Fundamentals of Marketing

Marilyn Stone

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781134197439
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Fundamentals of Marketing provides a sound appreciation of the fundamentals of the theory and practice of marketing. Using case studies drawn from a cross section of sectors, in particular the banking, hospitality, retail and public service sectors this textbook critically evaluates the effectiveness of different marketing strategies and approaches. Exploring the principles of marketing this volume engages the reader, not only in theory but also in practice, using a broad range of real-life case studies such as Coca Cola, Apple, FCUK, Virgin, Amazon.com, Barnes and Noble, Dyno Rod and New Zealand wool.

The text analyzes the marketing mix: product development, pricing, promotion (and communications marketing) and place (channels of distribution). It also emphasizes the role of Marketing Information Systems (MIS) using internal reporting, marketing intelligence and marketing research including the contribution from marketing research agencies and reviews the role of technology, e-commerce and the Internet in supporting successful marketing.

Featuring a support website that provides student and lecturer resources, Fundamentals of Marketing conveys the main principles of marketing in a challenging yet accessible manner and provides the reader with insights into the workings of marketing today.

Visit the Companion website at www.routledge.com/textbooks/9780415370974

1 MARKETING:DEVELOPMENT AND SCOPE OF THE SUBJECT

LEARNING OBJECTIVES

By the end of this chapter you should be able to:

• have a feel for the diversity of the subject of marketing and its
• historical development;
• distinguish between different schools of thought in marketing;
• know what the marketing concept is;
• understand what is meant by the ‘functionalist’ approach by which
• this text is organized;
• have a grasp of the major contemporary environmental trends in
• marketing;
• appreciate the adaptive role of marketing strategy.

INTRODUCTION

The greatest difficulty in writing an academic book about marketing is that people already know much about the subject. The rather dry academic text can seem a poor substitute for the excitement of shopping, or working out what a particular advertisement is saying, telling friends about the latest new product you have bought. Even complaining about the poor level of service received from a shop, the local transport company or perhaps the bank can seem more relevant. Typically, people associate marketing with advertising or selling but while there is no doubt that marketing practice definitely encompasses both, there is much more to the subject than a narrow focus on either advertising or selling might suggest. The true scope of the subject is astonishing and a central aim of this book is to provide a flavour of the diverse nature of marketing. Another key aim is to ensure that your knowledge of marketing is built on solid foundations. For this reason, the approach generally follows the traditional managerialist focus on the ‘4 Ps’ (product, price, promotion and place). Additionally, there is an overview of other perspectives, including social marketing, green marketing and relationship marketing.

THE STUDY OF MARKETING

There are many different approaches to the study of the marketing subject. Sheth et al. (1988) suggests that there are no less than twelve schools of marketing thought. While the variety of approaches contributes to the dynamism of marketing scholarship, the same diversity may confuse readers who expect marketing to be a unified subject. Readers may think that marketers are being contradictory when actually they represent different approaches to the subject. To discuss this diversity it is useful to outline key issues in the historical development of the study of marketing. To begin with it is important to distinguish the practice of marketing from its academic study. From earliest recorded history markets have existed as a means of bringing producer and consumer together. Likewise individuals have sought to influence the perceptions of others in favour of the goods that they offer. One might also point to medieval courtiers as being early consumers (McCracken, 1990). On the other hand, it can be argued that it is wrong to reach back into history in order to label practices that had a particular meaning and function in earlier times as being ‘marketing’ practices. According to American academics, the study of marketing first began in the US in the late nineteenth century. The following is a simplified account of some of the major developments in the academic study of marketing during the course of the twentieth and twenty-first centuries.

Product-centred approaches

As the study of marketing developed during the early 1900s, academics focused on understanding and classifying the profusion of products that were coming on to the market. Much effort was expended on building a product classification which in a revised form is still used today and is reflected in the division between convenience, shopping and speciality goods. The idea is that consumers behave in different ways when purchasing convenience products, relatively inexpensive and frequently purchased goods, compared with shopping products, e.g. consumer durables such as stereos, bicycles and furniture. Speciality products possess a single unique characteristic which buyers are willing to expend a considerable amount of effort to obtain, e.g. a Cartier watch. In our text this work is integrated into the section on Product, one of the ‘4 Ps’ of marketing. You should also be able to detect its influence in the discussion of consumer involvement in Chapter 3.

Another group of academics focused on what marketers do. This research yielded up a classification of marketing activities, e.g. in assembling goods and storing them, assuming risk, rearranging commodities by sorting, grading and breaking up large quantities into smaller units, selling and transporting. This work is integrated into the discussion of place or distribution (Chapter 11), which is another of the ‘4 Ps’.

In the 1930s researchers turned to explore another kind of problem; the spatial separation between producer and consumer – especially the distances consumers might be prepared to travel and the role played by distance in consumer decision to patronize one store rather than another. This work is integrated into the marketing links with logistics, physical distribution and retail location, again as part of the ‘place’ element of the ‘4 Ps’.

