CHAPTER 1
Introduction to Marketing Management
Why marketing is important?
The value of marketing
• Marketing managers are challenged to deliver value and profits in the face of an
unforgiving economic environment, unprecedented changes in business, growing
globalization, climate change concerns and continuing digital technology advancement.
Finance, operations, accounting, and other business functions are all dependent on
sufficient demand for products and services from customers who are prepared to pay
for them so that companies can make a profit. Thus, financial success often depends on
marketing ability.
• Marketing skill can be used to market ten main types of entities:
1. Products
2. Services
3. Events
4. Experiences
5. People
6. Places
7. Properties
8. Non-Profits
9. Information
10. Ideas
• Marketing’s value also extends to society as a whole. It has helped introduce new or
enhanced products and services that ease or enrich people’s lives. Successful
marketing builds demand for products and services, which in turn creates jobs. By
contributing to the bottom line, successful marketing also allows firms to engage in
socially responsible activities more fully.
The scope of marketing
• Marketing is about identifying and meeting human and social needs at a profit. One of
the shortest definitions of marketing is that it is the process of ‘meeting customer needs
profitably’.
• A formal definition is that marketing is the science and art of exploring, creating, and
delivering value to satisfy the needs of a target market at a profit. The marketing
concept focuses on a total company effort to provide exchange and value for
customers, clients partners and society. Coping with these exchange processes calls for
a considerable amount of work and skill. Marketing management takes place when at
least one party to a potential exchange thinks about the means of achieving desired
responses from other parties. Thus, we see marketing management as the managerial
responsibility that aligns the total company effort towards choosing and satisfying target
market(s) by getting, keeping and growing customers through creating, delivering and
communicating superior customer value at a profit to the organization.
• Marketing is an often-misunderstood term, seen more as ‘the art of selling products or
advertising, and many people are surprised when the full extent of marketing beyond
selling, and advertising is articulated. The reality is that selling, and advertising are only
the tip of the marketing iceberg
Marketing’s role in creating demand
• Marketers must be skilled at stimulating and managing demand. Demand is the
willingness and ability of buyers to purchase different quantities of a product or service,
at different prices, during a specific time period. Both willingness and ability must be
present; if either is missing, there is no demand. Great marketing is when you see an
unfulfilled need and launch an appropriate offering, and the offering matches this need
and there is demand and ultimately profitable sales of your offering.
• Marketing managers seek to influence the level, timing and composition of demand to
meet the organization’s objectives. Marketers must identify the underlying cause(s) of
the demand state and then determine a plan of action to shift the demand to a more
desirable state. Demand is linked to needs and wants. Needs are basic human
requirements such as air, food, water, clothing and shelter. Humans also have strong
needs for recreation, education and entertainment. These needs become wants when
directed to specific objects that might satisfy the need. Wants are shaped by our
society. Demands are wants for specific products or services backed by an ability to
pay. Companies must measure not only how many people want their offering but also
how many are willing and able to pay for it. These distinctions shed light on the frequent
criticism that ‘marketers create needs’ or ‘marketers get people to buy things they don’t
want’. Marketers do not create needs: needs pre-exist marketers. Marketers, along with
other societal factors, influence wants.
• Some customers have needs of which they are not fully conscious or that they cannot
articulate. The marketer must probe further. We can distinguish five types of needs:
• Stated needs (the customer wants an inexpensive car).
• Real needs (the customer wants a car whose operating cost, not initial price, is low).
• Unstated needs (the customer expects good service from the dealer).
• Delight needs (the customer would like an onboard GPS navigation system).
• Secret needs (the customer wants friends to see them as a savvy consumer).
• Responding only to the stated need may short-change the customer. Companies need
to be innovative and creative and be ahead of consumer needs and wants.
Marketing Realities
• In this text we focus on three transformative forces: technology, globalization and
social responsibility.
Technology – The heartbeat of modern marketing is technology focused on data
activation, personalization, building a digital culture and having an integrated simplified
technology operating model. Web, mobile and social are core technologies that are now
dominant within society. Beyond the rapid rise of the internet, smartphones and social
media is an ever-increasing range of innovative technologies that could be impactful for
marketing. They include the Internet of Things (IoT), augmented and virtual reality,
robotics, wearable technologies, data analytics, machine learning, artificial intelligence
and more. The pace of change and the scale of technological growth is staggering.
