MARKETING
DEFINITION OF MARKETING
Process associated with promoting for sale goods or services. The classic components of marketing are the Four Ps: product, price, place, and promotion-the selection and development of the product, determination of price, selection and design of distribution channels (place), and all aspects of generating or enhancing demand for the product, including advertising (promotion). See also direct marketing; market; market profile; target market.
MARKETING (BUSINESS)
The term market is the root word for the word marketing. Market refers to the location where exchanges between buyers and sellers occur. Marketing pertains to the interactive process that requires developing, pricing, placing, and promoting goods, ideas, or services in order to facilitate exchanges between customers and sellers to satisfy the needs and wants of consumers. Thus, at the very center of the marketing process is satisfying the needs and wants of customers.
NEEDS AND WANTS
Needs are the basic items required for human survival. Human needs are an essential concept underlying the marketing process because needs are translated into consumer wants. Human needs are often described as a state of real or perceived deprivation. Basic human needs take one of three forms: physical, social, and individual. Physical needs are basic to survival and include food, clothing, warmth, and safety. Social needs revolve around the desire for belonging and affection. Individual needs include longings for knowledge and self-expression, through items such as clothing choices. Wants are needs that are shaped by both cultural influences and individual preferences. Wants are often described as goods, ideas, and services that fulfill the needs of an individual consumer. The wants of individuals change as both society and technology change. For example, when a computer is released, a consumer may want it simply because it is a new and improved technology. Therefore, the purpose of marketing is to convert these generic needs into wants for specific goods, ideas, or services. Demand is created when wants are supported by an individual consumer's ability to purchase the goods, ideas, or services in question.
Consumers buy products that will best meet their needs, as well as provide the most fulfillment resulting from the exchange process. The first step in the exchange process is to provide a product. Products can take a number of forms such as goods, ideas, and services. All products are produced to satisfy the needs, wants, and demands of individual buyers.
The second step in the satisfaction process is exchange. Exchange occurs when an individual receives a product from a seller in return for something called consideration. Consideration usually takes the form of currency. For an exchange to take place, it must meet a number of conditions. (1) There must be at least two participants in the process. (2) Each party must offer something of value to the other. (3) Both parties must want to deal with each other. (4) Both participants have the right to accept or to reject the offer. (5) Both groups must have the ability to communicate and deliver on the mutual agreement. Thus, the transaction process is a core component of marketing. Whenever there is a trade of values between two parties, a transaction has occurred. A transaction is often considered a unit of measurement in marketing. The earliest form of exchange was known as barter.
MARKETING IN THE OVERALL BUSINESS
There are four areas of operation within all firms: accounting, finance, management, and marketing. Each of these four areas performs specific functions. The accounting department is responsible for keeping track of income and expenditures. The primary responsibility of the finance department is maintaining and tracking assets. The management department is responsible for creating and implementing procedural policies of the firm. The marketing department is responsible for generating revenue through the exchange process. As a means of generating revenue, marketing objectives are established in alignment with the overall objectives of the firm.
Aligning the marketing activities with the objectives of the firm is completed through the process of marketing management. The marketing management process involves developing objectives that promote the long-term competitive advantage of a firm. The first step in the marketing management process is to develop the firm's overall strategic plan. The second step is to establish marketing strategies that support the firm's overall strategic objectives. Lastly, a marketing plan is developed for each product. Each product plan contains an executive summary, an explanation of the current marketing situation, a list of threats and opportunities, proposed sales objectives, possible marketing strategies, action programs, and budget proposals.
The marketing management process includes analyzing marketing opportunities, selecting target markets, developing the marketing mix, and managing the marketing effort. In order to analyze marketing opportunities, firms scan current environmental conditions in order to determine potential opportunities. The aim of the marketing effort is to satisfy the needs and wants of consumers. Thus, it is necessary for marketing managers to determine the particular needs and wants of potential customers. Various quantitative and qualitative techniques of marketing research are used to collect data about potential customers, who are then segmented into markets.
MARKET SEGMENTATION
In order to better manage the marketing effort and to satisfy the needs and wants of customers, many firms place consumers into groups, a process called market segmentation. In this process, potential customers are categorized based on different needs, characteristics, or behaviors. Market segments are evaluated as to their attractiveness or potential for generating revenue for the firm. Four factors are generally reviewed to determine the potential of a particular market segment. Effective segments are measurable, accessible, substantial, and actionable. Measurability is the degree to which a market segment's size and purchasing power can be measured. Accessibility refers to the degree to which a market segment can be reached and served. Substantiality refers to the size of the segment in term of profitability for the firm. Action ability refers to the degree to which a firm can design or develop a product to serve a particular market segment.
Consumer characteristics are used to segment markets into workable groups. Common characteristics used for consumer categorizations include demographic, geographic, psychographic, and behavioral segmentation. Demographic segmentation categorizes consumers based on such characteristics as age, gender, income level, and occupation. It is one of the most popular methods of segmenting potential customers because it makes it relatively easy to identify potential customers. Categorizing consumers according to their locations is called geographic segmentation. Consumers can be segmented geographically according to the nations, states, regions, cities, or neighborhoods in which they live, shop, and/or work. Psychographic segmentation uses consumers' activities, interests, and opinions to sort them into groups. Social class, lifestyle, or personality characteristics are psychographic variables used to categorize consumers into different groups. In behavioral segmentation, marketers divide consumers into groups based on their knowledge, attitudes, uses, or responses to a product.
Once the potential market has been segmented, firms need to station their products relative to similar products of other producers, a process called product positioning. Market positioning is the process of arranging a product so as to engage the minds of target consumers. Firm managers position their products in such a way as to distinguish it from those of competitors in order to gain a competitive advantage in the marketplace. The position of a product in the marketplace must be clear, distinctive, and desirable relative to those of its competitors in order for it to be effective.
COVERAGE STRATEGIES
There are three basic market-coverage strategies used by marketing managers: undifferentiated, differentiated, and concentrated. An undifferentiated marketing strategy occurs when a firm focuses on the common needs of consumers rather than their different needs. When using this strategy, producers design products to appeal to the largest number of potential buyers. The benefit of an undifferentiated strategy is that it is cost-effective because a narrow product focus results in lower production, inventory, and transportation costs. A firm using a differentiated strategy makes a conscious decision to divide and target several different market segments, with a different product geared to each segment. Thus, a different marketing plan is needed for each segment in order to maximize sales and, as a result, increase firm profits. With a differentiated marketing strategy, firms create more total sales because of broader appeal across market segments and stronger position within each segment. The last market coverage strategy is known as the concentrated marketing strategy. The concentrated strategy, which aims to serve a large share of one or a very few markets, is best suited for firms with limited resources. This approach allows firms to obtain a much stronger position in the segments it targets because of the greater emphasis on these targeted segments. This greater emphasis ultimately leads to a better understanding of the needs of the targeted segments.
MARKETING MIX
Once a positioning strategy has been determined, marketing managers seek to control the four basic elements of the marketing mix: product, price, place, and promotion, known as the four P's of marketing. Since these four variables are controllable, the best mix of these elements is determined to reach the selected target market.
Product. The first element in the marketing mix is the product. Products can be either tangible or intangible. Tangible products are products that can be touched; intangible products are those that cannot be touched, such as services. There are three basic levels of a product: core, actual, and augmented. The core product is the most basic level, what consumers really buy in terms of benefits. For example, consumers do not buy food processors, per se; rather, they buy the benefit of being able to process food quickly and efficiently. The next level of the product is the actual product—in the case of the previous example, food processors. Products are typically sorted according to the following five characteristics: quality, features, styling, brand name, and packaging. Finally, the augmented level of a product consists of all the elements that surround both the core and the actual product. The augmented level provides purchasers with additional services and benefits. For example, follow-up technical assistance and warranties and guaranties are augmented product components. When planning new products, firm managers consider a number of issues including product quality, features, options, styles, brand name, packaging, size, service, warranties, and return policies, all in an attempt to meet the needs and wants of consumers.
