The Marketing Concept and Process

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The Marketing Concept and Process

• Lecture 1
• 18 Nov. 2004

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The Marketing Concept What It Is and What It Is
Not

• The marketing concept has suffered in two ways
• First, it has been established as optimal
  management philosophy when it is not necessarily
  so in all instances, and
• Second, we can see many examples of poor
  marketing practice that have been adopted in the
  name of the marketing concept.
• .It is time that we relearn the marketing
  concept.

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The Marketing Concept What It Is and What It Is
Not

• The marketing concept
• Customer focus, profits, and integration of
  organizational efforts.

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The Marketing Concept What It Is and What It Is
Not

• Customer orientation
• Satisfying its customers at a profit
• Determining the needs and wants of target
  markets
• Discovering the wants of a target audience and
  then creating the goods and services to satisfy
  them

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The Marketing Concept What It Is and What It Is
Not

• Kotlers social definition
• Marketing is a social and managerial process by
  which individuals and groups obtain what they
  need and want through creating and exchanging
  products and value with others.

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The Marketing Concept What It Is and What It Is
Not
Many Things Can Be Marketed!

• Goods
• Services
• Experiences
• Events
• Persons

• Places
• Properties
• Organizations
• Information
• Ideas

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What is Marketing?
Core Marketing Concepts

• Value and satisfaction
• Exchange, transactions and relationships
• Markets

• Needs, wants, and demands
• Marketing offers including products, services
  and experiences

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The Marketing Concept What It Is and What It Is
Not

• The conditions under which the marketing concept
  offers the proper guidance to the marketer

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The Marketing Concept What It Is and What It Is
Not

• To the extent that the organization relies on
  exchange as the means of obtaining compliance
  with organizations needs, we describe that
  organization as engaging in marketing.
• Strive to understand exchange partners and tailor
  offerings for them through what is called the
  marketing mix (Borden 1964).

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The Marketing Concept What It Is and What It Is
Not

• it is important to recognize that under some
  circumstances, the production concept or the
  sales concept would be a more appropriate
  management philosophy for the organization than
  the marketing concept.
• Can you give some examples?

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The Marketing Concept What It Is and What It Is
Not
.customers are not necessarily good sources of
information about their needs a decade from now
sometimes customers have to learn about new
technologies, beliefs, and ways of behaving
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The Marketing Myopia

• In 1960, Theodore Levitt wrote "Marketing
  Myopia," a widely quoted and frequently reprinted
  Harvard Business Review article.
• Chapter eight in Theodore Levitt's book - The
  Marketing Imagination (New York The Free Press,
  1986).

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The Marketing Myopia

• What does the term marketing myopia means?
• What were the evidence and examples used to
  illustrate the notion of marketing myopia?
• How is the self-deceiving cycle related to
  marketing myopia?
• Is this notion of marketing myopia still valid
  today, and explain?

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The Marketing Myopia

• Marketing myopia was initially described as a
  firm's shortsightedness or narrowness when
  attempting to define its business.
• The key question what business are you in?

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The Marketing Myopia

• Levitt cites the railroads and Hollywood as
  examples of "industries that have been and are
  now endangering their futures by improperly
  defining their purposes." Their problem, he says,
  is they were "product-oriented instead of
  customer-oriented.

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The Marketing Myopia

• Warning of the dangers of being product-oriented
  rather than customer-oriented - creating the Ford
  Edsel, New Coke or smokeless cigarettes, as it
  were, rather than products consumers wanted.

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The Marketing Myopia

• According to Levitt, "the organization must learn
  to think of itself not as producing goods or
  services but as buying customers, as doing the
  things that will make people want to do business
  with it."

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The Marketing Myopia

• Since its publication, corporate leaders have
  moved from product-orientation toward
  market-orientation.

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The Marketing Myopia
Customer orientation has also been considered as
a type of marketing myopia.
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The Marketing Myopia

• Firms overemphasize the satisfaction of customer
  wants and needs and as a result ignore
  competition.

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The Marketing Myopia

• Competitor orientation has been proposed as a
  replacement for the customer orientation with
  this orientation, a firm's strategy is influenced
  by its competitors (Oxenfeldt and Moore, 1978).

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The Marketing Myopia
The marketing myopia described by Levitt has
also evolved into a planning myopia
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The Marketing Myopia

• Businesses need to take Levitt's idea to its
  ultimate end
• do not just sell a product, sell the solution to
  a problem.

