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1.6: The role of marketing in the firm - a basis for classification

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    • Contributed by John Burnett
    • Sourced from Global Text Project

    Marketing is an individualized and highly creative process. Despite the availability of high-powered computers and sophisticated software capable of analyzing massive amounts of data, marketing is still more of an art rather than a science. Each business must customize its marketing efforts in response to its environment and the exchange process. Consequently, no two marketing strategies are exactly the same.

    This requirement of marketing to play slightly different roles, depending upon some set of situational criteria, has in turn provided us with a division of marketing into a number of different categories. This is not to imply, however, that there are not general marketing principles that work in most businesses—there are. There is a right and wrong way to design a package. There are certain advertising strategies that tend to work more often than others. Rather, we are saying that because of certain factors, a business's approach toward marketing and the ensuing strategy will require some modification from the basic plan.

    Shown in Table 1 are the most common types of marketing categories. Since these various types of marketing will be discussed throughout this text, a brief introduction is provided at this point.

    Macromarketing versus micromarketing

    The division of marketing into macromarketing and micromarketing is a fairly recent one. Initially, the division was a result of the controversy concerning the responsibility of marketing. Should marketing be limited to the success of the individual firm, or should marketing consider the economic welfare of a whole society? Accepting the later, or "macro", point of view dramatically changes the way marketing is carried out. In this light, every marketing decision must be evaluated with regard to how it might positively or negatively affect each person and institution operating in that society. In 1982, Bunt and Burnett surveyed the academic community in order to define more precisely the distinction between macro- and mircomarketing.4 Their findings suggest that the separation depends upon "what is being studied", "whether it is being viewed from the perspective of society or the firm", and "who receives the consequences of the activity". Examples of macromarketing activities are studying the marketing systems of different nations, the consequences on society of certain marketing actions, and the impact of certain technologies on the marketing transaction.

    The use of scanners in supermarkets and automatic teller machines in banking illustrates the last example. Micromarketing examples include determining how Nikon Steel should segment its market, recommending how Denver Colorado’s National Jewish Hospital in the US should price their products, and evaluating the success of the US "Just Say No" anti-drug campaign.

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    AD 2: The pharmaceutical industry tries to maintain contact with consumers.

    Service marketing versus goods marketing

    The distinction between services and goods products is not always clear-cut. In general, service products tend to be intangible, are often consumed as they are produced, are difficult to standardize because they require human labor, and may require the customer to participate in the creation of the service product.

    Goods products tend to be just the opposite in terms of these criteria. Consequently, marketers of service products usually employ a marketing strategy quite different from that of goods marketers. For example, a local family physician creates tangibility by providing an environment: waiting room examination rooms, diplomas on the walls, that convinces patients that they are receiving good health care. Conversely, coffee producers create intangibility in order to appear different from competitors. This is done through colorful packaging and advertisements showing people who are successful because they start each day with a cup or two or ten of Starbuck's coffee.

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    AD 3: Hot dogs are goods products and, as such, are marketed differently.

    Table 1: Kinds of marketing

    Classification

    Example

    Factors

    Macromarketing

    The devaluation of the yen

    Emphasis of study

    Micromarketing

    A pricing strategy for Wal-Mart

    Perspective, receiver of consequences

    Goods Marketing

    Nabisco International

    Tangibility, standardization, storage, production, involvement

    Service marketing

    Chase Manhattan Bank

    For-profit marketing

    Otis Elevator

    Concerns for profits

    Nonprofit marketing

    New York Museum of Art

    Tax status

    Mass marketing

    Sony

    Nature of contact information, process for purchasing and delivery

    Direct marketing

    Time Magazine

    Internet marketing

    trip.com

    Local marketing

    Imperial Garden Restaurant

    Proximity of customers, geographic area, extent of distribution, network, marketing, variation commitment to country

    Regional marketing

    Olympia Brewery

    National marketing

    American Red Cross

    International marketing

    Ford Motor Company

    Global marketing

    Qwest

    Consumer goods marketing

    Kraft Foods

    Nature of consumer

    Business-to-business marketing

    IBM

    Product function

    For-profit marketing versus nonprofit marketing

    As the terms connote, the difference between for-profit and nonprofit marketing is in their primary objective. For-profit marketers measure success in terms of profitability and their ability to pay dividends or pay back loans. Continued existence is contingent upon level of profits.

    Nonprofit institutions exist to benefit a society, regardless of whether profits are achieved. Because of the implicit objectives assigned to non-profits, they are subject to an entirely different additional set of laws, notably tax laws. While they are allowed to generate profits, they must use these monies in specific way in order to maintain their non-profit status. There are several other factors that require adjustments to be made in the marketing strategies for nonprofits.

