Introduction
Key Terms: production concept, selling concept, product concept, marketing myopia, marketing concept, societal marketing concept, general demarketing, selective demarketing, market segmentation, target market, marketing strategy, the 4Ps, marketing mix, definition of marketing, relationship marketing, convenience goods, shopping goods, specialty goods. Influence of the Internet on marketing. social marketing.
Production Concept — Firms that follow this philosophy focus on manufacturing products that are relatively easy to produce; the firm does everything it can to improve production efficiency and thereby lower the price of the product. The problem with this approach is that it does not focus on the needs of the customer. Since the focus is on production efficiencies, this means the firm has to "sell" the product after manufacturing it.
Selling Concept — Firms that follow this philosophy focus on "pushing" the product using advertising and promotion. Please note that marketing is not selling: selling is similar to pushing, and marketing, we will see, is more like pulling. A firm that promotes a product heavily after it is manufactured is in danger of creating a dissatisfied customer. People are very likely to be disappointed in the product’s performance. Your textbook cites a study that shows that a dissatisfied customer is likely to complain to ten others about a bad experience with a product.
Product Concept — Focusing too much on one’s product and trying to make it the best-performing product in the market via improv ements can also be dangerous. Marketing myopia is a term coined by Theodore Levitt to describe firms that define themselves in terms of a product rather than in terms of the need that the product satisfies. For example, the public does not want rail transportation, it wants fast, inexpensive, and convenient transportation. The railroads made a great deal of money during the latter part of the 19th Century. They made the mistake of thinking that the public wanted rail transportation. Much of their business was taken away by newer modes of travel (planes stole much of their passenger business; planes and trucks took away a great deal of their freight shipping business). The railroads should not have focused on rail transportation but on transportation in general. The goal is to do the best job of satisfying one's customers. Consumers want energy, not necessarily oil; education, not necessarily in classrooms; communication, not necessarily by telephone; music, not necessarily on cassettes; and entertainment, not necessarily films or television. A firm that defines itself in terms of a product, e.g., a firm that insists that it is in the business of providing long-distance telephone service, might become obsolete.
You must read this article ("Marketing Myopia") as part of this course. It is among the most important articles ever written in the area of marketing. Click on the link below (let's hope it works):
http://www.dushkin.com/text-data/articles/1374/body.pdf
Companies should not focus on existing products but on customer needs. This is the reason the marketing concept became the philosophy that guides most firms today.
Marketing Concept — One of the most
important terms that you will learn in this course is the marketing concept.
If a firm wants to achieve its goals it has to focus on satisfying the needs
of its customers. These goals do not necessarily have to relate to profit since
any firm that is involved in a transaction should follow the marketing concept.
Libraries, politicians, colleges, hospitals, and many other kinds of organizations
should be marketing-oriented. If a firm focuses on satisfying the needs of its
customers, it does not have to "push" its product.
The public will demand the product and "pull" it
through the channel of distribution. Note what happens in a college when a course
or program is offered that satisfies students’ needs for getting a good
job. You do not have to beg students to take the course or to major in that
program.
As you can see from the above discussion, the two major concerns of
marketing-oriented firms that abide by the marketing concept are discovering
consumer needs and then doing everything possible to satisfy those needs.
This, in a nutshell, is what marketing is all about.
What do we expect of organizations that abide by the marketing concept?
(1) They use marketing research to ensure that
they are indeed performing well. Marketing research is used to help develop
new products and to determine whether the new product will actually satisfy
the needs of customers.
(2) They are innovative and constantly improving their products/services to
maximize their customers’ satisfaction.
(3) They understand that a market is not monolithic, i.e., not everyone
has the same needs. Therefore, they will practice market segmentation.
For instance, the market for soap consists of such segments as: those that want
a "pure" soap (mothers for their babies), those that want an anti-bacterial
soap (teenagers), those that want an anti-deodorant soap (people worried about
body odors), those that want an inexpensive soap (bargain shoppers) , those
that want a creamy soap (women who want soft skin), those that want an abrasive
soap (mechanics), and those that want a soap that makes one feel fresh.