Globalization – The continuing integration of world trade and the world’s major
economies, coupled with technological advances in transportation and communications,
has made it easier for companies to market and easier for consumers to buy products
and services from all over the world. We can have kiwis from New Zealand and oranges
from South Africa, with worldwide access to money and phone calls. Politically and
economically, global business operates with poverty amidst plenty, on-going economic
and political crises, conflicts, and social unrest around the world, and particularly in the
Middle East, and unprecedented stock growth and decline. Globalization has also made
countries increasingly multicultural. Businesses in the twenty-first century have multiple
product and service lines and operate in multiple geographies with millions and even
billions of customers, sometimes with revenues the size of small economies.
Take Unilever, the Anglo–Dutch company: in any given day, 2.5 billion people use its
products. The average market capitalization of the top 100 global companies is a
staggering €117 billion. Interestingly, only 22 of the top 100 global companies are
European, and from just nine countries. Many companies are now using Marketing
Glocal – operating both globally and locally by managing customers locally within their
area, nationally within their borders and also globally on the world stage.
Social responsibility – Companies have a corporate social responsibility (CSR) to
understand how their actions impact on the planet and the sustainability of human life.
Capitalism and other economic systems can cause major social issues such as wealth
concentrations, poverty, pollution, water shortages, climate change and wars. These
issues require attention and discussion. Because marketing’s effects extend to society
as a whole, marketers must consider the ethical, environmental, legal and social context
of their activities. The marketing task is thus to determine the needs, wants and
interests of target markets and satisfy them more effectively and efficiently than
competitors while preserving or enhancing consumers’ and society’s long-term well-
being As consumers grow more socially conscious, some companies incorporate social
responsibility as a way to differentiate themselves from competitors, build consumer
preference and achieve notable sales and profit gains.
Failures of CSR, such as the horse meat scare, oil spills and VWs emission scandal, all
raise concerns about whether companies pay lip service or really engage with this.
New consumer capabilities – Across the World, a generation of digital natives exists,
who grew up with technology and are the first generation for which the internet, mobile
technology and social media are not something they have had to adapt to. They have
no memory of (or nostalgia for) pre-internet history; they take the internet for granted,
accept and expect to have Snapchat, WhatsApp, email, Wikipedia, search engines,
Skype and social media such as Facebook and YouTube as normal. This is the most
connected generation ever, having more mobile phones than people. Expanded
mobility, communication, information and technology enable customers to make better
choices and share their preferences and opinions with others around the world. At the
same time, consumer engagement is a huge challenge.
This is a complex phenomenon, and understanding the underlying dynamics that
facilitate its development, particularly in the virtual environment, is important due to its
ability to influence value creation for customers and organizations, and because it
introduces ongoing and multifaceted challenges to marketers.
• Consumers use the internet as a powerful information, interaction and
purchasing aid.
• Consumers embrace mobile.
• Consumers tap into social media.
• Consumers reject marketing practices they find inappropriate.
New company capabilities – At the same time, technology, globalization and social
responsibility have generated a new set of capabilities to help companies cope with and
respond to the consumer challenges.
• Companies can use the internet as a powerful information and sales channel
with increased personalization and customization.
• Companies use data analytics for richer insights about markets, customers,
prospects and competitors.
• Companies embrace mobile and location-dependent information.
• Companies are moving towards increased automation, robotics and the Internet
of Things (IoT)
• Production, selling, marketing and holistic marketing philosophies
• The production philosophy is one of the oldest concepts in business. It holds that
consumers prefer products that are widely available and inexpensive. Managers of
production-orientated at businesses concentrate on achieving high production
efficiency, low costs and mass distribution. This orientation has made sense in
developing countries such as China, where the largest PC manufacturer, Legend
(principal owner of Lenovo Group), and domestic appliances giant Haier have taken
advantage of the country’s huge and inexpensive labor pool to dominate the market.
Marketers also use the production concept when they want to expand the market. The
product philosophy proposes that consumers favor products offering the most quality,
performance or innovative features, and companies with this focus overemphasis the
development of the product or service, always searching for improvements. However,
managers are sometimes caught in a love affair with their products or services. They
might commit the ‘better mouse trap’ fallacy, believing a better product will by itself lead
people to beat a path to their door. As many start-ups have learned the hard way, a new
or improved product or service will not necessarily be successful unless it’s priced,
distributed, advertised and sold properly and critically, actually aligns with customer
needs.