    Mass marketing, direct marketing, and Internet marketing

    Mass marketing is distinguished from direct marketing in terms of the distance between the manufacturer and the ultimate user of the product. Mass marketing is characterized as having wide separation and indirect communication. A mass marketer, such as Nike, has very little direct contact with its customers and must distribute its product through various retail outlets alongside its competitors. Communication is impersonal, as evidenced by its national television and print advertising campaigns, couponing, and point-of-purchase displays. The success of mass marketing is contingent on the probability that within the huge audience exposed to the marketing strategy there exist sufficient potential customers interested in the product to make the strategy worthwhile.

    Direct marketing establishes a somewhat personal relationship with the customer by first allowing the customer to purchase the product directly from the manufacturer and then communicating with the customer on a first-name basis. This type of marketing is experiencing tremendous growth. Apparently, marketers have tired of the waste associated with mass marketing and customers want more personal attention. Also, modern mechanisms for collecting and processing accurate mailing lists have greatly increased the effectiveness of direct marketing. Catalogue companies (Spiegel, J.C. Penney), telecommunications companies (Sprint), and direct mail companies (Publishers Clearing House) are example of direct marketers. A modified type of direct marketing is represented by companies that allow ordering of product by calling a toll-free number or mailing in an order card as part of an advertisement.

    Although, officially, Internet marketing is a type of direct marketing, it has evolved so quickly and demanded the attention of so many companies that a separate section here is warranted. Essentially, Internet technology (which changes by the moment) has created a new way of doing business. In the Internet age, the way consumers evaluate and follow through on their purchase decisions has changed significantly. "Call now!" is no longer an effective pitch. Consumers have control over how, when, and where they shop on the Internet. The Internet has all but eliminated the urgency of satisfying the need when the opportunity is presented. Internet marketing will be discussed in detail in a later chapter.

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    AD 4: An example of Internet marketing.

    Local, regional, national, international, and global marketers

    As one would expect, the size and location of a company's market varies greatly. Local marketers are concerned with customers that tend to be clustered tightly around the marketer. The marketer is able to learn a great deal about the customer and make necessary changes quickly. Naturally, the total potential market is limited. There is also the possibility that a new competitor or environmental factor will put a local marketer out of business.

    Regional marketers cover a larger geographic area that may necessitate multiple production plants and a more complex distribution network. While regional marketers tend to serve adjoining cities, parts of states, or entire states, dramatic differences in demand may still exist, requiring extensive adjustments in marketing strategy.

    National marketers distribute their product throughout a country. This may involve multiple manufacturing plants, a distribution system including warehouses and privately owned delivery vehicles, and different versions of the marketing "mix" or overall strategy. This type of marketing offers tremendous profit potential, but also exposes the marketer to new, aggressive competitors.

    International marketers operate in more than one country. As will become clear later in this book, massive adjustments are normally made in the marketing mix in various countries. Legal and cultural differences alone can greatly affect a strategy's outcome. As the US market becomes more and more saturated with US-made products, the continued expansion into foreign markets appears inevitable.

    Global marketing differs from international marketing in some very definite ways. Whereas international marketing means a company sells its goods or services in another country, it does not necessarily mean that the company has made any further commitments. Usually the product is still manufactured in the home country, sold by their people, and the profits are taken back to that country. In the case of Honda Motors, for example, it means building manufacturing plants in the US, hiring local employees, using local distribution systems and advertising agencies, and reinvesting a large percentage of the profits back into the US

    Consumer goods marketing and business-to-business (industrial) marketing

    Consumer goods marketers sell to individuals who consume the finished product. Business-to-business marketers sell to other businesses or institutions that consume the product in turn as part of operating the business, or use the product in the assembly of the final product they sell to consumers. Business-to-marketers engage in more personal selling rather than mass advertising and are willing to make extensive adjustments in factors such as the selling price, product features, terms of delivery, and so forth.

    For the consumer goods marketer, the various marketing components are relatively fixed. In addition, consumer goods marketers might employ emotional appeals and are faced with the constant battle of getting their product into retail outlets.

    Strategic components of marketing

    A necessary and useful starting point for the study of marketing is consideration of the management process. The management of marketing serves as the framework for the process of marketing. Marketing management also serves as a central link between marketing and the societal level and everyday consumption by the general public. Although there are many variations of the marketing process, the one shown in Exhibit 1 will be employed in this book. Our process begins with corporate-level considerations, which dictate the direction the entire organization will take. The three corporate-level considerations listed here (mission, objectives, and strategy) are more precisely basic management topics, but are addressed in passing in the following sections.

