5 Marketing Foundations and Strategy

Illustration of a hand with megaphone popping out of a tablet, indicating marketing

Learning Objectives

Describe the marketing concept and identify successful marketing concepts.

Define the target market for an organization.

Identify how marketing can create a competitive advantage for an organization.

Introduction

The right principle
Figure 1: The “Right” Principle

Marketing is the process of getting the right goods or services or ideas to the right people at the right place, time, and price, using the right promotion techniques and utilizing the appropriate people to provide the customer service associated with those goods, services, or ideas. This concept is referred to as the “right” principle and is the basis of all marketing strategy. We can say that marketing is finding out the needs and wants of potential buyers (whether organizations or consumers) and then providing goods and services that meet or exceed the expectations of those buyers.

Marketing is about creating exchanges. An exchange takes place when two parties give something of value to each other to satisfy their respective needs or wants. In a typical exchange, a consumer trades money for a good or service. In some exchanges, non-monetary things are exchanged, such as when a person who volunteers for the company charity receives a T-shirt in exchange for time spent. One common misconception is that some people see no difference between marketing and sales. They are two different things that are both part of a company’s strategy. Sales incorporates actually selling the company’s products or service to its customers, while marketing is the process of communicating the value of a product or service to customers so that the product or service sells.

To encourage exchanges, marketers follow the “right” principle. If a local Avon representative doesn’t have the right lipstick for a potential customer when the customer wants it, at the right price, the potential customer will not exchange money for a new lipstick from Avon. Think about the last exchange (purchase) you made: What if the price had been 30 percent higher? What if the store or other source had been less accessible? Would you have bought anything? The “right” principle tells us that marketers control many factors that determine marketing success.

Furthermore, successful marketing generates revenue that pays for all other company operations. Without marketing, no business can last very long. It is that important and that simple—and it applies to every business. Marketing is applicable to goods, services, events, experiences, people, places, properties, organizations, businesses, ideas, and information.  There are several concepts that are basic to an understanding of marketing: the marketing concept, customer value, the marketing mix, segmentation, target market, the marketing environment, and marketing strategy.

The Marketing Concept

Example

A Robot with Attitude

35-45 year old man in a Tilley hat standing by a wall and holding his robot creation (approximately 14 inches tall)
M. Tilden and his creation, Robosapien

Mark Tilden used to build robots for NASA that ended up being destroyed on Mars, but after seven years of watching the results of his work meet violent ends thirty-six million miles from home, he decided to specialize in robots for earthlings. He left the space world for the toy world and teamed up with Wow Wee Toys Ltd. to create “Robosapien,” an intelligent robot with an attitude. The fourteen-inch-tall robot, which is operated by remote control, has great moves. In addition to walking forward, backward, and turning, he dances, raps, and gives karate chops. He can pick up small objects and even fling them across the room, and he does everything while grunting, belching, and emitting other “bodily” sounds.

Robosapien gave Wow Wee Toys a good head start in the toy robot market: in the first five months, more than 1.5 million Robosapiens were sold. The company expanded the line to more than a dozen robotics and other interactive toys, including FlyTech Bladestar, a revolutionary indoor flying machine that won a Popular Mechanics magazine Editor’s Choice Award in 2008).

What does Robosapien have to do with marketing? The answer is fairly simple: though Mark Tilden is an accomplished inventor who has created a clever product, Robosapien wouldn’t be going anywhere without the marketing expertise of Wow Wee. In this chapter, we’ll look at the ways in which marketing converts product ideas like Robosapien into commercial success.

Most successful organizations have adopted the marketing concept. The marketing concept is based on the “right” principle. The marketing concept is the use of marketing data to focus on the needs and wants of customers in order to develop marketing strategies that not only satisfy the needs of the customers but also accomplish the goals of the organization. An organization uses the marketing concept when it identifies the buyer’s needs and then produces the goods, services, or ideas that will satisfy them (using the “right” principle). The marketing concept is oriented toward pleasing customers (be those customers organizations or consumers) by offering value. Specifically, the marketing concept involves the following:

  • Identifying the needs and wants of the customers, or potential customers, so the organization can distinguish its product(s) from competitors’ offerings. Products can be goods, services, or ideas.
  • Integrating all of the organization’s activities to satisfy these wants and needs
  • Achieving long-term goals for the organization by satisfying customer wants and needs legally and responsibly.

Today, companies of every size in all industries are applying the marketing concept. Enterprise Rent-A-Car found that its customers didn’t want to have to drive to its offices. Therefore, Enterprise began delivering vehicles to customers’ homes or places of work. Disney found that some of its patrons really disliked waiting in lines. In response, Disney began offering FastPass at a premium price, which allows patrons to avoid standing in long lines waiting for attractions. One important key to understanding the marketing concept is to know that using the marketing concept means the product is created after market research is used to identify the needs and wants of the customers. Products are not just created by production departments and then marketing departments are expected to identify ways to sell them based on the research. An organization that truly utilizes the marketing concept uses the data about potential customers from the very inception of the product to create the best good, service, or idea possible, as well as other marketing strategies to support it.

