industrial output. Industrial economies have markets that are diverse and carry many different types of goods. Each is important to the marketer because each has a highly different spending pattern as well as a different distribution of wealth.
The natural environment includes the natural resources that a company uses as inputs. As raw materials become increasingly scarcer, the ability to create a company’s product gets much harder.
Technology includes all developments from antibiotics and surgery to nuclear missiles and chemical weapons to automobiles and credit cards. As these markets develop, it can create new markets and new uses for products. It also requires a company to stay ahead of others and update their own technology.
The political environment includes all the laws, government agencies, and groups that influence or limit organizations and individuals within a society. It is important for marketers to be aware of these restrictions as they can be complex and can change often. For example, regulations on packaging, such as the necessary inclusion of ingredients for food products or the limitation on product capability claims, must be understood by marketers to avoid negative public perception or sanctions.
The cultural environment consists of institutions and the basic values and beliefs of a group of people. The values can also be further categorized into core beliefs, which are passed on from generation to generation and are very difficult to change, and secondary beliefs, which tend to be easier to influence. As a marketer, it is important to know the difference between the two and to focus your marketing campaign to reflect the values of a target audience.
1.1.8: Marketing by Individuals and Firms
Marketing by firms compared to marketing by individuals differs greatly in terms of customization level and personal attention.
Distinguish between the process used when deciding on marketing plan for a firm or organization and the process used for an individual
- The overall marketing strategy of an organization should focus on developing relationships with customers to understand their needs, while also developing goods, services and ideas to meet those needs.
- Marketing strategies include niche, growth and defensive strategies. These can be implemented with an eye toward market penetration, development or diversification.
- Personal selling determines a customer’s needs and attains a sales order. The personal selling process is a seven step approach: Prospecting, Pre-Approach, Approach, Presentation, Meeting Objections, Closing the Sale and Follow-Up.
a plan of action intended to accomplish a specific goal
- target market
a group of people whose needs and preferences match the product range of a company and to whom those products are marketed
an area in a market in which there are unmet needs that, when met, can lead to unique business opportunities
- personal selling
the act of using people to sell products to consumers face-to-face
Marketing by Firms
A marketing strategy is the combination of all of an organization’s marketing goals into one comprehensive plan. The overall marketing strategy of an organization should focus on developing relationships with customers to understand their needs while also developing goods, services and ideas to meet those needs. Creating a marketing strategy generally involves six steps:
- Information Gathering: Research potential customers, their needs and spending habits in order to understand what sort of product, service or idea they wish to buy. A specific method of information gathering is targeting, which is the process of finding customers whose needs and preferences match the product range offered by a company.
- Evaluation of Organization Capabilities: Decide what your organization can produce and what your organization is not capable of producing based on the organization’s specific strengths and weaknesses.
- Identify Market Opportunities: Research the current market for a product idea with no competition or strong demand.
- Set Objectives of Marketing Strategy: Decide what results need to be achieved in order to reach the organization’s goals. An objective is a specific result that an organization aims to achieve within a certain timeframe and with available resources.
- Formulate an Action Plan: List the specific steps the organization needs to take to implement the marketing plan, and assign the responsibilities to specific staff members. One such step is product positioning, which is the process by which marketers try to create an image or identity in the minds of their target market. Action plans should be based around the 4 Ps of marketing, or SIVA analysis.
- Monitor & Evaluate: Study the marketing plan at least once per quarter to track performance against the set objectives.
General Marketing Strategies
- Niche Strategy: A niche is an area in a market in which there are unmet needs that, when met, can lead to unique business opportunities. Niche strategy involves finding customers under-served by current offerings. An example of niche marketing is the online, self-help market in which businesses cater to highly specific aspects of peoples’ lives for which they desire tips and advice.
- Growth Strategy: This strategy aims to increase revenue from existing market niches and deliver better offerings to new target markets.
- Defensive Strategy: This strategy aims to maintain, or defend, a leadership position in a market by developing brand loyalty and mass distribution.
- Offensive Strategy: This strategy aims to adopt a policy of “destroyer pricing” to preempt the entry of new firms or drive away existing competitors. Also known as predatory pricing, this strategy is useful when competitors or potential competitors cannot sustain equal or lower prices without losing money.
To portray alternative growth strategies, Igor Ansoff presented a matrix that focused on the firm’s present and potential products and markets (customers). When considering ways to grow via existing products and new products, and in existing markets and new markets, there are four possible product-market combinations.
Igor Ansoff created a matrix that shows alternative corporate growth strategies.
A matrix that focuses on present and future corporate growth strategies for companies and products – market penetration, market development, product development, and diversification.
The growth strategies include:
- Market Penetration: This strategy aims to increase sales of an organization’s current products through an aggressive marketing campaign. Market penetration occurs when a company penetrates a market in which current or similar products already exist. The market penetration strategy is the least risky since it leverages many of the firm’s existing resources and capabilities. A prominent example of market penetration was the emergence of Facebook in the social networking market. It was able to take market share away from competitors such as MySpace.
- Market Development: This strategy aims to increase sales by selling current products in new markets to satisfy new consumer needs or to identify new market segments. The development of new markets for the product may be a good strategy if the firm’s core competencies are related more to the specific product than to its experience with a specific market segment.
- Product Development: This strategy offers new and improved products to the current market. A product development strategy may be appropriate if the firm’s strengths are related to its specific customers rather than to the specific product itself.
- Diversification: In this strategy, companies move into multiple lines of revenue generation. Diversification is the most risky of the four growth strategies since it requires both product and market development and may be outside the core competencies of the firm. In fact, this quadrant of the matrix has been referred to by some as the “suicide cell. “
Marketing by Individuals
Marketing by individuals, as opposed to organizations, can be most clearly differentiated by the strategy of personal selling. Personal selling is the act of using people to sell products to consumers face-toface. The personal selling process is a seven step approach:
- Prospecting – the step where salespeople determine leads or prospects.
- Pre-approach – consists of customer research and goal planning for the presentation.
- Approach – when the salesperson initially meets with the customer and determines the need.
- Presentation – the process of grabbing the customer’s Attention, igniting Interest, creating Desire, and inspiring Action, or AIDA.
- Meeting objections – salespeople should do their best to anticipate objections and respectfully respond to them.
- Closing the sale – the salesperson uses various techniques to gain a commitment to buy.
- Follow-up – following up will ensure customer satisfaction and help establish a relationship with the customer.
These are very general steps, but they form a foundation for differentiating between marketing by individuals and by firms. Personal selling represents the focus and customization that can be achieved through marketing on the individual level as opposed to the organizational level. More specific subjects in the realm of personal selling include qualifying leads; additional information gathering beyond the customer meeting; negotiating; ensuring delivery, training, and satisfactory use of products; and ensuring adequate billing and collection techniques. These factors will be explored in more detail in later chapters.
1.1.9: Adding Value
Marketing adds value to an organization by communicating relevant positioning and building long-term customer relationships.
Analyze, from a marketing perspective, how the “value” of a business and the products sold is quantified and qualified
- Marketing is the science of choosing target markets through market analysis and market segmentation, as well as understanding consumer buying behavior and providing superior customer value.
- Value is a customer’s perception of relative price (the cost to own and use) and performance (quality) of a product.
- The “total market offering” includes an organization’s reputation, staff representation, product benefits, and technological characteristics as compared to competitors. Value, in this sense, is defined as the relationship of a firm’s market offerings to those of its competitors.
- Since value changes based on time, place, and people in relation to changing environmental factors, marketing adapts to consumers changing perceptions and beliefs in order to have optimal value creation.
- benefit segmentation
the division of the market into subsets according to benefits sought by the consumer or which the product/service can provide
an advantage, help or aid from something
- customer value analysis
the collection and evaluation of data associated with customer needs and market trends
a customer’s perception of relative price (the cost to own and use) and performance (quality)
a characteristic or quality of a thing
- Louis Vuitton is a prime example of how marketing adds value. Louis Vuitton is known for quality, luxury custom-made handbags. Without a marketing team to position the company in a way relevant to its consumers and in contrast to its competitors, the value of a Louis Vuitton would be no more than a store brand handbag.
A main goal of marketing is to add value to an organization. Marketing also aims to present the value an organization’s products can add to a consumer’s life. It is able to accomplish this via the following avenues:
- It is the link between a society’s material requirements and its economic patterns of response.
- It satisfies needs and wants through exchange processes and building long-term relationships.
- It is the process of communicating the value of a product or service through positioning to customers.
- It is an organizational function and a set of processes for creating, delivering, and communicating value to customers. It also manages customer relationships in ways that benefit the organization and its shareholders.
- It is the science of choosing target markets through market analysis and market segmentation, as well as understanding consumer buying behavior and providing superior customer value.
Marketing Methods Used to Deliver Value
For marketers to deliver value to a firm’s customers, and also add value to the firm itself, they must consider what is known as the “total market offering. ” This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to the market offerings and prices of competitors. Value, in this sense, can be defined as the relationship of a firm’s market offerings to those of its competitors.
Value in marketing can be defined by both qualitative and quantitative measures. On the qualitative side, value is the perceived gain composed of an individual’s emotional, mental, and physical condition plus various social, economic, cultural, and environmental factors. On the quantitative side, value is the actual gain measured in terms of financial numbers, percentages, and dollars.
One way for an organization to increase its perceived value added is to improve its quality/price ratio. When an organization delivers high quality but at a high price, the perceived value may be low. When it delivers high quality at a low price, the perceived value may be high. The key to delivering high perceived value is for a firm to make consumers believe that its products will help them solve a problem, offer a solution, produce results, and make them happy.
Marketing provides a creative energy exchange between people and organizations in our marketplace. Since value changes based on time, place, and people in relation to changing environmental factors, marketing adapts to consumers changing perceptions and beliefs in order to have optimal value creation.
