About marketing: Definition and goals.
Marketing is all around you in a host of forms, including traditional forms as well as several modern and innovative forms like websites, apps, videos, and social media. Of all the business functions, marketing is the most customer-facing function. The simplest definition of marketing according to Kotler is engaging customers and managing profitable customer relationships.
Marketing has a two-fold goal. The first goal of marketing is to attract new customers by promising superior value. The second goal is to keep and grow the current customer base by delivering value and satisfaction. To keep and grow your customer base successfully, you need to deliver on your promise. Nike is a perfect example of such a brand. It has beaten its rivals in the market by delivering on its promise of inspiring athletes to achieve their dreams, reflected in its Just Do It slogan.
Amazon dominates the global e-commerce market by having created an online shopping experience for customers where they can search and find nearly anything they might want to buy online. Similarly, Facebook’s customer base has kept growing and reached past 2.8 billion by delivering on its promise to help people worldwide connect and share with people in their lives. The same is true about Coca-Cola and any other market-leading brand. These all brands have a distinct value proposition and have achieved market-leading positions by delivering superior customer value and satisfaction.
Marketing is critical to any organization’s success. The market-leading brands are the market leaders because of their excellent marketing. Large businesses like Google, Microsoft, Apple, P&G, and Coca-Cola, all use marketing. However, the not for profit organizations also use marketing.
People already know a lot about marketing, because it is everywhere around them. In its traditional forms, marketing is there around you in the nearby shops and malls, outdoor advertisements, TV ads, and magazine ads. However, a lot has changed about marketing in recent years and marketers are using a vast range of new approaches including websites, apps, blogs, videos, and social media. These approaches are not used just to send messages to people but to reach the consumers directly, personally, and interactively. Today marketing is much more interactive and lively. Marketers want to become a part of their consumers’ lives, offer them a superior experience, and help them live their brands.
For most people, marketing means only selling and advertising. Every day, people are bombarded with advertisements, catalogs, and sales pitches. However, that is just a part of the bigger story. Marketing must not be understood in the traditional sense as telling and selling. Modern marketing is about satisfying customer needs.
Today, to be successful, a marketer has to engage customers well, understand consumer needs and develop good products that offer superior customer value. Apart from that, he needs to price, distribute and promote products well to sell them without difficulty. Management Guru Peter F Drucker has stated that the aim of marketing is to make selling unnecessary. You can infer from his words that if marketed well, selling a product would not be difficult. However, it also includes delivering superior customer value.
Selling and advertising are just a part of the larger marketing mix that includes a set of marketing tools for engaging customers, satisfying customer needs, and building customer relationships.
Kotler has defined marketing as the process by which companies engage customers, build stronger customer relationships, and create customer value for capturing value from customers in return.
The Marketing Process: Five Steps Model
The marketing process includes five steps. The first four steps in this model are dedicated to understanding consumers, building customer value, and creating strong customer relationships. In the last step, companies earn the rewards generated by following the first four steps or by creating and delivering superior customer value. By creating superior customer value for consumers, companies can capture value in return in the form of sales, profitability, and long-term customer equity. A critical thing worth noting is that since marketing is all about creating value for consumers, companies and marketers must understand the consumers and marketplace well as a first step.
Step 1: Understanding the marketplace and customer needs:
The first step in the marketing process includes understanding the marketplace and customer needs. Marketers should first develop an understanding of the customer needs and wants and the marketplace in which they are operating. There are the five core marketplace concepts that can help marketers in this regard.
Five Core Marketplace Concepts in detail:
- Needs, wants and demands:
Human needs are the most basic concepts related to marketing. Human needs are a state of felt deprivation. For example, when you are deprived of food, you feel the need to eat. Apart from the basic physical needs like food and clothes, the social needs of the humans and their personal needs are also included in this area.
These needs are already there since that is how humans are made or simply put it is a basic fact about the human life. Marketers just identify these needs. They did not create them. Influenced by culture and individual personality, these needs become wants. For example, an American needs food and wants a burger but an Asian needs food and wants rice. These wants become demands when backed by buying power. Based on their wants and resources, people demand the products and services with benefits that provide the highest perceived value and satisfaction.
Companies would do everything they can to understand customer needs, wants, and demands better. They conduct market research, analyze tons of customer data, and observe customer behavior while their customers shop and interact with the brand online and offline. Since the customer is at the core of the picture, people at all levels of the organization, including the top management, stay close to the customers.
- Market offerings: (Products, services and experiences)
Market offerings satisfy customer needs and wants. They include a combination of products, services, information, and experiences offered to meet a market’s need or want. Market offerings do not include only tangible physical products but also include intangible services that are consumed but do not necessarily result in the ownership of anything. For example, as a Netflix member, you can watch as many movies as you like but you do not own any. Your world is full of such examples, as banking, hospitality, and airline services.
However, while marketing their offering some sellers may suffer from marketing myopia. In that case, rather than paying attention to the benefit that the product produces, the seller may pay more attention to the product itself. If another seller develops a product that serves the same needs better, or at a lower cost, the sales of the first seller will suffer. The focus rather than being on the product must be on the need it satisfies. Smart marketers do not remain engrossed with the products and services they sell but look beyond it. They create brand experiences for customers by orchestrating several products and services. The result is an immersive experience like Walt Disney’s.
