Chapter 1: Managing Marketing Organizations

Marketing Management-Terms and Definitions

In our daily lives, without any particular focus, we all witness marketing activities of different firms and brands. For instance, the furniture brand IKEA or the cereal brand Kellogs attracts their customers with different marketing activities, such as delivering coupons to the IKEA family card holders or placing fun games and puzzles on cereal and snack packs.

The term market can have a number of meanings. It is used to refer primarly to the place where goods were bought and sold. It can also refer to a geographic area such as Turkish market. In some occasions, “market” refers to the relationship between the demand and supply of a specific product. A market is the cluster of actual and potential buyers of a product or service. These actual and potential buyers have a specific need or want that can be satisfied through exchange relationships. In a typical market-place, buyers and sellers come together to conduct transactions for their mutual benefit.

Consumer markets : Consumers are individuals who buy products or services for personal consumption. Since not all consumers are similar in terms of preferences, buying habits etc., marketers define their consumers’ characteristics through market segmentation based on demographic, psychographic, behavioristic and geographic criteria.

Business markets: Business markets function differently than consumer markets. Their buying processes are particularly different. These markets consist of organizations that buy products or services for use in their own businesses or to make other products. For example, a dishwasher manufacturer might purchase steel, wiring, relevant equipment and so forth, as part of its final product from other parties in the business markets.

Global markets: Business markets function differently than consumer markets. Their buying processes are particularly different. These markets consist of organizations that buy products or services for use in their own businesses or to make other products. For example, a dishwasher manufacturer might purchase steel, wiring, relevant equipment and so forth, as part of its final product from other parties in the business markets.

Nonprofit and Governmental Markets: Nonprofit institutions are present for providing benefit to society and they are subject to different set of laws.6 Some educational institutions, charitable organizations and government agencies can be given as examples. For instance, Kızılay, Unicef or WWF offers different benefits to society.

According to the American Marketing Association, marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large Marketing management, on the other hand, is “the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior value

Kotler and Armstrong listed five main steps for marketers to follow in their marketing processes as below:

• Understanding the market place and customer needs and wants,
• Designing a customer-driven marketing strategy,
• Developing an integrated marketing program that delivers superior value,
• Building profitable relationships and creating customer satisfaction,

Capturing value from customers to create profits and customer equity.

A marketing system is mainly defined as an environment where main players, such as suppliers, companies, competitors, marketing intermediaries, and consumers come together. a marketing system includes suppliers, company, competitors, marketing intermediaries, and consumers. Companies work with their suppliers in order to supply the needed parts, raw materials, services needed in their production processes. Suppliers can have a significant influence on a manufacturer’s performance, through their contributions to cost reduction, new product design and enabling the constant improvement of quality. In today’s increasingly competitive environment, it is no longer enough to understand customers in the marketing system of the companies. Firms must pay close attention to their competitors and need to constantly compare their products, prices, channels, and promotional efforts with their competitors. The main role of marketing intermediaries is to make goods available and accessible to target markets by offering more effectiveness and efficiency than the selling company could achieve on its own.

Needs can be considered as the basic human requirements such as food, shelter, water, etc. While physical needs are considered in case of food, warmth or clothing, social needs can be considered as belonging and affection. Individual needs are basic needs for induviduals in case of knowledge acquisition and self-expression. Wants are different than needs that they are mainly shaped by the cultural environment or the peronality of indviduals.

Differences in customers’ buying habits, differences in their responses to the marketing mix of the companies direct companies to segment their markets according to the criteria specific for consumer and business markets. Hence, market segmentation is a process of dividing the market into smaller groups that the members of each group are similar to each other as well as their reactions to the marketing mix of the company. Following the segmentation process, companies need to select one or more market segments to serve as their target markets. Otherwise, it would be ineffective for companies to try reaching every market. For each target market, thecompany develops a market offering through positioning the product or service in the minds of the customers.

Value is basically defined as a trade-off between benefits and sacrifice. Companies can increase the value of the offering by 1) raising benefits, 2) reducing costs, 3) raising benefits and reducing costs, 4) raising benefits by more than the raise in costs, or 5) lowering benefits by less than the reduction in costs. Customer value is mainly discussed from two perspectives 1) as the value for the customer (customer perceived value) and 2) as value for the firm (value of the customer or customer lifetime value).

Marketing is mainly about satisfaction of people’s needs and want through Exchange relationships. Exchange is the habit of achieving a desired object from someone by offering something in return. When H&M, as a fast fashion clothing and accessories retailer, offers clothing, accessories to its customers, it expects them to pay for their shopping in return. Greenpeace wants more volunteers to support the organization with regards to the social media campaigns or start their own campaigns. As a result of exchanges taking place in the marketing environment, companies build relationships with their customers through their market offerings. Although attracting new customers is important for the businesses, retaining the existing ones and building close relationships with them based on loyalty and trustworthiness brings out the creation of superior value together. A marketing network includes the company and its supporting stakeholders (i.e. customers, employees, suppliers, distributors, university scientists, and others) with whom it has built mutually profitable business relationships.

Supply chain management is mainly the broader concept including the series of companies including suppliers, customers, and logistics service providers that work together to deliver a value package of goods and services to the end-customer. Supply chain management is an important concept in today’s business systems due to its increasing importance in connecting and managing the related parties within the overall supply chain of a company. Supply chain management is defined as “the management of a network of relationships within a firm and between interdependent organizations and business units consisting of material suppliers, purchasing, production facilities, logistics, marketing, and related systems that facilitate the forward and reverse flow of materials, services, finances and information from the original producer to final customer with the benefits of adding value, maximizing profitability through efficiencies, and achieving customer satisfaction”.