Price. Price is the cost of the product paid by consumers. This is the only element in the marketing mix that generates revenue for firms. In order to generate revenue, managers must consider factors both internal and external to the organization. Internal factors take the form of marketing objectives, the marketing-mix strategy, and production costs. External factors to consider are the target market, product demand, competition, economic conditions, and government regulations. There are a number of pricing strategies available to marketing managers: skimming, penetration, quantity, and psychological. With a price-skimming strategy, the price is initially set high, allowing firms to generate maximum profits from customers willing to pay the high price. Prices are then gradually lowered until maximum profit is received from each level of consumer. Penetration pricing is used when firms set low prices in order to capture a large share of a market quickly. A quantity-pricing strategy provides lower prices to consumers who purchase larger quantities of a product. Psychological pricing tends to focus on consumer perceptions. For example, odd pricing is a common psychological pricing strategy. With odd pricing, the cost of the product may be a few cents lower than a full-dollar value. Consumers tend to focus on the lower-value full-dollar cost even though it is really priced closer to the next higher full-dollar amount. For example, if a good is priced at $19.95, consumers will focus on $19 rather than $20.
Place. Place refers to where and how the products will be distributed to consumers. There are two basic issues involved in getting the products to consumers: channel management and logistics management. Channel management involves the process of selecting and motivating wholesalers and retailers, sometimes called middlemen, through the use of incentives. Several factors are reviewed by firm management when determining where to sell their products: distribution channels, market-coverage strategy, geographic locations, inventory, and transportation methods. The process of moving products from a manufacturer to the final consumer is often called the channel of distribution.
Promotion. The last variable in the marketing mix is promotion. Various promotional tools are used to communicate messages about products, ideas, or services from firms and their customers. The promotional tools available to managers are advertising, personal selling, sales promotion, and publicity. For the promotional program to be effective, managers use a blend of the four promotional tools that best reaches potential customers. This blending of promotional tools is sometimes referred to as the promotional mix. The goal of this promotional mix is to communicate to potential customers the features and benefits of products.
INTERNATIONAL MARKETING
International business has been practiced for thousands of years. In modern times, advances in technology have improved transportation and communication methods; as a result, more and more firms have set up shop at various locations around the globe. A natural component of international business is international marketing. International marketing occurs when firms plan and conduct transactions across international borders in order to satisfy the objectives of both consumers and the firm. International marketing is simply a strategy used by firms to improve both market share and profits. While firm managers may try to employ the same basic marketing strategies used in the domestic market when promoting products in international locations, those strategies may not be appropriate or effective. Firm managers must adapt their strategies to fit the unique characteristics of each international market. Unique environmental factors that need to be explored by firm managers before going global include trade systems, economic conditions, political-legal, and cultural conditions.
The first factor to consider in the international marketplace is each country's trading system. All countries have their own trade system regulations and restrictions. Common trade system regulations and restrictions include tariffs, quotas, embargoes, exchange controls, and non-tariff trade barriers. The second factor to review is the economic environment. There are two economic factors which reflect how attractive a particular market is in a selected country: industrial structure and income distribution. Industrial structure refers to how well developed a country's infrastructure is while income distributed refers to how income is distributed among its citizens. Political-legal environment is the third factor to investigate. For example, the individual and cultural attitudes regarding purchasing products from foreign countries, political stability, monetary regulations, and government bureaucracy all influence marketing practices and opportunities. Finally, the last factor to be considered before entering a global market is the cultural environment. Since cultural values regarding particular products will vary considerably from one country to another around the world, managers must take into account these differences in the planning process.
Just as with domestic markets, managers must establish their international marketing objectives and policies before going overseas. For example, target countries will need to be identified and evaluated in terms of their potential sales and profits. After selecting a market and establishing marketing objectives, the mode of entry into the market must be determined. There are three major modes of entry into international markets: exporting, joint venture, and direct investment. Exporting is the simplest way to enter an international market. With exporting, firms enter international markets by selling products internationally through the use of middlemen. This use of these middlemen is sometimes called indirect exporting. The second way to enter an international market is by using the joint-venture approach. A joint venture takes place when firms join forces with companies from the international market to produce or market a product. Joint ventures differ from direct investment in that an association is formed between firms and businesses in the international market. Four types of joint venture are licensing, contract manufacturing, management contracting, and joint ownership. Under licensing, firms allow other businesses in the international market to produce products under an agreement called a license. The licensee has the right to use the manufacturing process, trademark, patent, trade secret, or other items of value for a fee or royalty. Firms also use contract manufacturing, which arranges for the manufacture of products to enter international markets. The third type of joint venture is called management contracting. With this approach, the firms supply the capital to the local international firm in exchange for the management know-how. The last category of joint venture is joint ownership. Firms join with the local international investors to establish a local business. Both groups share joint ownership and control of the newly established business. Finally, direct investment is the last mode used by firms to enter international markets. With direct investment, a firm enters the market by establishing its own base in international locations. Direct investment is advantageous because labor and raw materials may be cheaper in some countries. Firms can also improve their images in international markets because of the employment opportunities they create.
MASS MARKETING
Spurred by a communications revolution and the completion of a national railroad network that by 1900 consisted of more miles of track than the rest of the world combined, a national mass market emerged. Technological innovation mushroomed, and a small number of firms realized economies of scale previously undreamed of. Giant corporations (or a small cluster of corporations) dominated single industries. Companies were able to produce goods in high volume at low prices. By 1900, firms followed the logic of mass production as they sought to create a "democracy of desire" by universalizing the availability of products.
Mass production required the development of mass marketing as well as modern management, a process spurred by analysis of the depression of the 1870s, when unsold inventory was blamed in part for the depth of the crisis, and the depression of the 1890s, when the chaos of market competition spurred efforts to make the market more predictable and controllable.
As the mass market emerged, manufacturers and retailers developed a range of instruments to shape and mold the market. National brand names like the Singer Sewing Machine from the 1860s, Coca-Cola from the 1890s, Wrigley's Chewing Gum after 1907, and Maxwell House coffee around the same time heralded the "golden age of brand names." Advertising also came into its own during the early decades of the twentieth century. The first advertising agency was established in 1869 as N. W. Ayer and Son. John Wanamaker placed the first full-page advertisement in a newspaper in 1879. Advertising media were powerfully supplemented by the use of subway cars, electric trolleys, trams, billboards, and the explosion in magazine sales. Further developments came after the 1890s with flashing electric signs, and in 1912 "talking signs" that allowed copy to move swiftly along boards from right to left first appeared on Broadway in New York City. By 1910, photo technology and color lithography revolutionized the capacity to reproduce images of all kinds.
Forward integration into wholesaling also aided mass marketing, beginning in the 1870s and 1880s with meat packers like Gustavus Swift. Franchise agreements with retailers were one key to the success of companies such as Coca-Cola. Another feature in the success of mass marketing was the creation and implementation of sales programs made possible by the spread of modern management structures and the division of corporate functions. In 1911, with the appointment of its first director of commercial research, the Curtis Publishing Company instituted the systematic analysis of carefully collected data. Hart, Shafner, and Marx became the largest manufacturer of men's suits in America by the 1910s through research that suggested producing suits for fourteen different male body types and psychographic appeals in its advertising. During and after the 1920s, as the social sciences matured, sweeping improvements in statistical methodology, behavioral science, and quantitative analysis made market research more important and accurate. Through these means—as well as coherent production and marketing plans—a mass market was created by World War II. However, consumerism as understood in the beginning of the twenty-first century did not triumph until after 1950.
MARKETING DEFINITION AND BODY
Marketing is one of the terms in academia that does not have one commonly agreed upon definition. Even after a better part of a century the debate continues. In a nutshell it consists of the social and managerial processes by which products (goods or services) and value are exchanged in order to fulfill the needs and wants of individuals or groups. Although many people seem to think that "marketing" and "advertising" are synonymous, they are not. Advertising is simply one of the many processes that together constitute marketing .[1]
Definitions
In his book, The Practice of Management, Peter Drucker wrote that "Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business." [2]
If marketing is the distinguishing function of the business, then what is marketing and how is it achieved?
1. "...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." [3]
2. "Human activity directed at satisfying needs and wants through exchange processes." Philip Kotler
3. "...the ongoing process of moving people closer to making a decision to purchase, use, follow, refer, upload, download, obey, reject, conform, become complacent to someone else's products, services or values. Simply, if it doesn't facilitate a "sale" then it's not marketing."[4]
4. "...the thing process of anticipating, identifying and satisfying customer requirements profitably" Chartered Institute of Marketing
Take these definitions collectively and a comprehensive definition of marketing, applicable to both business and non-business environments, emerges:
Processes, functions, exchanges or activities – that create perceived value by satisfying needs of those involved in the transaction. These processes succeed in moving people closer to making a decision to purchase and facilitate a "sale." Afterwards, these processes anticipate, identify and satisfy customer requirements profitably and successfully manage existing relationships.
