As you may gather, marketing is a very broad-based activity, and consequently, it calls for a broad definition. Now the essence of marketing is a transaction---- an exchange-----intended to satisfy human needs and wants. That is, marketing occurs any time one social until (person of organization) strives to exchange something of value with another social unit. Our broad definition then is as follows:
Marketing consists of all activities designed to generate and facilitate any exchange intended to satisfy human needs or wants.
Our micro definition of marketing ----- applicable in a business or nonbusiness organization-----is as follows:
Marketing is a total system of business activities designed to plan, price, promote, and distribute want-satisfying products, services, and ideas to target markets in order to achieve organizational objectives.
As business people have come to recognize that marketing is vitally important to the success of a firm, an entirely new way of business thinking----a new philosophy—has evolved. It is called the marketing concept, and it is based on three fundamental beliefs:
All company planning and operations should be customer-oriented.
The goal of the firm should be profitable sales volume and not just volume for the sake of volume alone.
All marketing activities in a firm should be organizational coordinated.
In its fullest sense, the marketing concept is a philosophy of business that states that the customers’ want-satisfaction is the economic and social justification for a firm’s existence. Consequently, all company activities should be devoted to determining customers’ wants and then satisfying those wants, while still marking a profit over the long run.
A company operates its marketing system within a framework of ever-changing forces that constitute the system’s environment. Some of the forces are broad, external variables that generally cannot be controlled by the executives in a firm. Demographic conditions are one of these macro influences. Another is economic conditions such as the business cycle, inflation, interest rates, and unemployment. Management must be aware of the various types of competition and the competitive structure within which a given firm operates. Social and cultural forces, including cultural changes, are another factor to contend with. Political and legal forces, along with technology, round out our group of external macroenvironmental influences. Management should establish a system for monitoring these external forces.
Another set of environmental factors ---producer----suppliers, marketing intermediaries, and the market itself---is also external to the firm. But these elements clearly are a part of the firm’s marketing system, and they also can be controlled to some extent by the firm. At the same time, a set of nonmarketing resources within the firm (production, facilities, personnel, finances, and so on) influences its marketing system. These variables generally are controllable by management, as are the environmental elements within the marketing department.
With its external and internal environment, a company must develop and operate its marketing system. That is, the organization must manage its marketing effort. The management process, as applied to marketing, involves (1) planning the company’s goals and strategies, (2) implementing these plans, and (3) evaluating the marketing performance. Executives need to understand the management concepts of objectives, strategies, tactics, and policies.
Strategic planning is a major key to a company’s success. With regard to the organizational level on which it is conducted, we find company-wide planning, strategic business unit planning, and strategic marketing planning. Strategic company planning is the process of matching an organization’s resources with its marketing opportunities over the long run. The organization-wide strategic planning process consists of (1) defining the organization’s mission, (2) setting organizational objectives, (3) conducting an organizational portfolio analysis, and (4) designing organizational strategies to achieve the objectives.
Strategic marketing planning should be done within the context of the organization’s overall strategic planning. The strategic marketing planning process consists of (1) conducting a situation analysis, (2) setting marketing goals, (3) selecting target markets, (4) designing a strategic marketing mix to satisfy those markets and achieve those goals, and (5) preparing an annual marketing plan to guide the tactical operations.
Management next must design a strategic marketing mix that enables the company to satisfy the wants of its target markets and to achieve its market goals. The design, and later the operation, of the marketing mix constitutes the bulk of the company’s marketing effort.
Marketing mix is the term that is used to describe the combination of the four inputs that constitute the core of an organization’s marketing system. These four elements are the product offerings, the price structure, the promotional activities, and the distribution system. While the marketing mix is largely controllable by company management, this mix still is constrained by external environmental forces. The mix also is both influenced and supported by a company’s internal nonmarketing resources.
The four “ingredients” in the marketing mix are interrelated. Again we see the systems concept; decisions in one area usually affect actions in the others. Also, each of the four contains countless variables. A company may market one item or several related or unrelated. They may be distributed through wholesalers or directly to retailers, and so on. Ultimately, from the multitude of variables, management must select the combination that will (1) best adapt to the environment, (2) satisfy the target markets, and (3) still meet the organizational and marketing goals.
