Marketing (RLE Marketing)

The Management Way

Arnold K. Weinstein

• Publisher: Routledge
• Year: 2014
• Print ISBN: 9781138980518
• eBook ISBN: 9781317638049
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Drawing from the behavioural sciences, management theory, quantitative decision theory and marketing theory, this book presents a comprehensive approach to marketing decision-making and illustrates why a marketing orientation is necessary for corporate survival.

1

Scope and Nature of Marketing Management

THE term marketing is not new to our vocabulary, but very few people will give the same answer when you ask, “What is marketing?” A housewife will tell you she does marketing when she shops for the family’s food. The salesman is marketing when he calls on a customer. And the farmer does marketing when he brings his produce to market. These are all aspects of marketing, but they are only small parts of a much larger discipline.

The first academic definition of marketing to gain wide acceptance was that of the American Marketing Association. “The performance of business activities that direct the flow of goods and services from producer to consumer or user.” Under critical contemporary analysis this definition breaks down. One is left with the feeling that this definition starts “marketing” with a completed product and ends it with delivery of the product to the consumer. The little we do know about marketing theory forces us to reject any definition that does not include the pre-production and post-delivery aspects of marketing management.

In a current and well-accepted elementary marketing text, marketing is defined as follows: “The performance of all activities necessary for ascertaining the needs and wants of markets, planning product availability, effecting transfers in ownership of products, providing for their physical distribution, and facilitating the entire marketing process”.¹ If you wanted a functional task-oriented definition, Beckman’s treatment would be satisfactory. How many of you would be happy if your doctor defined the practice of medicine in the same way. “Medicine is the practice of seeing patients, analyzing their problems, prescribing a cure and receiving payment.” I think most of us would find a new doctor.

To my way of thinking, marketing is an organized system of behaviour that functions for the purpose of evaluating and facilitating the satisfaction of consumer needs. Many of you will be thinking that this is a very broad definition. It is meant to be exactly that. Only through a broad definition of marketing can management begin to understand the even more important “marketing concept”.

Most marketing texts and discussions always assume the operating unit to be a business enterprise. It would not be wrong to assume the operating unit to be a government, church or social group. All that is necessary is a change of words from consumer to “public”. This concept should become clear as you gain understanding of the need for consumer orientation.

The Marketing Concept

Before moving into a discussion of the marketing concept, let us take a look at two parallel changes in management philosophy that have led up to the concept. Earliest management in an industrial society has always been production oriented. Marketing was a peripheral problem in the same class as accounting. Marketing was necessary only to distribute productive capacity. The customer was assumed and no effort was made to satisfy his particular needs. Because customer demand usually outstripped productive capacity, this was a perfectly valid and operative management philosophy.

Along with production-oriented management, there tends to be a non-public orientation towards social responsibility. Management has as a basic philosophy the subordination of all activities to the direct effort of making increased profits. The primary interest is to serve the property interests of the corporate shareholders.

As customer demand and productive capacity come into a type of equilibrium, management is forced to rethink its marketing philosophy. Competition forces realization that production cannot be sold without an effective sales force. To be effective, management has to supply its sales force with ground support in the form of advertising, marketing research and sales training. This is still a production orientation. Customer importance is realized, but only as a means of disposing of corporate production. To differentiate this stage, we call it sales orientation.

With increased competition, especially in consumer goods, companies in the sales-oriented stage of development begin to have troubles. Rapid changes in consumer demands continually leave the organization in turmoil. Analysis of the trouble shows that these companies are trying to sell products that were successful in the past without making an effort to adapt to the changing consumer. In order to succeed, these companies must realize the critical importance of the customer.

As customer orientation becomes the accepted marketing philosophy, the entire corporate philosophy undergoes a subtle change. Modern corporate philosophy has as its aim long-term profits, along with a basic concern for those who have committed their property. The property being committed is the time and effort of employees, the community life that is dependent on the industry, the money of creditors and the property of suppliers, the time of customers and, of course, the investment of the shareholder.

Lazer and Kelly, in Managerial Marketing: Perspectives and View Points, list ten criteria that must be met to consider a firm as customer oriented.

“1. The company appreciates and understands the consumer’s strategic position as a determinant of the firm’s survival and growth. The entire marketing system is designed to serve consumer needs in companies operating under the marketing concept.

2. It is assumed that marketing activity which serves consumers’ needs can be planned, and corporate destinies shaped to a large extent, by planned marketing efforts.

3. Short- and long-range planning of company activities on a continuing basis, and the development of consistent strategies and tactics resulting in an integrated system of marketing action, are seen as the key to marketing management’s tasks.

4. Marketing and business research is utilized to arrive at more fact-founded decisions. Research, including a system of intelligence, is becoming indispensible in modern marketing planning and action.

5. The significant role of marketing intelligence in establishing corporate goals and targets is recognized. Market potentials, rather than production resources, become guides to corporate marketing action.

6. Intra- and inter-departmental implications of marketing decisions and actions of various organizational units are recognized and the integration of all marketing effort is sought.

7. Programmed process and product innovation is accepted as standard and necessary.

8. New product planning and development and their impact on company profits and position are recognized and emphasized in corporate policy.

9. A marketing focus is adopted to co-ordinate company effort and establish corporate and departmental objectives consistent with the firm’s profit goals.

