Fb5601 lecture1

The Marketing Concept and Process

Lecture 1Lecture 1

18 Nov. 200418 Nov. 2004

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The Marketing Concept: What It Is and

What It Is Not• The marketing concept has suffered in two The marketing concept has suffered in two

ways:ways: First, it has been established as First, it has been established as optimal optimal

management philosophymanagement philosophy when it is not when it is not necessarily so in all instances, andnecessarily so in all instances, and

Second, we can see many examples of Second, we can see many examples of poor poor marketing practicemarketing practice that have been that have been adopted adopted in the name of the marketing conceptin the name of the marketing concept..

……..It is time that we relearn the marketing It is time that we relearn the marketing concept.concept.

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What It Is Not

•The marketing conceptThe marketing concept Customer focus, profits, and Customer focus, profits, and

integration of organizational integration of organizational efforts.efforts.

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What It Is Not Customer orientationCustomer orientation

Satisfying its customers at a profit…Satisfying its customers at a profit…Determining the needs and wants of Determining the needs and wants of target markets…target markets…

Discovering the wants of a target Discovering the wants of a target audience and then creating the audience and then creating the goods and services to satisfy them…goods and services to satisfy them…

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What It Is Not

•Kotler’s social definition:Kotler’s social definition: ““Marketing is a social and Marketing is a social and managerial process by which managerial process by which individuals and groups individuals and groups obtain what they need and obtain what they need and want through creating and want through creating and exchanging products and exchanging products and value with others.”value with others.”

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• GoodsGoods

• ServicesServices

• ExperiencesExperiences

• EventsEvents

• PersonsPersons

• PlacesPlaces

• PropertiesProperties

• OrganizationsOrganizations

• InformationInformation

• IdeasIdeas

Many Things Can Be Many Things Can Be Marketed!Marketed!


What It Is Not

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• Needs, wants, Needs, wants, and demandsand demands

• Marketing Marketing offers: including offers: including products, products, services and services and experiencesexperiences

• Value and Value and satisfaction satisfaction

• Exchange, Exchange, transactions transactions and and relationshipsrelationships

• MarketsMarkets

Core Marketing ConceptsCore Marketing Concepts

What is Marketing?

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What It Is Not

•The The conditionsconditions under under which the marketing which the marketing concept offers the proper concept offers the proper guidance to the marketer:guidance to the marketer:

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What It Is Not To the extent that the organization To the extent that the organization

relies on relies on exchangeexchange as the means as the means of obtaining compliance with of obtaining compliance with organization’s needs, we describe organization’s needs, we describe that organization as engaging in that organization as engaging in “marketing”. “marketing”. Strive to understand Strive to understand exchange exchange partnerspartners and tailor offerings for them and tailor offerings for them through what is called the through what is called the marketing marketing mixmix (Borden 1964). (Borden 1964).

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What It Is Not• ……it is important to recognize that it is important to recognize that

under some circumstancesunder some circumstances, the , the production conceptproduction concept or the or the sales sales conceptconcept would be a more would be a more appropriate management appropriate management philosophy for the organization philosophy for the organization than the than the marketing conceptmarketing concept.. Can you give some examples?Can you give some examples?

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What It Is Not

….customers are not necessarily good sources of information about

their needs a decade from now…

…sometimes customers have to learnabout new technologies, beliefs, and

ways of behaving…

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The Marketing Myopia

• In 1960, Theodore Levitt wrote In 1960, Theodore Levitt wrote "Marketing Myopia," a widely "Marketing Myopia," a widely quoted and frequently reprinted quoted and frequently reprinted Harvard Business ReviewHarvard Business Review article. article.

• Chapter eight in Theodore Chapter eight in Theodore Levitt's book - Levitt's book - The Marketing The Marketing ImaginationImagination (New York: The (New York: The Free Press, 1986).Free Press, 1986).

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• What does the term marketing What does the term marketing myopia means?myopia means?

• What were the evidence and What were the evidence and examples used to illustrate the examples used to illustrate the notion of marketing myopia?notion of marketing myopia?