“The marketing concept recognizes that there is no reason why customers should buy one organization’s offerings unless it is in some way better at serving the customers’ wants and needs than those offered by competing organizations. Customers have higher expectations and more choices than ever before. This means that marketers have to listen more closely than ever before.” Charles W. Lamb, Joseph F. Hair, and Carl McDaniel, Essentials of Marketing (Mason, OH: South-Western, 2004), 8.

Sam Walton, the founder of Walmart, put it best when he said, “There is only one boss: the customer. And he can fire everybody in the company, from the chairman on down, simply by spending his money somewhere else.” (“You Don’t Say?,” Sales and Marketing Management, October 1994, 111–12). Small businesses are particularly suited to abiding by the marketing concept because they are more nimble and closer to the customer than large companies. Changes can be made more quickly in response to customer wants and needs.

Customer Value

The definition of marketing specifically includes the notion that offerings must have value to customers, clients, partners, and society at large. This necessarily implies an understanding of what customer value is. Customer value is the difference between perceived benefits and perceived costs. Such a simple definition can be misleading, however, because the creation of customer value will always be a challenge—most notably because a company must know its customers extremely well to offer them what they need and want. This is complicated because customers could be seeking functional value (a product or a service performs a utilitarian purpose), social value (a sense of relationship with other groups through images or symbols), emotional value (the ability to evoke an emotional or an affective response), epistemic value (offering novelty or fun), or conditional value (derived from a particular context or a sociocultural setting, such as shared holidays)—or some combination of these types of value.

Marketing plays a key role in creating and delivering value to a customer. Customer value can be offered in a myriad of ways. In addition to superlative ice cream, for example, the local ice cream shop can offer a frequent purchase card that allows for a free ice cream cone after the purchase of fifteen ice cream products at the regular price. Your favorite website can offer free shipping for Christmas purchases and/or pay for returns. Zappos.com offers free shipping both ways for its shoes. The key is for a company to know its consumers so well that it can provide the value that will be of interest to them.

What is Marketing Strategy?

Marketing strategy involves selecting one or more target markets, deciding how to differentiate and position the product or the service, and creating and maintaining a marketing mix that will hopefully prove successful with the selected target market(s). Specifically, a firm creates a marketing strategy by understanding the external environment, defining the target market, determining a competitive advantage, and developing a marketing mix. Environmental scanning enables companies to understand the external environment.

Understanding the External Environment

Marketers utilize the tools of marketing strategy to develop new products and sell them in the marketplace. But marketers cannot create products in isolation. Marketers must understand and consider all aspects of the external environment in order to create marketing programs (plans) that will be successful in the current market and in future markets. Thus, many organizations assemble a team of specialists to continually collect and evaluate environmental information, a process called environmental scanning. The goal in gathering the environmental data is to identify current and future market opportunities and threats.

Computer manufacturers understand the importance of environmental scanning to monitor rapidly changing consumer interests. Since the invention of the personal computer (PC), computer technicians and other enthusiasts have taken two things for granted: processor speeds will grow exponentially, and PCs will become indistinguishable from televisions. The result of this will be “convergence,” which means that the digital industry (manufacturers of computers, smartphones, and other mobile devices) will merge together with entertainment (such as television, radio, streaming video, and the internet). This convergence is already creating great opportunities for new products—watches that have both computers and cell phones in them, cell phones used to download videos not available except by independent entertainment producers (who are not affiliated with traditional media) such as Amazon and Google.

One clear winner in this new world so far is Apple, which has leveraged its computer platform to make it easy and fashionable for consumers to become experts in the digital age. Apple has capitalized on this through the development of iTunes, the iPhone and iPads, and the Apple Watch. Apple sells almost as many iPads per quarter as it does Macintosh computers, and it certainly sells a massive number of iPhones. Microsoft wants in on this business badly, but Hewlett-Packard decided to shift its loyalty to Apple, so Microsoft doesn’t have much leverage just now.  The other company to watch over the next few years is Samsung, which has doubled its efforts to make its consumer electronics offerings strong competition to Apple products. Finally, the device-free streaming services such as Amazon Music, Pandora, and Spotify have provided competition to Apple while restoring profitability to the music industry.

In general, six categories of environmental data shape most marketing decisions:

  • Cultural/social forces: Includes such factors as the buying behaviors of specific cultures and subcultures, the values of potential customers, the changing roles of families, and other societal trends such as employees working from home and flexible work hours
  • Demographic forces: Includes such factors as changes in the ages of potential customers (e.g., baby boomers, millennials), birth and death rates, and locations of various groups of people
  • Economic forces: Includes such factors as changing incomes, unemployment levels, inflation, and recession
  • Technological forces: Includes such factors as advances in telecommunications and computer technology
  • Political and legal forces: Includes such factors as changes in laws, regulatory agency activities, and political movements
  • Competitive forces: Includes such factors as new and shifting competition from domestic and foreign-based firms

Defining the Target Market

How do marketers identify target markets? First, they usually identify the overall market for their product—the individuals or organizations that need a product and are able to buy it. This market can include either or both of two groups:

  1. A consumer market—buyers who want the product for personal use
  2. An industrial market—buyers who want the product for use in making other products

You might focus on only one market or both. A farmer, for example, might sell blueberries to individuals on the consumer market and, on the industrial market, to bakeries that will use them to make muffins and pies.