10. There is a continual reshaping of company products, services, and other activities to meet the demands and opportunities of the market place effectively.”²

Marketing and Change

There is one basic problem common to all marketing administrators. What place does change play in an organization and how do you cope with change? While it may seem obvious to say every company must organize for change, it is the exceptional company that has a formalized programme to expedite change. Drucker has said the two basic functions of a business enterprise are marketing and innovation. It is the blending of these two functions that enables a company to meet an everchanging customer structure.

It has been said that “the real challenge to marketing people is to firmly get hold of the idea that changing a business, finding it new sales, new customers, new markets, is even more important than operating it efficiently.”³ What the author is saying is that the need for creative innovation is far more important than wringing the last ounce of efficiency from a production system. Productive capacity is of little value if it can only produce unwanted goods and services. When looked at closely, one finds that successful companies fully understand the place and value of new products.

We may ask ourselves why new products are so important. The answer comes back to the persistent management problem; change. Ours is a society based on change. Cultural changes take place continuously. Technological change is taking place so quickly that computers must be used to keep libraries up to date. Political and economic changes are everyday experiences. Each of these changes has a profound effect on the consumer and on the producer.

In addition to these macro-environmental changes, there are simple market place changes that create the need for new products. Shifts in customer purchases create direct changes in a company’s sales. Changes in customers’ manufacturing methods can be the cause of immediate product obsolescence. Customer moves will quickly remove a firm’s only competitive advantage.

A single simple reality of marketing causes the greatest need for product innovation. When a product reaches maturity, the cost of increasing sales goes up much faster than the profits from any increased sales.

In industries subject to the pressure of market competition, there is a distinct product life cycle. During its life, a product usually passes through the following stages: pre-introduction, introduction, growth, maturity and decline. Each stage in the life cycle is typified by a unique sales-profit relationship.

“Pre-introduction” is that stage in a product’s life when it receives approval for further study and moves through the development process. This stage would include all market and design research. It would include pilot runs or preliminary model building. The stage ends with final approval for manufacture or sale. The length of time a product stays in “pre-introduction” depends on three factors: the availability of technical data and trained personnel, proper definition of market requirements and lastly, the willingness of management to take risks. It is obvious that “pre-introduction” represents a relationship of all cost and zero revenue. The measurement of these costs should include estimates of opportunity cost, in addition to direct out-of-pocket expenses.

A product’s market life begins with “introduction” to the consumer. “Introduction” is usually a high cost, low profit operation. Gaining consumer acceptance is an expensive procedure. Building a better mousetrap will not automatically bring profitable sales to your door. If a product is one of the forty to fifty per cent of new products that succeeds, introduction should lead to a very profitable “growth” phase.

The snowballing effect of product demand by opinion leaders and early innovators makes “growth” most profitable. During this period the firm holds a strong advantage over competition because of its being first with a new product. Competitive advantage is eventually eroded. New products, even if protected by patent, can be copied or improved upon. The high profits of the “growth” stage will tempt many new producers to compete directly or indirectly. Initially, this will have the effect of slowing sales and reducing profit.

As the total market for a new product stabilizes, it enters the “maturity” phase. Competition will continue to enter the market until it is no longer profitable. In an effort to maintain market share, profits will decrease sharply. During “maturity”, the small firms that jumped on the bandwagon during “growth” will slowly drop out of the race. A new level of operation will establish itself and continue until something happens to disturb the mature product.

The “something” referred to above will usually be a significant technological change making the mature product obsolete. Obsolescence will cause a rather abrupt drop in sales. Heavy capital losses can be incurred and, unless a firm has prepared for the change, obsolescence may cause bankruptcy.

At this point you may be saying that the product life cycle concept is very interesting, but what is its value? Stated simply, the phase of the life cycle should determine the amount of risk management takes with a product. Products in the “growth” stage may represent a need for building new plant capacity. The same product while in the “maturity” phase would hardly be considered as cause for increasing capacity. Phase of life cycle should also govern the amount of money spent on promotion to increase sales. The phase of the life cycle is therefore an important management consideration.

General factors to consider in determining a product’s place in its life cycle are: profit, competition and customers. How profitable is the product today as compared with last year and the year before? Is competition non-existent, still coming on strong or dropping off? Are customers more demanding in areas of price, service, and special features?

Theodore Levitt, in his article “Marketing Myopia”, outlines certain management misconceptions that have led otherwise dynamic companies to neglect new product development. Some managements claim that growth in sales is guaranteed by growth in population. On other occasions even more absurd sentiments are voiced. There is no substitute for our product. Reality shows that continued population growth is likely to stimulate the rapid changes in technology that make once firmly entrenched products fall into obsolescence.

The first step a company takes towards developing a proper attitude on new products is realizing that innovation must be managed. Innovations must be managed because managements have a tendency to grow anti-innovation and organizations tend to inhibit innovation.

It may seem strange to say management tends to become anti-innovation but the factors causing it are quite real. With the introduction of quantitative methods, management begins to want more certainty in forecasting the future. New products are by nature a very uncertain investment. Successful companies build up a background of knowledge and tradition that tends to inhibit innovation and free thinking. Increased automation has an inhibiting influence on innovation as it makes great demands for a smooth-running organization. Finally, the temptati...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Copyright Page
• Dedication
• Table of Contents
• Preface
• 1 Scope and Nature of Marketing Management
• 2 The Market Transaction
• 3 Consumer Behaviour
• 4 Planning and the Marketing Function
• 5 Forecasting and Planning
• 6 Product Planning: Policy and Problems
• 7 The Pricing Decision
• 8 Channels of Distribution
• 9 Advertising Management
• 10 Sales Planning and Control
• 11 Control of the Marketing Effect
• Index