Customer Value Analysis
To reveal the company’s strengths and weaknesses compared to other competitors, it is important to conduct a customer value analysis. This is the collection and evaluation of data associated with customer needs and market trends. The steps are as follows:
- Identify the major attributes and benefits, such as ease of use or improved social standing, that customers value for choosing a product. It is important to identify and define benefits as opposed to features.
- Assess the quantitative importance of the different attributes and benefits. In other words, attempt to assign an actual price differentiation for products with value-adding benefits.
- Assess the company’s and competitors’ performance on each attribute and benefit. It is important to be honest with yourself about who your actual closest competitors are and how they price their products.
- Examine how customers in the particular segment rated the company against major competitors on each attribute.
- Monitor customer perceived value over time.
Conducting an effective customer value analysis can lead a company to creating an accurate value proposition. A value proposition is a promise of value to be delivered and a belief from the customer that value will be experienced. A value proposition can apply to an entire organization, or parts thereof, or customer accounts, or products or services.
Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its customers, prospective customers, and other constituent groups within and outside the organization. Organizations can use value propositions to position value to a range of constituents such as:
- Customers: to explain why a customer should buy from a supplier.
- Partners: to persuade them to forge a strategic alliance or joint venture.
- Employees: to “sell” the company when recruiting new people, or for retaining and motivating existing employees.
- Suppliers: to explain why a supplier should want to be a supplier to an organization or customer.
Louis Vuitton Store on Champs-Elysees in France
Louis Vuitton’s marketing team communicates value to consumers by utilizing a high price point.
1.2: Evolution of the Marketing Orientation
1.2.1: Production Orientation
Production orientation follows the premise that any product of high quality can be readily sold.
Demonstrate the characteristics of production orientation from an economic and marketing perspective
- Prior to the 1950s, the production orientation generally held true due to the growing numbers of affluent and middle class people that capitalism had created.
- Say’s Law states that the “production of commodities creates, and is the one and universal cause which creates, a market for the commodities produced”.
- The emphasis of firms adopting a production orientation of marketing would have been based on the theory of economies of scale, which are the cost advantages that an enterprise obtains due to expansion.
- minimum efficient scale
The smallest output that a plant (or firm) can produce such that its long run average costs are minimized.
The evolution from production-oriented organizations to marketing-oriented organizations was driven by a shift toward a marketplace that catered to meeting customer wants and needs rather than strictly delivering product features and functionality. In today’s business world, it can be argued that customer desires, concerns, and opinions, rather than industry profits, are the driving force behind many strategic business decisions.
However, until the 1950s, organizations relied on the assumption that their businesses would be profitable so long as they produced high quality products that were durable and worked well. This business model — also known as production orientation — soon became outdated as the marketplace turned into an increasingly crowded and global one. In the decades since its introduction, marketing orientation has been the model of choice for brands looking to sell products that compete effectively for consumer attention and brand loyalty.
Economies of Scale in Production-Oriented Organizations
During the Industrial Age of the 18th and 19th centuries, production-oriented companies thrived due to both the scarcity and high demand for mass-produced, high quality goods and services. Industrial firms focused on production orientation models that exploited economies of scale to reach maximum efficiency at the lowest cost. This business practice can also be explained by Say’s Law, which states that “products are paid for with products” and that “production of commodities creates, and is the one and universal cause which creates a market for the commodities produced.”
Jean-Baptiste Say made Say’s Law, an economic theory, popular even though he wasn’t the originator.
Economies of scale posits that by driving efficiency, companies (particularly production-oriented organizations) will realize significant cost advantages as they expand operations. For example, companies that focus on increasing economies of scale will see reductions in unit cost as the size of facilities and the usage levels of other inputs increase. In theory, such organizations can ramp up production until the minimum efficient scale is reached. Some common sources of economies of scale include:
Economies of Scale
The graph plots long-run average costs according to a firm’s level of production.
A graph that shows long-run average costs according to a firm’s level of production (average cost and output).
- Purchasing -bulk buying of materials through long-term contracts
- Managerial – increasing the specialization of managers
- Financial – obtaining lower-interest charges when borrowing from banks and having access to a greater range of financial instruments
- Marketing – spreading the cost of advertising over a greater range of output in media markets
- Technological – taking advantage of returns to scale in the production function
1.2.2: Product Orientation
A firm employing a product orientation is chiefly concerned with the quality of its product.
Describe the basis for a company using product orientation as its marketing premise
- A firm employing a product orientation would assume that as long as its product was of a high standard, people would buy and consume the product.
- Under the product orientation, management focuses on developing high quality products which can be sold at the right price, but with insufficient attention to what it is that customers really need and want.
- Product orientation assumes a developing or closed economy where few, if any, choices are available.
- Market Share
The percentage of some market held by a company.
Similar to production orientation, the product orientation of marketing focuses solely on the product a company intends to sell. This orientation was popular during the 1950s and into the 1960s. A firm employing a product orientation is chiefly concerned with the quality of its product. A firm such as this would assume that as long as its product was of a high standard, people would buy and consume the product. This approach stresses the research and development of products and the continuous evolution during their life cycles , in order to maintain the attention of potential customers. Under the product orientation, management focuses on developing high quality products which can be sold at the right price, but with insufficient attention to what it is that customers really need and want. The premises implicit in this orientation include:
Cycle of Research and Development
Companies adopting a product orientation of marketing focus on product quality and therefore emphasize research and development.
- Consumers buy products more than solutions.
- Consumers are interested in product quality.
- Consumers recognize product quality and differences in the performance of alternative products.
- Consumers choose between different products based on getting the best quality for the price paid.
The main task of an organization utilizing the product orientation approach is to continue improving quality and reducing costs as key factors in the fight to maintain and attract customers.
Adopting the product orientation can be advantageous to a company, due to the fact that the cost of determining consumer preferences and the development of new products and services are minimized or eliminated because consumers are in some way captive. Product orientation assumes a developing or closed economy where few, if any, choices are available. There are disadvantages to the product model, however. As soon as a competing company can offer a product more oriented to the satisfaction of customers’ needs and desires, the companies undertaking product orientation will lose most if not all of its market share.
1.2.3: Selling Orientation
As opposed to production or product orientation, a sales orientation focuses primarily on the selling and promotion of a particular product.
Outline the methodology and importance of selling orientation as it relates to product inventory
- A sales orientation entails simply selling an already existing product and using promotion techniques to attain the highest sales possible.
- Such a modern day 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 that would diminish demand.
- Selling orientations of marketing became popular after the untapped demand following World War II was saturated in the 1950s, when products were not selling as easily as they had been.
- dead stock
Merchandize that had been removed from sale, now offered for sale at a later date.
As opposed to production orientation or product orientation, a firm using a sales orientation focuses primarily on the selling and promotion of a particular product. The successful management of the relationship between the company and its customers defines the act of sales or selling. It creates value for customers. Emphasis is not placed on 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 a modern day 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 that would diminish demand.
Approaching marketing with a selling orientation was popular for companies in the 1950s and 1960s. Up to this point, a growing population and lack of significant competition combined to create an environment in which production and product orientations could lead to success. However, after the untapped demand caused by the second World War was saturated in the 1950s, it became obvious that products were not selling as easily as they had been. The answer was to concentrate on selling. The 1950s and 1960s are known as the sales era, as the guiding philosophy of business at the time was the sales orientation.
A marketing orientation centered around sales represented a major milestone in modern business. The amount of competition being realized at that point was unprecedented, and the scale of consumerism was rising. For the first time, a more significant effort had to be made to understand the desires of potential customers. In today’s realm of marketing, selling has developed into a holistic business system required to effectively develop, manage, enable, and execute a mutually beneficial, interpersonal exchange of goods and services for equitable value. In other words, the importance of selling makes it indispensable to modern business, and it has subsequently evolved into a complex system. Effective selling requires a systems approach, at minimum involving roles that sell, enable selling, and develop sales capabilities.
Modern Sales Development
Today, selling has become indispensable for companies. Marketing orientation revolves around selling.
A man standing on a stage during a presentation. A PowerPoint slide is displayed on a projector behind him.
1.2.4: Marketing Orientation
A marketing-oriented business starts with the customer, finds out what they want, and then produces it for them.
Define the characteristics of marketing orientation from a consumer perspective
- The marketing orientation is perhaps the most common orientation used in contemporary marketing.
- Market orientation also involves monitoring competitors’ actions and their effect on customer preferences, as well as analyzing the effect of other exogenous factors.
- Companies must understand that to find success using a marketing orientation, it is very important that all the firm’s resources reach for common goals.
Produced or originating outside of an organization.
Marketing orientation is a business model that focuses on delivering products designed according to customer desires, needs, and requirements, in addition to product functionality and production efficiency (i.e., production orientation). As stated by Bernard J. Jaworski and Ajay K. Kohli in the “Journal of Marketing”, marketing orientation is “The organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments and organization wide responsiveness to it.”
From the beginning of the Industrial Revolution until the 1950s, companies focused on maximizing economies of scale and minimizing production costs. Since high quality products were scarce during this period, brands could make products on a massive scale that were functional and durable, but ignore marketing elements such as add-on features and design. This was largely due to the growing numbers of affluent and middle class people that the rise of capitalism had created.
Following the second world war, it soon became obvious that products were not selling as easily as during the Industrial era due to a saturated market. Throughout the 1950s and 1960s, companies responded by adopting a sales orientation model that concentrated first on making products, then selling them to customers. Despite organizations’ move from product-oriented to sales-oriented strategies, customers were still excluded from the product development process.