• How is the How is the self-deceiving cycleself-deceiving cycle related to marketing myopia? related to marketing myopia?

• Is this notion of marketing myopia Is this notion of marketing myopia still valid today, and explain?still valid today, and explain?

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• Marketing myopiaMarketing myopia was was initially described as a firm's initially described as a firm's shortsightedness or shortsightedness or narrowness when attempting narrowness when attempting to define its business. to define its business.

• The key question – “The key question – “what what business are you in?”business are you in?”

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• Levitt cites the Levitt cites the railroadsrailroads and and Hollywood Hollywood as examples of as examples of "industries that have been and "industries that have been and are now endangering their are now endangering their futures by futures by improperly defining improperly defining their purposestheir purposes." Their problem, ." Their problem, he says, is they were "he says, is they were "product-product-oriented instead of oriented instead of customer-orientedcustomer-oriented.“.“

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• Warning of the dangers of being Warning of the dangers of being product-oriented rather than product-oriented rather than customer-oriented - creating the customer-oriented - creating the Ford Edsel, New Coke or Ford Edsel, New Coke or smokeless cigarettes, as it were, smokeless cigarettes, as it were, rather than products consumers rather than products consumers wanted. wanted.

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•According to Levitt, "According to Levitt, "the the organization must learn to organization must learn to think of itself not as think of itself not as producing goods or services producing goods or services but as buying customers, as but as buying customers, as doing the things that will doing the things that will make people want to do make people want to do business with itbusiness with it." ."

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•Since its publication, Since its publication, corporate leaders have corporate leaders have moved from product-moved from product-orientation toward market-orientation toward market-orientation. orientation.

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Customer orientation has also been

considered as a type of marketing myopia.

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Firms overemphasize the Firms overemphasize the satisfaction of customer satisfaction of customer wants and needs and as a wants and needs and as a result result ignore competitionignore competition. .

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Competitor orientationCompetitor orientation has has been proposed as a been proposed as a replacement for the customer replacement for the customer orientation; with this orientation; with this orientation, a firm's strategy is orientation, a firm's strategy is influenced by its competitors influenced by its competitors (Oxenfeldt and Moore, 1978).(Oxenfeldt and Moore, 1978).

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The marketing myopia described by Levitt

has also evolved into a planning myopia…

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• Businesses need to take Businesses need to take Levitt's idea to its ultimate Levitt's idea to its ultimate endend – – do not just sell a product, sell the do not just sell a product, sell the

solution to a problem.solution to a problem.

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Oil companies have followed that strategy by Oil companies have followed that strategy by developing minimarts in service stations. developing minimarts in service stations.

Digital Equipment Corp. earned one-third of its Digital Equipment Corp. earned one-third of its $7 billion in revenue from computer $7 billion in revenue from computer maintenance services. maintenance services.

General Motors Acceptance Corp. financial General Motors Acceptance Corp. financial services accounted for $1 billion of the services accounted for $1 billion of the automaker's $4 billion in 1985 revenues, and automaker's $4 billion in 1985 revenues, and

Gerber Products is opening day care centers as Gerber Products is opening day care centers as well as acquiring baby-related product well as acquiring baby-related product companies. companies.

By recognizing customer needs, these By recognizing customer needs, these companies have used available corporate companies have used available corporate resources to enter nonmanufacturing segments resources to enter nonmanufacturing segments of the market.of the market.

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The marketing myopia to the world market

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The Marketing Myopia Yves Doz, Jose Santos and Peter J. Yves Doz, Jose Santos and Peter J.

Williamson draw on some examples of Williamson draw on some examples of companies that are major successes companies that are major successes because they sought knowledge in because they sought knowledge in other countries, such as other countries, such as Shiseido, the Japanese cosmetic company Shiseido, the Japanese cosmetic company

that looked to France to become once that looked to France to become once again a leading player. again a leading player.