• The selling philosophy holds that consumers and businesses, if left alone, won’t buy
enough of the organization’s offerings. It is practiced most aggressively with unsought
offerings – an offering buyer don’t normally think of buying, such as insurance and
cemetery plots – and when firms with overcapacity aim to sell what they make, rather
than make what the market wants. Marketing based on hard selling is risky. It assumes
customers coaxed into buying an offering or service will not complain online or offline
but might even buy it again.
• The marketing philosophy emerged in the mid-1950s as a customer-centered,
sense-and-respond philosophy – a total company effort to achieve customer satisfaction
at a profit. Dell, for example, doesn’t manufacture a PC or laptop for its target market
but rather, it provides product platforms on which each person customizes the features
he or she desires in the machine. The marketing philosophy holds that the key to
achieving organizational goals is being more effective than competitors in creating,
delivering and communicating superior customer value to your target markets, and that
everyone in the organization has the customer as the focus of their operations and
plans.
• The contrast between the selling and marketing philosophies:
1. Selling focuses on the needs of the seller; marketing on the needs of the buyer.
2. Selling is preoccupied with the seller’s need to convert his product into cash;
marketing with the idea of satisfying the needs of the customer by means of the product
and the whole cluster of things associated with creating, delivering, and finally
consuming it.
• The holistic marketing philosophy Without question, the trends and forces that have .
3.defined the new marketing realities in the first years of the 21st century are leading
firms to embrace a new set of beliefs and practices, but there are still challenges of
orientation and perception to the reality of a customer focus.
• Two different focuses
1. Marketing Customer focus
a. Finance is aware that each decision can ultimately affect the customer and
profitability is aligned with the customers’ needs and the marketing plan.
b. Production is focused on producing the agreed product or service in a timely manner
aligned to the stated goals of marketing.
c. Sales are customer focused and only promise what they can deliver, looking to the
lifetime value of the customer rather than the short-term objective. Sales is seen as
working with the customer.
2. Marketing Non-Customer focus.
a. Finance is inward focused on keeping costs low, regardless of the effect on
marketing plans and the customer.
b. Production has a speed and cost focus, which cuts corners and compromises on
quality – not concerned if the offering does not fulfil needs.
c. Sales are always thinking of making the sales and their sales target, and their own
daily or weekly figures. Even if the customer does not need the product/service they will
pressurize them in order to make the sale.
• Relationship marketing – A key goal of marketing is to develop deep, enduring
relationships with people and organizations that directly or indirectly affect the success
of the firm’s marketing activities. Relationship marketing aims to build mutually
satisfying long-term relationships with key constituents in order to earn and retain their
business.
• Integrated marketing is critical, as a marketer must devise marketing activities and
programs to create, communicate and deliver value for consumers such that ‘the whole
is greater than the sum of its parts’. Two key themes are that
1. many different marketing activities can create, communicate and deliver value and
2. marketers must design and implement any one marketing activity with all other
activities in mind
• Internal marketing is a core aspect of holistic marketing that focuses internally on
company employees. Internal marketing is inward-facing marketing and is the plan for
how marketing will ensure that all staff are aware of and aligned to the vision and
marketing plan of the company. Internal marketing supports and motivates staff to want
to serve customers and to manage their roles in a consumer-focused way.
• Performance marketing requires understanding of the critical metrics, both financial
and non financial, that are measures of the marketing activities and programs, and is
often referred to as marketing metrics. Top marketers must go beyond sales revenue to
examine the marketing scorecard or dashboard metrics and interpret what is happening
to market share, customer-loss rate, churn rates, social media and web analytics,
customer satisfaction and other measures aligned with managerial insights. They must
also consider the legal, ethical, social and environmental effects of marketing activities
and programmes
Overview of marketing management
• Case study of marketing management – We can identify a specific set of tasks that
make up successful marketing management and marketing leadership. We’ll use the
following case study to illustrate these tasks in the context of the plan of the text.
• Understanding marketing management
• Developing marketing strategies and plans
• Managing digital technology in marketing
• Capturing marketing insights
• Connecting with customers: segmentation, targeting and positioning
• Building strong brands
• Creating value – shaping the market offerings
• Communicating value