Marketing, as suggested by the American Marketing Association, 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".[1] Another definition, perhaps simpler and more universal, is this: "Marketing is the ongoing process of moving people closer to making a decision to purchase, use, follow...or conform to someone else's products, services or values. Simply, if it doesn't facilitate a "sale" then it's not marketing."[2] Philip Kotler in his earlier books defines as: "Marketing is human activity directed at satisfying needs and wants through exchange processes". Add to Kotler's and Norris' definitions, a response from the Chartered Institute of Marketing (CIM) [3]. The association's definition claims marketing to be the "management process of anticipating, identifying and satisfying customer requirements profitably". Thus, operative marketing involves the processes of market research, new product development, product life cycle management, pricing, channel management as well as promotion. Marketing-"taking actions to define, create, grow, develop, maintain, defend and own markets". An approach to business that seeks to identify, anticipate and satisfy customers needs. Al Ries and Jack Trout defined marketing as simply "war" between competitors, however this is clearly absurd - 'Ali v Frazier' is not marketing...however the publicity and hyping of the event for commercial purposes is.
"This is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to satisfy customers." Nick Jones, the Concepts of Business
History
The practice of marketing is almost as old as humanity itself. A Market was originally simply a gathering place where people with a supply of items or capacity to perform a service could meet with those who might desire the items or services, perhaps at a pre-arranged time.
Such meetings embodied many aspects of today's marketing methods, although sometimes in an informal way. Sellers and buyers sought to understand each other's needs, capacities, and psychology, all with the goal of getting the exchange of items or services to take place. Today's New York Stock Exchange had its humble beginnings as an open air market located at Wall Street in New York City.
The rise of Agriculture undoubtedly influenced markets as the earliest means of 'mass production' of an item, namely foodstuffs. As agriculture allowed one to grow more food than could be eaten by the grower alone, and most food is perishable, there was likely motivation to seek out others who could use the excess food, before it spoiled, in exchange for other items.
In 1960 Theodore Levitt wrote a journal article called Marketing Myopia. This is said to have really begun the marketing craze. In it he discussed that the big manufacturing industries at the time were misinterpreting what industry they were part of. He stated that until you fully understood the industry you were part of you were likely to fail. For example the rail industry was not in the business of rail transport but in the industry of transport in general they were still competing with the likes of cars and public transport.
Levitt is said to be one of the founders of the marketing discipline, and contributed to the making of the 4Ps framework that transactional marketing is based around.
Relationship marketing is a form of marketing that evolved from direct response marketing in the 1960s and emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customer's needs as they go through their life cycles. It emphasizes providing a range of products or services to existing customers as they need them.
Phillip Kotler introduced 1971 Societal Marketing which is an enlightened concept that holds that a company should make good marketing decisions by considering consumers' wants, the company's requirements and society's long run interests. These efforts are now known as Corporate Social Responsibility.
TRANSACTIONAL MARKETING
First assumption
There are a large number of potential customers
Second assumption
Customers and their needs are fairly homogenous
Third assumption
It is rather easy to replace lost customers with new ones
TWO LEVELS OF MARKETING
Marketing is understanding that marketing operates on 2 different levels.
STRATEGIC MARKETING
Strategic Marketing attempts to determine how an organization competes against its competition in a market place. In particular, it aims at generating a competitive advantage relative to its competition. When Jack Trout says that marketing is 'the war between competitors' and 'the conflict between companies' what he is really doing is defining marketing at the business level.
STRATEGIC MARKETING PROCESS
Step 1: Develop a vision, mission and set objectives: Top management needs to determine what type of business to run and where the business wants to be in 15 - 20 years time.
Step 2: To enable management to make well informed decisions, information needs to be gathered from the environment. The environment is divided into three main parts namely the micro environment (This represents the business itself and is also known as the internal environment), the market environment (this represents part of the external environment and engages those participants that closely interact with the business) and the macro environment (this represents political (policies & license),economical and social environment of the region). This is also part of the external environment but there is limited direct interaction with the business. Assessments of all three environments are known as a situation analysis. All data gathered during the situation analysis must be processed into a usable format so that the managers can use it (known as information). An aid in analyzing the information to support management in decision making is using a SWOT grid. A SWOT grid is a summary of the findings of the situation analysis in Strengths, Weaknesses (both from the internal environment) and Opportunites and Threats (both from the external environment).
Step 3: Decision making. Once the marketing managers are in possession of suitable information, they embark on a process of decision making. The combined result of the decisions forms the marketing strategy. First the marketing manager will (in conjunction with the top management of the business) participate in determining the main strategic direction of the business. Based on the information available, they decide whether it is appropriate to grow the business, keep it as it is, turn it around or even get out of the market (divest). After this decision has been made, the marketing manager must decide what competitive advantages a business possesses. A decision on segmentation follows, and from these segments a business can decide which and how many segments to select as target markets. Following the selection of target markets, a positioning sub strategy should be created for each and every target market selected to serve. Positioning consists of two steps. First, the positioning instruments (marketing mix variables) are employed to create in the mind of a consumer a favorable picture of the business when compared to rivals. Secondly, the position should be communicated to the targeted consumers by using one of the positioning instruments, namely marketing communication. Marketing communication consists of the communication mix (instruments), such as personal selling, advertising, publicity, public relations and sales promotion.
Step 4: Implementation. Once all the decisions are made it is said that the strategy is created. It can be the best strategy ever, but if it stays on paper nothing will happen. Implementation is a two part process. The first is the development of the marketing plan. The second is the development of an action plan. A simplified example of an action plan: (Flowcharting can help here) Action i.e. Budget Responsible person Starting date Completion date
Many influences exert pressure on the environment. Some of these include your own and your competitors' business decisions and the government. These pressures cause the environment to change, thus forcing businesses to revisit their visions, missions and objectives and the whole strategic process repeats itself.
CUSTOMER FOCUS
Many companies today have a customer focus (or customer orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.[7] 7
SIVA
A formal approach to this customer-focused marketing is known as SIVA[8] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.
The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.
Product -> SolutionPromotion -> InformationPrice -> ValuePlace ->Access
The four elements of the SIVA model are:
- Solution: How appropriate is the solution to the customers problem/need
- Information: Does the customer know about the solution, and if so how, who from, do they know enough to let them make a buying decision
- Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?
- Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery.
This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.
The model focuses heavily on the customer and how they view the transaction.
PRODUCT FOCUS
In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation. Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.
OTHER ASPECTS
An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding).
Diffusion of innovations research explores how and why people adopt new products, services and ideas.
A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It typically tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.
With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of Permission marketing such as Branded content and Reality marketing.
The use of herd behavior in marketing.
In an article entitled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales", The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[9] Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 .
Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon).
Criticism of marketing
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Some aspects of marketing, especially promotion, are the subject of criticism. It is especially problematic in classical economic theory, which is based on the assumption that supply and demand are independent. However, product promotion is an attempt coming from the supply side to influence demand. In this way producer market power is attained as measured by profits that would not be realized under a free market. Then the argument follows that non-free markets are imperfect and lead to production and consumption of suboptimal amounts of the product.
Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses, governments and criminals. Critics see a systemic social evil inherent in marketing (see No Logo, Bill Hicks, Marxism or Commercial Alert). Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume. (see Fashion victim)
Most marketers believe that marketing techniques themselves are amoral. While it is ethically neutral, it can be used for negative purposes, such as selling unhealthy food to obese people or selling SUVs in a time of global warming, but it can also have a positive influence on consumer welfare.[10]
The Observer’s survey among 1’206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating, identifying and satisfying customer needs profitably), mainly in consumer marketing. There are similar concerns in industrial markets, also known as business-to-business or B2B. Industrial market segmentation attempts to provide some answers.
Core marketing elements such as segmentation, targeting and positioning are still relevant in the modern (or post-modern) world.[11] However, they are complex topics that need a high level of effort, intelligent thinking as well as resources to be implemented successfully. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. Its relevance is very much situational and depends on many factors such as the product, the segment, time, location, political and economic conditions and the inner workings of a company.
However, some scholars such as Stephen Brown challenge the marketing concept in an extreme language. Their statements, sometimes unfair, are relevant, which is why Post-Modern Marketing 2 was chosen as a key reference point for this chapter.[12]
On the one hand Brown makes positive statements about marketing, e.g. “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown, 1998:16); and “indeed, the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology, anthropology and history; far from being the second-hand rose of the scholarship, marketing is now something of a fashion leader” (p 17)[13]
On the other hand, he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” (p 17); and using quotes such as “mid-life crisis” (p 23); “in decline; failing; anachronistic; being abandoned; no longer appropriate; in an unprecedented state of crisis; delivered nothing of value; failure; confusion; misunderstanding; occasional inexplicable hitting of the jackpot” (p. 21).
