Chapter 1 - Marketing Principles and Society PDF

Preview

Summary

Chapter 1 Marketing Principles and Society What is Marketing? Numerous definitions of marketing three for easy reference CIM and AMA: marketing as a management process and an activity, (although many firms organize marketing as a discrete department, rather than a service across departments (Sheth S...

Description

Chapter 1 – Marketing Principles and Society What is Marketing? Numerous definitions of marketing  three for easy reference - CIM and AMA: marketing as a management process and an activity, (although many firms organize marketing as a discrete department, rather than a service across departments (Sheth & Sisodia, 2005)) - Nike, for example, uses a regional matrix organisational structure  operate within and across departments - all of these definitions display concept of marketing has changed over the years, from including only transactional concepts such as pricing, promotion and distribution, to encompassing relationship concepts as well (such as the importance customer trust, risk, commitment and co-creation) - nature of the relationships between organisation and its customers, in its offerings and its mission, are different in not-for-profit and for-profit organisations. Defining Institution Definition The management process responsible for identifying, anticipating, Chartered Institute of Marketing (CIM) and satisfying customer requirements profitably. (CIM, 2015) American Marketing Marketing is the activity, set of institutions, and processes for Association (AMA) creating communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (AMA, 2013) A French perspective Marketing is the adaptation strategy of organisations to (Lendrevie & Lévy, 2014) competitive markets so that they can influence the behaviour of the publics on which they depend, through an offering whose broadly translated perceived value is durably superior to that of competitors. In the commercial sector, the role of marketing is to create economic value for the company by creating value as perceived by customers.

What is the difference between customers and consumers? - difference is subtle but real - Customer: is a buyer, a purchaser, a patron, a client or a shopper, and therefore someone who buys from a ship, a website, a business, or, in the sharing economy, another customer - Consumer: someone who uses the offering - Example: Oreo-cookies Mom purchases the cookies (customers) & gives them to her kids to eat (consumer)

Market Orientation - concept of market orientation (Kohli & Jaworski, 1990) at the heart of marketing - makes organisations more profitable in both the long and the short runs - meta-analysis of market orientation studies, by Kirca and colleagues (2005) conclude that market orientation may be imperative for survival in service firms and the souce of competitive advantage in manufacturing firms - market orientation ≠ marketing orientation - Marketing orientation= company that recognises the importance of marketing within the organisation (appointing a marketing person as CEO or to the chair) - Market orientation= the organisation-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across the departments, and organisation-wide responsiveness to it. (K&J, 1990) Not only involves marketing but also: o customer orientation creating superior value by continuously developing and redeveloping offerings to meet customer needs o competitor orientation requires an organisation to develop an understanding of its competitors’ short-term strengths & weaknesses + its own long-term capabilities o interfunctional orientation requires all functions of an organisation to work together for long-term profit growth

A Brief History of Marketing Marketing developed in a four-stage sequence: 1. Production period: 1890s-1920s o characterised by a focus in the firm on physical production and supply, o where demand exceeded supply, o there was little competition, o and the range of products was limited 2. Sales period: 1920s-1950s o characterised by a focus in the firm on personal selling, o supported by market research and advertising 3. Marketing period: 1950s-1980s o characterised by a focus in the firm on the customer’s needs 4. Societal Marketing period: 1980s-Present Day o characterised by a focus in the firm on social and ethical concerns in marketing and o recognition that not-for-profits could also undertake marketing

Marketing has developed as a result of the influence of its practitioners, as well as developments in related disciplines, including the areas of industrial economics, psychology, sociology, and anthropology. -

Industrial economics influences knowledge of the matching of supply and demand economic concepts of perfect competition and the matching of supply and demand underlie the marketing concept (particularly in relation to the price and the quantity) Theories of income distribution, scale of operation, monopoly, competition, and finance all derive from economics (Bartels, 1951) even if their influence on marketing is declining (Howard et al, 1991)