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The Marketing Myopia

• Oil companies have followed that strategy by
  developing minimarts in service stations.
• Digital Equipment Corp. earned one-third of its
  7 billion in revenue from computer maintenance
  services.
• General Motors Acceptance Corp. financial
  services accounted for 1 billion of the
  automaker's 4 billion in 1985 revenues, and
• Gerber Products is opening day care centers as
  well as acquiring baby-related product companies.
  
• By recognizing customer needs, these companies
  have used available corporate resources to enter
  nonmanufacturing segments of the market.

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The Marketing Myopia
The marketing myopia to the world market
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The Marketing Myopia

• Yves Doz, Jose Santos and Peter J. Williamson
  draw on some examples of companies that are major
  successes because they sought knowledge in other
  countries, such as
• Shiseido, the Japanese cosmetic company that
  looked to France to become once again a leading
  player.
• Little Scandinavian Nokia overtook Motorola in
  the early days of the mobile wars simply by
  monitoring the radar for emerging phenomena in
  markets around the world.

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The Marketing Myopia

• Innovating using local knowledge, perfecting your
  product and service to meet the needs of
  customers in your home market, and benchmarking
  yourself against domestic competitors-each of
  these has become a high risk strategy.

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The Marketing Myopia

• After all, cellular telephony had been invented
  in America-at Bell Laboratories, and Motorola was
  among the first to massproduce mobile telephones.
  
• So then, how did Nokia, a little-known upstart
  from the edge of the Arctic Circle leave Motorola
  behind and manage to become the global leader in
  mobile telephony?
• Nokia was the first to see the potential of a
  cellphone as a fashion accessory from
  observations of its customers in Asia.

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The Marketing Myopia

• Nokia has the ability to plug into knowledge
  about new technologies and emerging customer
  needs from every corner of the world.
• It understood the need for customised handsets
  from its experience in Europe, where it first
  became apparent that there were different
  segments of users.
• Observing pilot users across Scandinavia, it was
  among the first to recognise that digital
  technology could dramatically improve the
  functionality of mobile phones.
• And in China, India and Africa, it saw that
  mobile phones could potentially become substitute
  for wire-line phones.

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The Marketing Myopia

• While Nokia prospected the world for insight
  about promising technologies, diverse customer
  behavior and new ways to use mobile phones,
  Motorola continued to develop its products based
  on its knowledge of the customers and
  technologies in its U.S. backyard.

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The Marketing Myopia

• The result Motorola missed the shift to digital
  mobile telephony and the growing strength of the
  European GSM standard. It didn't see the
  potential to turn the phone into a fashion icon
  it was slow to take on board the new ways mobiles
  were being used and to recognise that a broader,
  but more fragmented user base would spell the end
  of "one-size-fits-all" products.
• This myopic approach to competition, and the
  failure to engage fully with the rest of the
  world and capture the potential of global markets
  and the innovative ideas in them, would cost
  Motorola dearly.

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The Marketing Myopia
The types of marketing myopia can be classified
along two dimensions 1. the management's
definition of the firm, and 2. the firm's
business environment perspective.
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The Marketing Myopia

• The second dimension concerns the firm's business
  environment perspective. In essence, these firms
  have an inward orientation toward that industry.
• Firms with a single-industry perspective are
  preoccupied with the actions and reactions of
  immediate competitors.

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The Marketing Myopia

• In addition, they are considered to have inbred
  management. Some managers have spent the greater
  part of their professional careers in one
  industry.
• Inbred management is not necessarily undesirable,
  but it is potentially detrimental when it fosters
  the contention that it can learn nothing from
  firms in other industries, and it keeps its firm
  perceptually insulated from such other firms.
• For example, managers of the cold breakfast
  cereal firm may be concerned only with the
  actions and reactions of other cold cereal firms.

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The Marketing Myopia

• Firms with a multi-industry perspective, on the
  other hand, have a broader view of the market.
• While they are concerned with immediate
  competitors, they also realize that firms in
  other industries can serve as sources of
  innovative strategies as well as being potential
  competitors.

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The Marketing Myopia

• Such management is said to be cross-bred, in that
  managers may have experience in a broad range of
  industries or they are willing to learn from
  firms facing similar situations in other
  industries.
• Firms with a multi-industry perspective are
  outwardly oriented and not perceptually insulted
  from other industries.