(4) They will have a target market. To come up with a marketing strategy,
you must select a target market and develop the best marketing mix
(discussed below) to
satisfy this target market Thus, a marketing strategy is a target market + an
optimum marketing mix to satisfy the target market. The marketing mix is the
4 Ps of marketing: product, price, promotion, and place.
(5) They do not suffer from "marketing myopia." They
define their business in terms of a need (which they will satisfy) and not in
terms of a particular product.
(6) They are concerned about improving the quality of their products. Defective
products will not result in customer satisfaction. Many firms have special procedures
for dealing with customer complaints and do everything possible to resolve problems.
Marketing Mix: The Four Ps of Marketing
PRODUCT: What features/benefits to offer in order to satisfy the needs
of one's target market. This includes packaging, branding, and warranties.
PRICE: What price to charge? You have to do research to see
how your target market/customers will respond to your price. You may
have a fabulous product but your target market may not buy it if they believe it
is overpriced.
PLACE: You have to get the product to the customer/target market when
s/he needs it. A great product is of no value to the customer if it
arrives three months after it is needed (imagine buying a beautiful wedding
dress or tuxedo and it arrives after the wedding). We will be learning
about channels of distribution. Many of you are purchasing textbooks via
the Internet while others are using the college bookstore--two very different
channels of distribution.
PROMOTION: Is concerned with communicated with
customers/target market and convincing them that your product/service offers
real benefits. Includes advertising, publicity, sales promotions, and
personal selling.
The four
Ps are are the controllable marketing mix factors, i.e., the organization
can control and manipulate them. An organization has little control over such
factors as the economy, government regulation (they may try to do some
lobbying), or social. Forces over which an organization has little
control are known as environmental factors. For example, if the
United States Government passes legislation requiring all cars to be
nonpolluting, this would be an example of government regulation, an
environmental factor. Of course, this would have a huge impact on
automobile sales. Other environmental factors include economic, regulatory
(legal),
competitive, social (this includes cultural), technological, etc.
Thus, the five major environmental factors are: social, technological,
economic, competitive, and regulatory (legal). Global warming is a
controversial area and the government may pass laws to reduce it-- this may have
an impact on many industries. If you think regulation is not an issue,
restaurants in NYC may no longer use trans fats in their products. I am
sure this had an impact on many restaurants.
One reason that so many consumers are using the
Internet to purchase products (one example of electronic commerce at work) has
to do with environmental factors. Men and women have to work long hours
and do not have the time to spend shopping at malls. Most of you will find
that the 9 to 5 job is disappearing. If you are going to be an accountant,
lawyer, manager, marketer, etc. expect to work a lot longer than 9 to 5.
One of my former students who is an accountant at a Big 4 firm usually works
from 6:30 AM to 1 PM. I doubt she has time to purchase clothing at a mall.
In fact, on weekends she works from home using her computer.
Societal marketing concept – unfortunately, satisfying customers’ short-term needs may not be compatible with society’s needs. For instance, your customers may prefer large automobiles, disposable diapers, hamburgers, no-deposit bottles, etc. Society is better off if we drive small cars, use cloth diapers, and eat soy burgers. Should a firm worry about its customers’ short-term needs, or consider what is best for society? Think about this. Social responsibility is the belief that organizations have a responsibility to society as a whole. An organization must think of the effects its actions have on society. Convincing the public to purchase products that are unhealthy and clog arteries are not in the best interests of society. There is nothing wrong with making a profit but a firm must also care about society.
By now you should realize that the primary
objective and first task of marketing is to discover the needs of consumers.
A need occurs when an individual feels that s/he lacks a basic necessity.
A want, on the other hand, is something learned; it is shaped by such factors as
culture, experience, social influence, family influence, etc. A market is
composed of potential consumers with the desire and ability to purchase a
specific product. The group or groups towards which a company or
organization directs, focuses and concentrates its marketing program is the
target market.
