Marketing, the process of identifying, anticipating, and satisfying customer requirements for consumer goods or services. Early marketing techniques involved little more than making potential consumers aware of a product’s existence and benefits, and getting it to the market. Now, however, the marketing process starts even before decisions are taken about what products should be made.
Marketing concentrates on the buyers, or consumers, determining their needs and desires, educating them with regard to the availability of products and too important product features, developing strategies to persuade them to buy, enhancing their satisfaction with a purchase, and, finally, building trust and long-term relationships with them where appropriate. Marketing also looks to create successful brands to which customers are attracted and remain “loyal”. Strong brands are increasingly important for businesses, as long-term relationships with consumers generate greater profits.
Marketing management includes researching, planning, organizing, directing, and controlling decision-making regarding product lines, pricing, promotion, and servicing. In most of these areas, the marketing department has complete control; in others, as in product-line development, its function is primarily advisory. In addition, the marketing department of a business is responsible for the physical distribution of the products, determining the channels that will be used, and supervising the efficient flow of goods from the factory or warehouse.
II TAILORING THE PRODUCT
Merchandise generally similar in appearance, that is, in style or design, but varying in such elements as size, price, and quality is collectively known as a product line. Product lines must be planned according to consumer needs and wants.
In order to develop a line effectively, market research is conducted to study consumer behaviour. Changing attitudes and modes of living directly affect the demand for products. For example, greater awareness of the importance of eating healthily has led to a decline in demand for foods such as crisps and chocolate bars.
Also, a high-income economy triggers a demand for products very different from those selected in a declining business cycle. The availability or lack of disposable income, meaning income over and above that spent for basic necessities such as food, shelter, and clothing, affects the buying pattern for so-called luxury products. Similarly, the purchase of durable or long-lived goods, such as refrigerators, cars, and houses, may be deferred when the economy is declining and may increase rapidly in periods of prosperity. Staple products, such as food and clothing, tend not to be seriously affected by the business cycle.
The life cycles of products require careful study. Virtually all product ideas lose in time the attraction that initially drew people to buy them. Technological changes can speed up this process, as some producers of video cassette recorders and 35-mm film cameras have found. Manufacturers may also accelerate the obsolescence of a product by introducing new, more desirable products or versions of the existing product. Consumers today expect product innovations and tend to react favourably to new features. This has an important bearing on the usable life deliberately designed into a product, which in turn has a significant effect on the costs to the manufacturer and ultimately on the price to the consumer. Competition between manufacturers of similar products naturally accelerates the speed of changes made in those products.
III PRICING THE PRODUCT
The two basic components that affect product pricing are costs of manufacture and competition in selling. It is unprofitable to sell a product below the manufacturer’s production costs and unfeasible to sell it at a price higher than that at which comparable merchandise is being offered.
Other variables also affect pricing. Company pricing policy may require a minimum profit on new product lines or a specified return on investments, or discounts may be offered on purchases in quantity. Pricing is also affected by the image the company wants to create in consumers’ minds. Companies such as ASDA Wal-Mart or Primark purposefully set their prices low as they seek to attract those customers looking for a bargain or value for money. In contrast, companies at the top end of the market are more likely to deliberately charge higher prices, to emphasize their high quality or exclusivity.
Attempts to fix resale prices normally violate competition laws, which usually prohibit manufacturers from controlling the prices set by wholesalers and retailers. Such control can still be maintained, however, if the manufacturers market directly through their own outlets.
Attempts have also been made, generally at government insistence, to maintain product price competition in order to minimize the danger of injuring small businesses. Therefore, pricing decisions are reviewed by the legal department of the marketing organization.
IV PROMOTING THE PRODUCT
Advertising, personal (face-to-face) selling, sales promotion, direct marketing, and public relations are all techniques that can be used to persuade people or organizations to buy.
The primary objective of advertising is to raise awareness of a product or brand. Although a company may have an excellent product that meets customers’ needs and is competitively priced if no-one knows of its existence the company will struggle to make enough sales.
Most companies consider this function so important that they allocate extensive budgets and engage specialist advertising agencies to develop their programme of advertising. By repeatedly exposing the consumer to a brand name or trademark, to the appearance or package of a product, and to special features of an item, advertisers hope to incline consumers towards their particular product or brand. Advertising is most frequently done on television, radio, the Internet, and billboards or other large displays; in newspapers, magazines, and catalogues; and through direct mail to consumers. In recent years, advertising agencies have been joining forces to become giants, making it possible for them to offer their clients a comprehensive range of worldwide promotion services.