The term marketing myopia was coined by Harvard Business School Professor Theodore Levitt. He had famously stated: “People don’t want a quarter-inch drill. They want a quarter-inch hole!” However, sellers made the mistake of focusing on the drill rather than the hole. The bigger problem is that it is easy for the sellers and marketers to be myopic. Levitt’s article was published in 1960, in which he highlighted that companies are too focused on producing goods and services and spent very little time understanding customer wants and needs.
- Customer Value and satisfaction:
Both customer value and customer satisfaction are essential concepts in the field of marketing. There are generally several products and services in the market to fulfill any given need. So, how do the customers select from a vast range of market offerings? Customers buy based on their expectations of value and satisfaction from these offerings. Satisfied customers tell others about the products, appreciate the product and its attributes, whereas dissatisfied customers will criticize the offerings before fellow buyers.
It is why marketers need to be cautious about setting expectations. They cannot set it too low or too high. Setting too low expectations will allow the sellers to fulfill those expectations easily, but it won’t be easy to attract enough buyers for the offering. If marketers set too high expectations for their offerings, they might end up disappointing buyers. Customer value and customer satisfaction are two important building blocks in terms of managing and developing customer relationships.
- Exchanges and relationships:
When does marketing take place? It occurs when people decide to satisfy their needs and wants through exchange relationships. Exchange refers to the act of obtaining a desired object from someone in return for something. Marketing includes actions marketers take to create, maintain and grow desirable exchange relationships with target audiences involving a product, service, idea, or object. Companies try to build strong customer relationships by delivering superior customer value.
The concept of a market is based on the concept of exchange and relationships. A market is a set of potential and actual buyers for a product or service that satisfies a particular need or want. These buyers share a particular need or want that can be satisfied through exchange relationships.
Marketing also means managing markets to bring about profitable relationships. However, a lot of effort goes into it. What sellers must do, is to search for and engage buyers, identify their needs, design great market offerings, set prices, promote them, store and deliver their offerings. Some core marketing activities include consumer research, product development, communication, distribution, pricing, and customer service.
Generally, we see marketing as an activity only sellers are engaged in. However, buyers are also involved in marketing. They market while searching for products, interacting with brands to gain information, and making their purchases. The latest technologies, including websites, apps, and social media, have bolstered marketing and turned it into a two-way affair in which the customer is an active participant.
Step 2: Designing a customer value driven marketing strategy.
After understanding the consumers and the market fully, the marketing function can design a customer value driven marketing strategy. Marketing management is the art and science of selecting target markets and building profitable relationships with them. The marketing manager’s main goal is to attract, engage, retain and grow target customers by creating, delivering, and communicating superior customer value. A marketing manager must answer two important questions to design a winning marketing strategy.
- What’s our target market?
- What’s our value proposition?
Selecting your target market:
The company first needs to select which customers to serve. In this regard, it will need to first divide the market into customer segments (market segmentation) and then select the segments to serve (target marketing). While some may believe that marketing management is all about finding as many customers as possible and growing demand, marketing managers cannot serve all customers in all possible manners. If the company does not select a target market to serve and instead just tries to sell to anyone and everyone, the company will not be able to serve anyone well. The company wants to target the segments it can serve well and profitably. For example, Apple targets affluent customers, whereas Walmart targets a broader base of customers mainly from the middle class.
Choosing a value proposition:-
After selecting a target market, the company must also decide how it can serve its customers well. It should also decide how it will differentiate and position itself in the market. A brand’s value proposition is the benefits or values that the company promises to deliver to consumers to satisfy their needs.
For example, Walmart’s value proposition is Everyday Lowest Prices. It has built a market-leading position by delivering on its promise of everyday lowest prices across a vast assortment of products that are available across a large number of convenient locations.
Such value propositions differentiate a business from the others. They answer the fundamental question : why should a customer purchase from a particular brand rather than its rivals in the market?
Step 3: Constructing an integrated marketing program to deliver superior customer value.
A company’s marketing strategy outlines which customers it will serve and how it will create value for them. After that, marketers develop an integrated marketing program that works to actually deliver the intended value to the target customers. The marketing program transforms marketing strategy into action and builds customer relationships. It includes the firm’s marketing mix or the set of marketing tools, it uses to implement its marketing strategy. In the case of product marketing, these marketing tools are divided into four leading categories called the four Ps of the marketing mix. The firm must blend each of these tools into a comprehensive integrated marketing program that communicates and delivers the intended value to the selected target customers.
Step 4: Engaging customers, building profitable customer relationships and creating customer delight.
The fourth step is the most vital step in the marketing process. It includes engaging customers and creating strong customer relationships. In this step, the focus is one customer relationship management or building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging and growing the customer base.
Customer value and customer satisfaction are two key concepts related to customer relationship management. These are also the building blocks of CRM. Lasting customer relationships are built through a focus on delivering higher customer value and satisfaction. With higher customer satisfaction comes higher customer loyalty. Apart from that, marketing intends to create customer value but not at the cost of profits. Firms are generally required to strike a delicate balance between customer value and profitability. Marketers must seek to create customer value and satisfaction but without sacrificing profitability.
Step 5: Capturing value from customers to create profits and customer equity.
The final step in the marketing process involves capturing value from customers. Firms create and deliver superior customer value in return for capturing value in the form of sales, market share and profits.
A firm that delivers superior customer value, creates satisfied customers who will stay loyal to the firm and buy more from it. It means greater returns for the firm in the longer term.
The final aim of customer relationship management is to create higher customer equity. Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. As such, it’s a measure of the future value of the company’s customer base (Kotler). If the profitable customers of a firm are more loyal, its customer equity will be higher.