What Is Marketing?

What makes a business idea work? Does it only take money? Why are some products
a huge success and similar products a dismal failure? How was Apple, a computer
company, able to create and launch the wildly successful iPod, yet Microsoft’s first
foray into MP3 players was a total disaster? If the size of the company and the
money behind a product’s launch were the difference, Microsoft would have won.
But for Microsoft to have won, it would have needed something it’s not had in a
while—good marketing so it can produce and sell products that consumers want.
So how does good marketing get done?

      Marketing is defined by the American Marketing Association as “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.”American Marketing Association, “Definition of Marketing,”
 If you read the definition closely, you see that there are four activities, or
components, of marketing:
1. Creating. The process of collaborating with suppliers and customers
to create offerings that have value.
2. Communicating. Broadly, describing those offerings, as well as
learning from customers.
3. Delivering. Getting those offerings to the consumer in a way that
optimizes value.
4. Exchanging. Trading value for those offerings.
The traditional way of viewing the components of marketing is via the four Ps:
1. Product. Goods and services (creating offerings).
2. Promotion. Communication.
3. Place. Getting the product to a point at which the customer can
purchase it (delivering).
4. Price. The monetary amount charged for the product (exchanging).
Introduced in the early 1950s, the four Ps were called the marketing mix, meaning
that a marketing plan is a mix of these four components.
If the four Ps are the same as creating, communicating, delivering, and exchanging,
you might be wondering why there was a change. The answer is that they are not
exactly the same. Product, price, place, and promotion are nouns. As such, these
words fail to capture all the activities of marketing. For example, exchanging requires mechanisms for a transaction, which consist of more than simply a price or
place. Exchanging requires, among other things, the transfer of ownership. For
example, when you buy a car, you sign documents that transfer the car’s title from
the seller to you. That’s part of the exchange process.
Even the term product, which seems pretty obvious, is limited. Does the product
include services that come with your new car purchase (such as free maintenance
for a certain period of time on some models)? Or does the product mean only the
car itself?
Finally, none of the four Ps describes particularly well what marketing people do.
However, one of the goals of this book is to focus on exactly what it is that
marketing professionals do.