B Personal Selling
As the costs of personal selling have risen, the role of salespeople has changed. It is relatively rare now for salespeople to need to explain in detail how a product works and why it is needed; consumers can usually find out this information themselves through the Internet. Instead, their role tends to focus on persuading consumers to buy their product rather than a competing brand, and on negotiating price and arranging terms of payment.
Personal selling remains an important means for selling between businesses. Businesses often have specific needs and concerns, which are most effectively addressed through personal selling. It also has the benefit of helping to build and strengthen relationships, helping to increase sales in the long term.
C Sales Promotion
The purpose of sales promotion is to get people or organizations to try a product or service. An incentive to buy is given, in the hope that consumers or organizations will like the product or service and buy it again and again. Sales promotions are often used in conjunction with advertising.
Often it is necessary to work closely with the dealers who handle a manufacturer’s products to make sure that satisfactory sales levels are achieved. Displays must be supplied and set up, and cooperative advertising programmes may be worked out. Shop staff should be trained so that they have knowledge of the manufacturer’s products. Often the manufacturer must provide services such as installation and maintenance for a specified time period. On the consumer level, sales promotion may involve special merchandising inducements such as discount coupons, contests, a premium (gift) with the purchase of a product, or a lower price on the purchase of a second item.
D Direct Marketing
Companies use direct marketing to communicate directly with their customers, rather than going through intermediaries such as retailers. It is an enormous growth area in marketing and includes the following activities: direct mail, telemarketing, direct response TV, and e-mail. It is an attractive communication tool as it allows a company to use a personalized approach, which is more warmly received by customers than unpersonalized messages. As technology improves, marketers are able to target their messages, products, and promotions more closely to individual customer needs and desires. It is also an effective way to build up and develop longer-term relationships with customers.
Direct marketing has become so popular that its benefits are now being diminished. The sheer volume of direct mail and emails now sent to consumers is increasingly overwhelming and unwelcome. Direct mail is commonly referred to as “junk” mail, as many consumers simply throw it away without opening it, while e-mails are referred to as “spam”. Consumers in the United kingdom can now sign up to the Mail Preference Service or Telephone Preference Service, which forbid companies from contacting them unless they have been given the consumer’s permission. Many consumers in the United Kingdom have already signed up and as a result, many companies are becoming increasingly limited in who they are able to contact. Developing on-going relationships with consumers where such communications are permitted has become more and more important for companies.
E Public Relations
Public relations, or PR, is used by companies to improve their image with various publics, usually consumers, society, and investors. Public relations seeks to influence the way an organization or brand is portrayed or perceived, either to generate goodwill or positive coverage of the company and its products or to combat any negative stories appearing in the press. Public relations activity can be as simple as sending out press releases to newspapers and relevant publications, through to carefully managed and on-going awareness campaigns. It is cheaper than other communication tools such as advertising, as any coverage given is not paid for. Because the coverage appears in independent or impartial publications, rather than direct from the company, it is more likely to be trusted by consumers and can, therefore, be a highly effective and persuasive means of communication.
V DISTRIBUTING THE PRODUCT
Some products are marketed most effectively by direct sale from manufacturer to consumer. Among these are durable equipment—for example, computers, office equipment, and industrial machinery and supplies. However, many consumer goods are also sold directly to the public as well, through advertisements, telemarketing, “house parties”, and the Internet.
The Internet has had a profound effect on distribution and how companies reach consumers. Many companies are now able to sell their goods direct to people around the world via the Internet and online ordering facilities. Company websites often provide detailed product information and answers to Frequently Asked Questions (FAQs). Credit cards have made it easy for people to purchase via the Internet, mail, or telephone. Through the Internet, consumers from anywhere in the world can shop and buy goods from a company, at any time that suits them. Comparison shopping has also been made easier by websites that check product details and prices across a range of retailers, with the result that price competition among companies has intensified.
Sales via the Internet are attractive to companies as the process is often automated, meaning that orders can be processed quicker and more cheaply than was previously possible.
The Internet also offers a more dynamic and direct means of reaching customers than through traditional retail outlets. It enables a two-way dialogue between the customer and the company to take place and can help to resolve queries or problems more speedily. It therefore also helps in building and developing longer-term relationships, in a way that other outlets cannot.
Despite the phenomenal growth in direct sales via the Internet, most consumer products still move from the manufacturer through agents to wholesalers and then to retailers, before ultimately reaching the consumer. Determining how products should move through wholesale and retail organizations is a crucial marketing decision.
