The Marketing Concept and Process Lecture 1 18 Nov. 2004
The Marketing Concept: What It Is and What It Is Not • The marketing concept has suffered in two ways: • First, it has been established as optimal management philosophy when it is not necessarily so in all instances, and • Second, we can see many examples of poor marketing practice that have been adopted in the name of the marketing concept. ….It is time that we relearn the marketing concept.
The Marketing Concept: What It Is and What It Is Not • The marketing concept • Customer focus, profits, and integration of organizational efforts.
The Marketing Concept: What It Is and What It Is Not • Customer orientation • Satisfying its customers at a profit… • Determining the needs and wants of target markets… • Discovering the wants of a target audience and then creating the goods and services to satisfy them…
The Marketing Concept: What It Is and What It Is Not • Kotler’s social definition: “Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.”
Goods Services Experiences Events Persons Places Properties Organizations Information Ideas The Marketing Concept: What It Is and What It Is Not Many Things Can Be Marketed!
Needs, wants, and demands Marketing offers: including products, services and experiences Value and satisfaction Exchange, transactions and relationships Markets What is Marketing? Core Marketing Concepts
The Marketing Concept: What It Is and What It Is Not • The conditions under which the marketing concept offers the proper guidance to the marketer:
The Marketing Concept: What It Is and What It Is Not • To the extent that the organization relies on exchange as the means of obtaining compliance with organization’s needs, we describe that organization as engaging in “marketing”. • Strive to understand exchange partners and tailor offerings for them through what is called the marketing mix (Borden 1964).
The Marketing Concept: What It Is and What It Is Not • …it is important to recognize that under some circumstances, the production concept or the sales concept would be a more appropriate management philosophy for the organization than the marketing concept. • Can you give some examples?
The Marketing Concept: What It Is and What It Is Not ….customers are not necessarily good sources of information about their needs a decade from now… …sometimes customers have to learn about new technologies, beliefs, and ways of behaving…
The Marketing Myopia • In 1960, Theodore Levitt wrote "Marketing Myopia," a widely quoted and frequently reprinted Harvard Business Review article. • Chapter eight in Theodore Levitt's book - The Marketing Imagination (New York: The Free Press, 1986).
The Marketing Myopia • What does the term marketing myopia means? • What were the evidence and examples used to illustrate the notion of marketing myopia? • How is the self-deceiving cycle related to marketing myopia? • Is this notion of marketing myopia still valid today, and explain?
The Marketing Myopia • Marketing myopia was initially described as a firm's shortsightedness or narrowness when attempting to define its business. • The key question – “what business are you in?”
The Marketing Myopia • Levitt cites the railroads and Hollywood as examples of "industries that have been and are now endangering their futures by improperly defining their purposes." Their problem, he says, is they were "product-oriented instead of customer-oriented.“
The Marketing Myopia • Warning of the dangers of being product-oriented rather than customer-oriented - creating the Ford Edsel, New Coke or smokeless cigarettes, as it were, rather than products consumers wanted.
The Marketing Myopia • According to Levitt, "the organization must learn to think of itself not as producing goods or services but as buying customers, as doing the things that will make people want to do business with it."
The Marketing Myopia • Since its publication, corporate leaders have moved from product-orientation toward market-orientation.
The Marketing Myopia Customer orientationhas also been considered as a type of marketing myopia.
The Marketing Myopia • Firms overemphasize the satisfaction of customer wants and needs and as a result ignore competition.
The Marketing Myopia • Competitor orientation has been proposed as a replacement for the customer orientation; with this orientation, a firm's strategy is influenced by its competitors (Oxenfeldt and Moore, 1978).
The Marketing Myopia The marketing myopia described by Levitt has also evolved into a planning myopia…
The Marketing Myopia • Businesses need to take Levitt's idea to its ultimate end – • do not just sell a product, sell the solution to a problem.
The Marketing Myopia • Oil companies have followed that strategy by developing minimarts in service stations. • Digital Equipment Corp. earned one-third of its $7 billion in revenue from computer maintenance services. • General Motors Acceptance Corp. financial services accounted for $1 billion of the automaker's $4 billion in 1985 revenues, and • Gerber Products is opening day care centers as well as acquiring baby-related product companies. • By recognizing customer needs, these companies have used available corporate resources to enter nonmanufacturing segments of the market.
The Marketing Myopia The marketing myopia to the world market
The Marketing Myopia • Yves Doz, Jose Santos and Peter J. Williamson draw on some examples of companies that are major successes because they sought knowledge in other countries, such as • Shiseido, the Japanese cosmetic company that looked to France to become once again a leading player. • Little Scandinavian Nokia overtook Motorola in the early days of the mobile wars simply by monitoring the radar for emerging phenomena in markets around the world.
The Marketing Myopia • Innovating using local knowledge, perfecting your product and service to meet the needs of customers in your home market, and benchmarking yourself against domestic competitors-each of these has become a high risk strategy.
The Marketing Myopia • After all, cellular telephony had been invented in America-at Bell Laboratories, and Motorola was among the first to massproduce mobile telephones. • So then, how did Nokia, a little-known upstart from the edge of the Arctic Circle leave Motorola behind and manage to become the global leader in mobile telephony? • Nokia was the first to see the potential of a cellphone as a fashion accessory from observations of its customers in Asia.