This apparent love-hate relationship is proof in itself that even a skeptics find it difficult to deny the contribution that marketing has made and can make to customer satisfaction and economic value. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. The marketing concept, together with other business disciplines, helped the UK to make the transition from a 19th-century manufacturing economy to a modern model of success in the service industry, creating an economic growth period never seen before in the United Kingdom.
Marketing has helped create value through customized products, no-questions-asked refund policies, comfortable cars, environmental attention, shopkeepers’ smile, and guaranteed delivery dates. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers.' Of course all of the above is done for economic or political gain, for better or worse. Despite all this achievement, to dismiss marketing as a failure is unfair.
Marketing also helps companies avoid unnecessary R&D, operational and sales costs by helping to develop products because customers want them, not for the sake of innovation. Another success is the now commonly implemented value-pricing principle, whereby a product or service is sold for the price the customer is willing to pay, not on a cost-plus basis. This way, both suppliers and customers get a fair deal.
In the context of segmentation, Brown suggests that “the traditional, linear, step-by-step marketing model of analysis, planning, implementation and control no longer seems applicable, appropriate or even pertinent to what is actually happening on the ground” (p. 23-24). If Mr. Brown had studied “the ground” before making his statement, he would have realised that companies are successful the world over precisely because they implement this model.
They segment their markets, relate their products and services to them, define their value proposition and serve their customers accordingly. Examples are General Electric, HSBC, PriceWaterhouseCoopers, Smiths Aerospace, BAE Systems, BOC Edwards, Weir Group and the BT Group to name but a few. A brief visit to their websites can make this point clear.
Stephen Brown also has a constructive suggestion: “I reckon we need more passion in marketing, not less; it is time we banished banishing passion from works of marketing scholarship” (p. 256). This refers mainly to promotion, which is only one element within the marketing concept. The truth is that marketing today leads the way in segmentation, innovation, pricing, product management, distribution, and last but not least, promotion.
After all the contribution as well as further potential, to deny its successes and try to reduce it to only promotion is a great injustice to the marketing profession as well as to academic insight. Contrary to Brown’s suggestion in his final paragraph (p. 257), we need objectivity, rigour, quantification, models, relationships, paradigm shifts and (some application of) science.
TYPES OF MARKETING
EVANGELISM MARKETING
Evangelism marketing is an advanced form of word of mouth marketing (WOMM) in which companies develop customers who believe so strongly in a particular product or service that they freely try to convince others to buy and use it. The customers become voluntary advocates, actively spreading the word on behalf of the company.
Evangelism marketing is sometimes confused with affiliate marketing. However, while affiliate programs provide incentives in the form of money or products, evangelist customers spread their recommendations and recruit new customers out of pure belief, not for the receipt of goods or money. Rather, the goal of the customer evangelist is simply to provide benefit to other individuals.
As they act independently, evangelist customers often become key influencers. The fact that evangelists are not paid or associated with any company make their beliefs perceived by others as credible and trustworthy.
Evangelism literally comes from the three words of 'bringing good news' and the marketing term justly draws from the religious sense, as consumers are literally driven by their beliefs in a product or service, which they preach in an attempt to convert others.
HOW TO CREATE CUSTOMER EVANGELISTS?
In their book, Creating Customer Evangelists: How Loyal Customers Become a Volunteer Sales Force, Ben McConnell and Jackie Huba outline six steps to creating customer evangelists:
Customer plus-delta (Continuously gather customer feedback)
Napsterize knowledge (Freely share your knowledge)
Build the buzz (Create intelligent word-of-mouth networks)
Create community (Encourage communities of customers to meet and share)
Make bite-size chunks (Devise specialized, smaller offerings to get customers to bite)
Create a cause (Focus on making the world, or your industry, better)
CUSTOMER COMMUNITIES
A strong avenue for evangelists is in the form of customer communities, which bring together groups of users of a product or service to share information and discuss common issues. Some companies assist with such events, for example General Motors' Saturn division in Tennessee organizes an annual summer picnic for thousands of customers. Another example is the Harley Owners Groups (HOGS), organized by Harley Davidson, which associate bikers locally and globally through quarterly and annual meetings held all over the world.
GLOBAL MARKETING
The 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.” Oxford University Press’ Glossary of Marketing Terms.
WHY GLOBAL MARKETING?
Here are three reasons for the shift from domestic to global marketing as given by the authors of the textbook, Global Marketing Management—3rd Edition by Masaaki Kotabe and Kristiaan Helsen, 2004.
SATURATION OF DOMESTIC MARKETS
For a company to keep growing, it must increase sales. Industrialized nations have, in many product and service categories, saturated their domestic markets and have turned to other countries for new marketing opportunities. Companies in some developing economies have found profitability by exporting products that are too expensive for locals but are considered inexpensive in wealthier countries. (Kotabe & Helsen, p.3)
WORLDWIDE COMPETITION
One of the product categories in which global competition has been easy to track is in U.S. automotive sales. Three decades ago, there were only the big three: General Motors, Ford, and Chrysler. Now, Toyota, Honda, and Volkswagen are among the most popular manufacturers. Companies are on a global playing field whether they had planned to be global marketers or not. (Kotabe & Helsen, p.3)
E-COMMERCE
With the proliferation of the Internet and e-commerce (electronic commerce), if a business is online, it is a global business. With more people becoming Internet users daily, this market is constantly growing. Customers can come from anywhere. According to the book, “Global Marketing Management,” business-to-business (B2B) e-commerce is larger, growing faster, and has fewer geographical distribution obstacles than even business-to-consumer (B2C) e-commerce. (Kotabe & Helsen, p.4) With e-commerce, a brick and mortar storefront is unnecessary.
EVOLUTION TO GLOBAL MARKETING
Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies. The five stages outlined below are explored in depth in the textbook Global Marketing Management.
DOMESTIC MARKETING
A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country. (Kotabe & Helsen, pp.13, 15)jkj
EXPORT MARKETING
Generally, companies began exporting, reluctantly, to the occasional foreign customer who sought them out. At the beginning of this stage, filling these orders was considered a burden, not an opportunity. If there was enough interest, some companies became passive or secondary exporters by hiring an export management company to deal with all the customs paperwork and language barriers. Others became direct exporters, creating exporting departments at headquarters. Product development at this stage is still focused on the needs of domestic customers. Thus, these marketers are also considered ethnocentric. (Kotabe & Helsen, pp.15-16)
INTERNATIONAL MARKETING
If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers. These marketers are considered polycentric because they acknowledge that each market/country has different needs. (Kotabe & Helsen, p.16)
MULTINATIONAL MARKETING
At the multi-national stage, the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. Consolidation of research, development, production, and marketing on a regional level is the next step. An example of a region is Western Europe with the US. But, at the multi-national stage, consolidation, and thus product planning, does not take place across regions; a regiocentric approach. (Kotabe & Helsen, pp.16-17)
GLOBAL MARKETING
When a company becomes a global marketer, it views the world as one market and creates products that will only require tweaks to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere. (Levitt, 'Harvard Business Review) These marketers are considered geocentric. (Kotabe & Helsen, pp.7-18)
DEFINITION OF MARKETING
Process associated with promoting for sale goods or services. The classic components of marketing are the Four Ps: product, price, place, and promotion-the selection and development of the product, determination of price, selection and design of distribution channels (place), and all aspects of generating or enhancing demand for the product, including advertising (promotion). See also direct marketing; market; market profile; target market.
MARKETING (BUSINESS)
The term market is the root word for the word marketing. Market refers to the location where exchanges between buyers and sellers occur. Marketing pertains to the interactive process that requires developing, pricing, placing, and promoting goods, ideas, or services in order to facilitate exchanges between customers and sellers to satisfy the needs and wants of consumers. Thus, at the very center of the marketing process is satisfying the needs and wants of customers.
NEEDS AND WANTS
Needs are the basic items required for human survival. Human needs are an essential concept underlying the marketing process because needs are translated into consumer wants. Human needs are often described as a state of real or perceived deprivation. Basic human needs take one of three forms: physical, social, and individual. Physical needs are basic to survival and include food, clothing, warmth, and safety. Social needs revolve around the desire for belonging and affection. Individual needs include longings for knowledge and self-expression, through items such as clothing choices. Wants are needs that are shaped by both cultural influences and individual preferences. Wants are often described as goods, ideas, and services that fulfill the needs of an individual consumer. The wants of individuals change as both society and technology change. For example, when a computer is released, a consumer may want it simply because it is a new and improved technology. Therefore, the purpose of marketing is to convert these generic needs into wants for specific goods, ideas, or services. Demand is created when wants are supported by an individual consumer's ability to purchase the goods, ideas, or services in question.
