Chapter 1: The Core Concepts of Marketing

Marketing and Relevant Concepts

There is no doubt that for a business to survive, selling products or services produced is essential. In other words, in order to accomplish sales objectives, advertising and personal selling may be used heavily by some companies. There are a lot of definitions for marketing. Board of Directors of the association approved the following definition in July 2013 and has not changed it until today. That definition is “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.’’ We can underline some of important points about marketing:

• Marketing is an exchange process
• Customer needs and wants are the starting point of marketing process
• Marketing offers are goods, services and ideas.
• The needs of the customers and the objectives of the companies are satisfied in the marketing process.
• Developing, pricing, distributing and promoting products are core marketing activities.
• Marketing creates customer value
• Marketing does not only affect customers, but partners and society as a value.
• Marketing is both a business function and philosophy.

A need is the difference between a consumer’s actual state and some ideal or desired state. A want is a desire for a particular product used to satisfy a need.3 While all people around the world need food when they are hungry, based on their culture, income and some other characteristics, they might want a different product or service to satisfy the same need. Marketers generally try to influence the ways that consumers’ needs are met. In other words, marketing tries to impact what we may want when a need arises. Human needs may be physical, psychological or social. Marketers show their customers what they might want when a need arises through their products, brands, and advertisements. A need may arise and a consumer may want a specific product, however, customers won’t purchase a product unless a demand occurs.

Demand is an economy term that means customer’s need and want for a product must be coupled with purchasing power (money, resources) to obtain the product. In marketing, the term “market” is used for the consumers who have a need or want for a spesific product/service whom also have the resources and willingness to buy the product.

A market consists of consumers who have a need, resources (money) and willingness to buy a product.

Exchange is an act of obtaining a desired object from someone by offering something in return.4 In the exchange process, there must be two or more parties involved like individuals or organizations. Each of these parties must have valuable offer to satisfy the needs and wants of the other party. The exchange process is a voluntary process while parties communicate with each other. On one side of the exchange process, there is marketer and on the other side is the market. Marketer may offer something like a product, a service or an idea to the market. Market includes a group of current and potantial customers where any company that offers goods and services is called a marketer. However, not only companies are involved in the exchange process. To take instances, an airline offers a flight service to potantial passengers or a movie theatre may offer entertainment. The market pay money in the exchange process if accepts the offer of the marketer as valuable and wants to have transaction. Money is not the only payable concept by customers. While an individual may donate money to a non-profit institution, he also spends his/her time, energy, expertise in this exchange process and feels better as a result of good deeds done for the society. Consumers’ needs and wants are fulfilled through market offerings a combination of products, services, information, or experiences offered to a market to satisfy a need or a want. Whilst some companies only offer physical products such as a detergent, toothpaste, others offer services like delivery, banking, insurance or hospitality. In addition, some companies gain competitive advantages through offering both products and services to customers. Provide memorable experiences by engaging customers is a way to make customers satisfied and loyal.

Experiences are very important part of the marketing offers today. An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event. Physical goods are tangible, services are intangible, and experiences are memorable.

Pine and Gilmore offered four types of consumer experience: educational, esthetic, entertainment, and escapist that are termed as the “4Es.6 Products and services creating memorable customer experiences have more chance to be successful in the market. For example, a store selling kitchen appliances may provide cooking workshop for its customers as well. Restaurants like Hard Rock Cafe integrate entertainment to their offers which are known as eatertainment restaurants.

Taken from another point of view, marketers may also offer an idea. In this sense, all marketing is the marketing of an idea. An institution may offer an idea to society in order to change their attitudes and behaviors.

For some people, BİM or ŞOK markets to get reasonable products at low prices. For some others, value may mean a pleasant store ambiance, premium products and Macro Center may satisfy their needs for value. On the other hand, local markets like Özbesin in Eskişehir will be the preferred retailer if value means positive customer relations. Therefore, while each store model provides a value for its customers, the important point is that customers do not judge value objectively; they make their decision to shop from any of these stores based on their own value perceptions. Customer value is a key concept in marketing because it gives importance to the idea that marketers should always be looking for ways to improve their customers’ experience of dealing with their company and products.