Market Segmentation

Market segmentation diagram
Figure 2: Market Segmentation

The next step in identifying a target market is to divide the entire market into smaller portions, or market segments—groups of potential customers with common characteristics that influence their buying decisions. The purpose of segmenting a market is to focus the marketing and sales efforts of a business on those prospects who are most likely to purchase the company’s product(s) or service(s), thereby helping the company (if done properly) earn the greatest return on those marketing and sales expenditures. (Center for Business Planning, “Market Segmentation,” Business Resource Software, Inc., accessed December 1, 2011, www.businessplans.org/segment.html). Market segmentation maintains two very important things: (1) there are relatively homogeneous subgroups (no subgroup will ever be exactly alike) of the total population that will behave the same way in the marketplace, and (2) these subgroups will behave differently from each other. You can use a number of characteristics to narrow a market. Let’s look at some of the most useful categories in detail. Figure 2 labels the four important categories of marketing segmentation.

Demographic Segmentation

Demographic segmentation divides the market into groups based on such variables as age, marital status, gender, ethnic background, income, occupation, and education.

Age, for example, will be of interest to marketers who develop products for children, retailers who cater to teenagers, colleges and universities that recruit students, and assisted-living facilities that promote services among the elderly. W Network targets female viewers, while TeleLatino Network (TLN) networks targets Spanish-speaking viewers. When Mazda Canada offers recent college and university graduates a $400 bonus toward leasing or buying a new Mazda, the company’s marketers are segmenting the market according to education level.

Geographic Segmentation

Geographic segmentation—dividing a market according to such variables as climate, region, and population density (urban, suburban, small-town, or rural)—is also quite common. Climate is crucial for many products: try selling snow shovels in Hawaii or above-ground pools in the Yukon. Consumer tastes also vary by region. That’s why McDonald’s caters to regional preferences, offering poutine at Canadian locations, whereas in the United States you can get a breakfast of Spam, sausage and rice in Hawaii, lobster rolls in New England and country ham, biscuits and gravy in the southern states. Outside of North America, menus diverge even more widely. You can get a McPaneer Royale in India, Mozzarella Dippers in the UK, a prawn burger in Singapore and gazpacho in Spain.

Likewise, differences between urban and suburban life can influence product selection. For example, it’s a hassle to parallel park on crowded city streets. Thus, Toyota engineers have developed a product especially for city dwellers. The Japanese version of the Prius, Toyota’s hybrid gas-electric car, can automatically parallel park itself. Using computer software and a rear-mounted camera, the parking system measures the spot, turns the steering wheel, and swings the car into the space (making the driver—who just sits there—look like a master of parking skills). After its success in the Japanese market, the self-parking feature was brought to the United States.

Behavioural Segmentation

Dividing consumers by such variables as attitude toward the product, user status, or usage rate is called behavioural segmentation. Behavioural segmentation, developed by Forrester Research, divides consumers into two camps: technology optimists, who embrace new technology, and technology pessimists, who are indifferent, anxious, or downright hostile when it comes to technology.

Some companies segment consumers according to user status, distinguishing among nonusers, potential users, first-time users, and regular users of a product. Depending on the product, they can then target specific groups, such as first-time users. Credit-card companies use this approach when they offer frequent flyer miles to potential customers in order to induce them to get their card. Once they start using it, they’ll probably be segmented according to usage. “Heavy users” who pay their bills on time will likely get increased credit lines.

Psychographic Segmentation

Psychographic segmentation classifies consumers on the basis of individual lifestyles as they’re reflected in people’s interests, activities, attitudes, and values. Do you live an active life and love the outdoors? If so, you may be a potential buyer of hiking or camping equipment or apparel. If you’re a risk taker, you might catch the attention of a gambling casino. The possibilities are limited only by the imagination.

Clustering Segments

Typically, marketers determine target markets by combining, or “clustering,” segmenting criteria. What characteristics does Starbucks look for in marketing its products? Three demographic variables come to mind: age, geography, and income. Buyers are likely to be males and females ranging in age from about twenty-five to forty (although college students, aged eighteen to twenty-four, are moving up in importance). Geography is a factor as customers tend to live or work in cities or upscale suburban areas. Those with relatively high incomes are willing to pay a premium for Starbucks specialty coffee and so income—a socioeconomic factor—is also important.

 

[Sources: Adapted from “Market Segmentation,” Business Resource Software, Inc., accessed December 2, 2011, http://www.businessplans.org/segment.html; adapted from Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 214, 227.]