Wholesalers distribute goods in large quantities, usually to retailers, for resale. Some retail businesses have grown so large, however, that they have found it more profitable to bypass the wholesaler and deal directly with the manufacturers or their agents. Wholesalers first responded to this trend by adapting their operations so that they moved faster and called for a lower margin of profit. Small retailers fought back through cooperative wholesaling, the voluntary banding together of independent retailers to market a product. The result has been a trend towards a much closer, interlocking relationship between a wholesaler and independent retailer.
Retailing has undergone even more change. Intensive pre-selling by manufacturers and the development of minimum-service operations—for example, self-service in department stores—have drastically changed the retailer’s way of doing business. Supermarkets have become commonplace not only for groceries but for products as diverse as books, medicines, clothes, and electronic equipment. Warehouse retailing has become a major means of retailing higher-priced consumer goods such as furniture, appliances, and electronic equipment. The emphasis is on generating shop traffic, speeding up the transaction, and rapidly expanding the sales volume. Chain stores—groups of shops owned by the same firm—and cooperative groups have also proliferated. Special types of retailing, for example, vending machines and convenience stores, have also developed to satisfy consumers’ needs more easily and cheaply.
Transporting and warehousing merchandise are also technically within the purview of marketing. Products are often moved several times as they go from producer to consumer. Products are carried by rail, lorry, ship, aeroplane, and pipeline. Efficient traffic management determines the best method and timetable of shipment for any particular product.
VI SERVICES AND MARKETING
Services are intangible goods, which can be sold despite not being actual objects. Consumers pay for a service as they would for manufactured goods. Already more people are employed in the developed economies in the provision of services than in the manufacture of products, and the service sector shows every indication of expanding even further. Services familiar to most consumers are in the fields of maintenance and repair, transport, travel, entertainment, education, and medical care. Business-oriented services include computer applications, management consulting, banking, accounting and legal services, stock brokerage, and advertising.
Services, like products, require marketing. Those members of staff who are responsible for delivering the service are extremely important in marketing services, as they will to a large degree shape the customer’s experience of that service. Likewise, service quality, the delivery of consistently good service, is also important if a company wants customers to use its services again.
As with products, services too must be planned and developed carefully to meet consumer demand. For example, in the field of temporary personnel, a service that continues to increase in monetary value, studies are made to determine the types of employee skills needed in various geographical locations and fields of business. Because intangibles are more difficult to sell than physical products, promotional campaigns for services often have to try harder to encourage trial and take up. Through extensive promotion, temporary personnel agencies have convinced many companies that hiring on a temporary basis only in times of need is more economical than hiring permanent, full-time personnel.
VII MARKET RESEARCH
Market research involves the use of surveys, tests, and statistical studies to analyse consumer trends and to forecast the size and location of markets for specific products or services. The social sciences are increasingly utilized in customer research. Psychology and sociology, anthropology, and even neurology can provide clues as to people’s activities, circumstances, wants desires, and general motivation. They, therefore, play a key role in understanding the various behavioural patterns of consumers.
Coupled with applications from the social sciences has been the introduction of modern measuring methods when surveys are carried out to determine the extent of markets for a particular product. These methods include the use of statistics and the utilization of computer models to determine trends in consumers’ desires for various products. Scientific analysis is being used in such areas as product development, particularly in evaluating the sales potential of new product ideas. For example, use is made of mathematical models—that is, theory-based projections of social behaviour in a particular social relationship. Sales projections become the basis for many important marketing decisions, including those relating to the type and extent of advertising, the allocation of salespeople, and the number and location of warehouses.
VIII FORCES AFFECTING MODERN MARKETING
An important influence on marketing theory is the continuous and rapid change in consumer interests and desires. Consumers today are more sophisticated than ever before. They are in education for much longer; they are exposed to the Internet, newspapers, magazines, films, radio, television, and travel; and they have much greater interaction with other people. Their demands are more exacting, and their taste is more volatile. They are safeguarded against the blandishments of indiscriminate marketing by consumer protection schemes, and they are better informed, thanks to publications dedicated to evaluating the merits and faults of different products.
Markets tend to be segmented as each group calls for products suited to its particular tastes. Positioning the product—that is, determining the exact segment of the population that is likely to buy a product, and then developing a marketing campaign to enhance the product’s image to fit that particular segment—requires great care and planning.
The number of ways marketers can reach consumers has exploded over the past few decades, with countless magazines, publications, radio stations, digital and satellite channels, and soon broadband TV, available to people. This “media fragmentation” has meant that it is harder than ever for marketers to get their messages across to a large number of consumers, as the audience for each TV channel or publication steadily drops. At the same time, as consumers have become exposed to greater and greater amounts of advertising, so they have become more and more resistant to it. Many consumers now actively seek to avoid advertising if they can, for example by changing channels during the ad break, or skipping through the breaks on recorded programmes. In response, marketing has looked to develop on-going, longer-term relationships with customers, where their communications are welcomed rather than resented.