The Shift Toward Marketing Orientation
Beginning in the 1970s, Harvard Professor Theodore Levitt and other academics argued that the sales orientation model was ill-equipped to deliver products tailored to customer wants and needs. Instead of manufacturing products for the sole purpose of generating profit, they argued for businesses to shift their strategy toward developing products based on customers’ desires, insights, and opinions. Using this customer intelligence, companies could produce products that supported their overall business strategy, competed effectively in an increasingly global and competitive market, and delivered solutions for current and future customer needs.
With the widespread adoption of Internet technology, e-commerce, and social media technologies, the customer has clearly become the driving force behind contemporary business strategies. Marketing-oriented companies revolve around internal business processes that gather, synthesize, and package market intelligence into integrated marketing communications programs (i.e., advertising campaign, new product launch, promotional offer, etc.). Furthermore, it involves a brand planning its marketing activities around a singular concept — the customer — and supplying products to suit diverse tastes.
Competitive analysis is also a significant component of market orientation. Generally, companies gather this information using market research, consumer surveys, and focus groups with prospective customers to identify needs, preferences, as well as competitor strengths and weaknesses. Since its introduction, marketing orientation has been reformulated and repackaged under numerous names including customer orientation, marketing philosophy, and customer intimacy.
Focus on the Customer
One way for a company to focus on customers’ desires is to have a database of all its customers.
A screenshot of a database that’s used to track information.
Marketing Orientation Components
Components which define a marketing orientated organization include:
- Customer orientation
- Competition orientation
- Interfunctional coordination
As stated, the most important focus in a market-orientated business is the customer. Similar to a production-oriented company, one of the primary goals of marketing-oriented or customer-oriented businesses is long-term profitability. Nevertheless, organizations that follow a marketing orientation model realize that delivering superior customer value through product innovation, as well as products and services tailored to customer needs, directly correlates with generating revenue.
1.2.5: Holistic Marketing
Holistic marketing incorporates integrated marketing, relationship management, internal marketing, and social responsibility to build a unified and shared brand.
Differentiate between holistic marketing and the traditional methods that came before it
- Traditionally, marketing mostly related to personal selling. The idea of marketing was largely one of managing key relationships.
- As marketing evolved alongside technology, the scope, scale, and the availability of data has changed significantly. Today, marketing is largely about careful research, targeted market selection, and segmentation.
- However, segmentation may not be the ideal form of utilizing technology and data for marketing strategy. Holistic marketing is the idea that unifying a market based on shared goals is better.
- Holistic marketing is often considered to include four components: relationship marketing, integrated marketing, internal marketing, and socially responsible marketing.
- Through combining these four components of marketing, a holistic marketing strategy will focus on putting forward a vision and brand that is meaningful to consumers across the entire market.
The act or an instance of dividing into segments.
The history of marketing has seen a fair amount of evolution over time, particularly with the integration of technology and big data. The origins of marketing are much simpler than modern marketing, revolving primarily around managing relationships and personal selling. Marketing tactics and methods have changed over time, spanning from simple personal selling to advertising, promotions, affiliate advertising, social media, PR, branding, and market research to support each of these investments and initiatives.
Holistic marketing is the latest phase in the evolution of marketing.
A table that lists the various dominant perspectives in marketing over the past century by orientation – production, product, setting, marketing, and holistic marketing.
As globalization, mass production, and big data became prevalent across industries, marketing evolved to be more targeted and specific across many different potential channels. This resulted in marketing segmentation, or the strategic decisions to pursue specific groupings within the broader population of the market. Segmentation through target markets has been (and currently is) a powerful trend in marketing strategy and tactics.
This targeting and segmentation through broader market opportunities has substantial advantages, and is a useful perspective for marketing managers to consider. However, holistic marketing assumes that segmentation is as much a threat as it is an opportunity. The prospect of ‘divide and conquer’ is potentially more expensive than uniting the market based on shared initiatives and needs. Holistic marketing unites the market on shared ideals and vision, creating an inclusive, relationship-oriented and socially responsible strategy. This typically includes four perspectives:
- Relationship Marketing – A large field (often referred to as retention), relationship marketing is the simple idea that retaining a customer is significantly cheaper than getting new ones. Relationship is about building a meaningful engagement with current customers, not so much to make a sale but simply to ensure a continued relationship with the organization.
- Integrated Marketing – Another substantial branch of marketing is referred to as integrated marketing communications. Integrated marketing focuses on aligning the messaging, communication, and brand image across a variety of channels, customer groups, stakeholders, and other communications. By having a consistent brand across the board, companies can build a sense of trust, reliability, and shared expectations when dealing with the firm.
- Internal Marketing – Potentially viewed as a facet of integrated marketing, it’s important to keep in mind that internal stakeholders such as employees require careful organizational brand management as well. Employees impact what the organization stands for (brand), and play an integral role in driving the organization towards its objectives, mission, and vision. Internal consistency of intention and vision is therefore a critical part of external consistency.
- Socially Responsible Marketing – Finally, the modern holistic view of marketing takes into account some of the ethical criticisms of the past advertising eras (and with good reason). Organizations should stand for things that society values. Let’s take an example. An organization sells carpets and furniture. They realize the negative impact of their operations on the environment. This company decides to define their brand on perfect efficiency in terms of shipping, complete utilization of recycled goods, large donations to environmental research, and local sourcing. As a result, they build meaningful relationships with their consumers based on shared values, while cutting operating costs and capturing subsidies. This is a great utilization of holistic marketing.
While holistic marketing is an evolving field, the general concept is simple. Markets are full of people, and these people are often united on certain initiatives. By aligning the organization with the people who work there and the people it serves, the organization’s brand will evolve holistically across various channels, supported by operations that align with the vision of the customers.
1.3: Contemporary Relationship Marketing
1.3.1: Relationship Marketing and Management
Relationship marketing is a form of marketing that shifts focus away from sales transactions to emphasize customer satisfaction.
Illustrate the basis for and application of relationship marketing in the short and long term
- Relationship marketing is cross-functional, in that it is organized around processes that involve all aspects of the organization.
- The practice of relationship marketing has been facilitated by several generations of customer relationship management software that allow tracking and analyzing of each customer’s preferences, activities, tastes, likes, dislikes, and complaints.
- Customer relationship management involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support.
- A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade.
A grouping of people for statistical purposes, based as age, race, gender, etc.
Relationship Marketing & Management
Relationship marketing is a form of marketing that shifts focus away from sales transactions to emphasize customer satisfaction. It refers to a short-term arrangement where both the buyer and seller have an interest in providing a more satisfying exchange. This approach tries to disambiguiously transcend the simple post-purchase exchange process with a customer to make more truthful and richer contact by providing a more holistic, personalized purchase. Thus, relationship marketing uses this experience to create stronger ties between buyer and seller. Relationship marketing is cross-functional, in that it is organized around processes that involve all aspects of the organization. It can be applied when there are competitive product alternatives for customers to choose from, and when there is an ongoing and periodic desire for the product or service. Examples of markets in which relationship marketing can be crucial include:
- Internal markets
- Supplier markets
- Recruitment markets
- Referral markets
- Influence markets
- Customer markets
With the growth of the internet and mobile platforms, relationship marketing has continued to evolve and move forward as technology opens more collaborative and social communication channels. This includes tools for managing relationships with customers, which go beyond simple demographic and customer service data. The practice of relationship marketing has been facilitated by several generations of customer relationship management software that allow tracking and analyzing of each customer’s preferences, activities, tastes, likes, dislikes, and complaints. Relationship marketing extends to include inbound marketing efforts, public relations, social media, and application development. It is a broadly recognized, widely implemented strategy for managing and nurturing a company’s interactions with clients and sales prospects. The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service.
Customer Relationship Management
Customer relationship management (CRM) is a widely implemented model for managing a company’s interactions with customers, clients, and sales prospects. It involves using technology to organize, automate, and synchronize business processes—principally sales activities, but also those for marketing, customer service, and technical support. Once simply a label for a category of software tools, today CRM generally denotes a company-wide business strategy embracing all client-facing departments and beyond. When an implementation is effective, then people, processes, and technology work in synergy to increase profitability and reduce operational costs. A CRM system may be chosen because it is thought to provide:
- quality and effeciency
- a decrease in overall costs
- an increase in profitability
Customer Relationship Management Systems
Customer relationship management systems help companies keep track of interactions clients and business associates.
A screenshot from an example CRM system, WebCRM.
Successful development, implementation, use, and support of CRM systems can provide a significant advantage to the user, but often there are obstacles that obstruct the user from using the system to its full potential. A CRM attempting to contain a large, complex group of data can become cumbersome and difficult to understand for ill-trained users. The lack of senior management sponsorship can also hinder its success. Stakeholders must be identified early in the process and a full commitment is needed from all executives before beginning the conversion. Additionally, an interface that is difficult to navigate or understand can inhibit the CRM’s effectiveness, causing users to pick and choose which areas of the system to use and which to push aside. This fragmented implementation can cause inherent challenges, as only certain parts are used and the system is not fully functional.
A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade. This is accomplished by satisfying customer requirements more effectively than competing companies through a mutually beneficial relationship. Customer retention involves counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit. Many companies in competitive markets will redirect or allocate large amounts of resources or attention towards customer retention. In markets with increasing competition, it may cost five times more to attract new customers than it would to retain current customers.
1.3.2: Business Marketing
Business marketing is the practice of organizations facilitating the sale of their products or services to other companies or organizations.
Differentiate the characteristics of business marketing from consumer marketing
- Demand in business markets exists only because of another demand somewhere in the consumer market.
- The number of products sold in business markets dwarfs the number sold in consumer markets.
- Business marketing generally entails shorter and more direct channels of distribution.
- Business products can be complex, and so can figuring out the buying dynamics of organizations.