Extending the Principles of Marketing
As noted above, the principles of marketing are being extended
to such areas as the marketing of ideas, political marketing, and even marketing
the volunteer army. Whenever there is some type of exchange, it is
important to understand marketing. Politicians, for instance, understand
that they must segment voters and select a target market(s). A good
politician does research to learn what voters want (jobs, increase in social
security, homeland security, health insurance, strengthening the traditional
family, etc.). Direct mail and Internet marketing with different messages for different
groups is one tool being used by shrewd politicians. One interesting
fact that is being studied after the 2004 Presidential election is the fact that
97 out of 100 of the fastest growing counties -mainly
exurbs- voted
Republican. Exurbs are too far from urban areas to be considered suburbs
but too large to be considered rural.
Even libraries have started using marketing. Libraries are being defined
as a place to find information, not only books. (If they define themselves
solely as a place to borrow books they are suffering from marketing myopia.)
This is why libraries have numerous computers and wireless networks so that
anyone with a laptop can access the Internet. Libraries also have DVDs since
they are almost as important as books. Incidentally, there is a revolution
in the area of book publishing, a new kind of book is the eBook.
Libraries are also places where young children whose mothers work can do their
homework after school.
Colleges are also using sophisticated marketing
tools to attract students. This is becoming a hot area since colleges find
themselves competing for students. Research shows that students choose schools
based on reputation, convenience, and course offerings. Hospitals are also becoming
marketing-oriented. Patient satisfaction is becoming very important to
hospitals. Customer satisfaction is very important in marketing (indeed,
that is what the marketing concept is all about). Today, hospitals and
colleges are learning about the importance of satisfying patients and students,
respectively. Do you think this college has done a good job satisfying
you?
Can marketing help a church expand its membership? Read "The Soul of the
New Exurb" by Jonathan Mahler (New York Times Magazine, March 27, 2005,
pp. 30-50) to learn how Pastor Lee McFarland built a mega-church (weekly
attendance of 2,000+) in the exurb of Surprise, Arizona; weekly attendance is
5,000. Before building the church, McFarland did some marketing research
and asked only two questions: "What's your favorite radio station?" "Why
do you think people don't go to church?" What he found was that the
people living in Surprise liked rock music; they did not go to church because
they did not own fancy clothing, did not like to be asked for money, and felt
that the church sermons they heard in the past were not relevant to their lives.
His church has no crosses or other religious icons; no stained glass and it
looks like a mall. Krispy Kreme doughnuts are served ($16,000 a year spent on
the doughnuts), the dress code is lax, and Pastor McFarland wears a T-shirt and
jeans. Half of each service is devoted to Christian rock. McFarland's
"sermons" deal with what he calls "successful principles of living."
People are attracted to the church for various reasons including aerobics
classes, child care, counseling, financial planning, etc. Radiant has small
groups for all kinds of people: widows, divorced, etc. This is known
as getting people in through the side door (going to church for Sunday sermon =
front door). Small groups allow people to share their pains and hopes.
Outdoor advertisement for the church: "Isn't It Time You Laughed Again?"
with a picture of happy family.
The church has a branch of Celebrate Recovery, a Christian program for recovering addicts that is similar to the 12-step program of Alcoholics Anonymous. Recovering addicts can feel comfortable talking about their Christian beliefs at the Celebrate Recovery meetings.
Definition of marketing
The American Marketing Association's (AMA) previous definition (2004) of marketing
was:
"Marketing is an organizational function and a
set of processes for creating, communicating, and delivering value to customers
and for managing customer relationships in ways that benefit the organization
and its stakeholders."
The new definition of marketing, as of 2008, is: "Marketing is 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."
Note that the definition of marketing focuses on the lifetime value of a customer. All the functional areas have to take an "integrated marketing" approach and work towards the goal of satisfying and delivering value to customers. If you do not truly care about your customers, you are not a good marketer. Also, note the importance of all stakeholders and society at large. A good marketer is not only concerned with making money.