-

Psychological influences knowledge of consumer behaviour derives principally from psychology motivational research in relation to o consumer attitudes, o perceptions, motivations, o and information processing (Holden and Holden, 1998) and our understanding of o persuasion, o consumer personability, o and customer satisfaction (Bartels, 1951)

-

Sociological influences knowledge of how groups of people behave derives from sociology, with insights into areas such as o how people from similar gender and age groups behave (demographics), o how people in different social positions within society behave (class), o why we do things in the way we do (motivation), o general ways that groups behave (customs), o and culture (Bartels, 1951, 1959) + our understanding of o what society thinks as a whole (Katz, 1957) o how we influence the way in which people think, & to adopt our perspective

-

Anthropological influences debt to social anthropology increases as we use qualitative approaches such as ethnography, netnography and observation in researching consumer behaviour

What Do Marketers Do? - important to stress that marketing is present in all aspects of an organisation, since all departments have some role to play with respect to creating, delivering, and satisfying customers - in each department, there is a marketing role to be played to some extent - in other words, marketing is distributed throughout the organisation and all employees can be considered to be part-time marketers (Gummesson, 1990) A functional depicture for marketing 1. Provide marketing intelligence and customer insight 2. Provide strategic marketing direction for the organisation 3. Develop the customer proposition 4. Manage and provide marketing communications 5. Use and develop marketing and customer information 6. Led marketing operations and programmes 7. Work with other business functions and third parties 8. Manage and develop teams and individuals

The Principal Principles of Marketing Marketing involves a series of highly complex interactions between individuals, organisations, society, and government.  difficult to develop general principles However, we can make at least some law-like generalisations. According to Leone and Shultz (1980), these are: - Generalisation 1: Advertising has a direct and positive influence on total industry (market) sales: all advertising done at industry level serves to increase sales within that market - Generalisation 2: Selective Advertising has a direct and positive influence on individual company (brand) sales: advertising undertaken by a company tends to increase the sales of the particular brand for which it was spent - Generalisation 3: The elasticity of selective advertising on company (brand) sales is low (inelastic): for frequently purchased goods, advertising has only a very limited effect in raising sales - Generalisation 4: Increasing store shelf space (display) has a positive impact on sales of non-staple grocery items, such as products bought on impulse rather that those that are planned purchases, which are less important, but perhaps more luxurious, types of good. For impulse goods, the more shelf space you give, the more likely selling’s are. - Generalisation 5: Distribution, defined by the number of outlets, has a positive influence on company sales (market share): setting up more retail locations has a positive influence on sale. Marketing as Exchange - marketing: two-way (dyadic) exchange process - not solely the marketing organisation doing the work; the customer inputs also - they might specify how we might satisfy their needs - customers must then pay for the offering There are numerous types of buyer-seller exchange in marketing: (Some examples) - Police and public Keeping public order for public funds and cooperation - Retailer and customer Goods and customer service for money, retail price for goods - Manufacturer and retailer Goods, credit facilities, return facilities,… for money, wholesale price for goods - Charity and donors Provision of services to those in need for funds and volunteering

The Marketing Mix and the 4P’s - Neil Borden (1950’s) developed the concept of the ‘marketing mix’ at Harvard - idea: marketing managers were mixers of ingredients  concoct a unique marketing recipe to fit the requirements of customers’ needs He composed a 12-iteam list of elements that the manufacturer should consider when developing marketing mix policies and procedures (Borden, 1964) - List simplified and amended by Eugene McCarthy (1960) to become the more memorable, but rigid 4Ps (4Cs): o Product (Customer Solution) the offering and how it meets the customers’ need, packaging, labelling, … o Place (Customer Convenience) the way in which the offering meets customers’ needs (distribution, …) o Price (Customer cost) cost to the customer and the cost, plus profit to the seller o Promotion (Customer communication) how the offering’s benefits and features are conveyed to the potential buyer -

