Marketing concepts – Explained

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Marketing Overview

Marketing:

1. Definition:  Kotler (2003, p.19) defines marketing as, “ meeting needs profitable”. While Jobber (2007, p.4) says that, marketing is associated with creation and retention of the customers. If we combine the ideas of both these marketing gurus then we can say that “Marketing is a function to create and retain customers, while meeting their and our needs profitable”

The word profit, in the above definition not necessarily means that it should be a monetary profit. There are many organizations which are non-profit organisation; does it mean that they do not need to market themselves? Indeed, they have to.  To explain this we can take an example of a famous non-profit organisation CRY (Child Rights and You). They, too, follow a series of marketing campaign to, perhaps, make sure that more people know about their objective, which is fighting for the rights of children worldwide, and succeed in it. They profit when the objective is served.

The concept: The customers these days are very lucky since they have an option to choose from, everywhere. From buying an aerated drink to an air ticket. And while all these businesses are busy marketing them-selves to create and retain customers, and generate profit, the only way a customer will choose them over their competitors, is if their Unique Selling Preposition meets the needs and expectations of their customers better than their competitor, Jobber (2007, p.5).

Supply and Demand: To best explain this concept, we can refer to a very well-known example of the underground trains in London, making it easier to understand. In London, the local trains have two types of fare lists; Peak hour fares and Off-peak fares, and obviously, the latter is cheaper. This can be related to the supply and demand concept. When the demand is more (peak – hours) the supply has to be increased and vice-versa. To avoid congestion people are offered a lower fare in the off-peak hours which evenly distribute the demand, throughout all the hours of the day.

Dynamic environment: The environment in which various companies carry out their business is not constant, it is changing continuously and hence is referred to as “dynamic”. In the example cited in Supply and Demand, the number of people travelling every hour changes and in the CRY example, the children throughout the world are taken care of, so their creed, caste, race, ethnicity and demography changes.

To sum it up, we can conclude that, “For successful marketing, one must be able to supply efficiently to the demand of its customers in the dynamic environment, and meet their needs and expectations, better than their competitor, to achieve profit.”

2)    Marketing Factors

No product can, or either aims to satisfy the needs of all of the customers in the market. To explain the various concepts we will use an example of Apple iPod, a famous brand of hi-tech portable music player. It is not capable of or does wish to sell to every individual who wants an access to music on the go.

Apple iPod only targets a set of customers to whom it can sell most of its product and generate profit, anything over and above that is welcome but not expected. So, how does Apple, or any company, find out if there is a set of people who would want such a product, and what is their number, buying behaviour and other attributes?

Apple starts gathering information for this purpose and this recorded information is then analysed.  The process, called as market research, is done in various ways. Data is collected internally and externally, continuously and in an ad-hoc way and when collated, is termed as information. This whole system in which this research is carried out is called as marketing information system, Jobber (2007, p.230).

After the market research, Apple knows about the set of people, also called as the segment of customers, who desire a lot more than a traditional music player. This process is called Segmentation, and Apple now knows that it has to target to sell most of its innovation to this segment and generate profit.

Segmentation to target is done based on many factors classified under three broad sections – Behavioural, Psychographic and Profile of the customers, Jobber (2007, p. 278).

Once a segment is defined then, since marketing works closely with manufacturing, this innovation is tailored to fit the expectation and needs of the customer, so that profit can be generated. The process of designing a product to fit these requirements, keeping the targeted segment in mind, is called as positioning.

In this case, Apple designed iPod for a customer base in certain geographic, demographic and socio-economic condition (profile) following a certain lifestyle and with certain personality (Psychographic) and for the customer who seek a set of certain benefits, purchase occasion and behaviour, usage and have a certain set of perceptions and beliefs (Behavioural). For people with not this high expectation, they have a lower range of a similar product, smartly termed as Apple iPod Shuffle.

Hence to conclude, Apple iPod is positioned to a target a certain segment of customers, carefully selected by an appropriate market research by a marketing information system.

