Marketing Culture and OrientationChapter 1

Contenty The Development of Marketing y What is Marketing? y The Strategic Orientation of Business y Developing a Marketing Orientation y Strategic Implications of a Marketing Orientation y Coordination of Marketing with other Management

Functions y Organization for Marketing

A. The Development of Marketingy When communities began to specialise they produced

surpluses in certain products which they then sought to exchange with other communities. y The need to exchange goods encouraged the emergence of local markets where different products could be brought together in one place for sellers and buyers to trade. y In these simple market structures, the sellers had a fairly good idea of what pleased their customers, since often they were neighbors of each other.

The Industrial Revolutiony Prior to the 17th century and the start of the Industrial

Revolution, producers and merchants tended to operate on a small scale, concentrating their operations in very localised markets. y The Industrial Revolution, however, brought with it advances in technology and production techniques which meant new processes, greater output and a transformation of the British economy away from its dependence on agriculture to one of industrial production. y Industry now became more remote from its markets as it sought power and fuel to generateits machines.

y The era was founded on the principle of supply in trying to

satisfy even greater demands by increasing production efficiency. y It laid the foundation of the modern industrial society, with sophisticated systems of marketing institutions and finances, all of which are based on the fundamental concept of carrying out trade through exchange.

The 20th Centuryy The invention of the internet has had a major impact on businesses

and the way customers purchase products by providing customers with wider access to products and services, more information to inform their purchase decisions and more transparent pricing and by providing businesses with both opportunities and threats, for example, being able to reach new and wider markets but being exposed to increased competition. y All kinds of industries are now engaged in an intense struggle to establish customer preference in favour of their products over that of the competition. y Rather than wait for orders to come to them, the industry must go out and manage demand for its products by winning customers and also importantly retaining customers by building customer loyalty.

y Advertising appeared as a means of stimulating sales. y Branding and packaging were developed as a way of

saying something about the quality of the product. y Salesforces were introduced rather than relying solely on the merchants to find and develop new markets for their products, while products themselves were developed to better satisfycustomer needs.

B. WHAT IS MARKETING?y Marketing is now recognised almost as a science. y It is seen as a logical approach to business which involves the

studying, and understanding, of relationships and exchanges between buyers and sellers. y Various definitions of "marketing" have been proposed by practitioners of marketing:y "Marketing is a human activity directed at satisfying needs and wants"

(Kotler). y "The management process responsible for identifying, anticipating and satisfying customer requirements profitably" (CIM).

y In marketing terms, a customer's needs, wants or requirements

tend to mean a product or service. y Products are tangible, albeit the wider meaning of a product includes intangible benefits such as after sale service and services are intangible. y People can satisfy their requirements, or problems, in one of four ways:y Self-solution (coming up with the answer to the problem themselves) y Force (threatening/stealing) y Begging (pleading/seeking sympathy) y Exchange (offering something of value to the owner).

y This value exchange summarises marketing and applies in every

type of product exchange, from the simple purchase of a bar of soap by a customer in a supermarket, to the purchase of attack aircraft by a government. y In every case both parties give, or exchange, something of value to the other. y For this to be possible, two parties must:y Have something of value to exchange y Be capable of communicating y Be free to accept or reject the exchange situation.

y The existence of these criteria does not necessarily mean that an

exchange WILL take place only that it is possible.

C. THE STRATEGIC ORIENTATION OF BUSINESSProduction Concept (or orientation)

Marketing Concept.

Types of marketing orientation:Sales Concept

Product Concept

Production Concepty A company following this concept is operating on the idea that the

more you can produce the more you can sell. y Managers assume that customers are only interested in the availability of products and low prices and that marketing is not necessary. This may or may not be true. y Consider the following examples:y A fashion company making exclusive dresses, selling on average at

3,000, producesand sells 12 dresses each month. If they were to double their production rate it is unlikely that they could retain their "exclusive" appeal. y This would mean prices would have to be reduced and revenue would fall not to mention the increased costs in materials and labour needed to make more dresses.

y Companies following a production orientation gain

from:y Economies of scale y Reduced marketing and production costs y Greater market share y Strength over the competition.

y However, they lose:y Any degree of "exclusive" appeal y Close contact with customer needs y High levels of customer loyalty.

