Introduction to Marketing

There have been some exciting changes in the way marketing is viewed by practicing marketing managers and students of marketing. No longer is marketing thought of as being limited to personal selling and advertising designed to get rid of the output of the production process. On the contrary, today the concept of marketing held by most successful firms is that (1) marketing must be consumer oriented, and (2) it must have a part in the decision making in all phases of management. Modern marketing begins with the customer, not with the production department. But it plays a vital role in design and production; and it follows the product through its entire cycle into the hands of the final users. Thus management is seen as a total marketing management system, highly complex, and often expensive.
Marketing Defined
Marketing is an organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Marketers with a stronger consumer orientation and a broader management approach place emphasis, in defining marketing, on its role in directing the flow of goods and services to the consumer. In other words, marketing is not viewed as the actual performance of such functions as production and design but as the influencing and guiding of these activities through the role marketing plays in decision making. Marketing may also be defined as the activities involved in recognizing consumer needs, developing products and services to satisfy these needs, and creating and then expanding a demand for these products and services.
While marketing, especially in its use of marketing research and in its borrowing from the behavioral sciences, does to some extent employ the scientific method, it can never control all the variables or exactly repeat experiments with the same results. Therefore, marketing is more of an art than a science. Like practitioners of other arts, the marketing person relies on skill, judgment, and intuition in making decisions more often than on scientifically established certainties. The Economic Impact of Marketing Marketing’s role as a catalytic agent is dramatically illustrated by the growth of the U.S. Gross Domestic Product (GDP). GDP, the value of all goods and services produced in a year, rose from a little over $1 trillion in 1970 to over $12.3 trillion by the first quarter of 2005. Marketing provides the synergistic network required for an economy of abundance. Marketing activities are the source of increasing employment. Sales employees in manufacturing, service, and other industries, retail employees, and workers in transportation, communications, and other related groups represent between one fourth and one third of the civilian labor force. About 50 cents of every retail dollar goes to cover marketing costs. Basic Economic Functions Marketing is a regulating force, allocating scarce resources and influencing the distribution and size of income for both individuals and firms. Basically, marketing is closely related to the broader field of economics. Marketing is viewed by economists as creating time, place and possession utilities - that is having goods when and where they are wanted, and then completing the transfer to provide possession utility. As a branch of economics, marketing draws on such concepts as value theory, demand-supply analysis, scale of economy, marginal revenue, the law of diminishing marginal utility, various theories of competition, and concepts of nonprice competition. While most closely related to the field of economics, marketing also makes use of techniques and findings borrowed from the other behavioral sciences, especially psychology, sociology, and anthropology. These disciplines help the marketer better understand consumers - their motivations and needs, their social behavior and structure, and human nature in general. Marketing also looks to mathematics for techniques - sampling, probability and quality control, and quantitative methods with varying applications. The Marketing Management Concept Today, most successful business firms have emerged, or are emerging, from dominance by production and engineering considerations to a marketing management viewpoint, which encompasses all of the activities of the firm. Fundamental to this new philosophy is the recognition and acceptance of a customer-oriented approach. Although the overall dimensions of the business system are determined by individual decisions, such decisions now include a much broader range of interrelated internal and external factors.
Internally, executive decision makers now realize that profitable decisions emerge from not only production or sales estimates, but also from the ripple effect of information concerning areas such as personnel, finance, management, or accounting. Each area of the firm has aspects of marketing just as marketing contains functions of all the other areas. To make intelligent decisions a marketing manager must know the nature of these other functions and must understand how alternative marketing strategies will be affected. Externally, information for the development of alternative strategies is generated by a consumer-oriented view of marketing activity by the firm. Early approaches to marketing emphasized commodities, institutions, and functions. These elements were studied in an attempt to determine the nature of the marketing activity. Little emphasis was placed on interaction between the various functional areas of the firm or on the decision-making process. Functional conflicts arise when the accountant wants a high rate of capital turnover and return on investment, the production manager or engineer wants costly capital-intensive equipment to produce large homogeneous quantities, the cost control person wants small inventories and limited varieties, the personnel manager wants stable production with few cyclical demands for labor, and the marketer wants increased varieties and large inventories in an attempt to please clients and maximize sales. It is easy to see that any marketing strategy will involve many compromises before an optimum decision is reached. Marketing management implies that all functional areas, including marketing, must be first devoted to determining consumers’ wants followed by an integrated effort toward satisfying those wants at a profit. Profit replaces sales as a primary goal. A basic change in management attitudes resulting in organizational and procedural changes may be necessary for effective adoption of the marketing management concept. Today’s marketing person - more and more, the marketers of the future - rely on systems theories and analysis to guide their decisions. Marketing is seen as a total system, embedded in the overall social and economic system, and not as a collection of unrelated activities and institutions. You will learn more of the systems approach later in this course. Present-day marketers and students of marketing emphasize the importance of marketing strategy. Development of strategies entails two steps: (1) selection of a target market, and (2) development of a marketing mix. The Target Market The idea of a target market is based on the concept of market segmentation - the thought that any market with divergent demands (heterogeneous) will consist of a number of smaller markets. The marketer can identify these segments and set up targets by taking into consideration the characteristics of potential customers in these segments, the marketing mixes that might meet their needs, the goals of the company’s marketing program, and various other factors. The market grid is a matrix type of chart used to analyze markets, set up target markets, and develop appropriate marketing mixes for each individual segment.