Creating a Competitive Advantage

A competitive advantage, also called a differential advantage, is a set of unique features of a company and its products that are perceived by the target market(s) as significant and superior to those of the competition. Competitive advantage is the factor that causes customers to patronize a specific firm and not the competition. There are four types of competitive advantage: cost, product differentiation, service differentiation, and niche.

Cost Competitive Advantage

A firm that has a cost competitive advantage can produce a product or service at a lower cost than all its competitors while maintaining satisfactory profit margins. Firms become cost leaders by obtaining inexpensive raw materials, making plant operations more efficient, designing products for ease of manufacture, controlling overhead costs, and avoiding marginal customers.

Over time, the cost competitive advantage may fail. Typically, if one firm is using an innovative technology to reduce its costs, then other firms in the industry will adopt this technology and reduce their costs as well. For example, Bell Labs invented fiber-optic cables that reduced the cost of voice and data transmission by dramatically increasing the number of calls that could be transmitted simultaneously through a two-inch cable. Within five years, however, fiber-optic technology had spread through the industry, and Bell Labs lost its cost competitive advantage. Firms may also lose their cost competitive advantage if competing firms match their low costs by using the same lower-cost suppliers. Therefore, a cost competitive advantage may not offer a long-term competitive advantage.

Product Differentiation Competitive Advantage

Because cost competitive advantages are subject to continual erosion, other types of competitive advantage tend to provide a longer-lasting competitive advantage. The durability of a differential competitive advantage can be more successful for the long-term viability of the company. Common differential advantages are brand names (Tide detergent), a strong dealer network (Caterpillar for construction equipment), product reliability (Lexus vehicles), image (Neiman Marcus in retailing), and service (Federal Express). Brand names such as Chanel, BMW, and Cartier stand for quality the world over. Through continual product and marketing innovations and attention to quality and value, marketers at these organizations have created enduring competitive advantages.

Service Differentiation Competitive Advantage

In today’s world of instant connection and social media, services are crucial for both tangible and intangible  products. Almost every day, the media report the consequences of poor service that went “viral” on social media because the service interaction was videotaped and uploaded to the internet (or worse – see for example https://youtu.be/5YGc4zOqozo). Customers now demand a higher level of service for all kinds of products, and if the service level does not meet customer expectations, it is likely that the customer will post negative comments on a review site or upload the interaction to various social media platforms. Some small companies have had to close their doors on the basis of one poor service interaction that went viral. Service levels that delight customers are even more important for intangible products such as engineering and accounting. More than 80 percent of the U.S. GDP is based on services . The ability to create the service product, continually refine the service process, and interact with customers (co-creators of the service) is crucial. Higher-level services require more planning, better execution, and constant evolution through the relationships with the customers. The use of service differentiation as a competitive advantage can be one of the most enduring and viable types of advantage.

Niche Competitive Advantage

A company with a niche competitive advantage targets and effectively serves a single segment of the market. For small companies with limited resources that potentially face giant competitors, utilizing a niche competitive advantage may be the only viable option. A market segment that has good growth potential but is not crucial to the success of major competitors is a good candidate for a niche strategy. Once a potential segment has been identified, the firm needs to make certain it can defend against challengers through its superior ability to serve buyers in the segment. For example, Regions Bank–Music Row Private Bank follows a niche strategy with its concentration on country music stars and entertainment industry professionals in Nashville. Its office is in the heart of Nashville’s music district. Music Row Private Bank has decided to expand its niche strategy to Miami, the “epicenter” of Latin music, and to Atlanta. The latter is a longtime rhythm-and-blues capital and now is the center of contemporary “urban” music. Both new markets have the kinds of music professionals—entertainers, record executives, producers, agents, and others—that have made Regions Bank–Music Row Private Bank so successful in Nashville.

Developing A Marketing Mix

Target Marketing - the marketing mix: Price, Place, Promotion, ProductMarketers use a number of different tools to develop the products or services that meet the needs and wants of their customers, provide excellent value for the customers, and satisfy those customers. Marketing strategy is mainly comprised of the five different components of marketing mix. More commonly known as “the four Ps” of marketing, the traditional marketing mix refers to the combination of product, price, promotion, and place.The marketing mix is discussed in more detail in Chapter 6: Product, Promotion, Place and Pricing. A brief overview is presented here.

Product

Product refers to tangible, physical products as well as to intangible services. Examples of product decisions include design and styling, sizes, variety, packaging, warranties and guarantees, ingredients, quality, safety, brand name and image, brand logo, and support services. In the case of a services business, product decisions also include the design and delivery of the service, with delivery including such things as congeniality, promptness, and efficiency. Without the product, nothing else happens. Product also includes a company’s website.

Price

Price is what it will cost for someone to buy the product. Although the exchange of money is what we traditionally consider as price, time and convenience should also be considered. Examples of pricing decisions include pricing strategy selection (e.g., channel pricing and customer segment pricing), retail versus wholesale pricing, credit terms, discounts, and the means of making online payments. Channel pricing occurs when different prices are charged depending on where the customer purchases the product. A paper manufacturer may charge different prices for paper purchased by businesses, school bookstores, and local stationery stores. Customer segment pricing refers to charging different prices for different groups. A local museum may charge students and senior citizens less for admission. Philip Kotler and Kevin Lane Keller, Marketing Management (Upper Saddle River, NJ: Pearson Prentice Hall, 2009), 401.