Value
When we use the term value, we mean the benefits buyers receive that meet their
needs. In other words, value is what the customer gets by purchasing and
consuming a company’s offering. So, although the offering is created by the
company, the value is determined by the customer.
Furthermore, our goal as marketers is to create a profitable exchange for
consumers. By profitable, we mean that the consumer’s personal value equation is
positive. The personal value equation is
value = benefits received – [price + hassle]
Hassle is the time and effort the consumer puts into the shopping process. The
equation is a personal one because how each consumer judges the benefits of a
product will vary, as will the time and effort he or she puts into shopping. Value,
then, varies for each consumer.
One way to think of value is to think of a meal in a restaurant. If you and three
friends go to a restaurant and order the same dish, each of you will like it more or
less depending on your own personal tastes. Yet the dish was exactly the same,
priced the same, and served exactly the same way. Because your tastes varied, the
benefits you received varied. Therefore the value varied for each of you. That’s why
we call it a personal value equation.
Value varies from customer to customer based on each customer’s needs. The
marketing concept, a philosophy underlying all that marketers do, requires that
marketers seek to satisfy customer wants and needs. Firms operating with that
philosophy are said to be market oriented7. At the same time, market-oriented
firms recognize that exchange must be profitable for the company to be successful.
A marketing orientation is not an excuse to fail to make profit.
Firms don’t always embrace the marketing concept and a market orientation.
Beginning with the Industrial Revolution in the late 1800s, companies were
production orientation. They believed that the best way to compete was by
reducing production costs. In other words, companies thought that good products
would sell themselves. Perhaps the best example of such a product was Henry
Ford’s Model A automobile, the first product of his production line innovation.
Ford’s production line made the automobile cheap and affordable for just about everyone. The production era lasted until the 1920s, when production-capacity
growth began to outpace demand growth and new strategies were called for. There
are, however, companies that still focus on production as the way to compete.
From the 1920s until after World War II, companies tended to be selling
orientation, meaning they believed it was necessary to push their products by
heavily emphasizing advertising and selling. Consumers during the Great
Depression and World War II did not have as much money, so the competition for
their available dollars was stiff. The result was this push approach during the
selling era. Companies like the Fuller Brush Company and Hoover Vacuum began
selling door-to-door and the vacuum-cleaner salesman (they were always men) was
created. Just as with production, some companies still operate with a push focus.
In the post–World War II environment, demand for goods increased as the economy
soared. Some products, limited in supply during World War II, were now plentiful to
the point of surplus. Companies believed that a way to compete was to create
products different from the competition, so many focused on product innovation.
This focus on product innovation is called the product orientation. Companies
like Procter & Gamble created many products that served the same basic function
but with a slight twist or difference in order to appeal to a different consumer, and
as a result products proliferated. But as consumers had many choices available to
them, companies had to find new ways to compete. Which products were best to
create? Why create them? The answer was to create what customers wanted,
leading to the development of the marketing concept. During this time, the
marketing concept was developed, and from about 1950 to 1990, businesses
operated in the marketing era.
So what era would you say we’re in now? Some call it the value era: a time when
companies emphasize creating value for customers. Is that really different from the
marketing era, in which the emphasis was on fulfilling the marketing concept?
Maybe not. Others call today’s business environment the one-to-one era,
meaning that the way to compete is to build relationships with customers one at a
time and seek to serve each customer’s needs individually. For example, the longer
you are customer of Amazon, the more detail they gain in your purchasing habits
and the better they can target you with offers of new products. With the advent of
social media and the empowerment of consumers through ubiquitous information
that includes consumer reviews, there is clearly greater emphasis on meeting
customer needs. Yet is that substantially different from the marketing concept?
Still others argue that this is the time of service-dominant logic and that we are
in the service-dominant logic era. Service-dominant logic is an approach to
business that recognizes that consumers want value no matter how it is delivered, whether it’s via a product, a service, or a combination of the two. Although there is
merit in this belief, there is also merit to the value approach and the one-to-one
approach. As you will see throughout this book, all three are intertwined. Perhaps,
then, the name for this era has yet to be devised.
Whatever era we’re in now, most historians would agree that defining and labeling
it is difficult. Value and one-to-one are both natural extensions of the marketing
concept, so we may still be in the marketing era. To make matters more confusing,
not all companies adopt the philosophy of the era. For example, in the 1800s Singer
and National Cash Register adopted strategies rooted in sales, so they operated in
the selling era forty years before it existed. Some companies are still in the selling
era. Recently, many considered automobile manufacturers to be in the trouble they
were in because they work too hard to sell or push product and not hard enough on
delivering value.

Creating Offerings That Have Value
Marketing creates those goods and services that the company offers at a price to its
customers or clients. That entire bundle consisting of the tangible good, the
intangible service, and the price is the company’s offering. When you compare
one car to another, for example, you can evaluate each of these dimensions—the
tangible, the intangible, and the price—separately. However, you can’t buy one
manufacturer’s car, another manufacturer’s service, and a third manufacturer’s
price when you actually make a choice. Together, the three make up a single firm’s
offer.
Marketing people do not create the offering alone. For example, when the iPad was
created, Apple’s engineers were also involved in its design. Apple’s financial
personnel had to review the costs of producing the offering and provide input on
how it should be priced. Apple’s operations group needed to evaluate the
manufacturing requirements the iPad would need. The company’s logistics
managers had to evaluate the cost and timing of getting the offering to retailers and
consumers. Apple’s dealers also likely provided input regarding the iPad’s service
policies and warranty structure. Marketing, however, has the biggest responsibility
because it is marketing’s responsibility to ensure that the new product delivers
value.

Communicating Offerings
Communicating is a broad term in marketing that means describing the offering
and its value to your potential and current customers, as well as learning from
customers what it is they want and like. Sometimes communicating means educating potential customers about the value of an offering, and sometimes it
means simply making customers aware of where they can find a product.
Communicating also means that customers get a chance to tell the company what
they think. Today companies are finding that to be successful, they need a more
interactive dialogue with their customers. For example, Comcast customer service
representatives monitor Twitter. When they observe consumers tweeting problems
with Comcast, the customer service reps will post resolutions to their problems.
Similarly, JCPenney has created consumer groups that talk among themselves on
JCPenney-monitored Web sites. The company might post questions, send samples,
or engage in other activities designed to solicit feedback from customers.
Mobile devices, like iPads and Droid smartphones, make mobile marketing possible
too. For example, if consumers check-in at a shopping mall on Foursquare or
Facebook, stores in the mall can send coupons and other offers directly to their
phones and pad computers.