Consumers buy products that will best meet their needs, as well as provide the most fulfillment resulting from the exchange process. The first step in the exchange process is to provide a product. Products can take a number of forms such as goods, ideas, and services. All products are produced to satisfy the needs, wants, and demands of individual buyers.
The second step in the satisfaction process is exchange. Exchange occurs when an individual receives a product from a seller in return for something called consideration. Consideration usually takes the form of currency. For an exchange to take place, it must meet a number of conditions. (1) There must be at least two participants in the process. (2) Each party must offer something of value to the other. (3) Both parties must want to deal with each other. (4) Both participants have the right to accept or to reject the offer. (5) Both groups must have the ability to communicate and deliver on the mutual agreement. Thus, the transaction process is a core component of marketing. Whenever there is a trade of values between two parties, a transaction has occurred. A transaction is often considered a unit of measurement in marketing. The earliest form of exchange was known as barter.
MARKETING IN THE OVERALL BUSINESS
There are four areas of operation within all firms: accounting, finance, management, and marketing. Each of these four areas performs specific functions. The accounting department is responsible for keeping track of income and expenditures. The primary responsibility of the finance department is maintaining and tracking assets. The management department is responsible for creating and implementing procedural policies of the firm. The marketing department is responsible for generating revenue through the exchange process. As a means of generating revenue, marketing objectives are established in alignment with the overall objectives of the firm.
Aligning the marketing activities with the objectives of the firm is completed through the process of marketing management. The marketing management process involves developing objectives that promote the long-term competitive advantage of a firm. The first step in the marketing management process is to develop the firm's overall strategic plan. The second step is to establish marketing strategies that support the firm's overall strategic objectives. Lastly, a marketing plan is developed for each product. Each product plan contains an executive summary, an explanation of the current marketing situation, a list of threats and opportunities, proposed sales objectives, possible marketing strategies, action programs, and budget proposals.
The marketing management process includes analyzing marketing opportunities, selecting target markets, developing the marketing mix, and managing the marketing effort. In order to analyze marketing opportunities, firms scan current environmental conditions in order to determine potential opportunities. The aim of the marketing effort is to satisfy the needs and wants of consumers. Thus, it is necessary for marketing managers to determine the particular needs and wants of potential customers. Various quantitative and qualitative techniques of marketing research are used to collect data about potential customers, who are then segmented into markets.
MARKET SEGMENTATION
In order to better manage the marketing effort and to satisfy the needs and wants of customers, many firms place consumers into groups, a process called market segmentation. In this process, potential customers are categorized based on different needs, characteristics, or behaviors. Market segments are evaluated as to their attractiveness or potential for generating revenue for the firm. Four factors are generally reviewed to determine the potential of a particular market segment. Effective segments are measurable, accessible, substantial, and actionable. Measurability is the degree to which a market segment's size and purchasing power can be measured. Accessibility refers to the degree to which a market segment can be reached and served. Substantiality refers to the size of the segment in term of profitability for the firm. Action ability refers to the degree to which a firm can design or develop a product to serve a particular market segment.
Consumer characteristics are used to segment markets into workable groups. Common characteristics used for consumer categorizations include demographic, geographic, psychographic, and behavioral segmentation. Demographic segmentation categorizes consumers based on such characteristics as age, gender, income level, and occupation. It is one of the most popular methods of segmenting potential customers because it makes it relatively easy to identify potential customers. Categorizing consumers according to their locations is called geographic segmentation. Consumers can be segmented geographically according to the nations, states, regions, cities, or neighborhoods in which they live, shop, and/or work. Psychographic segmentation uses consumers' activities, interests, and opinions to sort them into groups. Social class, lifestyle, or personality characteristics are psychographic variables used to categorize consumers into different groups. In behavioral segmentation, marketers divide consumers into groups based on their knowledge, attitudes, uses, or responses to a product.
Once the potential market has been segmented, firms need to station their products relative to similar products of other producers, a process called product positioning. Market positioning is the process of arranging a product so as to engage the minds of target consumers. Firm managers position their products in such a way as to distinguish it from those of competitors in order to gain a competitive advantage in the marketplace. The position of a product in the marketplace must be clear, distinctive, and desirable relative to those of its competitors in order for it to be effective.
COVERAGE STRATEGIES
There are three basic market-coverage strategies used by marketing managers: undifferentiated, differentiated, and concentrated. An undifferentiated marketing strategy occurs when a firm focuses on the common needs of consumers rather than their different needs. When using this strategy, producers design products to appeal to the largest number of potential buyers. The benefit of an undifferentiated strategy is that it is cost-effective because a narrow product focus results in lower production, inventory, and transportation costs. A firm using a differentiated strategy makes a conscious decision to divide and target several different market segments, with a different product geared to each segment. Thus, a different marketing plan is needed for each segment in order to maximize sales and, as a result, increase firm profits. With a differentiated marketing strategy, firms create more total sales because of broader appeal across market segments and stronger position within each segment. The last market coverage strategy is known as the concentrated marketing strategy. The concentrated strategy, which aims to serve a large share of one or a very few markets, is best suited for firms with limited resources. This approach allows firms to obtain a much stronger position in the segments it targets because of the greater emphasis on these targeted segments. This greater emphasis ultimately leads to a better understanding of the needs of the targeted segments.
MARKETING MIX
Once a positioning strategy has been determined, marketing managers seek to control the four basic elements of the marketing mix: product, price, place, and promotion, known as the four P's of marketing. Since these four variables are controllable, the best mix of these elements is determined to reach the selected target market.
Product. The first element in the marketing mix is the product. Products can be either tangible or intangible. Tangible products are products that can be touched; intangible products are those that cannot be touched, such as services. There are three basic levels of a product: core, actual, and augmented. The core product is the most basic level, what consumers really buy in terms of benefits. For example, consumers do not buy food processors, per se; rather, they buy the benefit of being able to process food quickly and efficiently. The next level of the product is the actual product—in the case of the previous example, food processors. Products are typically sorted according to the following five characteristics: quality, features, styling, brand name, and packaging. Finally, the augmented level of a product consists of all the elements that surround both the core and the actual product. The augmented level provides purchasers with additional services and benefits. For example, follow-up technical assistance and warranties and guaranties are augmented product components. When planning new products, firm managers consider a number of issues including product quality, features, options, styles, brand name, packaging, size, service, warranties, and return policies, all in an attempt to meet the needs and wants of consumers.
Price. Price is the cost of the product paid by consumers. This is the only element in the marketing mix that generates revenue for firms. In order to generate revenue, managers must consider factors both internal and external to the organization. Internal factors take the form of marketing objectives, the marketing-mix strategy, and production costs. External factors to consider are the target market, product demand, competition, economic conditions, and government regulations. There are a number of pricing strategies available to marketing managers: skimming, penetration, quantity, and psychological. With a price-skimming strategy, the price is initially set high, allowing firms to generate maximum profits from customers willing to pay the high price. Prices are then gradually lowered until maximum profit is received from each level of consumer. Penetration pricing is used when firms set low prices in order to capture a large share of a market quickly. A quantity-pricing strategy provides lower prices to consumers who purchase larger quantities of a product. Psychological pricing tends to focus on consumer perceptions. For example, odd pricing is a common psychological pricing strategy. With odd pricing, the cost of the product may be a few cents lower than a full-dollar value. Consumers tend to focus on the lower-value full-dollar cost even though it is really priced closer to the next higher full-dollar amount. For example, if a good is priced at $19.95, consumers will focus on $19 rather than $20.
Place. Place refers to where and how the products will be distributed to consumers. There are two basic issues involved in getting the products to consumers: channel management and logistics management. Channel management involves the process of selecting and motivating wholesalers and retailers, sometimes called middlemen, through the use of incentives. Several factors are reviewed by firm management when determining where to sell their products: distribution channels, market-coverage strategy, geographic locations, inventory, and transportation methods. The process of moving products from a manufacturer to the final consumer is often called the channel of distribution.
Promotion. The last variable in the marketing mix is promotion. Various promotional tools are used to communicate messages about products, ideas, or services from firms and their customers. The promotional tools available to managers are advertising, personal selling, sales promotion, and publicity. For the promotional program to be effective, managers use a blend of the four promotional tools that best reaches potential customers. This blending of promotional tools is sometimes referred to as the promotional mix. The goal of this promotional mix is to communicate to potential customers the features and benefits of products.