Relationship Marketing:
Relationship marketing is concerned with the long-term and not merely to
sell a product or service to a customer one time, and that is it. The goal
is to have a satisfied customer and establish an ongoing, personal, and
long-term relationship with him or her. This means that the organization
will have to understand the needs of the customer as they change over time.
A firm that believes in relationship marketing wants to establish a connection
with the customer. It is important to communicate with the customer and
develop the relationship. Without two-way communications, it is difficult
to develop a relationship. What matters is the lifetime value of the
customer, not how much money a firm makes with one transaction. One goal of
relationship marketing is customer retention, i.e., to keep an organization's
existing customers. The cost of keeping an existing customer is a fraction
of the cost of finding a new customer. It is therefore foolish for a firm
to ignore existing customers and focus solely on finding new ones. Of
course, if a firm only expects to sell a product to a customer once, than
relationship marketing may not be an issue. Think of all those stores
selling electronic appliances in mid-town to tourists. They do not expect
to ever see those customers again so they do not think of relationship
marketing. If a company expects to do business with a person for many
years, there is no question that it should be concerned about having a long-term
relationship with customers, i.e., relationship marketing. This is how
Brooklyn College or any college for that matter should see its students.
The college expects to have a long-term relationship with you. In fact,
after you graduate, we want you to come back and visit and hopefully donate some
money to the college (especially the Business Program).
Quality of automobiles:
J.D. Power & Associates conducts two important surveys of vehicle quality: (a) Initial Quality Study which measures complaints about automobiles in the first three months of ownership and (b) Vehicle Dependability Study which measures complains over the first three years of ownership. The firm uses a mail survey (100,000 questionnaires mailed out) and asks new car buyers to report problems.
The 2004 J.D. Power & Associates Vehicle
Dependability Study is showing that American automakers are catching up to the
Japanese automakers. Lexus, a very expensive luxury car, has been number 1 for
the last 10 years (162 problems per 100 cars). Toyota has 216 problems per
100 cars. The industry average is 269 problems per 100 cars. Chevy
Malibu has the best score for entry-level midsize cars; Ford F-150 was number 1
for pickups.
Note that firms are striving to improve their
quality. Good marketing is about improving quality and thereby satisfying
one's customers. The goal should be 0 problems per 100 cars.
J.D. Power & Associates is now involved in the rating of customer satisfaction in many new areas such as hospitals, cell-phone providers, and satellite dishes (Business Week, November 22, 2004, p. 158). The firm recently started rating auditors.
Demarketing
Sometimes it is necessary to demarket a product. There are two types of demarketing: general demarketing and selective demarketing. General demarketing is used when a firm (or government) wants to demarket to everyone. For instance, the government demarkets cigarettes and alcohol (discouraged goods) and illegal drugs (a banned good).
There are situations in which a company demarkets to one specific market segment. This is called selective demarketing. An example of this would be a resort in the Poconos that does not want the business of singles and prefers couples. Also, some areas in Florida prefer elderly vacationers and demarket to college students. This is accomplished by promoting in a way that attracts the desired target market and is unattractive to the demarketed segment. Photographs of elderly people in a promotional brochure that describes exciting bingo nights and shuffleboard tournaments should do the trick. There are adult resorts that cater to adults and children are not permitted.
Demarketing is necessary when there is a limited supply of a product and very heavy demand. In the past, gasoline was demarketed (general demarketing) and it is quite likely that electricity will have to be demarketed if the supply situation does not improve soon. Water is becoming scarce in many regions and general demarketing will be necessary. This is the reason NYC installed water meters in homes. One way to encourage conservation of water is to charge by amount of usage.
Back in 2001, the State of California demarketed the use of electricity. People were told how important it was to conserve electricity and what they could do to help. The public was also informed that they could make a difference. According to a study by Reiss and White, the demarketing campaign worked.
