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Introduction to marketing

MAN40037

Marketing and Operations Management

Krzysztof Kubacki

What is marketing?

� Marketing is the management process which identifies, anticipates, and supplies customer requirements efficiently and profitably (Chartered Institute of Marketing, 2004)

� AMA define marketing as the activity, set of

institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large (2009)

Management of exchange

� Marketing is what happens at the interface between the

organisation and its publics

� Marketing is about promoting and increasing exchanges

between the organisation and its customers

� Marketers are the people who manage the exchange

process

� Fair exchange is always good, because both parties end

up better off

� Drucker: “the aim of marketing is to make selling

superfluous. The aim of marketing is to know and

understand the customer so well that the product or

service fits him and sells itself. Ideally, marketing should

result in a customer who is ready to buy. All that should be

needed then is to make the product or service available”

What marketing is not!

� It is not a magic wand

� It is not selling

� It is not persuading people to buy things they don’t

want

� It is not as effective as all that in practice

� It is not an exact science

Marketing management philosophies

� The production concept

• focus on production and distribution� The product concept

• focus on quality, performance and innovation

� The selling concept• undertakes large-scale selling and promotion efforts

� The marketing concept

• determining needs and wants of the target markets� The societal marketing concept

• determining needs, wants and interests of the target markets

• effective and efficient achieving desired satisfactions• improves consumer’s and society’s well being

The marketing concept

� The customer is king

� If we do not satisfy our customers’ needs, they will go to someone who will

� Marketers focus on identifying people’s needs

� Marketers focus on turning needs into wants

� Marketing delivers a lifestyle

� Marketing means viewing the whole organisation

from the customer’s viewpoint

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Understanding customers

� People buy things to meet their needs (not yours!)

� Consumers are different (they are a lot like people in that respect)

� Emotional issues play a large part in the buying decision

� Human beings are not pussy-cats. We have much more complex needs

Reasons NOT to be customer-

centred

� It’s easier to understand your own needs than to understand the needs of others

� Customers are fickle, variable, and unreliable (unlike

us)

� Customers are harder to reduce to numbers than are products

� The managing director is the only customer we need to please

Reasons to BE customer-

centred

‘There is only one boss – the customer. And he can fire

everyone in the company from the chairman on down,

simply by spending his money somewhere else’

Quote by Sam Walton, founder of WalMart Stores, the

world’s largest retail company

The 7P model (the service mix)

Promotion

Place

Price

Product

PeoplePhysical

evidence

Process

The marketing mix

� Product: a bundle of benefits

� Price: that which is paid for the item

� Place: where the exchange takes place

� Promotion: Marketed-controlled communications about the firm and its products

� People: The from-line employees of the organisation

who deal with the customer

� Process: the activities involved in the exchange

� Physical evidence: tangible proof that the exchange has occurred

Problems with 7 P model

� It pigeonholes issues and activities in an unrealistic way

� It implies that we are doing things to customers rather than responding to their needs.

� It ignores aspect such as competition

� It is based on words starting with ‘P’ not on concepts starting with ‘Customer’, e.g.:

- product – customer benefit

- price – customer cost

- promotion – customer communication

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Criticisms of marketing

� Price

• High costs of distribution

• High advertising and

promotional costs

• Excessive mark-ups

� Deceptive pricing, promotion and

packaging

� High pressure selling

� Shoddy or unsafe products

� Planned obsolescence

� Poor service to disadvantaged consumers

Marketing ethics

� The marketing concept philosophy is based on

customer service and mutual benefit

� More than ever before marketers are dealing with sophisticated consumers who are more demanding and expectant of premium service and products as

well as demanding an ethical and socially responsible marketing ethos

Marketing ethics

� Not all companies follow these principles and there are

many that have dubious marketing practices that adversely affect innocent consumers and the wider society as well

� Marketers face difficult decisions and many dilemmas in pursuit of profit and the balancing act of meeting consumers’ desires, generating profit and accounting to

societal welfare

Marketing’s impact upon society

� Creating false wants and too much materialism

� Too few social goods

� Cultural pollution

– Advertising driving children to increase demands upon their parents; ‘pester power’

� Too much political power

Marketing’s impact on other businesses

� Critics charge that marketing practices can affect other companies and reduce competition. Three issues:

– Acquisition of competitors

– Marketing practices that create barriers to entry

– Unfair competitive marketing practices

Relationship marketing

� Some customers are worth more than others

� It is cheaper to keep an existing customer than find a new one

� Existing customers can easily be encouraged to buy more, and more often

� The lifetime value of a customer can be extremely

high

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Relationship marketing vs. transactional marketing

Quality is the concern of allQuality is the concern of the production department

High customer contactModerate customer contact

High customer commitmentLimited customer commitment

High emphasis on customer service

Little emphasis on customer service

Long-time scaleShort-time scale

Orientation on product benefitsOrientation on product features

Focus on customer retentionFocus on single sale

Relationship marketingTransaction marketing

Bad practices resulting from

transaction marketing

� Reactive approach to customer complaints

� Failure to recognise the needs of long-term customers

� Greater expenditure than necessary on promotion

� Inner conflict between production and marketing

Types of relationship marketing

� Basic

– Sale of product with no support and/or follow-up.

� Reactive

– Sale of product with minimal support.

� Accountable

– Following sale of the product, the salesperson follows up and checks that all is going well. Customer suggests improvements that are acted upon.

� Proactive

– Company contacts the existing customers finding out if current product is meeting their needs. Defining future needs and putting forward suggestions.

� Partnership

– Company continuously works with the customers to discover ways to deliver better value.

Problems with relationship marketing

� Works well in B2B, not so well on B2C markets

� Tends to ignore smaller customers or older customers who have limited lifetime value

� Forces changes which may be irreversible if the relationship ends

� Puts too much emphasis on a few customers: too many eggs in one basket

� Can breed complacency

Why has relationship marketing failed in B2C?

� People do not want to marry their mortgage provider

� People have closer relationships with their coffee brand than with their bank

� People are suspicious of firms’ motives

� Too much seduction, not enough commitment