Product: Managing the product ingredient includes planning and developing the right products and/or services to be marketed by the company. Strategies are needed for changing existing products, adding new ones, and taking other actions that affect the assortment of products carried. Strategic decisions are also needed regarding branding, packaging, and various other product features.
Price: In pricing, management must determine the right base price for its products. It must then decide on strategies concerning discounts, freight payments, and many other price-related variables.
Promotion: Promotion is the ingredient used to inform and persuade the market regarding a company’s products. Advertising, personal selling, and sales promotion are the major promotional activities.
Distribution: Even though marketing intermediaries are primarily a noncountrollable environmental factor, a marketing executive has considerable latitude when working with them. Management’s responsibility is (1) to select and manage the trade channels through which the products will reach the right market at the right time and (2) to develop distribution system for physically handling and transporting the products through these channels.
For a company to operate successfully today, management must develop an orderly method for gathering and analyzing the mass of information that is relevant to the organization. A marketing information system is such a method. It is a structure designed to generate and process an information flow to aid managerial planning and decision making in a company’s marketing program. A marketing information system is a future-oriented, continuously operating, computer-based process. It is designed to handle internal and external data and to prevent problems as well as to solve them.
Marketing research is a major component or subsystem within a marketing information system. It is used in a very wide variety of marketing situations. Typically, in a marketing research study, the problem to be solved is first identified. Then a researcher normally conducts a situation analysis and an informal investigation. If formal investigation is needed, the researcher decides whether to use secondary or primary sources of information. To gather primary data, the researcher may use the survey, observation, or experimental method. Normally, primary data are gathered by sampling. Then the data are analyzed, and a written report is prepared.
A sound marketing program starts with the identification and analysis of the target market for a product or service. A market is people with needs or wants, money to spend, and the willingness to spend it. In preparation for target-market selection, it is helpful first to divide the total market into ultimate-consumer and industrial-user submarkets. The makeup up of the population-its distribution and composition-has a major effect on target-market selection. For some products it is useful to analyze population on a regional basis. Another useful division is by urban, suburban, and rural segments. In this context, the bulk of the population is concentrated in metropolitan areas. Moreover, these areas are expanding and joining together in several parts of the country.
The major age groups of the population make up another significant basis for market analysis-young adults, teenagers, the over 65 group, and so on. The stage of the family life cycle influences the market for many products. Other demographic bases for market analysis include education, occupation, religion, and ethnic origin.
Consumer income---especially disposable income and discretionary income—is a meaningful measure of buying power and market potential. The distribution of income affects the market for many products. Income distribution has shifted considerably during the past 25 years. A family’s income level and life cycle are, in part, determinants of its spending patterns.
Some form of market segmentation is the strategy that most marketers adopt as a compromise between the extremes of an aggregate, undifferentiated market and a different product tailor-made for each customer. Market segmentation is the process of dividing the total heterogeneous market into several homogeneous segments. Then a separate marketing mix is developed for each segment that the seller selects as a target market. Market segmentation is a customer-oriented philosophy that is consistent with the marketing concept. Marketing segmentation enables a company to make more efficient use of its marketing resources. Also, this strategy allows a small company to compete effectively in one or two segments. The main drawback to market segmentation is that it requires higher production and marketing costs than if a one-product, mass-market strategy were used. The requirements for effective segmentation are the (1) the bases for segmentation be measurable with accessible data; (2) the segments themselves be accessible to existing marketing institutions; and (3) the segments be large enough to be potentially profitable.
There are three alternative segmentation strategies that a marketer can choose from when selecting a target market. The three are market aggregation, single-segment concentration, or multiple segmentation. Market aggregation involves using one marketing mix to reach a mass, undifferentiated market. In single-segment concentration, a company still uses only one marketing mix, but it is directed at only segment of the total market. The third alternative involves selecting two or more segments and then developing a separate marketing mix to reach each one.
Before deciding on a target market, the company should forecast the demand in the total market and in each segment under consideration. Demand forecasting involves measuring the industry’s market potential, then determining the company’s sales potential (market share), and finally preparing a sales forecast. The sales forecast is the foundation of all budgeting and operation planning in all major departments of a company. There are several major methods available for forecasting market demand.