Promotion

Having the best product in the world is not worth much if people do not know about it. This is the role of promotion—getting the word out. Examples of promotional activities include advertising (including on the Internet), sales promotion (e.g., coupons, sweepstakes, and 2-for-1 sales), personal sales, public relations, trade shows, webinars, videos on company websites and YouTube, publicity, social media such as Facebook and Twitter, and the company website itself. Word-of-mouth communication, where people talk to each other about their experiences with goods and services, is the most powerful promotion of all because the people who talk about products and services do not have any commercial interest.

Place

Place is another word for distribution. The objective is to have products and services available where customers want them when they want them. Examples of decisions made for place include inventory, transportation arrangements, channel decisions (e.g., making the product available to customers in retail stores only), order processing, warehousing, and whether the product will be available on a very limited (few retailers or wholesalers) or extensive (many retailers or wholesalers) basis. A company’s website is also part of the distribution domain.

Examples

No matter what the business or organization, there will be a marketing mix. The business owner may not think about it in these specific terms, but it is there nonetheless. Here is an example of how the marketing mix can be configured for a local Italian restaurant (consumer market).

  • Product. Extensive selection of pizza, hot and cold sub sandwiches, pasta and meat dinners, salads, soft drinks and wine, homemade ice cream and bakery products; the best service in town; and free delivery.
  • Price. Moderate; the same price is charged to all customer segments.
  • Promotion. Ads on local radio stations, websites, and local newspaper; flyers posted around town; coupons in ValPak booklets that are mailed to the local area; a sponsor of the local little league teams; ads and coupons in the high school newspaper; and a Facebook presence.
  • Place. One restaurant is located conveniently near the center of town with plenty of off-street parking. It is open until 10:00 p.m. on weekdays and 11:30 p.m. on Fridays and Saturdays. There is a drive-through for takeout orders, and they have a special arrangement with a local parochial school to provide pizza for lunch one day per week.

Here is an example of how the marketing mix could be configured for a green cleaning services business (business market).

  • Product. Wide range of cleaning services for businesses and organizations. Services can be weekly or biweekly, and they can be scheduled during the day, evening, weekends, or some combination thereof. Only green cleaning products and processes are used.
  • Price. Moderate to high depending on the services requested. Some price discounting is offered for long-term contracts.
  • Promotion. Ads on local radio stations, website with video presentation, business cards that are left in the offices of local businesses and medical offices, local newspaper advertising, Facebook and Twitter presence, trade show attendance (under consideration but very expensive), and direct mail marketing (when an offer, announcement, reminder, or other item is sent to an existing or prospective customer).
  • Place. Services are provided at the client’s business site. The cleaning staff is radio dispatched.

Introduction to International Marketing

Now that the world has entered  the next millennium, we are seeing the emergence of an interdependent global economy that is characterized by faster communication, transportation, and financial flows, all of which are creating new marketing opportunities and challenges. Given these circumstances, it could be argued that companies face a deceptively straightforward and stark choice: they must either respond to the challenges posed by this new environment, or recognize and accept the long-term consequences of failing to do so. This need to respond is not confined to firms of a certain size or particular industries. It is a change that to a greater or lesser extent will ultimately affect companies of all sizes in virtually all markets. The pressures of the international environment are now so great, and the bases of competition within many markets are changing so fundamentally, that the opportunities to survive with a purely domestic strategy are increasingly limited to small- and medium-sized companies in local niche markets. Perhaps partly because of the rapid evolution of international marketing, a vast array of terms have emerged that suggest various facets of international marketing. Clarification of these terms is a necessary first step before we can discuss this topic more thoroughly. In domestic marketing and international markets, we are goal-driven, do necessary marketing research, select target markets, employ the various tools of marketing (i.e., product, pricing, distribution, communication), develop a budget, and check our results. However, the uncontrollable factors such as culture, social, legal, and economic factors, along with the political and competitive environment, all create the need for a myriad of adjustments in the marketing management process. At its simplest level, international marketing involves the firm in making one or more marketing decisions across national boundaries. At its most complex, it involves the firm in establishing manufacturing and marketing facilities overseas and coordinating marketing strategies across markets. Thus, how international marketing is defined and interpreted depends on the level of involvement of the company in the international marketplace. Therefore, the following possibilities exist:

