Marketing

1 What is marketing?

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Kotler defines marketing as “the science and art of exploring, creating, and delivering value to satisfy the needs of a target market at a profit. Marketing identifies unfulfilled needs and desires. It defines, measures and quantifies the size of the identified market and the profit potential.”

To understand the marketing concept or the marketing approach it’s useful to contrast this with certain other approaches that might be available.

The product-led approach. For this, imagine a company which was started by a couple of engineers, clever and successful people, who are very interested in the technical qualities and the cleverness of the products they produce. They get enormous satisfaction in well-engineered, clever innovative products. Unfortunately, just because the product is well-engineered, innovative and clever doesn’t mean that product will sell. No matter how much those engineers appreciate the fine details of that product it may be a product that no one wants, or a product which is too expensive.

The sales-led approach may sound okay, but what it means is great emphasis on selling what you have, even if customers don’t really want it. The sales-led company will have a very high powered sales team, skilled in the arts of persuasion and getting people to sign contracts which they may later regret.

The marketing-led concept is quite different. What’s important about that is that it is very outward looking. It looks to see:

• What will potential customers want?
  

• What do they appreciate?
  

• What amount of money do they think it’s worth paying for the product or service we are providing?
  

Through market research we will establish the needs of potential customers and then develop an appropriate product to match those needs. It will stress to those customers the ability of the product or service to satisfy their needs and it will profit through customer satisfaction because it fulfils the needs of the customers.

In many ways it’s a very humble approach. It’s saying that the customer knows best: the marketing concept means finding out what do customers want and developing products or services to fulfil customer’s needs.

2 Market segmentation

We have said that marketing is finding out what customers want and designing products and services to meet customers’ needs. The first stage to find out whether all potential customers wanted the same thing or can the market be broken into different sections or segments. Market segmentation looks in how a market can be split up.

Commonly it can be split up according to age, sex, lifestyle, wealth, and geography. For example in the fashion market, there are quite different fashions which are bought by younger and older people. Obviously there are different fashions depending whether you are selling to male or female. Lifestyle is important: are we addressing the leisure market or are we addressing a more formal market? Wealth and disposable income are important, and it’s normal for most ranges of fashions to have cheaper ‘value goods’ and also the more expensive luxury goods.

The idea of segmentation is that if you break the market up into smaller sections and you design products or services which specifically address the needs of each segment of the market

3 Market targeting and the marketing mix

After investigating market segmentation, the next stage is market targeting, that is deciding which segments of the market to attack. Most companies have a range of products each of which targets a particular segment. Targeting each segment, known as product positioning, is carried out by adjusting the marketing mix.

Originally there were four variables or levers that could be used. These were known as McCarthy’s marketing mix or the Four Ps. Now seven Ps are often shown:

• Product
  

• Price
  

• Promotion
  

• Place
  

• People
  

• Process
  

• Physical evidence
  

The first four (product, price, promotion, and place) were the original components of the marketing mix and apply to the marketing of physical products. The three last ones (people, process, and physical evidence) are additional variables specifically to do with positioning services. When services are provided it is important to have the right people with the right attitude, whereas in manufacturing, customers might never meet employee. The process by which it is provided, and the physical evidence that something has actually happened are also important. For example, if you are booking an airline flight, you may ring up the airline and you expect to be dealt with in a helpful and friendly way by the representative. The process has to be convenient to you, you don’t want to be waiting too long before your phone call is answered. Finally you expect some sort of physical evidence, such as an e-mail, to show you that the service is actually going to be provided.

3.1 Product

The first of the Four Ps is product, and this includes:

The features of the product (what it does)

• Quality,
  

• Design,
  

• Brand,
  

• Packaging.
  

3.2 Pricing

The second of the Four Ps is price. This includes not only the price itself (the price level or price point), but also discounts for bulk buying which is particularly important in business-to-business sales. Price also includes the terms, that is how long a customer has to pay. There are also various types of strategic pricing, described below.

Pricing often has to take into account the price of competing products.

3.3 Promotion

There are four main types of promotion:

• Advertising
  

• Sales promotion
  

• Personal selling
  

• Public relations.
  

We are all familiar with advertising: TV, magazines and, increasingly, the Internet. Marketing can be very expensive, so setting a marketing budget is very important

Sales promotion is something which happens very close to the point-of-sale. You may have been in supermarkets where staff offer small portions of cheese or small glasses of wine for you to try in a hope that you will then go and purchase. Buy-one-get-one-free offers and coupons which give you money off the next purchase are also forms of sales promotion.

Personal selling is when a salesman or saleswomen, a sales representative in other words, goes around spending time with customers or potential customers trying to persuade them to buy. This is very important in business-to-business sales and, of course, it is economically justified there because often the orders placed in business-to-business sales are quite large and valuable.

Public relations usually means good mentions in the press. Sometimes there are charitable endeavours where a local firm has made some sort of donation or lent some sort of equipment. Corporate social responsibility and good ethics play important roles in public relations.

• Push promotion
  

• Pull promotion
  

Imagine a new product is about to be launched. Push promotion is concerned with getting the product into the shops and would use, for example, personal selling. Pull promotion is getting the public to demand that product, to go into shops and ask to buy it. That promotion could be done by advertising. For the whole promotional campaign to be successful, you need both push promotion and pull promotion to match up.

3.4 Place

The last of the four Ps is ‘Place’, meaning the place you go to buy or acquire the product. It really means distribution. Considerations to bear in mind there are:

• The length of the distribution chain. For example direct marketing where products go directly from manufacturer to consumer compared to manufacturer, wholesaler, retailer chains.
  

• Suitability of the outlet. For example, high fashion goods are better sold through exclusive shops, not supermarkets.
  

4 Link of marketing and strategy

A strategic plan, typically for five years, shows where the company will be at the end of the period: products being sold, countries of operations, manufacturing/sub-contracting, country of manufacture etc.

The key to any business’s success is sales, whether sales of products or services and, obviously, a strategic plan must be linked to the marketing plan. The marketing plan shows the products offered, their price the markets they are being sold into and this determines a large part of any strategic plan.