There are two ways to increase customer perceived benefits; one of them is; decrease prices and other costs for the consumers. The costs are not only the economic costs like paying money for the product’s price, spending time and energy may be other costs of getting the product. Alternative way of improving perceived value is increasing the benefits for consumers by offering more things. The benefits customers get may be a higher quality product, more convenient ones, superior services etc. The benefits may also be emotional like feeling unique or getting prestige and earning a status.

Marketing Mix: A Classification of Marketing Activities

Creating good products, setting right prices and delivering them to right places still may not be enough for marketing success. The marketer must do some activities to inform customer about the product. Communication with customers is a very important part of the marketing today. Consumers need communication to be convinced that the right product is available in the right place and right price. Therefore, marketers need to promote their products to inform, influence or convince customers.

Marketing mix consists of a set of marketing tools, which is known also as 4Ps of product, price, place and promotion. The 4Ps is the most commonly used schematic for the marketing mix and has the advantage of being both widely recognized and easy to remember.11 These activities are essential parts of a company’s marketing program. If any of these tools is missing or ignored by the marketers from marketing mix, it will not be completed. Marketers refer to these activities—product, pricing, distribution, and promotion—as the marketing mix because they decide what type of each element to use and in which amounts. Designing a good marketing mix and offering customers a good combination of 4Ps is not easy. Firstly, decisions about the marketing mix variables are interrelated. Each of the marketing mix variables must be coordinated with the other elements of the marketing program.

A product can be a good, a service, or an idea. A good is a physical entity that consumers may touch and perceive with their senses. A mobile phone, a car and a pack of instant coffee are examples of physical goods that we can touch, smell or taste. A service is the application of human and mechanical efforts to people or objects to provide intangible benefits to customers.14 While Iphone and Samsung are examples of goods, mobile phone operators Turkcell and Vodafone represent services. Product decisions include selecting a brand name, deciding product’s package and label, after sales services, warranty conditions, design and product’s features, product modifications and improvements, deciding product strategies at different stages during its life cycle.

Price can be defined as what the business charges its customers for the goods and services it provides. Price is a critical component of the marketing mix because of customers’ concern about the value obtained in an exchange. Price is often used as a competitive tool but intense price competition sometimes leads to price wars. Price decisions include setting initial price for a new product, modifying the price when necessary such as increasing and decreasing pricing in different economic environments, making price discounts to customers, pricing the products for different international markets.

Place is the location where the exchange takes place – the retail store, through the mail, in cyberspace, etc. Place decisions involve thinking about physical distribution (shipping and delivery) as well as finding the most convenient location for customers to buy the product. Marketers must think about the number of retailers, distributors, wholesalers. Online marketing channels are very popular today. Many companies are delivering their products with conventional channels like speciality stores while at the same time distributing their products through online stores.

A company’s total promotion mix—also called its marketing communications mix—consists of specific blend of advertising, public relations, personal selling, sales promotion, and direct marketing tools that company uses to engage consumers, persuasively communicate customer value, and build customer relationships.17 Advertising uses paid-for-media like television, radio to send messages to the target audiences. Short-term incentives offered to final consumers and retailers are called sales promotions. The incentives may be in the form of bonus packs, free samples, coupons, price offs and refunds. Personal selling consists of personal customer interactions by the firm’s sales force for the purpose of engaging customers, making sales, and building customer relationships. Direct and digital marketing includes direct mail, catalogs, online and social media, mobile marketing catalogues, and more.

Marketing Management Orientations

Different companies realize marketing in different ways. For some companies, the most important marketing activity is producing and delivering goods at reasonable prices, for some others, selling is the prime marketing activity and some companies may take customers above anything.