Marketing channels are classified into three groups as; communication channels, distribution channels and service channels. Communication channels, including newspapers, magazines, radio, television, mail, telephone, posters, brochures, and the Internet, send and receive messages from target buyers. Companies basically communicate through their websites and social media.

Competition is defined as “a rivalry between individuals (or groups or nations), and it arises whenever two or more parties strive for something that all cannot obtain”. Measurement of a company’s “competitiveness” should both incorporate quantitative measures of costs, prices and profitability, as well as qualitative indicators of non-price factors, specifically quality. To gain competitive advantage over its rivals, a firm should provide comparable buyer value, perform activites at a lower cost, or differentiate and perform activities in a unique way that creates greater buyer value and commands a premium price.

Changing Marketing Landscape

The developments taking place in the digital environments as well as retail markets necessitated e-tailers, brick-andmortars and brick-and-clicks to reconsider their strategies and business processes. The single channel system is not considered sufficient, and traditional retailers are looking for ways to go online as well as e-tailers are trying to establish a physical presence in the market. In accordance with the digitalization in marketing and retailing, there has been continuous change in the retail landscape.

Marketing passed through various stages starting from Marketing 1.0 up to Marketing 4.0. While Marketing 1.0 was built upon the product-centric approach, consumers started to be well informed and compare several values offerings of similar products in Marketing 2.0 (customercentric era). Marketing 3.0 is defined by Kotler et al.70 as “the era where the values are the main drivers of marketing”. Companies are more aware of the corporate responsibility and environmental issues. Marketing 4.0 emerged as a result of the changes triggered by turbulent markets, global competition, demanding customers, rapid emergence of new technologies, and disruptive innovation. Marketing 4.0 can be considered as a phase where creation of value is conducted collaboratively. In such system, customers are located at the center of this new digital marketing system.

Social media is seen as a new medium of business communication considering the latest development in the Internet. In the first generation of Internet, Web 1.0, companies were only able to share their knowledge, information related to products and services with their stakeholders. Interaction, at that times, was only one-way; from company to customers. The applications and systems were only static and channeled content. However, Web 2.0 has started an evolutionary process of the Internet as a marketing environment. This time, interaction has become bi-directional and companies have started not only to collect information from their customers; but also redefined stakeholders’ expectations without any restriction in time/ place/medium. There were 4.02 billion internet users in the world as of January 2018, which was 53% of the world’s population.

Company Orientation Towards the Marketplace

Marketing plays an important role by creating value for the society and by helping companies determine what and how to produce. As markets have changed, companies needed to deal with the marketplace in different ways. According to the theory of company orientation towards the marketplace, businesses orientate themselves into five categories: production concept, product concept, selling concept, marketing concept, and holistic marketing concept.

Production Concept: As one of the oldest concepts in business, production concept states that consumers will favor those products that are widely available and low in cost. So business is mainly concerned with producing as much as possible without emphasizing on quality and features. In this concept, the main aim of the company is to increase production level regardless of the demands of the consumers. Basic principle is that ‘’as the production level increases, the cost of production decreases’’. So consumer will be able to purchase a product much cheaper. Generally, production-oriented businesses concentrate on more productivity level, low costs and mass distribution.

Product Concept: The product concept emphasizes that consumers will always buy those products that are better in quality, performance and other features. The main focus point for the companies is to develop superior products and improve existing product lines over a period of time. This orientation is especially used for electronics and other innovative products. In this concept, generally “Technology Push Model’’ is used for making innovations. According to the model, when research and development in new technology drives the development of new products, consumers get an opportunity to know and use these products.

Selling Concept: The selling concept focuses that consumers will not purchase products of companies unless convinced to do so. Therefore, the companies should maintain assertive selling and promotion efforts for gaining customers against their products. This orientation accepts that consumers must be persuaded into buying with supportive motivational and selling tools. This concept often used by the companies for unsought goods like firefighting equipment, life insurance, vacuum cleaner or blood donations. These products may or may not meet expectations of customers in terms of features and price. For this reasons, companies should have a strong network of sales force. In the selling concept, companies typically want to sell what they produce rather than what the consumers want

Marketing Concept: As a customer-centered philosophy, marketing concept originated in the mid 1950’s. Before the 1950’s the main aim of the marketers was to create customers for mass- produced products. Under this concept, the focus point is “customer value’’ in achieving sales and profits. For this reason, marketing concept proposes to companies to find right products for their customers, not to find right customers for the products they produced. In this orientation, companies can achieve their sales targets by implementing marketing efforts successfully. Branding and marketing strategies of the companies are also important as well as selling for delivering a proposition to customers. Underneath this concept, “customer focus’’ and “delivering value’’ are the most important way to increase sales and profits for the companies.

Holistic Marketing Concept: Holistic marketing approach can be considered as a strategy that allows the businesses to look at their marketing efforts as a “whole’’. So this approach can help them develop an overall or a ‘holistic marketing’ plan. If a business wants to use the holistic approach in its marketing structure, every aspects of the business, such as consumer interactions with the product, advertising materials, websites, etc. must be carefully considered. Holistic marketing can be seen an important tool for any business to keep loyal relationships with its clients.