Little Scandinavian Nokia overtook Little Scandinavian Nokia overtook Motorola in the early days of the mobile Motorola in the early days of the mobile wars simply by monitoring the radar for wars simply by monitoring the radar for emerging phenomena in markets around emerging phenomena in markets around the world. the world.

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• Innovating using local knowledge, Innovating using local knowledge, perfecting your product and perfecting your product and service to meet the needs of service to meet the needs of customers in your home market, customers in your home market, and benchmarking yourself and benchmarking yourself against domestic competitors-against domestic competitors-each of these has become a high each of these has become a high risk strategy.risk strategy.

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• After all, cellular telephony had been invented After all, cellular telephony had been invented in America-at Bell Laboratories, and Motorola in America-at Bell Laboratories, and Motorola was among the first to massproduce mobile was among the first to massproduce mobile telephones. telephones.

• So then, how did Nokia, a little-known upstart So then, how did Nokia, a little-known upstart from the edge of the Arctic Circle leave from the edge of the Arctic Circle leave Motorola behind and manage to become the Motorola behind and manage to become the global leader in mobile telephony? global leader in mobile telephony?

• Nokia was the first to see the potential of Nokia was the first to see the potential of a cellphone as a fashion accessory from a cellphone as a fashion accessory from observations of its customers in Asiaobservations of its customers in Asia. .

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The Marketing Myopia• Nokia has the ability to plug into knowledge Nokia has the ability to plug into knowledge

about new technologies and emerging about new technologies and emerging customer needs from every corner of the customer needs from every corner of the worldworld. .

• It understood the need for customised handsets It understood the need for customised handsets from its experience in Europe, where it first became from its experience in Europe, where it first became apparent that there were different segments of apparent that there were different segments of users. users.

• Observing pilot users across Scandinavia, it was Observing pilot users across Scandinavia, it was among the first to recognise that digital technology among the first to recognise that digital technology could dramatically improve the functionality of could dramatically improve the functionality of mobile phones. mobile phones.

• And in China, India and Africa, it saw that mobile And in China, India and Africa, it saw that mobile phones could potentially become substitute for phones could potentially become substitute for wire-line phones.wire-line phones.

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• While While Nokia prospected the worldNokia prospected the world for insight about promising for insight about promising technologies, diverse customer technologies, diverse customer behavior and new ways to use mobile behavior and new ways to use mobile phones, phones, Motorola continued to Motorola continued to develop its products based on its develop its products based on its knowledge of the customers and knowledge of the customers and technologies in its U.S. backyardtechnologies in its U.S. backyard. .

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• The resultThe result: : Motorola missed the shiftMotorola missed the shift to to digital mobile telephony and the growing digital mobile telephony and the growing strength of the European GSM standard. It strength of the European GSM standard. It didn't see the potential to turn the phone into didn't see the potential to turn the phone into a fashion icon; it was slow to take on board the a fashion icon; it was slow to take on board the new ways mobiles were being used and to new ways mobiles were being used and to recognise that a broader, but more fragmented recognise that a broader, but more fragmented user base would spell the end of "one-size-fits-user base would spell the end of "one-size-fits-all" products. all" products.

• This This myopic approach to competitionmyopic approach to competition, and , and the failure to engage fully with the rest of the the failure to engage fully with the rest of the world and capture the potential of global world and capture the potential of global markets and the innovative ideas in them, markets and the innovative ideas in them, would cost Motorola dearly.would cost Motorola dearly.

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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.

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• The second dimension concerns the The second dimension concerns the firm's business environment firm's business environment perspective. In essence, these firms perspective. In essence, these firms have an inward orientation toward that have an inward orientation toward that industry. industry.

• Firms with a single-industry Firms with a single-industry perspective are preoccupied with the perspective are preoccupied with the actions and reactions of immediate actions and reactions of immediate competitors. competitors.

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• In addition, they are considered to have inbred In addition, they are considered to have inbred management. Some managers have spent the management. Some managers have spent the greater part of their professional careers in one greater part of their professional careers in one industry. industry.