Product Concepty This type of orientation is present when managers in the

company believe that customers will recognise a good product or service and buy it when it is made available. y The managers have such a firm belief in the quality and appeal of their product that they cannot accept that customers may not readily see the same advantages and they fail to undertake any marketing or even carry out essential research before beginning production. y Consequently the managers are dumbfounded when customers are not beating a path to their door to buy up the existing stocks.

y We must not overlook the fact that sometimes a good product

y y y y

does have a good future and that the belief of a manager can save the product from disappearing. Innovative products spring from creative minds and sometimes creative minds can be far ahead of the majority of the public. It is only after a period of time, and education, that people will appreciate the benefits and begin to buy. The product may then take off and become very successful. If every new product that did not sell was dropped immediately we would never move forward, but to simply go ahead and produce a product because its creator believes in it is dangerous.

y Companies following a product orientation can only be

successful if:y There is a current demand for the product y There is a potential demand for the product y Products are given full marketing support y Products meet customer requirements.

y Thus it is obvious that product orientation MUST, if it is to

be successful, be adopted only after research has been carried out.

Sales Concepty Orientation on selling means that the company sells what it

makes it does not make what it can sell. y Managers believe that buyers have to be "coaxed" into buying by aggressive techniques. y This will involve heavy activity on the selling and promotional aspects with perhaps discounted prices being used and incentives to buy being offered. y The company is more interested in "moving stock" than in stocking the right goods.

y Sales orientation usually implies the existence of an

aggressive sales-force and this can bring a company into disrepute. y If a salesperson is more interested in his/her commission from a sale than in repeat business from a customer they are more likely to use methods which could be, to put it mildly, disreputable. y Corporate reputations can be damaged very easily, but can take a long time to be recovered.

y The sales concept only works when:y There is little need for an after-sales service y Companies are not interested in forming relationships with

customers y Buyers have low expectations of the product or service y Repeat purchasing is unlikely.

Marketing Concepty Companies following the marketing concept firmly

believe that the customer is the key to successful business. y Unlike the three concepts discussed above, the marketing concept actually begins WITH the customer and the company is trying to provide what the customer wants rather than making the customer want what the company has.

y If an organisation is following the marketing concept it will have three

distinct characteristics:y Customer Orientation y The organisation must define customer needs from the point of view of the

y y

y y

customer and not its own. It will need to seek information actively from the marketplace in order to assess whether the offerings are meeting customer requirements and, if not, why not. Organisational Integration All functions, sections or departments of the organisation must work together to meet the overall objectives of the organisation which must be to satisfy customer requirements. When individual sections of a company do not fit in with the total effort there may be friction or problems which can result in lost opportunities or dissatisfied customers. Mutually Profitable Exchange The organisation is entitled to a reasonable profit for a reasonable product. The customer is entitled to a reasonable product for a reasonable price. In other words both should be satisfied. This satisfaction may well be the result of negotiation where the customer has accepted an alternative product or where the organisation has had to accept a lower profit but they must be satisfied with the exchange. If it is not a mutually accepted exchange, it is not marketing.

D. DEVELOPING A MARKETING ORIENTATIONy The Need for Integrationy Marketing affects most other activities in the company, so it is

inevitable there will be a lot of discussion between managers about the outcome of the marketing decisions.y The situation can change if a marketing concept is introduced

gradually, rather than overnight. Even in companies which consider themselves to be marketing oriented, changes in activities which will affect other departments must be made with care, so that managers are aware of the benefits they can achieve as well as the different working routines, which they may not like

y Introducing the Marketing Concepty The activities called "marketing" go on in most companies and

it is useful to identify just what level they work at. If the marketing function can be shown to be useful to other departments, any changes which may be recommended will be accepted more readily.y When "marketing" can be seen to be beneficial to other departments,

changes can be made so the total marketing effort is more efficient.

y Internal Marketingy You might have deduced by now that the marketing manager has a

marketing job to do within his own company if he is to introduce the marketing concept fully and effectively. y Internally, there is a variety of "customers", starting with the chief executive (to be handled with care) and including all the directors and senior managers. The marketing effort required here will be to persuadethem that the inconveniences which marketing will demand are worthwhile in the long run.y Many of the ideas used to communicate with customers outside the

company can also be used, with modifications, to

communicate with people inside the company.