The Marketing Myopia • Nokia has the ability to plug into knowledge about new technologies and emerging customer needs from every corner of the world. • It understood the need for customised handsets from its experience in Europe, where it first became apparent that there were different segments of users. • Observing pilot users across Scandinavia, it was among the first to recognise that digital technology could dramatically improve the functionality of mobile phones. • And in China, India and Africa, it saw that mobile phones could potentially become substitute for wire-line phones.
The Marketing Myopia • While Nokia prospected the world for insight about promising technologies, diverse customer behavior and new ways to use mobile phones, Motorola continued to develop its products based on its knowledge of the customers and technologies in its U.S. backyard.
The Marketing Myopia • The result: Motorola missed the shift to digital mobile telephony and the growing strength of the European GSM standard. It didn't see the potential to turn the phone into a fashion icon; it was slow to take on board the new ways mobiles were being used and to recognise that a broader, but more fragmented user base would spell the end of "one-size-fits-all" products. • This myopic approach to competition, and the failure to engage fully with the rest of the world and capture the potential of global markets and the innovative ideas in them, would cost Motorola dearly.
The Marketing Myopia • The types of marketing myopia can be • classified along two dimensions: • 1. the management's definition of the firm, and • 2. the firm's business environment perspective.
The Marketing Myopia • The second dimension concerns the firm's business environment perspective. In essence, these firms have an inward orientation toward that industry. • Firms with a single-industry perspective are preoccupied with the actions and reactions of immediate competitors.
The Marketing Myopia • In addition, they are considered to have inbred management. Some managers have spent the greater part of their professional careers in one industry. • Inbred management is not necessarily undesirable, but it is potentially detrimental when it fosters the contention that it can learn nothing from firms in other industries, and it keeps its firm perceptually insulated from such other firms. • For example, managers of the cold breakfast cereal firm may be concerned only with the actions and reactions of other cold cereal firms.
The Marketing Myopia • Firms with a multi-industry perspective, on the other hand, have a broader view of the market. • While they are concerned with immediate competitors, they also realize that firms in other industries can serve as sources of innovative strategies as well as being potential competitors.
The Marketing Myopia • Such management is said to be cross-bred, in that managers may have experience in a broad range of industries or they are willing to learn from firms facing similar situations in other industries. • Firms with a multi-industry perspective are outwardly oriented and not perceptually insulted from other industries.
The Marketing Myopia • The combination of the two dimensions produces a matrix with four types of firms:
The Marketing Myopia 1. classic myopia, with a product-definition/single-industry perspective, 2. competitive myopia, with a customer-definition/single-industry perspective, 3. efficiency myopia, with a product-definition/multi-industry perspective, 4. innovative myopia, with a customer-definition/multi-industry perspective.
The Marketing Myopia • Marketing managers who wish to achieve the innovative firm orientation should: • take a generic view of their firm or industry, • monitor other industries, • engage in benchmarking to determine the objectives for relevant areas of marketing, • recruit marketing people, and • be flexible enough to apply unique solutions to problems.
Strong sales, no profits Customer-driven to its core Each customer’s experience is unique Provides great selection, good value, discovery and convenience A true online community Case Study Amazon.com Discussion: Will Amazon.com Survive?
What is Marketing? • Marketing is managing profitable customer relationships • Attracting new customers • Retaining and growing current customers • “Marketing” is NOT synonymous with “sales” or “advertising”
Marketing Management • Marketing management is “the art and science of choosing target markets and building profitable relationships with them.” • Creating, delivering and communicating superior customer value is key.
Marketing Management • Customer Management: • Marketers select customers that can be served well and profitably. • Demand Management: • Marketers must deal with different demand states ranging from no demand to too much demand.
Production concept Product concept Selling concept Marketing concept Marketing Management Marketing Management Management Orientations • Societal marketing concept
CRM • CRM– Customer relationship management. . .“is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.”
CRM • It costs 5 to 10 times MORE to attract a new customer than it does to keep a current customer satisfied. • Marketers must be concerned with the lifetime value of the customer.
Attracting, retaining and growing customers Building customer relationships and customer equity Customer value/satisfaction Perceptions are key Meeting/exceeding expectations creates satisfaction Loyalty and retention Benefits of loyalty Loyalty increases as satisfaction levels increase Delighting consumers should be the goal Growing share of customer Cross-selling CRM Key Concepts
Customer equity The total combined customer lifetime values of all customers. Measures a firm’s performance, but in a manner that looks to the future. CRM Key Concepts • Attracting, retaining and growing customers • Building customer relationships and customer equity
Customer relationship levels and tools Target market typically dictates type of relationship Basic relationships Full relationships Customer loyalty and retention programs Adding financial benefits Adding social benefits Adding structural ties CRM Key Concepts • Attracting, retaining and growing customers • Building customer relationships and customer equity
Marketing Challenges • Technological advances, rapid globalization, and continuing social and economic shifts are causing marketplace changes. • Major marketing developments can be grouped under the theme of Connecting.