• Inbred management is not necessarily Inbred management is not necessarily undesirable, but it is potentially detrimental undesirable, but it is potentially detrimental when it fosters the contention that it can learn when it fosters the contention that it can learn nothing from firms in other industries, and it nothing from firms in other industries, and it keeps its firm perceptually insulated from such keeps its firm perceptually insulated from such other firms. other firms.

• For example, managers of the cold breakfast For example, managers of the cold breakfast cereal firm may be concerned only with the cereal firm may be concerned only with the actions and reactions of other cold cereal firms.actions and reactions of other cold cereal firms.

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• Firms with a multi-industry Firms with a multi-industry perspective, on the other hand, perspective, on the other hand, have a broader view of the have a broader view of the market. market.

• While they are concerned with While they are concerned with immediate competitors, they also immediate competitors, they also realize that firms in other realize that firms in other industries can serve as sources of industries can serve as sources of innovative strategies as well as innovative strategies as well as being potential competitors. being potential competitors.

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• Such management is said to be cross-Such management is said to be cross-bred, in that managers may have bred, in that managers may have experience in a broad range of experience in a broad range of industries or they are willing to learn industries or they are willing to learn from firms facing similar situations in from firms facing similar situations in other industries. other industries.

• Firms with a multi-industry perspective Firms with a multi-industry perspective are outwardly oriented and not are outwardly oriented and not perceptually insulted from other perceptually insulted from other industries.industries.

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•The combination of the The combination of the two dimensions produces two dimensions produces a matrix with four types of a matrix with four types of firms: firms:

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1.1. classic myopia classic myopia, with a product-, with a product-definition/single-industry perspective, definition/single-industry perspective,

2. 2. competitive myopiacompetitive myopia, with a , with a customer-definition/single-industry customer-definition/single-industry perspective, perspective,

3. 3. efficiency myopiaefficiency myopia, with a product-, with a product-definition/multi-industry perspective, definition/multi-industry perspective,

4. 4. innovative myopiainnovative myopia, with a , with a customer-definition/multi-industry customer-definition/multi-industry perspective. perspective.

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• Marketing managers who wish to Marketing managers who wish to achieve the achieve the innovative firm innovative firm orientationorientation should: should: 1.1.take a generic view of their firm or take a generic view of their firm or

industry, industry, 2.2.monitor other industries, monitor other industries, 3.3.engage in benchmarking to determine the engage in benchmarking to determine the

objectives for relevant areas of marketing, objectives for relevant areas of marketing, 4.4.recruit marketing people, and recruit marketing people, and 5.5.be flexible enough to apply unique be flexible enough to apply unique

solutions to problems. solutions to problems.

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• Strong sales, no Strong sales, no profitsprofits

• Customer-driven Customer-driven to its coreto its core

• Each customer’s Each customer’s experience is experience is uniqueunique

• Provides great Provides great selection, selection, good value, good value, discovery and discovery and convenienceconvenience

• A true online A true online communitycommunity

Amazon.comAmazon.com

Discussion:Discussion: Will Amazon.com Survive? Will Amazon.com Survive?

Case Study

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What is Marketing?• Marketing is managing profitable Marketing is managing profitable

customer relationshipscustomer relationships Attracting new customersAttracting new customers Retaining and growing current Retaining and growing current

customerscustomers

• ““Marketing” is NOT synonymous Marketing” is NOT synonymous with “sales” or “advertising”with “sales” or “advertising”

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Marketing Management

• Marketing managementMarketing management is is “the art and science of “the art and science of choosing target markets and choosing target markets and building profitable building profitable relationships with them.”relationships with them.” Creating, delivering and Creating, delivering and

communicating superior communicating superior customer value is key.customer value is key.

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• Customer Management:Customer Management: Marketers select customers Marketers select customers

that can be served well and that can be served well and profitably.profitably.

• Demand Management:Demand Management: Marketers must deal with Marketers must deal with

different demand states different demand states ranging from no demand to ranging from no demand to too much demand.too much demand.