Someone who supplies what is needed.
Business marketing is the practice of individuals or organizations—including commercial businesses—facilitating the sale of their products or services to other companies or organizations that in turn resell them, use them as components in products or services they offer, or use them to support their operations. In the broadest sense, the practice of one purveyor of goods doing trade with another is as old as commerce itself. As a niche in the field of marketing as we know it today, however, its history is more recent. Business markets have a derived demand. This means that a demand in business markets exists only because of another demand somewhere in the consumer market. In other words, business markets do not exist in isolation. For example, the demand for restaurant furniture is based on the consumer demand for more restaurants.
Also known as industrial marketing, business marketing is also called business-to-business marketing, or B2B marketing, for short.
Electronic product shops are an example of B2B marketing. They are local companies that supply various products.
A row of electronic product shops in Guangzhou, China.
B2B Versus B2C
Business-to-business (B2B) markets differ from business-to-consumer (B2C) markets in many ways. For one, the number of products sold in business markets dwarfs the number sold in consumer markets. Suppose you buy a computer from Dell. The sale amounts to a single transaction for you. But think of all the transactions Dell had to go through to sell you that one computer. Dell had to purchase many parts from many computer component makers. It also had to purchase equipment and facilities to assemble the computers; hire and pay employees; pay money to create and maintain its website and advertisements; and buy insurance, accounting, and financial services to keep its operations running smoothly. Many transactions had to happen before you could purchase your computer. Business products can be very complex. Some need to be custom built or retrofitted for buyers. The products include everything from high-dollar construction equipment to commercial real estate and buildings, military equipment, and billion-dollar cruise liners.
Business marketing generally entails shorter and more direct channels of distribution. While consumer marketing is aimed at large groups through mass media and retailers, the negotiation process between the buyer and seller is more personal in business marketing. A single customer can account for a huge amount of business. Some businesses, like those that supply the U.S. auto industry, have just a handful of customers, i.e., General Motors, Chrysler, Ford, etc. Figuring out the buying dynamics of organizations can also be very complex. Many people within an organization can be part of the buying process and have a say in what ultimately gets purchased, how much of it, and from whom. Having different people involved makes business marketing much more complicated, and because of the quantities each business customer is capable of buying, the stakes are high. However, B2B and B2C marketing do share some basic principles. Namely, the marketer must always:
- successfully match the product or service strengths with the needs of a definable target market;
- position and price to align the product or service with its market, often an intricate balance; and
- communicate and sell the product in the fashion that demonstrates its value effectively to the target market.
1.3.3: Social Marketing
Social marketing is the systematic application of marketing to achieve specific behavioral goals for a social good.
Define the concept of social marketing, its application and impact on society
- Social marketing can be applied to promote merit goods – or to make a society avoid demerit goods – and thus to promote society’s well being as a whole.
- The primary aim of social marketing is social good, while in commercial marketing the aim is primarily financial.
- Social marketing has matured into a much more integrative and inclusive discipline that draws on the full range of social sciences and social policy approaches as well as marketing.
- Green marketing concentrates on the marketing of products that are presumed to be environmentally safe.
A quality of being inadequate; a fault; a disadvantage
A conditional provision to an agreement
Social marketing is the systematic application of marketing, along with other concepts and techniques, to achieve specific behavioral goals for a social good. Social marketing has similar characteristics to marketing orientation but with the added proviso that there will be a curtailment of any harmful activities to society, in either product, production, or selling methods. Social marketing can be applied to promote merit goods – or to make a society avoid demerit goods – and thus to promote society’s well-being as a whole.
For example, this may include asking people not to smoke in public areas, asking them to use seat belts, or prompting them to make them follow speed limits. Social marketing is sometimes seen only as using standard commercial marketing practices to achieve non-commercial goals. This is an oversimplification, as the primary aim of social marketing is social good, while in commercial marketing the aim is primarily financial. Increasingly, social marketing is being described as having “two parents” – a “social parent,” i.e., social sciences and social policy; and a “marketing parent,” i.e., commercial and public sector marketing approaches. Social marketing has, in the last two decades, matured into a much more integrative and inclusive discipline that draws on the full range of social sciences and social policy approaches as well as marketing.
Health promotion campaigns in the late 1980s began applying social marketing in practice. Notable early developments took place in Australia. These included the Victoria Cancer Council developing its anti-tobacco campaign “Quit” (1988), and “SunSmart” (1988), its campaign against skin cancer. WorkSafe Victoria, a state-run Occupational Health and Safety organization in Australia, has used social marketing as a driver in its attempts to reduce the social and human impact of workplace safety failings. Social marketing theory and practice has been progressed in several countries such as the US, Canada, Australia, New Zealand and the UK, and in the latter a number of key Government policy papers have adopted a strategic social marketing approach.
Marketing sustainable ideals has come to the forefront of social marketing in recent years.
A green recycle sign that says “sustainable, renewable, natural.”
A variation of social marketing has emerged as a systematic way to foster more sustainable behavior. Referred to as Green Marketing, it concentrates on the marketing of products that are presumed to be environmentally safe. Green marketing incorporates a broad range of activities, including product modification, changes to the production process, packaging changes, as well as modifying advertising. It is a part of the new marketing approaches which do not just refocus, adjust or enhance existing marketing thinking and practice, but seek to challenge those approaches and provide a substantially different perspective.
A brand is a name, term, design, symbol, or any other feature that identifies a seller’s good or service.
Review the history of branding, the types, why it is necessary and how it impacts the buyer
- Brands in the field of mass-marketing originated in the 19th century with the advent of packaged goods.
- Proper branding can result in higher sales of not only one product, but other products associated with that brand as well.
- A brand is one of the most valuable elements in an advertising theme, as it demonstrates what the brand owner is able to offer in the marketplace.
- brand identity
The outward expression of a brand, including its name, trademark and visual appearance.
Relating to anthropology; The holistic scientific and social study of humanity, mainly using ethnography as its method.
- experiential aspect
The sum of all points of contact with the brand; otherwise known as the “brand experience. “
A brand is a name, term, design, symbol, or any other feature that identifies a seller’s good or service. A concept brand is a brand associated with an abstract concept like breast cancer awareness or environmentalism. A commodity brand is a brand associated with a commodity. “Got milk? ” is an example of a commodity brand.
History of Branding
Branding began as a way to tell one person’s cattle from another by means of a hot iron stamp. Brands in the field of mass marketing originated with the advent of packaged goods in the 19th century. Industrialization moved the production of many household items from local communities to centralized factories. Factories established during the Industrial Revolution introduced mass-produced goods to sell their products to a wider market. It became apparent that a generic package for a good had difficulty competing with familiar, local products. Packaged goods manufacturers had to convince the market that the public could place just as much trust in the non-local product. Campbell Soup, Coca-Cola and Juicy Fruit gum were among the first products to be “branded” in an effort to increase the consumer’s familiarity.
Branding is the use of a symbol to show ownership of a certain product.
A cattle brand burned onto a piece of wood.
By the 1940s, manufacturers began to recognize the way consumers were developing relationships with their brands in a social, psychological and anthropological sense. From there, manufacturers learned to build their brand’s identity and personality. This began the practice known as “branding,” whereby consumers buy “the brand” instead of the product.
Branding Concepts and Techniques
Proper branding can result in higher sales of not only one product, but on products associated with the brand as well. For example, if a customer loves Pillsbury biscuits, he or she is more likely to try other products offered by the company. Some people distinguish the psychological aspect of a brand from the experiential aspect. Psychological aspects include thoughts, feelings, perceptions and images associated with the brand. The experiential aspect consists of a consumer’s overall contact with the brand, otherwise known as the “brand experience. “
Brand image is a symbolic construct created within the minds of people. It consists consists of all the information and expectations associated with a product, service or the company. People engaged in branding seek to create the impression that a brand associated with a product or service has certain qualities that make it unique. A brand is therefore one of the most valuable elements in an advertising theme, as it demonstrates what the brand owner is able to offer in the marketplace. The art of creating and maintaining a brand relevant to a target audience is called brand management.
Brand orientation, meanwhile, refers to the concentration of an entire organization toward its particular brand. Brand orientation is developed in responsiveness to market intelligence. A brand which is widely known in the marketplace acquires brand recognition. When this recognition builds up to a point where a brand enjoys a critical mass of positive sentiment, it is said to have achieved brand franchise. Brand recognition is most successful when people can recognize a brand through visual signifiers like logos, slogans and colors.The outward expression of a brand, including its name, trademark and visual appearance, is brand identity. This is in contrast to the brand image, a customer’s mental picture of a brand.
1.4: Value-Based Marketing
1.4.1: Competition Based on Value
Value-based marketing allows organizations to create and sustain differentiating values that enable them to compete within their markets.
State what is important when shifting to a competition based on value marketing perspective
- For a firm to deliver value to its customers, they must consider what is known as the “total market offering.” This includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices.
- Total CVM also creates value by creating value for the employees, business partners (customer, delivery chain, supply chain, unions) and thereby for the shareholder.
- CVM requires implementing a customer-focused vision, which means a major shift in companies strategic thinking, often including radical move from product or price as the basis for competition to process or service value.
- supply chain
A supply chain is a system of organizations, people, technology, activities, information, and resources involved in moving a product or service from the supplier to the customer. Supply chain activities transform natural resources, raw materials, and components into a finished product that is delivered to the end customer.
- Total market offering
“total market offering” includes the reputation of the organization, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices.
The customer’s perceived value of a product is the relationship between the perceived benefits in relation to the perceived costs of receiving those benefits. Value is thus subjective (i.e., a function of consumers’ estimation) and relational (i.e., both benefits and cost must be positive values).