  • Domestic marketing: This involves the company manipulating a series of controllable variables, such as price, advertising, distribution, and the product, in a largely uncontrollable external environment that is made up of different economic structures, competitors, cultural values, and legal infrastructure within specific political or geographic country boundaries.
  • International marketing: This involves the company operating across several markets in which not only do the uncontrollable variables differ significantly between one market and another, but the controllable factor in the form of cost and price structures, opportunities for advertising, and distributive infrastructure are also likely to differ significantly. Degree of commitment is expressed as follows:
  • Export marketing: In this case the firm markets its goods and/or services across national/political boundaries.
  • Multinational marketing: Here the marketing activities of an organization include activities, interests, or operations in more than one country, and where there is some kind of influence or control of marketing activities from outside the country in which the goods or services will actually be sold. Each of these markets is typically perceived to be independent and a profit center in its own right.
  • Global marketing: The entire organization focuses on the selection and exploration of global marketing opportunities and marshals resources around the globe with the objective of achieving a global competitive advantage. The primary objective of the company is to achieve a synergy in the overall operation, so that by taking advantage of different exchange rates, tax rate, labor rates, skill levels, and market opportunities, the organization as a whole will be greater than the sum of its parts.

Thus Toyota Motors started out as a domestic marketer, eventually exported its cars to a few regional markets, grew to become a multinational marketer, and today is a true global marketer, building manufacturing plants in the foreign country as well as hiring local labor, using local ad agencies, and complying to that country’s cultural mores. As it moved from one level to the next, it also revised attitudes toward marketing and the underlying philosophy of business.

Ultimately, the successful marketer is the one who is best able to manipulate the controllable tools of the marketing mix within the uncontrollable environment. The principal reason for failure in international marketing results from a company not conducting the necessary research, and as a consequence, misunderstanding the differences and nuances of the marketing environment within the country that has been targeted. The topic of international marketing as part of a global business environment is further studied in Chapter 11.

Social Media Marketing

In the last several years, the popularity of social media marketing has exploded. You already know what social media is — Facebook, Twitter, Instagram, LinkedIn, YouTube, and any number of other online sites that allow you to network, share your opinions, ideas, photos, etc. Social media marketing is the practice of including social media as part of a company’s marketing program.

Why do businesses use social media marketing? Before responding, ask yourself these questions: how much time do I spend watching TV? When I watch TV, do I sit through the ads? Do I read newspapers or magazines and flip right past the ads? Now, put yourself in the place of Tammy Sadinsky, global chief marketing officer of Tim Hortons. Does it make sense for her to spend millions of dollars to place an ad for Tim Hortons on TV or in a newspaper or magazine? Or should she instead spend the money on social media marketing initiatives that have a high probability of connecting to Tim Horton’s market?

For companies like Tim Horton’s, the answer is clear. The days of trying to reach customers through ads on TV, in newspapers, or in magazines are over. Most television watchers skip over commercials, and whilst Tim Horton’s customers may or may not read newspapers or magazines, even if they do they don’t focus on the ads. Social media marketing provides a number of advantages to companies, including enabling them to:

  • create brand awareness;
  • connect with customers and potential customers by engaging them in two-way communication;
  • build brand loyalty by providing opportunities for a targeted audience to participate in company-sponsored activities, such as contests;
  • offer and publicize incentives, such as special discounts or coupons;
  • gather feedback and ideas on how to improve products and marketing initiatives;
  • allow customers to interact with each other and spread the word about a company’s products or marketing initiatives; and
  • take advantage of low-cost marketing opportunities by being active on free social sites, such as Facebook.

To get an idea of the power of social media marketing, think of the ALS Ice Bucket Challenge. According to the ALS Association: “the ALS Ice Bucket Challenge started in the summer of 2014 and became the world’s largest global social media phenomenon. More than 17 million people [including Steve’s children!] uploaded their challenge videos to Facebook; these videos were watched by 440 million people a total of 10 billion times.”  The ALS Association raised $115 million in six weeks (their usual annual budget was only $20 million). Steve’s favourite is Patrick Stewart’s video. To see how companies try to harness this power, let’s look at social media campaigns of Starbucks.

Example

Starbucks

One of most enthusiastic users of social media marketing is Starbucks. Let’s look at a few of their promotions: a discount for “Foursquare” mayors and free coffee on Tax Day via Twitter’s promoted tweets and a free pastry day promoted through Twitter and Facebook.

Discount for “Foursquare” Mayors of Starbucks

This promotion was a joint effort of Foursquare and Starbucks. Foursquare is a mobile social network, and in addition to the handy “friend finder” feature, you can use it to find new and interesting places around your neighborhood to do whatever you and your friends like to do. It even rewards you for doing business with sponsor companies, such as Starbucks. The individual with the most “check ins” at a particular Starbucks holds the title of mayor. For a period of time, the mayor of each store got $1 off a Frappuccino. Those who used Foursquare were particularly excited about Starbucks’s nationwide mayor rewards program because it brought attention to the marketing possibilities of the location-sharing app.

Free Coffee on Tax Day (via Twitter’s Promoted Tweets)

Starbucks was not the only company to give away freebies on the United States’s Tax Day, April 15, 2010.  But it was the only company to spread the message of their giveaway on the then-new Twitter’s Promoted Tweets platform (which went into operation on April 13, 2010). Promoted Tweets are Twitter’s means of making money by selling sponsored links to companies. Keeping with Twitter’s then 140 characters per tweet rule, Starbucks’s Promoted Tweet read, “On 4/15 bring a reusable tumbler and we’ll fill it with brewed coffee for free. Let’s all switch from paper cups”. The tweet also linked to a page that detailed Starbucks’s environmental initiatives.