Problem: Although there was recognition that all of these elements might be interlinked (e.g. promotion based on price), such interplay between these mix components was not taken into account by her framework

The Extended Marketing Mix -

Exchanges in goods context ≠ Exchanges in service context  two American scholars (Booms and Bitner, 1981) suggested an extension to the original model and incorporated a further three P’s into the marketing mix to reflect the need to market services differently: o Physical Evidence emphasize that the tangible components of services are strategically important (servicescape) o Process emphasize the importance of the service delivery Standardized processes to manage customer expectation o People emphasize the importance of customer service personnel experts and professional interacting with the customer

Relationship Marketing, Service-Dominant Logic, and Co-creation - Relationship marketing developed in 1990’s - based on the idea that if marketing is about exchange - it should also be concerned with the relationship between the two exchanging parties - spawned further evolution of marketing’s conceptual foundations - shift from the need to engage in transactions towards the need to develop long-term customer relationships, including relationships with other stakeholders (Christopher, 2002), including suppliers, potential employees, recruiters, referral markets, influence markets, internal markets. - companies employing a relationship marketing approach stressed customer retention over customer acquisition - Customer retention very important Research showed that companies retaining loyal clients are more likely to be profitable compared with competition who don’t, because loyal customers o will increase their purchases over time, o are cheaper targets for promotion, o who are happy with relationship with a company will refer it to others, o and are often prepared to pay a price premium (Reichheld and Sasser, 1990) - recently the realisation that marketing needed to shift beyond a goods-based paradigm towards a service-dominant logic (Vargo and Lusch, 2004) - this new marketing paradigm sees service as the fundamental basis of exchange + the benefit of co-creation (sometimes even after the purchase took place) -  Music CD vs Spotify - According to Prahalad & Ramaswamy (both 2004) organisations should use cocreation to differentiate their offerings, given that value is tied up inside the customer’s experience Co-creation experience is about joint creation of value, in which customers take part in an active dialogue and co-construct personalised experiences. -  Payne (2008) thus organisations that wish to enhance customer input should map supplier and customer processes to identify how to design their service accordingly. Process of co-creation shifts value creation from value-in-exchange, at the point of purchase, to value-in-use, after purchase. (Grönroos & Voima, 2013)

Marketing’s Positive Impact on Society -

Marketing impacts society both, positively and negatively Wilkie and Moore (1999) describe complexities of what they call the ‘aggregate marketing system’ - broadly the aggregate marketing system in most countries works well nobody is starving and we don’t have to ration food to preserve the amount we eat;  not everywhere the case (Africa, China, North Korea,… people dying of hunger)  Reason: experience imperfection in supply and demand because of political and environmental circumstances  marketing plays important role in developing and transforming society

Some of the world’s most important inventions have come to us through the aggregate marketing system (cereals, television, carton, artificial sweeteners, mobile phones,…), while also impeding offerings that do not meet consumer needs Hence, the aggregate marketing system provides a number of benefits to society, including the following (Wilkie and Moore (1999): - promotion and delivery of desired offerings, - the provision of a forum for market learning (see what and what not works) - stimulation of market demand - provision of a wide scope of choice by providing a close or customised fit with needs - facilitation of purchases (or acquisitions generally) - time savings and the promotion of efficiency in customer requirement matching, - new offerings, and improvements, to meet latent and unserved needs, and - the pursuit of customer satisfaction for repeat purchases

Unsustainable Marketing: The Critical ‘Turn’ -

-

marketing not always serve the common good frequently criticised for doing precisely the opposite – for being unethical in nature, manipulative, and creating wants and needs where none previously existed (Packard, 1960)  need to develop a critical approach to understanding marketing practices and study both mainstream and critical marketing (Shankar, 2009) Critical marketing analysis helps in ‘problematizing hitherto uncontentious marketing areas to reveal underlying institutional and theoretical dysfunctionalities’ (Saren, 11)