Tools used to demarket include:
Higher prices – This is one justification for high taxes on cigarettes
and liquor.
Counter-advertising – e.g., counter-ads advising young people not
to take crack, cocaine, or heroin.
Limiting advertising – Cigarettes, for example, may not be advertised on
television.
Limited distribution – Alcohol may only be sold in stores with a license.
Warning labels.
Development of substitutes.
Marketers prefer to classify goods using the following approach. Note that the advantage of this approach is that goods are classified in accordance with the way they are perceived by consumers. This approach is more useful to marketers than an approach used by non-marketers: durables, non-durables, and services.
Hospitality Marketing is a good way to
see how a marketer thinks.
(a) A marketer has to segment the market. Suppose you run a hotel/resort for
vacationers. Does every vacationer want the same
benefits/experiences? Benefits vacationers might want include:
sports (golf, tennis, or skiing), gambling, weight loss/spa, gourmet food,
activities for children, trips to historical sites, etc. Hotels that are
for the business traveler must offer benefits such as access to the latest
technology (fax machines, Tele-conferencing, conference rooms, scanners,
printers, etc). First thing to do is to select a target
market.
(b) The marketing mix:
Product/service mix: What benefits should be offered? Should
the hotel have a pool, spa, Jacuzzi, golf course, tennis court, etc. What kind
of food should be served (gourmet meals?)?
Price: What price to charge? Some hotels use several prices in
order to attract different segments. Price per room may range from $100 to
$2000 per night.
Promotion: Should we use television, direct mail, radio, travel
agents, telemarketing, Internet, etc.
The Internet has had a major affect on the hospitality industry. Rather
than having empty rooms, some hotels deal with online discounters.
The goal is to have a satisfied guest. Many hotels ask guests to complete a
questionnaire in order to measure satisfaction. Hotels also create a database
that includes the name and address of guests. A good marketer will try to
determine whether the hotel should change anything in order to improve customer
satisfaction. By the way, if you are interested in this area, the classic
text is by Philip Kotler, Marketing for Hospitality and Tourism (Prentice Hall).
Social Marketing
Can marketing be used to improve the world? The tools of marketing which you will learn in this course can be used to help humankind. They can be used to change behaviors. Some consumer behaviors are good and should be encouraged (e.g., improving health via annual checkups, checking for breast cancer, checking for skin cancer, etc.; improving the environment by using green products, driving less and walking more, etc.; getting people to donate organs, blood, time for good causes; avoiding injury by using products correctly, using seat belts, safe sex, etc.). Marketing may also be used to discourage behaviors that are harmful to people and society (smoking, littering, drugs, steroids, sexual harassment, etc.).
Kotler, Roberto, and Lee in their book, Social Marketing, define social marketing as: "the use of marketing principles and techniques to influence a target audience to voluntarily accept, reject, modify, or abandon a behavior for the benefit of individuals, groups, or society as a whole."
How would you use social marketing
to get people to donate organs such as kidneys? There is a big shortage of
organs and thousands of people die each year waiting for an organ. How
would you use social marketing to get people to exercise? To eat nutritious
foods?
Obesity is a national problem: Do you think social marketing can be used to help
solve it?
Note that the goal in social marketing is behavior change.
Go to the Webpage of the Social Marketing Institute to learn more about social marketing: http://www.social-marketing.org/
Classification of Consumer Goods:
Convenience goods— These are goods that consumers want to acquire with virtually no shopping effort. They include: staples (milk, bread), impulse items (candy, gum, soda, magazine), and emergency goods (ambulance, tow truck).
Shopping goods—Customers tend to shop around, i.e., make price and/or quality comparisons. Examples of shopping goods: computer, suit, coat, printer, sofa, and bedroom set.
Specialty goods –Customers are willing to make an extended search to find these goods. In some cases, a customer might be willing to travel 20 or 30 miles to find them. Some examples: wedding dress; Rolls Royce; a special stamp if you are a stamp collector; an exotic camera if you are a photography buff.