For a firm to deliver value to its customers, it must consider what is known as the “total market offering.” This comprises the organization’s reputation, staff representation, product benefits, and technological characteristics as compared to competitors’ market offerings and prices. Value can thus be defined as the relationship of a firm’s market offerings to those of its competitors.
The migration from product-oriented to customer-oriented strategies is called Total Customer Value Management (TCVM). This requires implementing a customer-focused vision – a major shift in strategic thinking, often including moving the basis for competition from product or price to process or service value.
TCVM goes beyond conventional customer value management, which provides a rational set of techniques, methodologies, and strategies to weave the needs and wants of customers into the key process designs and management activities of the enterprise. TCVM helps businesses create and sustain differentiating value, enabling them to compete within their markets. TCVM also creates value for employees, business partners (customers, delivery chain, supply chain, unions) and shareholders.
TCVM starts with a customer strategy, which is the precursor of building a conventional business strategy. By assigning customer tasks to traditionally non-customer facing departments like IT, Finance, and HR, a Continuous Customer Improvement Program is created to ensure customer delight.
Value creation is tied to cost and revenue.
The value model shows how value planning, value creation, and value realization are tied to revenue and cost.
1.4.2: The Development of Value-Driven Firms
The values of an organization are just as important as the products they sell; having a strong value driven culture is important.
Demonstrate how information guides companies to develop value driven marketing plans and approaches
- For a long time, the sole purpose of a company, it was thought, is to make profits–at least in the minds of CEO’s who normally focus on short term returns. This was the precursor to customer value management.
- Becoming a value driven firm involves aligning every function to the customer, discussions with key officers, and assigning customer roles.
- Becoming a value driven firm involves the training and certification of front line people to provide excellent customer service and value to a customers buying experience.
- customer value mapping
A method of measuring how you are doing in general and how you are doing in comparison to your competitors by matching the cost of your product with the benefits your customers receive for it.
- Total Customer Value Management
Total Customer Value Management represents migration from product orientation to customer orientation. This required implementing a customer focused vision that meant a major shift in companies’ strategic thinking, often including radical move from product or price as the basis for competition to process or service value, resulting in the concept Total Customer Value Management (CVM)
Having a strong value driven culture will ensure continuous high performance within an organization. The values of an organization are just as important as the products the organization sells.
For a long time, the sole purpose of a company, it was thought, is to make profits, at least in the minds of CEOs who normally focus on short term returns. This was the precursor to customer value management, which has been practiced for the last 35 years, being incorporated into corporate thinking. Some people focus on customer service, others on customer experience, others on lifetime value for a customer; many companies believe that having a customer service department is all it takes to create customer value.
Importance of Values
Socrates was an influential Greek philosopher who studied ethical behavior.
This is not true. A new practice called Total Customer Value Management (CVM) involves a total focus upon the customer.
Total customer value management requires:
- Aligning every function to the customer, discussions with key officers, and assigning customer roles
- Incorporating Customer Circles and propagating them. These will align the front line people and make them customer focused
- Assessing unnecessary and irrelevant tasks from a customer viewpoint
- Training and certification of front line people. This includes training shop employees, such as the one shown here .
- Listening to Voice of Employee, Voice of Customer, and Voice of Competitor. Voice of Employee will be captured through the Customer Circles and Employee Value Add, and the Voice of Customer and Voice of Competitor will be captured by Customer Value Added (CVA).
Becoming customer centered with CVM starts by identifying the target customers and securing their vision of the ideal outcomes from doing business with the company. This includes:
1. Customer relations
- Customer Portfolio Analysis
- Customer Intimacy
- Value Proposition
- Managing the relationship
2. Customer value mapping
- Identifying what you need to know about the market you’re competing in. Your knowledge includes: customer demographics, the importance of perceived costs and benefits to your customers, and how well you’re doing in these areas compared to the competition.
- Conducting research to uncover the information you need.
1.5: The Importance of Marketing
1.5.1: Societal Role and Nonprofits
Non-profit marketing focuses on goals in education, youth development, environmental protection, healthcare, poverty and spirituality.
Identify, from a marketing perspective the societal role of non-profit organizations as stand alone organizations and in collaboration with for profit companies, and how a marketing message can be used as a benefit to consumers and society
- While for-profit organizations exist to produce profit, non-profit institutions exist to benefit a society, regardless of whether profits are achieved.
- Despite their opposing objectives, for-profits and non-profits often come together to implement cause marketing programs.
- Domestic and international scandals including environmental disasters, financial crises and human rights violations have prompted global companies to integrate corporate social responsibility (CSR) into their business.
- Non-Profit Marketing
Mission-driven marketing using the organization’s core mission as the foundation, and marketing communications as the focus.
- cause-related marketing
a type of marketing involving the cooperative efforts of a “for profit” business and a non-profit organization for mutual benefit
- Cause Marketing
any type of marketing effort for social and other charitable causes, including in-house marketing efforts by non-profit organizations.
- corporate social responsibility
How different business functions affect people and the environment, and how to integrate practices that positively impact society, employees and nature.
Societal Role & Non-Profits
While for-profit organizations exist to produce profit, non-profit institutions exist to benefit a society, regardless of whether profits are achieved.
Non-profits are allowed to generate revenue, but must do so in specific ways to maintain their non-profit status. Non-profit marketing seeks to accomplish goals that can cover a wide range of focus areas including education, youth development, environmental protection, healthcare, poverty and spirituality. However, companies that adopt fair trade or environmental sustainability business practices also develop organizational philosophies that consider its obligations to the communities they impact.
Bill and Melinda Gates Foundation
The Bill and Melinda Gates Foundation is a non-profit organization that provides benefits globally.
Non-Profit Marketing and Cause-Related Marketing
Non-profit marketing is mission-driven marketing using the organization’s core mission as the foundation and marketing communications as the focus. Central to this mission-driven marketing philosophy is adherence to the organization’s core values, and using its mission statement as the basis for planning and implementation of marketing strategy. Corporations also use mission-driven marketing to promote the goals of the organization as outlined in its mission statement and to communicate the benefits of achieving those goals to its stakeholders. However, for-profit companies measure success in terms of the bottom line; that is, profitability, their ability to pay stock dividends or to repay loans.
Despite their opposing objectives, for-profits and non-profits often come together to implement cause marketing programs. Cause marketing or cause-related marketing activities involve the collaboration of for-profit businesses and non-profit organizations for mutual benefit. One example would be the partnership of Yoplait’s “Save Lids to Save Lives” campaign in support of Susan G. Komen for the Cure. The company packages specific products with a pink lid that consumers mail to Yoplait. In turn, Yoplait donates 10 cents for each lid.
Used more broadly, cause marketing efforts often refer to any type of marketing effort for social and other charitable causes, including in-house marketing efforts by non-profit organizations. Cause marketing differs from corporate giving, since corporate philanthropy typically involves a tax-deductible donation.
Corporate Social Responsibility (CSR)
Domestic and international scandals including environmental disasters, financial crises and human rights violations have prompted global companies to integrate corporate social responsibility (CSR) into their business.
CSR looks at how different business functions affect people and the environment, and integrates practices that positively impact society, employees and nature. Companies are manufacturing more goods, hiring more local labor, and utilizing more raw materials and resources extracted from the environment in international locations. To reduce the negative impact of their factories, production sites and supply chains, major brands have committed to sustainability targets that aim to reduce their carbon emissions and give back to the larger global community.
It is the overall opinion of a company that earns consumer support and loyalty. Marketing messages are used to shape consumer opinion. The right marketing stimulates trade. The marketing message, especially one based on societal benefit or good, shapes consumer buying decisions. The more the message resonates with the buyer and answers their questions, the more sales will increase.
More and more brands are integrating CSR into their businesses to improve their brand image, increase profits and position themselves favorably in competitive markets.
1.5.2: Influence on the Entire Supply Chain
Marketing can play a key role in integrating supply chain processes and promoting collaboration between different stakeholders.
Show the impact that marketing has on supply chains, both operational and marketing types
- Supply chains are crucial functions that allow brands to translate customer demand into product fulfillment and market delivery.
- As communication professionals, marketing promotes collaboration between buyers and suppliers, product developers and common systems, customers and sales to reduce lead time, streamline customer feedback, and improve sales forecasting.
- Similar to manufacturing environments, marketing supply chains rely on the creation, production, warehousing, and fulfillment of materials, as well as the collection of feedback for continuous refinement, all of which can be seamlessly integrated into the larger supply chain.
- knowledge sharing
An activity through which knowledge (i.e. information, skills, or expertise) is exchanged among people, friends, or members of a family, a community (e.g. Wikipedia), or an organization.
- best practices
Methods or techniques that consistently show results superior to those achieved with other means and that are used as benchmarks.
Influence on the Entire Supply Chain
Supply chains are crucial functions that allow organizations to translate customer demand into product fulfillment and market delivery. A brand’s entire supply chain also includes marketing, which can impact other functions such as sales, manufacturing, and distribution. A primary example are organizations that hire external suppliers to produce marketing materials (print publications, promotional products, and point of sale systems) to market their products and services.
Marketing flows are often integrated into an organization’s larger supply chain to promote efficiency.
Large rolls of industrial paper that are packaged with a label that says “Manufactured with Wind Power.”
One of the primary responsibilities of marketing is to encourage communication between different parts of an organization to facilitate knowledge sharing. Marketing teams can play an integral role in integrating supply chain business processes, and promoting collaboration between buyers and suppliers, product developers, and common systems. Because operating an integrated supply chain requires a continuous information flow, marketers serve as major internal communication channels between customers, sales, purchasing personnel, and suppliers.