INTERNATIONAL MARKETING
International business has been practiced for thousands of years. In modern times, advances in technology have improved transportation and communication methods; as a result, more and more firms have set up shop at various locations around the globe. A natural component of international business is international marketing. International marketing occurs when firms plan and conduct transactions across international borders in order to satisfy the objectives of both consumers and the firm. International marketing is simply a strategy used by firms to improve both market share and profits. While firm managers may try to employ the same basic marketing strategies used in the domestic market when promoting products in international locations, those strategies may not be appropriate or effective. Firm managers must adapt their strategies to fit the unique characteristics of each international market. Unique environmental factors that need to be explored by firm managers before going global include trade systems, economic conditions, political-legal, and cultural conditions.
The first factor to consider in the international marketplace is each country's trading system. All countries have their own trade system regulations and restrictions. Common trade system regulations and restrictions include tariffs, quotas, embargoes, exchange controls, and non-tariff trade barriers. The second factor to review is the economic environment. There are two economic factors which reflect how attractive a particular market is in a selected country: industrial structure and income distribution. Industrial structure refers to how well developed a country's infrastructure is while income distributed refers to how income is distributed among its citizens. Political-legal environment is the third factor to investigate. For example, the individual and cultural attitudes regarding purchasing products from foreign countries, political stability, monetary regulations, and government bureaucracy all influence marketing practices and opportunities. Finally, the last factor to be considered before entering a global market is the cultural environment. Since cultural values regarding particular products will vary considerably from one country to another around the world, managers must take into account these differences in the planning process.
Just as with domestic markets, managers must establish their international marketing objectives and policies before going overseas. For example, target countries will need to be identified and evaluated in terms of their potential sales and profits. After selecting a market and establishing marketing objectives, the mode of entry into the market must be determined. There are three major modes of entry into international markets: exporting, joint venture, and direct investment. Exporting is the simplest way to enter an international market. With exporting, firms enter international markets by selling products internationally through the use of middlemen. This use of these middlemen is sometimes called indirect exporting. The second way to enter an international market is by using the joint-venture approach. A joint venture takes place when firms join forces with companies from the international market to produce or market a product. Joint ventures differ from direct investment in that an association is formed between firms and businesses in the international market. Four types of joint venture are licensing, contract manufacturing, management contracting, and joint ownership. Under licensing, firms allow other businesses in the international market to produce products under an agreement called a license. The licensee has the right to use the manufacturing process, trademark, patent, trade secret, or other items of value for a fee or royalty. Firms also use contract manufacturing, which arranges for the manufacture of products to enter international markets. The third type of joint venture is called management contracting. With this approach, the firms supply the capital to the local international firm in exchange for the management know-how. The last category of joint venture is joint ownership. Firms join with the local international investors to establish a local business. Both groups share joint ownership and control of the newly established business. Finally, direct investment is the last mode used by firms to enter international markets. With direct investment, a firm enters the market by establishing its own base in international locations. Direct investment is advantageous because labor and raw materials may be cheaper in some countries. Firms can also improve their images in international markets because of the employment opportunities they create.
MASS MARKETING
Spurred by a communications revolution and the completion of a national railroad network that by 1900 consisted of more miles of track than the rest of the world combined, a national mass market emerged. Technological innovation mushroomed, and a small number of firms realized economies of scale previously undreamed of. Giant corporations (or a small cluster of corporations) dominated single industries. Companies were able to produce goods in high volume at low prices. By 1900, firms followed the logic of mass production as they sought to create a "democracy of desire" by universalizing the availability of products.
Mass production required the development of mass marketing as well as modern management, a process spurred by analysis of the depression of the 1870s, when unsold inventory was blamed in part for the depth of the crisis, and the depression of the 1890s, when the chaos of market competition spurred efforts to make the market more predictable and controllable.
As the mass market emerged, manufacturers and retailers developed a range of instruments to shape and mold the market. National brand names like the Singer Sewing Machine from the 1860s, Coca-Cola from the 1890s, Wrigley's Chewing Gum after 1907, and Maxwell House coffee around the same time heralded the "golden age of brand names." Advertising also came into its own during the early decades of the twentieth century. The first advertising agency was established in 1869 as N. W. Ayer and Son. John Wanamaker placed the first full-page advertisement in a newspaper in 1879. Advertising media were powerfully supplemented by the use of subway cars, electric trolleys, trams, billboards, and the explosion in magazine sales. Further developments came after the 1890s with flashing electric signs, and in 1912 "talking signs" that allowed copy to move swiftly along boards from right to left first appeared on Broadway in New York City. By 1910, photo technology and color lithography revolutionized the capacity to reproduce images of all kinds.
Forward integration into wholesaling also aided mass marketing, beginning in the 1870s and 1880s with meat packers like Gustavus Swift. Franchise agreements with retailers were one key to the success of companies such as Coca-Cola. Another feature in the success of mass marketing was the creation and implementation of sales programs made possible by the spread of modern management structures and the division of corporate functions. In 1911, with the appointment of its first director of commercial research, the Curtis Publishing Company instituted the systematic analysis of carefully collected data. Hart, Shafner, and Marx became the largest manufacturer of men's suits in America by the 1910s through research that suggested producing suits for fourteen different male body types and psychographic appeals in its advertising. During and after the 1920s, as the social sciences matured, sweeping improvements in statistical methodology, behavioral science, and quantitative analysis made market research more important and accurate. Through these means—as well as coherent production and marketing plans—a mass market was created by World War II. However, consumerism as understood in the beginning of the twenty-first century did not triumph until after 1950.
MARKETING DEFINITION AND BODY
Marketing is one of the terms in academia that does not have one commonly agreed upon definition. Even after a better part of a century the debate continues. In a nutshell it consists of the social and managerial processes by which products (goods or services) and value are exchanged in order to fulfill the needs and wants of individuals or groups. Although many people seem to think that "marketing" and "advertising" are synonymous, they are not. Advertising is simply one of the many processes that together constitute marketing .[1]
Definitions
In his book, The Practice of Management, Peter Drucker wrote that "Because the purpose of business is to create a customer, the business enterprise has two--and only two--basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business." [2]
If marketing is the distinguishing function of the business, then what is marketing and how is it achieved?
1. "...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." [3]
2. "Human activity directed at satisfying needs and wants through exchange processes." Philip Kotler
3. "...the ongoing process of moving people closer to making a decision to purchase, use, follow, refer, upload, download, obey, reject, conform, become complacent to someone else's products, services or values. Simply, if it doesn't facilitate a "sale" then it's not marketing."[4]
4. "...the thing process of anticipating, identifying and satisfying customer requirements profitably" Chartered Institute of Marketing
Take these definitions collectively and a comprehensive definition of marketing, applicable to both business and non-business environments, emerges:
Processes, functions, exchanges or activities – that create perceived value by satisfying needs of those involved in the transaction. These processes succeed in moving people closer to making a decision to purchase and facilitate a "sale." Afterwards, these processes anticipate, identify and satisfy customer requirements profitably and successfully manage existing relationships.
Marketing, as suggested by the American Marketing Association, 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".[1] Another definition, perhaps simpler and more universal, is this: "Marketing is the ongoing process of moving people closer to making a decision to purchase, use, follow...or conform to someone else's products, services or values. Simply, if it doesn't facilitate a "sale" then it's not marketing."[2] Philip Kotler in his earlier books defines as: "Marketing is human activity directed at satisfying needs and wants through exchange processes". Add to Kotler's and Norris' definitions, a response from the Chartered Institute of Marketing (CIM) [3]. The association's definition claims marketing to be the "management process of anticipating, identifying and satisfying customer requirements profitably". Thus, operative marketing involves the processes of market research, new product development, product life cycle management, pricing, channel management as well as promotion. Marketing-"taking actions to define, create, grow, develop, maintain, defend and own markets". An approach to business that seeks to identify, anticipate and satisfy customers needs. Al Ries and Jack Trout defined marketing as simply "war" between competitors, however this is clearly absurd - 'Ali v Frazier' is not marketing...however the publicity and hyping of the event for commercial purposes is.
"This is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to satisfy customers." Nick Jones, the Concepts of Business
History
The practice of marketing is almost as old as humanity itself. A Market was originally simply a gathering place where people with a supply of items or capacity to perform a service could meet with those who might desire the items or services, perhaps at a pre-arranged time.