Convenience goods need intensive distribution. Your product has to be in millions of outlets. Think of how many places you can purchase a newspaper or a cup of coffee. Many convenience goods are sold in vending machines to increase the number of outlets. For example, products sold in vending machines include newspapers, coffee, soda, and candy. How come wedding gowns are not sold in vending machines? Shopping goods require selective distribution and specialty goods require exclusive distribution.
It should be noted, however, that not everyone sees goods the same way. For instance, some people treat gasoline as a convenience good--they drive along and when the gas tank is almost empty, they stop at the closest service station. Others, will shop around and see which service station has the lowest price for gasoline. The same is true for motel rooms. When you are traveling with your family, do you shop around for a motel to stay at or do you select the first one you see? Prescription drugs are also treated by most people as a convenience good and they will get their prescription filled at the nearest drug store. This is not a good idea since prices vary greatly. It makes sense to shop around to get the best price, especially for drugs to treat a chronic condition.
Internet Marketing:
The Internet has had a profound influence on marketing. Firms that are not
interested in Internet marketing are as myopic as the railroads were during the
20th century.
Advantages of the Internet:
(a) The Internet provides information on demand 24/7. This information is "pulled" by the receiver (e.g., prospective customer) rather than being "pushed" by the sender. Suppose you are interested in learning about new drugs for hay fever or how to plant a lilac bush or the best digital camera for under $200, you can go to the Web anytime to get some answers.
(b) The Internet provides content that may be customized by the sender and/or receiver. Two individuals may go to the same website and can choose how much information they want. More knowledgeable consumers might demand considerably more information than those who are less savvy. Marketers can use information regarding search behavior and past purchases to make recommendations to consumers. Good marketers are tailoring the Internet experience to the individual viewer (check out Amazon and you will see what I mean).
(c) The Internet is interactive. The viewer interacts with the website and clicks wherever s/he wants to go. Because the Internet is interactive, individuals using it tend to be more involved. Television, on the other hand, is a low-involvement medium--viewers are passive. One is almost in a trance when watching television. In consumer behavior we refer to what is happening to the viewer as passive or low-involvement learning.
(d) The Internet has made every firm on it part of a global network and has thus contributed to the globalization. Nowadays, anyone on the planet with a website can compete with you. There is a level playing field. Thomas Friedman, the author, wrote a book that describes the world as being "flat." What he means is that the world has become a very small place. It is as easy to buy a book from an online bookstore in Australia as one in Brooklyn. As you know, most help desks are in India--Call Dell and you will probably be speaking to someone in India.
(e) The Internet allows for asynchronous communication. Unlike a phone call (synchronous communication) where both the buyer and seller have to be available at the same time, the Internet allows the buyer to place an order at, say, 3 a.m. and the seller can fulfill the order at 8 a.m. An online store can be open 24/7 and receive orders any time.
(f) The Internet has speeded up time. A rumor can be spread as quickly on the Internet as a virus. Organizations have to be on the alert and must provide timely and useful information.
The major benefits of conducting business over the Web include:
(1) Your business can be open 24/7 --
You can receive orders anytime, even when you are not there.
(2) You can sell your products to customers anywhere on the planet.
(3) You can provide customers with timely, up-to-date information.
(4) You can respond almost immediately to your customer.
(5) It enables one to tailor information to the customer's personal needs.
(6) It enables one to eliminate the costs of building "brick and mortar" retail
outlets. A website in cybermall is a lot cheaper to build than a store in
a shopping mall. Many retailers have both: brick and mortar outlets and
cyberspace outlets. They are referred to as "click and mortar" firms.
(7) It allows one to save time and money by reducing other costs associated with
having a brick and mortar store. For instance, a store must carry
inventory and this can be quite expensive. A web retailer does not have to
have to carry any inventory.
Check out the following informative Web sites:
Click here to read a paper that describes how one may determine whether or not a firm is truly marketing oriented.
(c) 2008 H.H. Friedman