Marketing’s Influence on the Supply Chain
On a smaller, but still significant scale are the numerous processes, and internal and external partners companies use to deliver marketing materials to customers and clients. To move a finished product or service to customers, marketing works closely with printers, fulfillment houses, and other vendors to produce communications and execute marketing activities for different target audiences. From product brochures and promotional flyers to point-of-sale systems and store signage, each of these supplies must be acquired, managed, and ultimately distributed to customers, sales teams, branch offices, retail outlets, dealers, distributors, and other key audiences around the world.
In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product or service is a vital part of each channel participant’s marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus linking the marketing channel with a company’s customers (e.g., links manufacturers, wholesalers, retailers).
Marketing flows and processes encourage information sharing throughout the entire supply chain. From customer service representatives providing real-time information on scheduling and product availability, to procurement departments that develop rapid communication systems, such as electronic data interchange and Internet linkage, to convey requirements from product marketing managers more rapidly, organizations must clearly communicate its marketing plan internally to successfully launch products with ever-shorter time schedules. By coordinating with product developers, plant managers (manufacturing), and logistics partners (distribution), companies can use this synergy between its departments to compete effectively in the marketplace and help drive firm revenue.
Subsequently, a brand’s entire supply chain generally encompasses:
Customer relationship management
- Customer service management
- Demand management style
- Order fulfillment
- Manufacturing flow management
- Supplier relationship management
- Product development and commercialization
- Returns management
Sustainability and Social Responsibility in Supply Chains
Sustainability, which uses a triple bottom line incorporating economic, social, and environmental aspects, is another business issue that affects a company’s entire supply chain or logistics network. Sustainability represents a company’s social, ethical, cultural, and health (SECH) footprint on the surrounding communities where it makes products and conducts business.
Within the last decade, consumers have become more aware of the environmental impact of their purchases and companies’ SECH ratings. Often times, marketing and communications professionals are responsible for reporting a company’s SECH performance to customers, employees, media, investors, suppliers, and other relevant stakeholders. Greater consumer awareness and involvement around a company’s sustainability activities, coupled with the delivery of more transparent marketing communications, arguably places more pressure on other supply chain areas. In response to consumer and market pressures, organizations may enact operational improvements ranging from reducing water use, energy use, and waste, to adopting best practices in governance and employee engagement.
Negative public response over the use of pesticides or the unfair treatment of factory workers have often led to brands selling organically grown foods, adopting anti-sweatshop labor practices, and promoting locally produced goods that support independent and small businesses. For example, in July 2009, Wal-Mart announced its intentions to create a global sustainability index that would rate products according to the environmental and social impacts of their manufacturing and distribution. The index is intended to create environmental accountability in Wal-Mart’s supply chain and to provide motivation and infrastructure for other retail companies to do the same.
Supply Chain Challenges
Over time, most supply chains can grow cumbersome as new partners, products, and technologies are introduced to processes. Failing to identify efficiencies and develop best practices can increase costs, reduce service levels, and result in an overall loss of control. Similar growing pains around the adoption and integration of new partners, products, and processes can create inefficiencies in marketing as well, driving up costs and potentially causing delays in other areas of a company’s supply chain. For instance, some of the world’s largest consulting firms estimate that up to 60% of marketing costs are related to non-product ancillary areas (distribution, people, freight, storage, obsolescence, technology, and inventory management).
It is crucial that brands support marketing functions so they are both managed effectively and integrated seamlessly into the larger supply chain, thereby meeting larger business goals. These range from supporting internal and external collaboration and lead time reduction initiatives, to streamlining feedback from customer and market demand and improving customer-level forecasting.
1.5.3: The Global Economy
Increased global competition, financial flows and internet technologies are some of the driving forces behind global marketing strategies.
Outline the changes that are included in a shift to a global marketing perspective
- Domestic marketing strategies are increasingly limited to small- and medium-sized companies in niche markets.
- The “Four P’s” of marketing – product, price, placement, and promotion – must all be adjusted in order for the brand to be successful in markets that differ in language, customs and consumer needs.
- While operating in a global economy allows brands to maximize economies of scale and portray a consistent brand image across many markets, it also poses challenges for addressing consumer needs and wants, and reacting effectively against competition.
Of or pertaining to a combination of social and economic factors.
Operating, or having subsidiary companies in multiple countries (especially more than two)
- A global company is one that can create a single product and only have to tweak elements for different markets. For example, Coca-Cola uses two formulas (one with sugar, one with corn syrup) for all markets. The product packaging in every country incorporates the contour bottle design and the dynamic ribbon in some way, shape, or form. However, the bottle can also include the country’s native language (such as this coca-cola bottle from Tunisia and is the same size as other beverage bottles or cans in that same country.
The Global Economy
Now that the world has entered the twenty-first century, we are seeing the emergence of an interdependent global economy. This global market is characterized by faster communication, transportation, and financial flows, all of which are creating new marketing opportunities and challenges. Companies recognize that worldwide competition, international marketing trends, and Internet technologies must be considered when launching campaigns both domestically and internationally.
Given these circumstances, it could be argued that both small and large companies face one of two options: They must either respond to the challenges posed by this new environment or recognize and accept the long-term consequences of failing to do so. With the exception of companies in local niche markets, competitive changes within various markets are increasingly forcing companies to incorporate global variables into their marketing communications strategy.
As a result of this rapid shift towards an integrated, global economy, brands must adjust all aspects of the marketing mix to fit local tastes and needs, while maintaining a consistent product and brand image. Oxford University Press defines global marketing as “marketing on a worldwide scale reconciling or taking commercial advantage of global operational differences, similarities and opportunities in order to meet global objectives. ” The global economy certainly provides advantages to companies wanting to increase revenues and expand their brand. However, brands must be cognizant of some of the major challenges that come with marketing to a global audience.
Adjusting the Marketing Mix for a Global Audience
The four “P’s” of marketing–product, price, placement, and promotion–are affected as a domestic or multinational company adjusts its strategy to become a global company. At the global marketing level, global marketing plans must be tailored so that companies speak in many voices rather than just one. Developing marketing plans for different regions gives companies flexibility when reacting against competition or defending their position (market leadership, low cost provider, etc.) in a particular market.
Product: A global company will have to tweak certain elements of its products for different markets. Even a single product will need to be modified according to the market it will be sold in. Product packaging features, including color, shape, and form, may be similar. However, messaging and language are tailored according to the country’s native language and customs.
Price: Because it is affected by several variables, price will always vary from market to market. For example, cost of product development (produced locally or imported), cost of ingredients, cost of delivery (transportation, tariffs, etc.), and other variables will determine product pricing. Product positioning, including whether the product is high-end, low-cost, or middle ground, compared with competing brands also influences the ultimate profit margin.
Placement: Product distribution will also be determined by local and global competition, as well as the product’s positioning in the marketplace. For example, brands would not want to place high-end products in “dollar stores” in the United States. Likewise, a low-cost product in France would find limited success in an expensive boutique.
Promotion: After product research, development and production, promotional tactics, such as advertising, are generally the largest line item in a global marketing budget. An integrated marketing communications (IMC) strategy is key to achieving marketing goals, since IMC reduces costs, minimizes organizational redundancies, maximizes speed of implementation, and unifies brand messaging.
Adjusting for Global Marketing
A global company has to tweak certain elements of its products for different markets.
A Coca-Cola bottle with the label in Arabic.
Advantages and Disadvantages of Global Marketing
The global economy provides many advantages for companies that are able to introduce their products on a global scale, while customizing their marketing strategies for different languages, cultures, and socio-economic demographics. These advantages include:
- Economies of scale in production and distribution
- Lower marketing costs
- Enhanced power and scope
- Consistency in brand image
- Ability to leverage good ideas quickly and efficiently
- Uniformity of marketing practices
- The development of relationships outside of the “political arena”
- The set-up of ancillary industries to cater to the needs of the global player
- Efficient and effective use of online marketing over traditional marketing
Nevertheless, many companies struggle with meeting the challenge of a larger and more complex marketplace. Brands conduct extensive research and consider numerous market variables when developing global marketing plans. Some of the challenges to marketing in a global economy are:
- Differences in consumer needs, wants and usage patterns for products
- Differences in consumer response to marketing mix elements
- Differences in brand and product development and the competitive environment
- Differences in the legal environment, which may conflict with laws in home market
- Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g., infrastructure)
- Differences in administrative procedures
- Differences in product placement or distribution channels
1.5.4: Consumer Awareness
Consumer awareness is the extent to which a brand is recognized by potential customers, and is correctly associated with a particular product.
Discuss the impact on consumer awareness as it relates to brand awareness and a company’s profitability
- Brand recall and consumer recognition are the two components comprising brand awareness.
- Brand awareness is an essential part of brand development, helping the brand stand out from competitors.
- Since brand awareness plays a major role in consumer buying decisions, brand awareness influences company sales and profits.
- brand extension
also known as brand stretching, brand extension is a marketing strategy in which a firm marketing a product with a well-developed image uses the same brand name in a different product category
- Market Share
The percentage of some market held by a company.
Brand awareness is the extent to which a brand is recognized by potential customers, and is correctly associated with a particular product. Expressed usually as a percentage of target market, brand awareness is the primary goal of advertising in the early months or years of a product’s introduction. Product awareness can consist of consumer knowledge of brand benefits, features, slogan, tag lines and other brand messaging elements.
Apple’s marketing strategy around the iPad is a brilliant example of high brand recognition and anticipation of a new product.