A critical approach to marketing suggests that we consider: - the need to (re-)evaluate marketing activities, categories, and frameworks, and to improve them so that marketing operates in a desirable manner within society, - the extent to which marketing knowledge is developed based on our contemporary social world - how the historical and cultural conditions in which we operate, as consumers and as students of marketing, impact on how we see marketing as a discipline, and - how marketing can benefit from other intellectual perspectives such as social anthropology, social psychology, linguistics, philosophy & sociology (Burton, 2001)  some key topics in critical marketing include the notions of marketing as manipulation, commodity fetishism, and the nature of need versus choice (Tadajewski, 2010)

Marketing as Manipulation - Packard (1960) criticised marketing by explaining that it beguiled its target audience, often covertly, and frequently without people even understanding they are being manipulated.  frame communications to make them more persuasive - Framing= action of presenting persuasive communication and the action of audiences in interpreting that communication to assimilate it into their existing understanding (Scheufele and Tewksbury, 2007) Framing via the framing of situations, attributes, choices, actions, issues, responsibilities and news - Problem: when framing becomes spin, because marketing promotions then becomes corporate propaganda (e.g. using photographic tricks for a better picture)

Commodity Fetishism - a critical perspective, derived from Marxist economic theory (Marx, 1867) that proposes that society is overly dominated by consumption, hence fetishizes it. - Prior to industrialisation, goods were produced for their use-value - After industrialisation, the social relationship between producer and user changed workers were exploited for their labour commodity produced acquired exchange-value, becoming tradable with other commodities within the capitalist market system -  for Marx this rigid pursuit of capitalism represented a religious ideology. commodities an religious aura worshipped by those seduced by perceived value  if worshipping consumption is the case, question arises whether marketers meet our wants or needs, or neither.

Need and Choice - Alvesson (1994) rejects the notion that marketing works to meet the needs of customers and consumers - people in affluent societies seek more without gaining any further long-term, satisfaction from such consumption, because much of the consumption is superficial anyway, appealing to people’s fantasies and highlighting their imperfections  narcissistic tendencies - in regard to the aggregate marketing system: the system is amoral - that is not immoral but designed without any care as to whether it harms or not. System made moral by the decisions taken by government and other institutional actors regulating the aggregate marketing system

Sustainable Marketing -

-

-

Sustainable marketing accept limitations of marketing philosophy and acknowledge the need to impose regulatory constraints on marketing (vanDam&Apeldoorn, 1996), particulary concerning the environment Attempt to broaden sustainable development to the practice of Marketing, beyond simply economic development Introduction of following maxims: o Ecological – Marketing not negatively impact upon the environment o Equitable – Marketing not allow or promote inequitable social practices o Economic – Marketing encourage long-term economic development Three ages of green marketing: o First age – ecological green marketing (1960s-1970s) concerned with automobile, oil, and agrichemical company’s problems o Second age – environmental green marketing (c.1980s) development of the green consumer – purchase to avoid negative environmental impacts. Too heavily focused on the purchasing element of consumption o Third age – sustainable green marketing focus on positioning and demand simulation for recycled/remanufactured products and build-to-order offerings, supply-chain-management issues such as enabling material recovery from end-consumers, designing offerings to enable their dismantlement and enabling reverse logistics for recycling and remanufactured offerings. (Sharma et al., 2010) Proposition development activities should fully consider inputs and outputs from all members of the supply chain companies adopt environmental auditing methods, discourage consumption in certain cases, or at least encourage more mindful consumption  led to the development of the circular economy

Ethics and Marketing -

-

moral principles that govern a person’s behaviour or the conducting of an activity and the branch of knowledge that deals with moral principles marketing like any other area, affected by ethical norms that relate to how we should behave Companies have their own code of conduct/professional practice that requires members to behave in a certain manner AMA requires the following of its members: o Do no harm o Foster truth in the marketing system o Embrace ethical values...