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• Production Production conceptconcept

• Product Product conceptconcept

• Selling Selling conceptconcept

• Marketing Marketing conceptconcept• Societal marketing conceptSocietal marketing concept

Management OrientationsManagement Orientations


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CRM•CRMCRM – – Customer Customer

relationship managementrelationship management . . .. . .“is the overall process of “is the overall process of building and maintaining building and maintaining profitable customer relationships profitable customer relationships by delivering superior customer by delivering superior customer value and satisfaction.”value and satisfaction.”

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CRM• It costs 5 to 10 times MORE It costs 5 to 10 times MORE

to attract a new customer to attract a new customer than it does to keep a than it does to keep a current customer satisfied.current customer satisfied.

•Marketers must be Marketers must be concerned with the lifetime concerned with the lifetime value of the customer.value of the customer.

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CRM

• Attracting, Attracting, retaining and retaining and growing growing customerscustomers

• Building customer Building customer relationships and relationships and customer equitycustomer equity

• Customer value/satisfactionCustomer value/satisfaction Perceptions are keyPerceptions are key Meeting/exceeding Meeting/exceeding

expectations creates expectations creates satisfactionsatisfaction

• Loyalty and retentionLoyalty and retention Benefits of loyalty Benefits of loyalty Loyalty increases as Loyalty increases as

satisfaction levels increasesatisfaction levels increase Delighting consumers Delighting consumers

should be the goalshould be the goal

• Growing share of customerGrowing share of customer Cross-sellingCross-selling

Key ConceptsKey Concepts

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CRM• Customer equityCustomer equity

The total combined The total combined customer lifetime customer lifetime values of all values of all customers.customers.

Measures a firm’s Measures a firm’s performance, but performance, but in a manner that in a manner that looks to the future.looks to the future.




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CRM• Customer relationship Customer relationship

levels and toolslevels and tools Target market Target market

typically dictates type typically dictates type of relationshipof relationship

Basic relationshipsBasic relationships Full relationshipsFull relationships

Customer loyalty and Customer loyalty and retention programsretention programs

Adding financial Adding financial benefitsbenefits

Adding social benefitsAdding social benefits Adding structural tiesAdding structural ties




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Marketing Challenges• Technological advances, rapid Technological advances, rapid

globalization, and continuing globalization, and continuing social and economic shifts are social and economic shifts are causing marketplace changes.causing marketplace changes.

• Major marketing developments Major marketing developments can be grouped under the can be grouped under the theme of theme of ConnectingConnecting..

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Marketing Challenges

• Via technologyVia technology

• With With customerscustomers

• With marketing With marketing partnerspartners

• With the worldWith the world

• Advances in computers, Advances in computers, telecommunications, telecommunications, video-conferencing, etc. video-conferencing, etc. are major forces.are major forces. Databases allow for Databases allow for

customization of customization of products, messages products, messages and analysis of needs.and analysis of needs.

• The InternetThe Internet Facilitates anytime, Facilitates anytime,

anywhere connectionsanywhere connections Facilitates CRMFacilitates CRM Creates marketspacesCreates marketspaces

ConnectingConnecting

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Marketing Challenges• Selective relationship Selective relationship

management is key.management is key. Customer profitability Customer profitability

analysis separates analysis separates winners from losers.winners from losers.

• Growing “share of Growing “share of customer” customer” Cross-selling and up-Cross-selling and up-

selling are helpful.selling are helpful.

• Direct sales to Direct sales to buyers are growing.buyers are growing.






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Marketing Challenges• Partner relationship Partner relationship

management management involves:involves: Connecting inside Connecting inside

the companythe company Connecting with Connecting with

outside partnersoutside partnersSupply chain Supply chain

managementmanagementStrategic alliancesStrategic alliances






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Marketing Challenges• GlobalizationGlobalization

CompetitionCompetition New opportunitiesNew opportunities

• Greater concern for Greater concern for environmental and environmental and social responsibilitysocial responsibility

• Increased marketing Increased marketing by nonprofit and by nonprofit and public-sector entitiespublic-sector entities Social marketing Social marketing

campaignscampaigns