3)    Product

Kotler (2003, p.100).

The above shown matrix will be explained using the example of Coca-Cola, a famous brand of carbonated soft drink sold worldwide. We will try to understand how the 4Ps – price, product, place and promotion are used to achieve this.

With a serving of 1.6 billion a day, throughout 200+ countries with 3,300+ types of soft drink products, (Coca-Cola website, 2006 – 2010), Coca-Cola would be following a well-strategized approach to the above shown matrix.

When Coca-Cola has to penetrate in an existing market, it uses the Price and Promotion as a major tool. No new product is launched, but an existing product is sold by offering volume discounts (price). Various new marketing campaigns are launched (promotion) to add to the sales.

In the product development stage, a new product is launched to sell to regular customers. Coca-Cola has done this by launching 3,300+ different brands with a slight change in existing products. To name few would be Diet coke, a few caffeine-free product line like Coca-Cola cherry, Coca-Cola zero and Coca-Cola vanilla (Product). Promotion is also used as a tool to achieve this, but Place and Price are normally not the strategy catalysts.

The market development stage looks at a new market with an existing product. For Coca Cola, it would be its legendary traditional “Coke”. This is normally done in a foreign market. Though a new product is not launched, a slight change is often made to respect the cultural difference. In this case, it’s the Place that works the strategy.

Diversification is a very interesting stage, as here a new product is launched in a new place. Promotion is a mandate and a price has to be chosen wisely to fit the new market. Here all the 4Ps work together to achieve the result. A classic example of this would be that since Indians love fresh lime water, Coca-Cola launched Minute-maid Nimbu, which is a brand name for packaged fresh lime water. This stage is supposed to be the most risky stage and is often backed up by the strong brand name behind it, Coca-Cola in this case. A great marketing campaign is equally important in this stage.

4)    Price

The first thing that would come to the customer’s mind, who wants to buy a car, and is shown a latest model of Ferrari, is “Price”.

Price influences the buying behaviour of most customers. However the response to a change in demand varies for different reason in different customers. Kotler (2003, 495 498) explains the reasons under which the demand is reacted upon with a change in price.

Normally the increase in price is often acknowledged with a decrease in demand, unless the product has no substitutes. Windows operating system is a classic example here. Not many users are proficient with other operating system and so Microsoft dominates the market and decides the price to which not many have an alternative.

Other reason is when the customers do not readily notice the change, and this happens if the change is hardly any. If Microsoft changes the price incredibly, then the people reacting to this will depend on the number of people who are ready to switch to another operating system and change the habit created by Windows. This is the third reason, the comfort in accepting change.

Apple is famous for its innovative and hi-tech gadgets. If it launches a new iPod with loaded features but prices it high, the customers may perhaps feel this justified and the demand may still not fall. This adds to the last reason.

Though people react to price change, company may have to lower or raise its price under several conditions. It is followed by a reaction, as one may expect.

Prices may be cut to notice the competitor’s reaction or maybe if the country in which the target market is located, is undergoing an economic low, like recession. However, it is very important for a brand to communicate the price cut wisely, through an appropriate channel of promotion so that the consumers do not assume that the product has lower quality products sailing through the market.

The company may increase its price to increase its profit percentage. It may be a result of the increased demand too. It may do this in one go or increase the price in small amounts in regular intervals. A company should be aware of the price change reaction, as discussed earlier before doing this, Kotler (2003, p. 495).

5)    Promotion

According to Jobber, Integrated marketing communication (IMC) is the concept by which companies their marketing communication tools to deliver a clear, consistent, credible and competitive message about the organisation and its products. Jobber (2007, p. 532)

Corporate social responsibility (CSR) refers to the ethical practice that an organisation must follow to demonstrate the care factor towards the society they are doing their business in. A good example of this is that Pepsico. restrained itself from advertising about its products to children for a while in America, as obesity in children was on a high, Jobber(2007,p. 530).