E. STRATEGIC IMPLICATIONS OF A MARKETING ORIENTATIONy External Changesy The change from sales orientation to marketing orientation was

described this way by Levitt in his famous article Marketing Myopia: y "Selling focuses on the needs of the seller; marketing on the needs of the buyer. Selling is preoccupied with the need of the seller to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering and consuming it."

y Changes in the company's strategy, as it changes from sales

orientation to marketing orientation, will be evident to people outside the company in various ways and we can look at some of the more significant strategic changes. y Product Designy Customers will see the changes which they asked for in design

now begin to be vailable, whereas the sales-oriented company just wanted to push what they had or could get easily. Customers will notice that the sales team will ask more questions and there may even be marketing researchers asking questions about desirable features in products.

y Suppliers y The old, long-run demands for existing products will be replaced by

shorter-run demands for different products to suit customers' needs. There ought to be a new enthusiasm in the company, which will be reflected in purchases of raw materials and components. Product line changes will show in different buying patterns in the company and ideas might also come through for quite different types of supplies. y Publicity y A marketing-oriented company will be much more "visible" in appropriate journals and maybe in other media too. There will be more originality in the design of advertising campaigns and evidence of coordination of different media. PR campaigns will be evident and the company name will feature more prominently in trade and other journals as articles are published by the company's technical experts. If the new strategy runs to sponsorship of sporting events, there will be dramatic changes in publicity efforts; selling activities ought to synchronise with sponsorship activities as far as possible.

y Distribution y "When do you want it?" might surprise some customers who have become

accustomed to "You'll have it next Tuesday, when the lorry will be round your way". y Scheduled deliveries to fit in with the customer's production plans may even feature in the strategy of a marketing-oriented company. "Just-in-Time" deliveries are part of the marketing strategy of some suppliers, who get the benefits of long-term association with valued customers. y Prices y There are not likely to be any bargains simply because a company changes its strategy from sales to marketing orientation, but the prices and terms which are applied are likely to be more realistic. Financial arrangements should be more in line with the customer's individual needs, because the marketing-oriented company will see the total offering, from analysis of the customer's needs right through to satisfying them, as one integrated concept.

F. COORDINATION OF MARKETING WITH OTHER MANAGEMENT FUNCTIONSy The most important single element in the implementation of

the marketing concept is that of coordination or bringing together and reconciling a diversity of conflicting views and attitudes in order to design a uniform customer-orientated plan of action. y In effect the marketing department has the responsibility for coping with all the vagaries of the marketplace. y It provides the organisation with forecasts and estimates of sales volume, profitability and market potentials, as well as the limitations imposed by the company on resources and policies.

Can you figure out ?Marketing and Production Marketing and Finance Relations with Other Departments

G. ORGANISATION FOR MARKETINGy Regional/Geographic y This is a very simple way of splitting up responsibilities. The region can

be small (local towns) to very large (Africa, Indonesia, United States, etc.). As the business develops each area can then be sub-divided to cope with increased work, e.g. north, south, etc. or perhaps in one of the ways we consider below. y Task/Function y Typical functions to be found in organisations are: Finance, Production, Purchasing, Marketing, Personnel, etc. Structuring a company by this method means that, irrespective of the region involved, there are people who are responsible for certain activities with the resulting benefits of experience and expertise. If a company organises in this way and then subsequently grows in size, it may further sub-divide the activities into regions.

y Market/Customer y Depending on what is being offered by the company this may

be a very good way of structuring. For example, a company which provides diagnostic testing media will have many different types of customers: hospitals, agricultural testing laboratories, food manufacturers, public health laboratories, cosmetic manufacturers. Having personnel who deal with specific customer groups means that expertise can be built up and specialised knowledge is available to deal with any relevant problems.

y Product/Technology y This type of structure is usually found in the large

conglomerates which have a wide range of products, e.g. ICI has paint, chemicals and textiles, which are used by different people for different purposes. The production processes can vary greatly and may have their own requirements which demand that they are regarded separately. Add this to the different customers they are likely to be dealing with and you can see why such a structure might be used.

y Matrix y This is a form of management structure which involves

bringing personnel from various sections of an organisation together for specific reasons. Predominantly used for a problem-solving exercise, it is most commonly used for managing complex projects and has the benefit of multipleskilled and experienced people working together. NASA (North American Space Agency) was one of the first organisations to use this type of structure when they wanted to land a man on the moon!

y Vertical and Horizontal y Vertical structure can mean a long chain from the top to the

bottom of the organisation, with power and authority reducing the further you move down the chain of command. y Horizontal structure means fewer "lines" of management and that people are nearer to the top. This can create better communication links which add to the overall efficiency and effectiveness levels

y Strategic Business Units y The evolution of markets and business into the highly

complex and competitive state which exists today has led many companies to base their activities on Strategic Business Units (SBUs). This idea was first introduced by McKinsey & Co. (USA) for General Electric in the early 1970s but it is common practice today.