    Functional-level considerations

    If a marketing firm is to adopt the customer-centered orientation discussed earlier, it must also extend this philosophy to the other functions/institutions with which it must interact. These functions, and the institutions that perform the functions can be categorized as non-marketing institutions and marketing institutions.

    Nonmarketing institutions can exist within the organization or outside the organization. The former include accounting, financial planning, human resources, engineering, manufacturing, research and development, and so on. Marketing must be familiar with the capabilities of each of these functions and plan accordingly. Establishing and maintaining rapport with leaders in these other functional areas is a challenge for every marketer. Non-marketing institutions outside the firm facilitated the marketing process by providing expertise in areas not directly related to marketing. Examples include financial institutions that lend marketers necessary funds; regulatory institutions that pass laws to allow marketers to perform an activity; and the press, which tells the public about the activities of the marketer.

    The marketing plan

    To a great extent, the same sequence of activities performed at the corporate level is repeated at the marketing level. The primary difference is that the marketing plan is directly influenced by the corporate plan as well as the role of the other functions within the organization. Consequently, the marketing plan must always involve monitoring and reacting to changes in the corporate plan.

    Apart from this need to be flexible to accommodate the corporate plan, the marketing plan follows a fairly standardized sequence. The marketing plan begins with a mission. A mission reflects the general values of the organization. What does it stand for? How does it define integrity? How does it view the people it serves? Every organization has an explicit or implicit mission. The corporate mission might contain words such as "quality", "global", "profitability", and "sacrifice". The marketing-level mission should extend the corporate mission by translating the latter into a marketing context. For example, a corporate mission that focuses on technology might be accompanied by a production-oriented marketing mission. A corporation that stresses stockholders/dividends may result in a sales-orientation in marketing. A corporate mission that concentrates on value or quality reflects a consumer oriented marketing mission. Once the mission is established, the situation analysis follows.

    Capsule 2: Review

    The characteristics of a marketing organization include:

    1. maintenance of contact with consumers

    2. objective comparison of existing capabilities with ability to meet present and future consumer need

    3. maintenance of a consistent message from all marketing elements to all consumer groups

    4. thorough understanding of strengths and weaknesses of competitors

    5. understanding of the capabilities of other non—marketing marketing functions

    6. attempts at familiarity with the community

    The types of marketing:

    1. macromarketing and micromarketing

    2. service marketing and goods marketing

    3. for-profit marketing and nonprofit marketing

    4. mass marketing, direct marketing, and internet marketing

    5. local, regional, national, and international marketing

    6. consumer goods marketing and business-to-business marketing

    clipboard_e50eefa5bfd00c45f8cc2dbe6686aedfb.pngExhibit 1: The marketing process.

    A marketing plan's situation analysis identifies factors, behaviors, and trends that have a direct bearing on the marketing plan. Much of this information is usually collected simultaneously with the corporate information. However, collecting information about potential and actual customers tends to be the concern of marketers. This is an ongoing activity and represents a great deal of the marketer's time and money. (The understanding and approaching the market chapter describes the process of marketing research.)

    The situation analysis helps produce a relevant set of marketing objectives. At the corporate level, typical objectives include profitability, cost savings, growth, market share improvement, risk containment, reputation, and so on. All these corporate objectives can imply specific marketing objectives. "Introducing a certain number of new products usually" may lead marketers to profitability, increased market share, and movement into new markets. Desire to increase profit margins might dictate level of product innovation, quality of materials, and price charged.

    The marketing mix

    Once the objectives are established, the marketer must decide how to achieve these objectives. This produces a set of general strategies that must be refined into actionable and achievable activities. The marketing mix-product, price, promotion, and distribution—represents the way in which an organization's broad marketing strategies are translated into marketing programs for action.

    Product. Products (and services)—the primary marketing mix element that satisfied customer wants and needs—provide the main link between the organization and its customers. Marketing organizations must be ready to alter products as dictated by changes in competitive strategies or changes in other elements of the organization's environment. Many organizations have a vast array of products in their mix. Ideally, each of the products is profitable. This is often not the case, so some tough decisions must be made concerning the length of time an unsuccessful product is kept on the market.

    Distribution. The organization's distribution system moves the product to the final consumer. Because there are many alternatives when selecting a distribution channel, marketing management must have a clear understanding of the types of distributors, of the trends influencing those distributors, and of how those distributors are perceived by customers.

    Communication (Promotion). The product's benefits must be communicated to the distributors and to the final customers. Therefore, the marketing organization must provide marketing information that is received favorably by distributors and final customers. Marketing organizations, through promotion, provide information by way of advertising, sales promotions, salespeople, public relations, and packaging.