CSR can be used as a very powerful tool in IMC. If a company make a really good effort it can communicate a very good message in people, hence increasing their loyalty in that company and product. In the above said example of Pepsico., when the company showed a concern about children, then it would have definitely won the hearts of their parents, which are also a potential consumers. So, maybe when they go
shopping
for soft-drinks, they will look at this brand with respect and may, perhaps prefer it over its competitors.

Advertising, which is a very important and strong function of IMC has some limitations too. In addition, most forms of marketing communication is paid and costs lots of money to the organisation. They are also non-personal and at times, the customers know that the company is speaking for itself. CSR, however can be a good tool to overcome this limitation. If a company takes a really appreciated step towards the society then can create a buzz and get people talking about their brand. It can also work as a publicity, which is very strong on credibility and attracts high readership, Jobber (2007, p. 531).

Google, the world’s biggest search engine, as per the Alexa ranking, also ranks high on CSR and lists in world top ethical companies. It has initiated green drive for a greener planet and to reduce carbon footprints with direct purchase of renewable energy. It also invests in wind mills for to meet its energy requirement, Google (Google website, 2010). Besides that, Google also support an energy saving model of google.com called blackle.com which has helped save more than 2,138,940.413 watt hours and counting as we discuss, so far.

These actions have been a topic of discussion enhancing the brand loyalty for Google and hence spreading the positive word for the company and its product.

6)    Place

According to Jonathan Reynolds, Christine Cuthbertson, Richard Bell (2004, p.3), “From the point of view of the marketer, retailers are, by definitions, closer to the consumers than supplier companies.” This means that supplier companies have to also focus on retailers need because they are the direct point of contact of the ultimate customers.

Though most retailing is carried out in the supermarket or a store based type of retail, the non-store type like a mail order and automated vending are also equally responsible for the sales revenues.

Customers have the privilege of buying the desired brand at different prices at different stores. They choose the store on various criteria. Store location is important, but there are other factors involved too which keep the customer involved. Many a times customers may be attracted by trendy foreign brands and styles, but may still demand a local touch in the store, Jobber (2007, p. 925).

Product assortment and services also play a very important role in keeping the customers involved with the same store. For instance a customer will prefer going to a one-stop shop which takes care of its grocery, electronics and toiletries needs rather than visiting 3 stores for each respective shopping. So, if a store decides to widen the scope of its offering within the same premises, then it is said to be a wise decision.

Price has always been important when it comes to buying, but that is not the only thing that all the customers look for. While some retailers may offer lower price as their Unique Selling Preposition, e.g. Aldi offering lower prices than Tesco and Booths, others may have higher price than its competitive counterpart and may still do well.

Unlike the previous days, shopping these days is considered as an act of leisure. Therefore it is very important for the store to maintain a pleasant design, colour theme and layout. Both exterior and interior design affect atmosphere, Jobber (2007, p. 928). Colour, sound and smell can affect mood and hence customers may perhaps spend more time in the store and eventually end up buying more, hence increasing sales. Customers do not even mind paying that little extra price, which is charged to recover the charges involved in proving the ambience to the customer for exceptional shopping experience.

Thus retailers play a very important role because of its high customer contact characteristic of service.

References:

Principle and practice of marketing – Fifth Edition – 2007 – By David Jobber

Marketing Management – Eleventh edition – 2004 – By Philip Kotler

Retail strategy: the view from the bridge – 2004 – By Jonathan Reynolds, Christine Cuthbertson, Richard Bell

Coca-cola website:
http://www.thecoca-colacompany.com/ourcompany/index.html

Google website:
http://www.google.com/corporate/green/

Oliver Bear website:
http://oliverbear.com

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I’m an eCommerce Project Director at an agency in London and a consultant for a number of eCommerce start-ups. I founded Think etc 9 years ago which now lets me share my research and experience with all the interesting brands, people, places and projects that I have been privileged to work with.

My work on crowdsourcing was published by Oxford as part of a journal article and I have been obsessing over eCommerce and Magento over the past several years.

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