The Foundation of Brand Awareness
Two components comprise brand awareness: brand recall and the consumer recognition of the brand. Brand recall is the ability of consumers to remember brands with reference to the product. Similarly, brand recognition is the potential of consumers to retrieve past knowledge of the brand when asked or shown an image of the brand logo. Brand awareness is an essential part of brand development, helping brands stand out from competitors. An organization that is highly successful in creating strong brand awareness within the consumer market is often referred to as a “household name. “
Impact of Brand Awareness
The eventual goal of most businesses is to generate profits and increase sales. Brand awareness plays a major role in a consumer’s buying decision process, and is essential to helping companies build market share. Word-of-mouth marketing from family and friends, or high recognition of the product through repeated advertising, can drive consumers to purchase certain brands over others. Consequently, integrated marketing communications strategies are instrumental in helping companies expand their customer base and encourage repeat purchases.
High brand awareness about a product suggests that the brand is easily recognizable and accepted by the market in ways that differentiate the brand from similar products and other competitors. Effective marketing campaigns that increase brand awareness also eliminate confusion between similar brands, as well as inconsistencies that may arise in brand extensions under single brands.
1.5.5: Social Responsibility and Welfare of Customers
Adopting socially responsible practices that benefit customers and society is fast becoming a competitive advantage in global business.
Apply the premise of social responsibility and customer welfare from a company’s marketing perspective
- Despite accusations of greenwashing and self-regulatory maneuvering, large and well-known companies have built social and environmental programs into their overall business agendas.
- Brands that adopt CSR or social responsibility ideologies either focus on improving the welfare of customers and communities, and or producing products and services that directly benefit society.
- Consumer protection laws helped bring about the adoption of ethical policies that drive socially responsible behavior in corporations.
A form of spin in which green public relations or green marketing is deceptively used to promote the perception that an organization’s aims and policies are environmentally friendly.
Social Responsibility & Welfare of Customers
Critics argue that corporate social responsibility (CSR) distracts from the fundamental economic role of businesses. While brands are incorporating social responsibility efforts into their marketing communication strategies, media and industry critics have accused companies of greenwashing human rights and environmental issues. Others argue that social responsibility efforts are an attempt to impose self-regulations and preempt the role of governments as a watchdog over powerful corporations.
Critics of social responsibility often accuse corporate brands of “greenwashing.”
Protestors in a street hold up a sign that says “Stop the Greenwashing.”
Despite these accusations, mega brands such as Walmart and Coca-Cola have built social and environmental programs into their overall business agendas. Recent scientific data pointing to climate change and dwindling natural resources, as well as concerns over human rights, have promoted companies to recognize its societal role and act to benefit society at large. It has also been a marketing exercise for business-to-business and consumer companies, as they strive to educate stakeholders on their social responsibility efforts and initiatives. Social responsibility has thus become part of the latest management strategies where companies try to create a positive impact on society, while strengthening their brand image and doing good business.
For example, a large information technology (IT) firm can produce IT products that enable instructors in the United States to teach online courses to students residing in poor and developing countries. Developing energy-efficient products made with non-toxic and recyclable materials is another way that brands can generate profit while considering the welfare of society and the environment. In other words, social responsibility drives organizations to discover and satisfy the needs of customers in ways that also provide for society’s well-being.
Customer Health and Safety
Ensuring that industrial factories and production sites create safe and reliable products is integral to the trustworthiness and ultimate survival of a brand. Since the beginning of the 20th century, there has been a concerted effort in the United States to implement consumer protection laws related to food, drugs, and cosmetics. The emergence of consumerism during the 1960s intended to increase consumer influence, power, and rights in dealing with corporate institutions.
Today, many of the ethical issues arising from consumer health and safety concerns have led to practices that prevent or reduce the frequency of unethical behavior in companies. Organizations are expected to have a “code of conduct” or set of ethical policies that help guide employees, partners and suppliers in safe, legal, and fair business practices. Though organizations establish corporate ethics policies to facilitate the process of recovery in the case of an ethical scandal, it also serves to promote ethical standards throughout the organization. Marketing organizations communicate these values by developing campaigns and programs designed to influence behavior that improves both the consumer’s personal welfare and that of society. From providing free leaflets offering “green” tips, to advice on how to safely dispose of electronics, social marketing is fast becoming a competitive advantage in global business.
1.5.6: Careers in Marketing
The marketing field provides a wide range of careers for professionals in brand management, PR, and communications.
Give examples of careers in marketing and what they do for the organization
- Most roles and functions in marketing involve presenting information to target audiences, increasing consumer and customer demand, and differentiating products against market competition.
- Field marketing managers, brand managers, PR specialists, and account managers are all positions that fall under the broader field of marketing.
- Some companies customize marketing positions according to organizational or market needs.
- Public relations
Public relations (PR) is the practice of managing the flow of information between an individual or an organization and the public.
- customer relationship management
Customer Relations Management (CRM) is concerned with (among other things) the conversion rate: percentage of customers who “try and buy” the product.
A person or organization with a legitimate interest in a given situation, action or enterprise. It can range from employees and investors of a company to the customers purchasing from the company.
Careers in Marketing
The marketing field provides a wide range of careers for aspiring professionals in areas such as brand management, public relations, and communications. University students major in disciplines like business management, mass communications, and international marketing to prepare for entry- and mid-level careers at corporations, organizations or government institutions. Educational and research institutions—independent think tanks, colleges, secondary schools, etc.—also hire marketing professionals to promote activities and develop brand messaging for their stakeholders.
Marketing professionals develop, execute, and monitor activities that increase brand awareness and customer sales.
Two women look at a laptop and discuss information that is on the screen.
Types of Marketing Careers
Jobs in marketing reflect the diverse marketing mix and the array of business tools used to address customer concerns and increase brand awareness. Regardless of their role or function, marketers must present information to target audiences; increase consumer and customer demand; and differentiate products against market competition. Marketing positions that support these functions include:
- Field marketing managers conduct promotions in the field. Field marketing is historically thought of as a one-way communication tool. The brand’s message is delivered from promotional personnel to the consumer, by way of a sample, a piece of merchandise, or literature. Today, field marketing may also include two-way communications such as requesting feedback about a sample, or inviting consumers to follow a brand on social media.
- Brand managers develop and promote a brand’s image, experience, and promise to consumers and customers. Brand manager roles touch all areas of marketing, including advertising, design, public relations, internal and external communications, and customer service.
- Public relations (PR) specialists manage the flow of information between individuals or organizations and the public. PR specialists help clients and companies gain exposure to target audiences using topics of public interest and news items that do not require direct payment. Some of the main responsibilities of PR specialists include organizing speaking engagements, positioning companies to win industry recognition and accolades, writing press releases, and developing relationships with analysts and media.
- Advertisers handle a range of functions, including creative services, copywriting, account management, media planning, and media buying. Account managers liaise with clients, while creative directors and copywriters generate key messaging and visual elements for advertisements. Media planners and buyers research the most appropriate online and offline platforms for advertisements.
Other marketing roles commonly found in organizations include marketing communications managers, marketing analysts, marketing and sales assistants, marketing writers, and internal communications specialists. Some companies customize marketing positions according to organizational or market needs. For example, a CRM marketing analyst may focus on customer relationship management systems and analytics, while social media and engagement managers launch and oversee marketing campaigns across different social media platforms.
1.5.7: Marketing as an Entrepreneurial Force
Many firms task their marketing teams to promote a culture of entrepreneurial thinking via initiatives in and outside the organization.
Relate entrepreneurial marketing practices and thinking to a corporate environment
- Intrapreneurship, a form of employee entrepreneurship, represents corporate management styles that integrate risk taking and innovative approaches, as well as reward and motivational techniques traditionally aligned with entrepreneurship.
- Entrepreneurial company cultures can foster innovation and creativity, as well as improve brand differentiation is competitive and crowded markets.
- Organizations can gather valuable industry and marketing data as a result of intrapreneurs’ learning experiences.
- flash mobs
a group of people who assemble suddenly in a place, perform an unusual and seemingly pointless act for a brief time, then disperse, often for the purposes of entertainment, satire, and artistic expression.
The art or science of innovation and risk taking for profit in business.
Delegating a task to a large diffuse group, usually without substantial monetary compensation.
Marketing as an Entrepreneurial Force
The size and scope of marketing efforts is determined by organizational factors, such as budget, people, the supply chain, customers, competition, and external environments. Likewise, marketing can influence various parts of the organization to help drive brand awareness, strengthen market positioning, encourage product innovation and, ultimately, increase sales. Many brands task their marketing teams to promote a culture of entrepreneurial thinking via initiatives in and outside the organization. The American Heritage Dictionary defines this practice as “intrapreneurship.” The practice of intrapreneurship represents corporate management styles that integrate risk taking and innovative approaches, as well as reward and motivational techniques traditionally aligned with entrepreneurship.
In marketing, best practices can be used to encourage innovation within organizations.
Two engineers in hard hats stand inside a building that’s under construction and discuss the work.
While improving marketing effectiveness, marketing strategies also transform ideas into profitable initiatives for the overall organization. Brand differentiation strategies aimed at making products more successful than competitor products and brands can facilitate entrepreneurial behavior that follows the goals of the organization.
Employees often serve as examples for intrapreneurship, and motivate other employees to undertake new or even revolutionary initiatives. Marketing employees, in particular, must constantly be versed in the latest online communications and industry best practices to competitively position brands in domestic and international markets. Likewise, marketers attempt to use innovative and creative promotional elements (e.g., flash mobs, crowdsourcing) to develop clever and relevant campaigns.
The Role of Marketers as Entrepreneurs
Marketing executives or employees engaged in special projects within a larger firm are encouraged to behave as entrepreneurs. These individuals often have the resources, capabilities, and security of an entire corporation at their disposal to execute marketing programs and achieve notable results. Although these “intrapreneurs” may face obstacles (e.g., cultural or fiscal conservatism, lack of research) and experience failures before achieving success, organizations can benefit from valuable data resulting from intrapreneurship. For example, trials and errors learned during a product launch can be used to modify future marketing plans and better utilize organizational resources.