    Price. Finally, marketers must price their products in such a way that customers believe they are receiving fair value. Price is the primary means by which customers judge the attractiveness of a product or service. Moreover, price is a reflection of all the activities of an organization. Finally, price is a competitive tool, in that it is used as a basis for comparison of product and perceived value across different organizations.

    Decisions about the marketing mix variables are interrelated. Each of the marketing mix variables must be coordinated with the other elements of the marketing program. Consider, for a moment, a situation in which a firm has two product alternatives (deluxe and economy), two price alternatives (USD 6 and USD 3), two promotion alternatives (advertising and couponing), and two distribution alternatives (department stores and specialty stores). Taken together, the firm has a total of 16 possible marketing mix combinations. Naturally, some of these appear to be in conflict, such as the "deluxe" product/low price combination. Nevertheless, the organization must consider many of the possible alternative marketing programs. The problem is magnified by the existence of competitors. The organization must find the right combination of product, price, promotion, and distribution so that it can gain a differential advantage over its competitors. (All the marketing mix elements will be discussed in more detail in later chapters of this book.)

    Nintendo Co., Ltd. (NTDOY) provides a good example of a multinational organization that has effectively implemented their marketing strategy. As a pioneer in the interactive entertainment industry, Nintendo has succeeded in branding their productions as social icons. The company produces innovative products, redefines traditional markets within the industry, and connects with its customers as a social experience.[1]

    Even a well-designed marketing program that has been through a thorough evaluation of alternatives will fail if its implementation is poor. Implementation involves such things as determining where to promote the product, getting the product to the ultimate consumer, putting a price on the product, and setting a commission rate for the salespeople. Once a decision is made, a marketing manager must decide how to best implement the terms of the plan.

    Scandinavian Airlines (SAS) provides a good example of an organization that has successfully implemented their marketing strategy. SAS had good on-time performance, a good safety record, and many services designed to make flying easier for its customers. However, these were not enough to improve SAS revenue. Other things had to be done to attract business-class customers. The approach taken by SAS was largely symbolic in nature. They put everyone who bought a full-price ticket in "Euroclass", entitling them to use a special boarding card, an executive waiting lounge, designer steel cutlery, and a small napkin clip that could be taken as a collector's item. These and other values were provided at no extra cost to the customer. The approach was very successful; business class passengers flocked to SAS, since they appreciated the perceived increase in value for the price of a ticket.

    The budget

    Marketing mix components must be evaluated as part of an overall marketing strategy. Therefore, the organization must establish a marketing budget based on the required marketing effort to influence consumers. The marketing budget represents a plan to allocate expenditures to each of the components of the marketing mix. For example, the firm must establish an advertising budget as part of the marketing budget and allocate expenditures to various types of advertising media—television, newspapers, magazines. A sales promotion budget should also be determined, allocating money for coupons, product samples, and trade promotions. Similarly, budgets are required for personal selling, distribution, and product development.

    How much should be spent? Consider the following example. A common question that marketers frequently ask is: "Are we spending enough (or too much) to promote the sale of our products?" A reasonable answer would revolve around another consideration: "What do we want to accomplish? What are our goals?" The discussion should next turn to the methods for achievement of goals and the removal of obstacles to these goals. This step is often skipped or avoided.

    Usually, when the question is asked, "Are we spending enough?" an automatic answer is given, in terms of what others spend. Knowing what others in the same industry spend can be important to an organization whose performance lags behind the competition or to an organization that suspects that its expenditures are higher than they need to be. But generally, knowing what others spend leads to an unproductive "keeping-up-with-the-Joneses" attitude. It also assumes that the others know what they are doing.

    Evaluating results

    No marketing program is planned and implemented perfectly. Marketing managers will tell you that they experience many surprises during the course of their activities. In an effort to ensure that performance goes according to plans, marketing managers establish controls that allow marketers to evaluate results and identify needs for modifications in marketing strategies and programs. Surprises occur, but marketing managers who have established sound control procedures can react to surprises quickly and effectively.

    Marketing control involves a number of decisions. One decision is what function to monitor. Some organizations monitor their entire marketing program, while others choose to monitor only a part of it, such as their sales force or their advertising program. A second set of decisions concerns the establishment of standards for performance; e.g. market share, profitability, or sales. A third set of decisions concerns how to collect information for making comparisons between actual performance and standards. Finally, to the extent that discrepancies exist between actual and planned performance, adjustments in the marketing program or the strategic plan must be made.

    Once a plan is put into action, a marketing manager must still gather information related to the effectiveness with which the plan was implemented. Information on sales, profits, reactions of consumers, and reactions of competitors must be collected and analyzed so that a marketing manager can identify new problems and opportunities.


    1. [1]Burnett's update for 2009 publication.

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