Free Pastry Day (Promoted through Twitter and Facebook)

Starbucks’s “free pastry day” was promoted on Facebook and Twitter. As the word spread from person to person in digital form, the wave of social media activity drove more than a million people to Starbucks’s stores around the country in search of free food.

As word of the freebie offering spread, Starbucks became the star of Twitter, with about 1 percent of total tweets commenting on the brand. That’s almost ten times the number of mentions on an average day. It performed equally well on Facebook’s event page where almost 600,000 people joined their friends and signed up as “attendees.” This is not surprising given that Starbucks was the most popular brand on Facebook with over 36 million “likes” in 2016.

How did Starbucks achieve this notoriety on Facebook? According to social media marketing experts, Starbucks earned this notoriety by making social media a central part of its marketing mix, distributing special offers, discounts, and coupons to Facebook users and placing ads on Facebook to drive traffic to its page. As explained by the CEO of Buddy Media, which oversees the brand’s social media efforts, “Starbucks has provided Facebook users a reason to become a fan.”

Social Media Marketing Challenges

The main challenge of social media marketing is that it can be very time consuming. It takes determination and resources to succeed. Small companies often lack the staff to initiate and manage social media marketing campaigns. Even large companies can find the management of media marketing initiates overwhelming. A recent study of 1,700 chief marketing officers indicates that many are overwhelmed by the sheer volume of customer data available on social sites, such as Facebook and Twitter. This is not surprising given that in 2017, Facebook had more than 2.1 billion active users, and five hundred million tweets are sent each day. The marketing officers recognize the potential value of this data but are not always capable of using it. A chief marketing officer in the survey described the situation as follows: “The perfect solution is to serve each consumer individually. The problem? There are 7 billion of them.” In spite of these limitations, 82 percent of those surveyed plan to increase their use of social media marketing over the next 3 to 5 years. To understand what real-time information is telling them, companies will use analytics software, which is capable of analyzing unstructured data. This software is being developed by technology companies, such as IBM, and advertising agencies.

The bottom line: what is clear is that marketing, and particularly advertising, has changed forever. As Simon Pestridge, Nike’s global director of marketing for Greater China, said about Nike’s marketing strategy, “We don’t do advertising any more. Advertising is all about achieving awareness, and we no longer need awareness. We need to become part of people’s lives, and digital allows us to do that”.

Why Study Marketing?

Products don’t, contrary to popular belief, sell themselves. Generally, the “build it and they will come” philosophy doesn’t work. Good marketing educates customers so that they can find the products they want, make better choices about those products, and extract the most value from them. In this way, marketing helps facilitate exchanges between buyers and sellers for the mutual benefit of both parties. Likewise, good social marketing provides people with information and helps them make healthier decisions for themselves and for others.

Of course, all business students should understand all functional areas of the firm, including marketing. There is more to marketing, however, than simply understanding its role in the business. Marketing has tremendous impact on society.

Marketing Delivers Value

Not only does marketing deliver value to customers, but also that value translates into the value of the firm as it develops a reliable customer base and increases its sales and profitability. So when we say that marketing delivers value, marketing delivers value to both the customer and the company. Franklin D. Roosevelt, the U.S. president with perhaps the greatest influence on our economic system, once said, “If I were starting life over again, I am inclined to think that I would go into the advertising business in preference to almost any other. The general raising of the standards of modern civilization among all groups of people during the past half century would have been impossible without the spreading of the knowledge of higher standards by means of advertising .” Roosevelt referred to advertising, but advertising alone is insufficient for delivering value. Marketing finishes the job by ensuring that what is delivered is valuable.

Marketing Benefits Society

Marketing benefits society in general by improving people’s lives in two ways. First, as we mentioned, it facilitates trade. As you have learned, or will learn, in economics, being able to trade makes people’s lives better. Otherwise people wouldn’t do it. (Imagine what an awful life you would lead if you had to live a Robinson Crusoe–like existence as did Tom Hanks’s character in the movie Castaway.) In addition, because better marketing means more successful companies, jobs are created. This generates wealth for people, who are then able to make purchases, which, in turn, creates more jobs.

The second way in which marketing improves the quality of life is based on the value delivery function of marketing, but in a broader sense. When you add all the marketers together who are trying to deliver offerings of greater value to consumers and are effectively communicating that value, consumers are able to make more informed decisions about a wider array of choices. From an economic perspective, more choices and smarter consumers are indicative of a higher quality of life.

Marketing Costs Money

Marketing can sometimes be the largest expense associated with producing a product. In the soft drink business, marketing expenses account for about one-third of a product’s price—about the same as the ingredients used to make the soft drink itself. At the bottling and retailing level, the expenses involved in marketing a drink to consumers like you and me make up the largest cost of the product.