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The Marketing Myopia

• The combination of the two dimensions produces a
  matrix with four types of firms

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The Marketing Myopia

• 1. classic myopia, with a product-definition/singl
  e-industry perspective,
• 2. competitive myopia, with a customer-definition
  /single-industry perspective,
• 3. efficiency myopia, with a product-definition/m
  ulti-industry perspective,
• 4. innovative myopia, with a customer-definition/
  multi-industry perspective.

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The Marketing Myopia

• Marketing managers who wish to achieve the
  innovative firm orientation should
• take a generic view of their firm or industry,
• monitor other industries,
• engage in benchmarking to determine the
  objectives for relevant areas of marketing,
• recruit marketing people, and
• be flexible enough to apply unique solutions to
  problems.

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Case Study
Amazon.com

• Strong sales, no profits
• Customer-driven to its core
• Each customers experience is unique

• Provides great selection, good value, discovery
  and convenience
• A true online community

Discussion Will Amazon.com Survive?
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What is Marketing?

• Marketing is managing profitable customer
  relationships
• Attracting new customers
• Retaining and growing current customers
• Marketing is NOT synonymous with sales or
  advertising

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Marketing Management

• Marketing management is the art and science of
  choosing target markets and building profitable
  relationships with them.
• Creating, delivering and communicating superior
  customer value is key.

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Marketing Management

• Customer Management
• Marketers select customers that can be served
  well and profitably.
• Demand Management
• Marketers must deal with different demand states
  ranging from no demand to too much demand.

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Marketing Management
Marketing Management
Management Orientations

• Selling concept
• Marketing concept

• Production concept
• Product concept

• Societal marketing concept

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CRM

• CRM Customer relationship management . . .is
  the overall process of building and maintaining
  profitable customer relationships by delivering
  superior customer value and satisfaction.

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CRM

• It costs 5 to 10 times MORE to attract a new
  customer than it does to keep a current customer
  satisfied.
• Marketers must be concerned with the lifetime
  value of the customer.

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CRM

• Customer value/satisfaction
• Perceptions are key
• Meeting/exceeding expectations creates
  satisfaction
• Loyalty and retention
• Benefits of loyalty
• Loyalty increases as satisfaction levels increase
• Delighting consumers should be the goal
• Growing share of customer
• Cross-selling

Key Concepts

• Attracting, retaining and growing customers
• Building customer relationships and customer
  equity

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CRM

• Customer equity
• The total combined customer lifetime values of
  all customers.
• Measures a firms performance, but in a manner
  that looks to the future.

Key Concepts

• Attracting, retaining and growing customers
• Building customer relationships and customer
  equity

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CRM

• Customer relationship levels and tools
• Target market typically dictates type of
  relationship
• Basic relationships
• Full relationships
• Customer loyalty and retention programs
• Adding financial benefits
• Adding social benefits
• Adding structural ties

Key Concepts

• Attracting, retaining and growing customers
• Building customer relationships and customer
  equity

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Marketing Challenges

• Technological advances, rapid globalization, and
  continuing social and economic shifts are causing
  marketplace changes.
• Major marketing developments can be grouped under
  the theme of Connecting.

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Marketing Challenges
Connecting

• Advances in computers, telecommunications,
  video-conferencing, etc. are major forces.
• Databases allow for customization of products,
  messages and analysis of needs.
• The Internet
• Facilitates anytime, anywhere connections
• Facilitates CRM
• Creates marketspaces

• Via technology
• With customers
• With marketing partners
• With the world

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Marketing Challenges
Connecting

• Selective relationship management is key.
• Customer profitability analysis separates winners
  from losers.
• Growing share of customer
• Cross-selling and up-selling are helpful.
• Direct sales to buyers are growing.

• Via technology
• With customers
• With marketing partners
• With the world

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Marketing Challenges
Connecting

• Partner relationship management involves
• Connecting inside the company
• Connecting with outside partners
• Supply chain management
• Strategic alliances

• Via technology
• With customers
• With marketing partners
• With the world

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Marketing Challenges

• Globalization
• Competition
• New opportunities
• Greater concern for environmental and social
  responsibility
• Increased marketing by nonprofit and
  public-sector entities
• Social marketing campaigns

Connecting

• Via technology
• With customers
• With marketing partners
• With the world