Such meetings embodied many aspects of today's marketing methods, although sometimes in an informal way. Sellers and buyers sought to understand each other's needs, capacities, and psychology, all with the goal of getting the exchange of items or services to take place. Today's New York Stock Exchange had its humble beginnings as an open air market located at Wall Street in New York City.
The rise of Agriculture undoubtedly influenced markets as the earliest means of 'mass production' of an item, namely foodstuffs. As agriculture allowed one to grow more food than could be eaten by the grower alone, and most food is perishable, there was likely motivation to seek out others who could use the excess food, before it spoiled, in exchange for other items.
In 1960 Theodore Levitt wrote a journal article called Marketing Myopia. This is said to have really begun the marketing craze. In it he discussed that the big manufacturing industries at the time were misinterpreting what industry they were part of. He stated that until you fully understood the industry you were part of you were likely to fail. For example the rail industry was not in the business of rail transport but in the industry of transport in general they were still competing with the likes of cars and public transport.
Levitt is said to be one of the founders of the marketing discipline, and contributed to the making of the 4Ps framework that transactional marketing is based around.
Relationship marketing is a form of marketing that evolved from direct response marketing in the 1960s and emerged in the 1980s, in which emphasis is placed on building longer term relationships with customers rather than on individual transactions. It involves understanding the customer's needs as they go through their life cycles. It emphasizes providing a range of products or services to existing customers as they need them.
Phillip Kotler introduced 1971 Societal Marketing which is an enlightened concept that holds that a company should make good marketing decisions by considering consumers' wants, the company's requirements and society's long run interests. These efforts are now known as Corporate Social Responsibility.
TRANSACTIONAL MARKETING
First assumption
There are a large number of potential customers
Second assumption
Customers and their needs are fairly homogenous
Third assumption
It is rather easy to replace lost customers with new ones
TWO LEVELS OF MARKETING
Marketing is understanding that marketing operates on 2 different levels.
STRATEGIC MARKETING
Strategic Marketing attempts to determine how an organization competes against its competition in a market place. In particular, it aims at generating a competitive advantage relative to its competition. When Jack Trout says that marketing is 'the war between competitors' and 'the conflict between companies' what he is really doing is defining marketing at the business level.
STRATEGIC MARKETING PROCESS
Step 1: Develop a vision, mission and set objectives: Top management needs to determine what type of business to run and where the business wants to be in 15 - 20 years time.
Step 2: To enable management to make well informed decisions, information needs to be gathered from the environment. The environment is divided into three main parts namely the micro environment (This represents the business itself and is also known as the internal environment), the market environment (this represents part of the external environment and engages those participants that closely interact with the business) and the macro environment (this represents political (policies & license),economical and social environment of the region). This is also part of the external environment but there is limited direct interaction with the business. Assessments of all three environments are known as a situation analysis. All data gathered during the situation analysis must be processed into a usable format so that the managers can use it (known as information). An aid in analyzing the information to support management in decision making is using a SWOT grid. A SWOT grid is a summary of the findings of the situation analysis in Strengths, Weaknesses (both from the internal environment) and Opportunites and Threats (both from the external environment).
Step 3: Decision making. Once the marketing managers are in possession of suitable information, they embark on a process of decision making. The combined result of the decisions forms the marketing strategy. First the marketing manager will (in conjunction with the top management of the business) participate in determining the main strategic direction of the business. Based on the information available, they decide whether it is appropriate to grow the business, keep it as it is, turn it around or even get out of the market (divest). After this decision has been made, the marketing manager must decide what competitive advantages a business possesses. A decision on segmentation follows, and from these segments a business can decide which and how many segments to select as target markets. Following the selection of target markets, a positioning sub strategy should be created for each and every target market selected to serve. Positioning consists of two steps. First, the positioning instruments (marketing mix variables) are employed to create in the mind of a consumer a favorable picture of the business when compared to rivals. Secondly, the position should be communicated to the targeted consumers by using one of the positioning instruments, namely marketing communication. Marketing communication consists of the communication mix (instruments), such as personal selling, advertising, publicity, public relations and sales promotion.
Step 4: Implementation. Once all the decisions are made it is said that the strategy is created. It can be the best strategy ever, but if it stays on paper nothing will happen. Implementation is a two part process. The first is the development of the marketing plan. The second is the development of an action plan. A simplified example of an action plan: (Flowcharting can help here) Action i.e. Budget Responsible person Starting date Completion date
Many influences exert pressure on the environment. Some of these include your own and your competitors' business decisions and the government. These pressures cause the environment to change, thus forcing businesses to revisit their visions, missions and objectives and the whole strategic process repeats itself.
CUSTOMER FOCUS
Many companies today have a customer focus (or customer orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.[7] 7
SIVA
A formal approach to this customer-focused marketing is known as SIVA[8] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.
The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.
Product -> SolutionPromotion -> InformationPrice -> ValuePlace ->Access
The four elements of the SIVA model are:
- Solution: How appropriate is the solution to the customers problem/need
- Information: Does the customer know about the solution, and if so how, who from, do they know enough to let them make a buying decision
- Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?
- Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery.
This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.
The model focuses heavily on the customer and how they view the transaction.
PRODUCT FOCUS
In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation. Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.
OTHER ASPECTS
An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding).
Diffusion of innovations research explores how and why people adopt new products, services and ideas.
A relatively new form of marketing uses the Internet and is called internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It typically tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.
With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of Permission marketing such as Branded content and Reality marketing.
The use of herd behavior in marketing.
In an article entitled "Swarming the shelves: How shops can exploit people's herd mentality to increase sales", The Economist recently reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.[9] Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 .
Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon).
Criticism of marketing
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Some aspects of marketing, especially promotion, are the subject of criticism. It is especially problematic in classical economic theory, which is based on the assumption that supply and demand are independent. However, product promotion is an attempt coming from the supply side to influence demand. In this way producer market power is attained as measured by profits that would not be realized under a free market. Then the argument follows that non-free markets are imperfect and lead to production and consumption of suboptimal amounts of the product.
Critics acknowledge that marketing has legitimate uses in connecting goods and services to the consumers who want them. Critics also point out that marketing techniques have been used to achieve morally dubious ends by businesses, governments and criminals. Critics see a systemic social evil inherent in marketing (see No Logo, Bill Hicks, Marxism or Commercial Alert). Marketing is accused of creating ruthless exploitation of both consumers and workers by treating people as commodities whose purpose is to consume. (see Fashion victim)
Most marketers believe that marketing techniques themselves are amoral. While it is ethically neutral, it can be used for negative purposes, such as selling unhealthy food to obese people or selling SUVs in a time of global warming, but it can also have a positive influence on consumer welfare.[10]
The Observer’s survey among 1’206 UK adult consumers in 2001 highlighted some of the stark changes our society has gone through in the last two decades. This raises a question on the effectiveness of the CIM’s definition of marketing (anticipating, identifying and satisfying customer needs profitably), mainly in consumer marketing. There are similar concerns in industrial markets, also known as business-to-business or B2B. Industrial market segmentation attempts to provide some answers.
Core marketing elements such as segmentation, targeting and positioning are still relevant in the modern (or post-modern) world.[11] However, they are complex topics that need a high level of effort, intelligent thinking as well as resources to be implemented successfully. A definitive statement cannot be made whether the conventional marketing concept is applicable in today’s environment. Its relevance is very much situational and depends on many factors such as the product, the segment, time, location, political and economic conditions and the inner workings of a company.
However, some scholars such as Stephen Brown challenge the marketing concept in an extreme language. Their statements, sometimes unfair, are relevant, which is why Post-Modern Marketing 2 was chosen as a key reference point for this chapter.[12]
On the one hand Brown makes positive statements about marketing, e.g. “marketing is endowed with considerable personal charm and has enjoyed more than its fair share of conquests” (Brown, 1998:16); and “indeed, the increasing academic attention that is being devoted to marketing and consumption-related phenomena by non-business disciplines such as sociology, anthropology and history; far from being the second-hand rose of the scholarship, marketing is now something of a fashion leader” (p 17)[13]
On the other hand, he condemns marketing by saying “marketing has to decide whether to expose its intellectual nakedness or press itself against the searing heat of postmodernism” (p 17); and using quotes such as “mid-life crisis” (p 23); “in decline; failing; anachronistic; being abandoned; no longer appropriate; in an unprecedented state of crisis; delivered nothing of value; failure; confusion; misunderstanding; occasional inexplicable hitting of the jackpot” (p. 21).