Some people argue that society does not benefit from marketing when it represents such a huge chunk of a product’s final price. In some cases, that argument is justified. Yet when marketing results in more informed consumers receiving a greater amount of value, then the cost is justified.

Marketing Offers People Career Opportunities

Marketing is the interface between producers and consumers. In other words, it is the one function in the organization in which the entire business comes together. Being responsible for both making money for your company and delivering satisfaction to your customers makes marketing a great career. In addition, because marketing can be such an expensive part of a business and is so critical to its success, companies actively seek good marketing people in positions like:

  • Marketing research. Personnel in marketing research are responsible for studying markets and customers in order to understand what strategies or tactics might work best for firms.
  • Merchandising. In retailing, merchandisers are responsible for developing strategies regarding what products wholesalers should carry to sell to retailers such as Target and Walmart.
  • Sales. Salespeople meet with customers, determine their needs, propose offerings, and make sure that the customer is satisfied. Sales departments can also include sales support teams who work on creating the offering.
  • Advertising. Whether it’s for an advertising agency or inside a company, some marketing personnel work on advertising. Television commercials and print ads are only part of the advertising mix. Many people who work in advertising spend all their time creating advertising for electronic media, such as Web sites and their pop-up ads, podcasts, and the like.
  • Product development. People in product development are responsible for identifying and creating features that meet the needs of a firm’s customers. They often work with engineers or other technical personnel to ensure that value is created.
  • Direct marketing. Professionals in direct marketing communicate directly with customers about a company’s product offerings via channels such as e-mail, chat lines, telephone, or direct mail.
  • Digital media. Digital media professionals combine advertising, direct marketing, and other areas of marketing to communicate directly with customers via social media, the Web, and mobile media (including texts). They also work with statisticians in order to determine which consumers receive which message and with IT professionals to create the right look and feel of digital media.
  • Event marketing. Some marketing personnel plan special events, orchestrating face-to-face conversations with potential and current customers in a special setting.
  • Nonprofit marketing. Nonprofit marketers often don’t get to do everything listed previously as nonprofits typically have smaller budgets. But their work is always very important as they try to change behaviors without having a product to sell.

A career in marketing can begin in a number of different ways. Entry-level positions for new college graduates are available in many of the positions previously mentioned. A growing number of CEOs are people with marketing backgrounds. Some legendary CEOs like Ross Perot and Mary Kay Ash got their start in marketing. More recently, CEOs like Mark Hurd, CEO of Oracle, and Jeffrey Immelt at GE are showing how marketing careers can lead to the highest pinnacles of the organization.

Criticisms of Marketing

Marketing is not without its critics. We already mentioned that one reason to study marketing is because it is costly, and business leaders need to understand the cost/benefit ratio of marketing in order to make wise investments. Yet that cost is precisely why some criticize marketing. If that money could be put into research and development of new products, perhaps the consumers would be better satisfied. Or, some critics argue, prices could be lowered. Marketing executives, though, are always on the lookout for less expensive ways to have the same performance, and do not intentionally waste money on marketing.

Another criticism is that marketing creates wants among consumers for products and services that aren’t really needed. For example, fashion marketing creates demand for high-dollar jeans when much less expensive jeans can fulfill the same basic function. Taken to the extreme, consumers may take on significant credit card debt to satisfy wants created by marketing, with serious negative consequences. When marketers target their messages carefully so an audience that can afford such products is the only group reached, such extreme consequences can be avoided or limited.

Exercises

  1. Assume you are about to graduate. How would you apply marketing principles to your job search? In what ways would you be able to create, communicate, and deliver value as a potential employee, and what would that value be, exactly? How would you prove that you can deliver that value?
  2. Is marketing always appropriate for political candidates? Why or why not?
  3. How do the activities of marketing for value fulfill the marketing concept for the market-oriented organization?
  4. This chapter introduces the personal value equation. How does that concept apply to people who buy for the government or for a business or for your university? How does that concept apply when organizations are engaged in social marketing?
  5. This chapter addresses several reasons why marketing is an important area of study. Should marketing be required for all college students, no matter their major? Why or why not?
  6. Of the four marketing functions, where does it look like most of the jobs are? What are the specific positions? How are the other marketing functions conducted through those job positions, even though in a smaller way?
  7. Why is service-dominant logic important?
  8. What is the difference between a need and a want? How do marketers create wants? Provide several examples.
  9. The marketing concept emphasizes satisfying customer needs and wants. How does marketing satisfy your needs as a college student? Are certain aspects of your life influenced more heavily by marketing than others? Provide examples.
  10. A company’s offering represents the bundling of the tangible good, the intangible service, and the price. Describe the specific elements of the offering for an airline carrier, a realtor, a restaurant, and an online auction site.
  11. The value of a product offering is determined by the customer and varies accordingly. How does a retailer like Walmart deliver value differently than Banana Republic?

 

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Management of the Enterprise Copyright © 2020 by OER Lab at Ontario Tech University is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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