Companies including Google and EM are known to be intrapreneur-friendly, allowing employees to spend a portion of their time to pursue personal projects. Some of these brands also have policies in place to fund these projects, as well as create an innovation-friendly atmosphere and intrapreneurial reputation in the marketplace.
1.6: Evaluating Marketing Performance
1.6.1: The Importance of Evaluating Marketing Performance
Evaluating marketing performance guides future marketing initiatives and helps a company achieve its goals.
Review the importance of performance evaluation from a marketing perspective
- Ideally, marketing performance measurement should be a logical extension of the planning and budgeting exercise that happens before a company’s fiscal year.
- Marketing performance metrics or key performance indicators (KPIs) are useful not only for marketing professionals but also for non-marketing executives.
- Determining what areas of the marketing mix to modify, as well as whether company goods, services, and ideas meet customer and stakeholder needs, are some of the primary reasons why companies evaluate the marketing performance.
- bottom line
The final balance; the amount of money or profit left after everything has been tallied.
- key performance indicators
considered industry jargon for a type of performance measurement, KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged.
- return on investment
Return on investment (ROI) is one way of considering profits in relation to capital invested.
Why Evaluate the Performance of Marketing
The intangible benefits of marketing – improving and enhancing brand awareness; educating customers and prospects about product benefits; and strengthening stakeholder relationships – make measuring its financial impact a perplexing and challenging process. Ideally, marketing performance measurement should be a logical extension of the planning and budgeting exercise that happens before a company’s fiscal year. The goals that are set should be both measurable and applicable to every marketing role within an organization. Companies employ various methodologies to measure marketing performance and ensure they meet those performance goals.
Evaluating marketing performance helps companies plan and budget for the next fiscal year.
Pages of a business report with a calculator and pair of reading glasses sitting on top.
Importance of Marketing Performance Metrics
Marketing performance metrics or key performance indicators (KPIs) are useful not only for marketing professionals, but also for non-marketing executives. From the chief executive officer to the vice president of sales, the senior management team needs marketing KPIs to gauge how marketing activities and spending impact the company’s bottom line. This is particularly important since companies are prone to reduce marketing budgets during economic downturns, downsizing, and mergers.
As marketers face more and more pressure to show a return on investment (ROI) on their activities, marketing performance metrics help measure the degree to which marketing spending contributes to profits. It also highlights how marketing contributes to, and complements, initiatives in other areas of the organization, such as sales and customer service.
Other reasons why companies evaluate marketing performance include:
- Monitoring marketing’s progress towards its annual goals
- Determining what areas of the marketing mix – product, price, place, and promotion – need modification or improvement to increase some aspect of performance
- Assessing whether company goods, services, and ideas meet customer and stakeholder needs
Establishing marketing performance metrics is integral to helping brands satisfy customers, establishing a clear company image, being proactive in the market, and fully incorporating marketing into the company’s overall business strategy.
1.6.2: Marketing Performance Metrics
Marketing metrics are numeric data that allow marketers to evaluate their performance against organizational goals.
Summarize how marketing metrics impacts company operations and goals
- Marketing metrics have different elements of measurement, including net sales billed, number of product or design registrations, and brand surveys to measure brand awareness.
- By monitoring and analyzing marketing performance metrics, brands can increase their competitive intelligence, assess their market strengths and weaknesses, and make calculated budgetary decisions across the marketing mix.
- Return on marketing investment (ROMI),marketing return on investment (ROI) and return-on-marketing-objective (ROMO) are examples of marketing performance metrics used by major brands to prioritize and allocate marketing investments.
- contribution margin
cost-volume-profit analysis, a form of management accounting; the marginal profit per unit sale
the discovery and communication of meaningful patterns in data, which rely on the simultaneous application of statistics, computer programming, and operations research to quantify performance.
Marketing Performance Metrics
As companies seek to run leaner and more efficient businesses, more marketing professionals are tasked to demonstrate how marketing generates revenue and contributes to companies’ business goals. Marketing metrics provide frameworks that public relations specialists, brand managers and marketing directors can use to evaluate marketing performance, as well as back their marketing plans and strategies.
Quantitative metrics and analysis help marketers make more accurate decisions and predict risks associated with decisions.
A screenshot of a marketing metrics program on a computer.
The numeric data allow marketers to not only justify their efforts, but also highlight the direct relationship between marketing and larger organizational goals. Marketing metrics have different elements of measurement, including net sales billed, number of product or design registrations, and brand surveys to measure brand awareness. By collecting and analyzing marketing metrics, brands can build their marketing performance in the following ways:
- Increasing competitive intelligence and anticipating competitor reactions to new marketing strategies
- More accurately assessing company marketing assets such as brand equity and its level of effectiveness among target audiences
- Building a knowledge base of current and historic data that help drive marketing mix decisions and steer the company through rapidly changing market conditions
Entities such as the Marketing Accountability Standards Board have developed formal processes for connecting marketing activities to the financial performance of organizations. Moreover, industry experts have developed various metrics – notably, return on marketing investment (ROMI) – to help marketers measure the performance of activities across the marketing mix. The purpose of metrics such as ROMI is to measure the degree to which marketing spending contributes to profits.
How ROMI Works
Return on marketing investment is one of the most difficult organizational aspects to measure. ROMI, a relatively new metric, is marketing contribution attributable to marketing (net of marketing spending), divided by the marketing “invested” or risked. ROMI is based on the calculation:
[Incremental Revenue Attributable to Marketing * Contribution Margin (%) – Marketing Spending] / Marketing Spending ($)
There are two forms of the ROMI metric: short-term ROMI and long-term ROMI. Short-term ROMI measures revenue such as market share, contribution margin or other desired outputs for every marketing dollar spent. This metric is best used to determine marketing effectiveness and steer investments from less productive to more productive activities.
In a similar way, long-term ROMI can be used to determine other less tangible aspects of marketing effectiveness such as increased brand awareness or consumer motives. However, long-term ROMI is often criticized as a “silo-in-the-making”. Long-term ROMI creates a challenge for brands unfamiliar with using business analytics together with marketing analytics to determine resource allocation decisions. Despite this challenge, long-term ROMI can be a sophisticated measure for prioritizing investments and allocating marketing and other resources within an established framework.
Other Marketing Performance Metrics
Marketing return on investment (ROI) is another term that refers to measuring company sales and profits. Author Rex Briggs also introduced the term “ROMO” for return-on-marketing-objective. This reflects the idea that marketing campaigns may have a range of objectives, where the return is not immediate sales or profits. For example, a marketing campaign may aim to change the perception of a brand. Nevertheless, in most cases, a simple determination of revenue per dollar spent for each marketing activity can be sufficient to help make important decisions to improve the entire marketing mix.
1.6.3: Methods for Evaluating Marketing Performance
KPIs, ROMI, and Accountable Marketing are all metrics that are used to track marketing performance.
Illustrate the purpose and characteristics of marketing performance evaluation methods
- When evaluating marketing performance, companies should measure marketing outcomes from the consumers’ points of view, include all marketing activities, measure across a continuous time period, and meet statistical and technical criteria required of all measurement systems.
- To accurately measure the effectiveness of marketing activities, KPIs must be integrated within the business and management of the company.
- To ensure meaningful comparisons among activities, companies should employ a common scale, and measurement error must be quantified so that managers can react to changes in conditions.
- key performance indicators
considered industry jargon for a type of performance measurement, KPIs are commonly used by an organization to evaluate its success or the success of a particular activity in which it is engaged.
- return on investment
Return on investment (ROI) is one way of considering profits in relation to capital invested.
- Advertising Research Foundation
The ARF is an association where practitioners from every avenue of advertising—agency, academia, marketer, media, and research—gather to exchange ideas and research strategies.
Evaluating Marketing Performance
Organizations use various methods to evaluate marketing key performance indicators (KPIs) or metrics. Marketing Performance Measurement, Marketing Performance Management, Marketing Return on Investment (ROI), Return on Marketing Investment (ROMI), and Accountable Marketing are all metrics that companies use to connect marketing performance to the financial performance of the organization.
Using an established methodology to evaluate marketing effectiveness helps companies measure performance and assess business needs.
A diagram that shows how companies (for example, YouTube, LinkedIn, Twitter, and Facebook) execute marketing strategies (responsibility, analytics, creativity, processes, guidelines, measurement, policy, support, monitoring, objectives, and business needs).
In order for marketing KPIs to be integrated within the business and management of the enterprise, and ensure consistency and reliability across the marketing mix, they must meet these minimum requirements:
- Measure marketing outcomes from the consumers’ points of view
- Include all marketing activities
- Be repeated over time
- Meet statistical and technical criteria required of all measurement systems
Consistency is Key
Marketing materials can be designed to inform, portray products and services attractively, and influence purchasing behavior. The methods for evaluating the performance of, and responses to, these materials range from simple calculations measuring return on investment, to tallying the number of visits to a website. Since marketing campaigns are typically integrated across all channels (e.g., print, email, and social media), these channels are measured together to understand the overall effect on target markets.
To ensure meaningful comparisons among activities, brands, markets, and time periods, organizations may employ a common scale to analyze performance metrics. Using different measurements to evaluate different communications activities, competitors, and markets does not allow direct comparison and results in lost synergies. Companies using formalized methodologies continually gather and monitor marketing data to understand where the marketing plan is strong and where it needs improvement. Long-term observation also brings true insight about unanticipated changes and “red flags” in the data.
All measurement systems should take into account accuracy, repeatability, reproducibility, bias, data shifts, and data drifts. Measurement error must be quantified so that managers can react to changes in conditions, but not to changes due to measurement variation. Independent organizations such as the Advertising Research Foundation evaluate the validity of commonly used measurement systems to produce standards and best practices for evaluating marketing and advertising data.