This apparent love-hate relationship is proof in itself that even a skeptics find it difficult to deny the contribution that marketing has made and can make to customer satisfaction and economic value. It has contributed to both customers’ and suppliers’ quality of life by selecting profitable customer satisfaction as its sole objective. The marketing concept, together with other business disciplines, helped the UK to make the transition from a 19th-century manufacturing economy to a modern model of success in the service industry, creating an economic growth period never seen before in the United Kingdom.
Marketing has helped create value through customized products, no-questions-asked refund policies, comfortable cars, environmental attention, shopkeepers’ smile, and guaranteed delivery dates. Even some government departments address the public not as ‘the Queen’s subjects’ or ‘the applicants’ any more but as ‘customers.' Of course all of the above is done for economic or political gain, for better or worse. Despite all this achievement, to dismiss marketing as a failure is unfair.
Marketing also helps companies avoid unnecessary R&D, operational and sales costs by helping to develop products because customers want them, not for the sake of innovation. Another success is the now commonly implemented value-pricing principle, whereby a product or service is sold for the price the customer is willing to pay, not on a cost-plus basis. This way, both suppliers and customers get a fair deal.
In the context of segmentation, Brown suggests that “the traditional, linear, step-by-step marketing model of analysis, planning, implementation and control no longer seems applicable, appropriate or even pertinent to what is actually happening on the ground” (p. 23-24). If Mr. Brown had studied “the ground” before making his statement, he would have realised that companies are successful the world over precisely because they implement this model.
They segment their markets, relate their products and services to them, define their value proposition and serve their customers accordingly. Examples are General Electric, HSBC, PriceWaterhouseCoopers, Smiths Aerospace, BAE Systems, BOC Edwards, Weir Group and the BT Group to name but a few. A brief visit to their websites can make this point clear.
Stephen Brown also has a constructive suggestion: “I reckon we need more passion in marketing, not less; it is time we banished banishing passion from works of marketing scholarship” (p. 256). This refers mainly to promotion, which is only one element within the marketing concept. The truth is that marketing today leads the way in segmentation, innovation, pricing, product management, distribution, and last but not least, promotion.
After all the contribution as well as further potential, to deny its successes and try to reduce it to only promotion is a great injustice to the marketing profession as well as to academic insight. Contrary to Brown’s suggestion in his final paragraph (p. 257), we need objectivity, rigour, quantification, models, relationships, paradigm shifts and (some application of) science.
TYPES OF MARKETING
EVANGELISM MARKETING
Evangelism marketing is an advanced form of word of mouth marketing (WOMM) in which companies develop customers who believe so strongly in a particular product or service that they freely try to convince others to buy and use it. The customers become voluntary advocates, actively spreading the word on behalf of the company.
Evangelism marketing is sometimes confused with affiliate marketing. However, while affiliate programs provide incentives in the form of money or products, evangelist customers spread their recommendations and recruit new customers out of pure belief, not for the receipt of goods or money. Rather, the goal of the customer evangelist is simply to provide benefit to other individuals.
As they act independently, evangelist customers often become key influencers. The fact that evangelists are not paid or associated with any company make their beliefs perceived by others as credible and trustworthy.
Evangelism literally comes from the three words of 'bringing good news' and the marketing term justly draws from the religious sense, as consumers are literally driven by their beliefs in a product or service, which they preach in an attempt to convert others.
HOW TO CREATE CUSTOMER EVANGELISTS?
In their book, Creating Customer Evangelists: How Loyal Customers Become a Volunteer Sales Force, Ben McConnell and Jackie Huba outline six steps to creating customer evangelists:
Customer plus-delta (Continuously gather customer feedback)
Napsterize knowledge (Freely share your knowledge)
Build the buzz (Create intelligent word-of-mouth networks)
Create community (Encourage communities of customers to meet and share)
Make bite-size chunks (Devise specialized, smaller offerings to get customers to bite)
Create a cause (Focus on making the world, or your industry, better)
CUSTOMER COMMUNITIES
A strong avenue for evangelists is in the form of customer communities, which bring together groups of users of a product or service to share information and discuss common issues. Some companies assist with such events, for example General Motors' Saturn division in Tennessee organizes an annual summer picnic for thousands of customers. Another example is the Harley Owners Groups (HOGS), organized by Harley Davidson, which associate bikers locally and globally through quarterly and annual meetings held all over the world.
GLOBAL MARKETING
The 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.” Oxford University Press’ Glossary of Marketing Terms.
WHY GLOBAL MARKETING?
Here are three reasons for the shift from domestic to global marketing as given by the authors of the textbook, Global Marketing Management—3rd Edition by Masaaki Kotabe and Kristiaan Helsen, 2004.
SATURATION OF DOMESTIC MARKETS
For a company to keep growing, it must increase sales. Industrialized nations have, in many product and service categories, saturated their domestic markets and have turned to other countries for new marketing opportunities. Companies in some developing economies have found profitability by exporting products that are too expensive for locals but are considered inexpensive in wealthier countries. (Kotabe & Helsen, p.3)
WORLDWIDE COMPETITION
One of the product categories in which global competition has been easy to track is in U.S. automotive sales. Three decades ago, there were only the big three: General Motors, Ford, and Chrysler. Now, Toyota, Honda, and Volkswagen are among the most popular manufacturers. Companies are on a global playing field whether they had planned to be global marketers or not. (Kotabe & Helsen, p.3)
E-COMMERCE
With the proliferation of the Internet and e-commerce (electronic commerce), if a business is online, it is a global business. With more people becoming Internet users daily, this market is constantly growing. Customers can come from anywhere. According to the book, “Global Marketing Management,” business-to-business (B2B) e-commerce is larger, growing faster, and has fewer geographical distribution obstacles than even business-to-consumer (B2C) e-commerce. (Kotabe & Helsen, p.4) With e-commerce, a brick and mortar storefront is unnecessary.
EVOLUTION TO GLOBAL MARKETING
Global marketing is not a revolutionary shift, it is an evolutionary process. While the following does not apply to all companies, it does apply to most companies that begin as domestic-only companies. The five stages outlined below are explored in depth in the textbook Global Marketing Management.
DOMESTIC MARKETING
A company marketing only within its national boundaries only has to consider domestic competition. Even if that competition includes companies from foreign markets, it still only has to focus on the competition that exists in its home market. Products and services are developed for customers in the home market without thought of how the product or service could be used in other markets. All marketing decisions are made at headquarters.
The biggest obstacle these marketers face is being blindsided by emerging global marketers. Because domestic marketers do not generally focus on the changes in the global marketplace, they may not be aware of a potential competitor who is a market leader on three continents until they simultaneously open 20 stores in the Northeastern U.S. These marketers can be considered ethnocentric as they are most concerned with how they are perceived in their home country. (Kotabe & Helsen, pp.13, 15)jkj
EXPORT MARKETING
Generally, companies began exporting, reluctantly, to the occasional foreign customer who sought them out. At the beginning of this stage, filling these orders was considered a burden, not an opportunity. If there was enough interest, some companies became passive or secondary exporters by hiring an export management company to deal with all the customs paperwork and language barriers. Others became direct exporters, creating exporting departments at headquarters. Product development at this stage is still focused on the needs of domestic customers. Thus, these marketers are also considered ethnocentric. (Kotabe & Helsen, pp.15-16)
INTERNATIONAL MARKETING
If the exporting departments are becoming successful but the costs of doing business from headquarters plus time differences, language barriers, and cultural ignorance are hindering the company’s competitiveness in the foreign market, then offices could be built in the foreign countries. Sometimes companies buy firms in the foreign countries to take advantage of relationships, storefronts, factories, and personnel already in place. These offices still report to headquarters in the home market but most of the marketing mix decisions are made in the individual countries since that staff is the most knowledgeable about the target markets. Local product development is based on the needs of local customers. These marketers are considered polycentric because they acknowledge that each market/country has different needs. (Kotabe & Helsen, p.16)
MULTINATIONAL MARKETING
At the multi-national stage, the company is marketing its products and services in many countries around the world and wants to benefit from economies of scale. Consolidation of research, development, production, and marketing on a regional level is the next step. An example of a region is Western Europe with the US. But, at the multi-national stage, consolidation, and thus product planning, does not take place across regions; a regiocentric approach. (Kotabe & Helsen, pp.16-17)
GLOBAL MARKETING
When a company becomes a global marketer, it views the world as one market and creates products that will only require tweaks to fit into any regional marketplace. Marketing decisions are made by consulting with marketers in all the countries that will be affected. The goal is to sell the same thing the same way everywhere. (Levitt, 'Harvard Business Review) These marketers are considered geocentric. (Kotabe & Helsen, pp.7-18)
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