Competition has also sharply intensified, as the number of firms engaged in producing similar products has increased. The advent of the Internet has brought global competition to even the smallest business. In response, firms have tried to differentiate their products from those of their competitors. Profit margins—the percentage of profit made by a business per unit of sales—are constantly being cut. While costs continue to rise, competition tends to keep prices down. The result is a narrowing spread between costs and selling prices, and an increase in a business’s sales volume is necessary to maintain or increase profit.
Companies have also responded to greater competition by building stronger brands to which the consumers stay loyal. Brands have become increasingly important in marketing, as they help companies to generate goodwill, develop customer loyalty, and increase profits. Although intangible, brands can now be recorded on a company’s balance sheet, and in some cases can be worth more than the physical assets of a company.
The consumer movement—that is, the insistence on reputable products and services by consumer groups—is a strong influence on marketing techniques. Both consumer groups and government agencies have intensified their scrutiny of products, challenging such diverse elements as product design, length and legitimacy of warranty, and promotional tactics. Warranty and guarantee practices, in particular, have been closely examined. New legislation has generally defined and extended the manufacturer’s responsibility for product performance.
Environmental concerns have also affected product design and marketing, especially as the expense of product modification has increased the retail cost. Such forces, which have added to the friction between producer and consumer, must be understood by the marketer and integrated into a sound marketing programme. This is often accomplished by emphasizing the “environmental friendliness” of a product, or incorporating environmental considerations into initial marketing decisions prior to manufacture.
Even the way a firm handles itself in public life, that is, how it reacts to social and political issues, has become significant. Information about companies and their actions across the world is now easily accessible to consumers via the Internet, and this has led to increased calls for transparency. As a result, corporate social responsibility is becoming an increasingly important issue for many companies. No longer may a corporation cloak its internal decisions as private affairs. The public’s dissatisfaction with the actions and attitudes of a firm has sometimes led to a reduction in sales; conversely, consumer enthusiasm, generated by a firm’s intentional establishment of a good public image or public relations, has led to increased sales.
IX SPECIALIZED MARKETING DEVELOPMENTS
The success of specialized marketing developments has caused many older organizations to revise their operating methods. In recent years, for example, franchising has become an important force in retailing. Under this plan, the retailer is given the right to sell, within a certain area, without competition from another retailer dealing in the same product.
Many consumers now find it more desirable to rent products than to purchase them outright. For example, a homeowner will often find it preferable to rent an electric floor polisher when needed, rather than purchase the appliance at the list price, use it only infrequently, and then have to provide storage space within the home. Another item that consumers have sometimes found easier and less expensive to rent in certain circumstances (when abroad, for instance) is the car. The renting of equipment also figures in the large industry. Corporations are finding it to their economic advantage to rent computers and office and industrial machinery, thereby assuring themselves of product servicing and repair and allowing a changeover, without great expense, to newer equipment models as they become available.
The use of credit has had a great impact on marketing. Customers with credit cards can make purchases without the normal immediate presentation of cash, and sales are thus stimulated. Shops often further stimulate sales by the use of premium promotions whereby customers making purchases receive free goods or the opportunity to buy special merchandise at very low prices.
Businesses must strive daily to outdo competitors. The methods available to businesses for distinguishing their commodity from others in the market are subject only to their ingenuity. Such methods may include product improvement, a unique promotional campaign, a new twist in service, a change in distribution channels, or an enticing price adjustment.
X THE MARKETING PROFESSION
Perhaps nothing is more conducive to the success of a firm than the image that it conveys of itself to the public. The marketing activities of a company, because they act directly on the consumer, do most to shape this image and thus must be developed with great care.
In a world of shifting consumer needs and desires, it is marketing that acts as the vital interface between an organization and its customers, looking outwards from the organization to determine future customer needs and developing suitable strategies to respond to those needs.
As marketing has become increasingly complex, a need has arisen for executives trained in the social sciences who also possess statistical, mathematical, and computer backgrounds. Courses are offered at undergraduate and graduate levels in such specialized fields as advertising, administrative practices, financial management, production, human relations, retailing, and personnel administration.
In recent years, as global competition between industries has intensified, the role of marketing departments has been seen as increasingly important. As competition continues to increase and brands battle it out for supremacy, the marketing profession is likely to provide more personnel in the ranks of top management.
Chartered Institute of Marketing