The basis of production orientation is that people will buy anything as long as it is cheap enough.18 Production orientation works best in a seller’s market when demand is greater than supply because it focuses on the most efficient ways to produce and distribute products.19 In such a situation, companies do not consider marketing as a necessary activity and customers’ specific needs and wants are not taken into consideration. Therefore, the drawback of this orientation is obvious; there may be companies that produce what the customer needs at cheaper prices.

Companies that accept product orientation are concerned with making the best possible product. They emphasize on product development and improvement, product quality and adding new features. product-oriented companies believe that if they produce a good quality product at reasonable prices, it will be sold without marketing efforts. Especially for the technology products, it is important to inform customers by a good marketing communication campaign. Product oriented companies could die due to “marketing myopia” which is a very important business concept. While myopic companies believe people buy products, in fact, solutions to our problems and satisfaction for our needs are what we really buy. Put differently, products are tools to satisfy our needs.

Companies following the selling concept, think that consumers will not buy products unless the company goes under substantial selling and promotion efforts. Generally, companies focus on selling what they produce instead of selling what the consumers need. Undoubtedly, companies may sell a product once by using sales promotions or by exaggerated advertisement messages. Sometimes a sales person may push a consumer aggressively into buying. Sales oriented companies may be successful on attracting customers, but if the product they sell or the services they provide does not satisfy the consumers, the customers leave the company and will not turn back.

Market-oriented companies give customers the highest priority while conducting business. Every department and employee should focus on contributing to the satisfaction of customers’ needs. A true marketing orientation requires a focus on both customers and competitors. While providing products and services that meet customers’ needs, it is important to do better than competitors. Marketing orientation of a company shows the guiding philosopy when conducting marketing activities. Types of marketing orientations are: production, product, sales, marketing and societal marketing orientations

The societal marketing concept which is the newest of marketing orientations holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well-being. We cannot call a company as a good marketing organization if it ignores social responsibilities even if it satisfies both its customers and the profit objectives. A company that sufficiently extends its marketing goals to fulfill its social responsibility is practising what has become known as the social marketing concept.

From Transactional Marketing to Relationship Marketing

In the past, the focus of marketing was on achieving sales in a very short time. But in 1990’s marketing’s focus has changed from creating immediate sales to the preservation of future sales. During the 1990s, marketing thinking moved towards the relationship marketing. The importance of building long-term customer relationships became apparent.

Relationship marketing means creating mutually beneficial relationships with customers. Keeping the current customers, increasing their loyalty, growing the company’s business with current customers became as important as attracting new customers although acquiring new customers, selling something to a customer for the first time is still important.

Marketing management’s responsibility has changed from creating transactions to building successful relationships. Relationship marketing focuses on the ’lifetime’ value of the customer. In transaction marketing, the aim of the marketer is selling to each customer segment and count each customer in a different group.

In relationship marketing approach, the company recognizes that if it can satisfy the customer and establish a longterm relationship with the customer, the company may keep on selling sportswear to this customer during the lifetime of this customer .

Relationship Bonds

Companies use three types of relational bond like financial, social and structural to retain their current customers and increase their loyalty. Through financial bonds, company offers some incentives that have a financial value such as price discounts on purchases and loyalty program rewards such as the airline companies’ free miles or the cash-back programs provided by some credit card issuers.

In many cases customers and companies may have close personal and social relationships. Especially in service industries like banks, restaurants and insurance agents, the service provider and customers develop interpersonal relationships. Today, with improvements in communication technology, it is possible to build social relationships with the customers through several channels. Technology is used to identify and build a database of current and potential customers and deliver differentiated messages based on consumers’ characteristics and preferences. Therefore, a company with a good database may send different gifts to its loyal customers on their birthdays based on their hobbies and lifestyle.

A company that serves business customers could use structural bonds to build deeper relationships. Structural bonds are used generally in business to business marketing situations such as exporterimporter and company-supplier relationships. Structural bonds include joint investments in projects and sharing of information, processes, and equipment.