Functionalism

The functionalist approach was a major development in marketing and is the approach which has been used for the design of this book. The functionalist approach differs from the functional approach mentioned earlier in that it develops a systems approach to marketing, whereby behaviour is considered to be systemic and goal-driven. The functionalist approach derives in large part from the theories of the biologist Charles Darwin. Within this view the goal of marketing is to effectively match firms’ supply with household demand. Functionalism is important because it views firms and households as organisms which must find some point of equilibrium (homeostasis) in relation to each other and the environment on which they both depend. This ecological view forms the basis of several approaches to the study of marketing, including the managerialist approach, which considers those activities which are best suited to ensuring the successful adaptation of the firm to its environment: macro-marketing, which focuses on the macro environmental impact of marketing, and green marketing, which seeks to bring the activities of firms into a new and more harmonious relation with the environment.

A MANAGERIAL APPROACH

This book takes a traditional managerial orientation to the study of marketing. This began at Harvard University in the US in the late nineteenth century but did not really become significant until the 1950s. According to Sheth et al. (1988) this was because there was excess capacity in the US after World War II when it was becoming harder to sell what was being produced. The development of the managerial approach is important in that it is partisan. Other schools of thought do not take sides between households and firms but study each in its own right. By contrast, as its name suggests, the managerial perspective views the subject from a manager’s point of view, which influences the sorts of questions which marketers ask. A major concern to managers is to understand consumer behaviour. In order to gain the necessary insights into such behaviour marketing research techniques were developed. Following from this Chapter 3 on consumer buyer behaviour is central to the text.

Marketing orientation and the marketing concept

The appropriate orientation of the firm to the household is an important issue for those who take the management perspective. Prior to the 1950s the idea that marketers needed to create customers for mass-produced products was the norm (Drucker, 1955: 52). However, during this period this notion began to be supplanted by a new idea, that of customer orientation. This deceptively simple formulation warns the marketer that to be successful in ‘competing successfully in the quicksilver of modern markets’ they should ‘not so much be skilful in making the customer do what suits the interests of the business as to be skilful in conceiving and then making the business do what suits the interest of the customer’ (McKitterick, 1957: 78). In some respects this formulation is paradoxical as, given consumer sovereignty, the firm should ideally have no long-term interest other than that of acting in the customer’s interests. This paradox may be answered by Levitt’s famous ‘marketing myopia’ (1960). In Levitt’s view managers in firms confuse false (short-term) desires with their real (long-term) interests through being blinded by a belief in the power of their product, technology or production process, or through the perceived need to get rid of ‘product’. Levitt argues that such thinking can only ever hold true in the short term as in the long run consumer sovereignty would prevail. McKitterick’s formulation of customer orientation has clear political and moral implications. The political implication is that if business attended to its long-run interests there would be little need for state regulation. This is tied to the moral dimension whereby managers are told that by acting selfishly they ultimately damage the long-run survival potential of the firm. In this way the marketing orientation seeks the internal regulation of the firm on the justification that managers will seek to come to believe that it is in the firm’s interests to adopt a marketing orientation.

Over the years the idea of the marketing orientation has been subject to elaboration, e.g. by the creation of a range of definitions of the marketing concept. The current definition of the marketing concept offered by the British Chartered Institute of Marketing (CIM) defines marketing as ‘the management process responsible for identifying, anticipating and satisfying customer requirements profitably.’ This definition could be described as wanting in that it fails to focus on the long-run interests of the firm. It can be contrasted with Kotler’s more completed definition: ‘The marketing concept calls for a customer orientation backed by integrated marketing aimed at generating long-run customer satisfaction as the key to attaining long-run profitable volume’ (Kotler, 1972b: 54).

In focusing on the long-run interest of the firm, and in calling for an integrated marketing programme, Kotler recognizes that a key problem for marketing, which is the external face of the organization, is the motivation, co-ordination and control of internal resources. Davidson, writing on marketing warfare, adopts a much blunter tone:

The practice of marketing is almost as old as civilization, and its validity has been proved over and over again. The oldest profession in the world used classic marketing techniques: it identified and satisfied a need; it created a market where buyer and seller could meet, in the form of a brothel; and it turned a handsome profit on the operation.

(Davidson, 1987: 29)

The warfare approach is reflected in Kohli and Jaworski’s definition of the marketing concept which focuses on the notion of marketing intelligence and information gathering in discussing a consumer orientation:

Market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across departments, and organizational responsiveness to it.

(Kohli and Jaworski, 1990: 6)

Ries and Trout (1981, 1986), who have made the marketing warfare orientation approach their own, place the competition and not the customer as the central problem of the marketer. Within this view, the key aim is to position the product in the mind of the customer and to knock the competitor’s out. Marketing warfare theorists are sceptical about those who might argue that marketers should be the lapdogs of customers. For example, Davidson (1987) describes ‘consumer worshippers’ as one of the ‘marketing perverts’.

Levitt (1962: 8) strikes a balance by suggesting that marketing is no ‘do-gooder’ treatise but a ‘tough-minded explanation, outline and example of how to serve yourself by serving the customer better’.¹ While the above definitions are diverse, taking either the customer or the competition as the central focus of marketing, they share the fundamental idea that the interest of the firm, as represented by the need to make a profit, is primary. The ultimate satisfaction of this interest is based on the need to satisfy customer requirements.

Table 1.1 summarizes the key distinctions between economic and marketing orientation and also between marketing orientation and production, costs and sales orientations. Levitt (1960) warns against the ‘self-deceiving cycle’ whereby producers can become lured into the illusory belief that the demand for their product will be eternal, or that their success is due to the technical quality of their product, or the efficiency of their operations. As an example of the former he cites the early twentieth-century millionaire who insisted that his vast inheritance be invested solely in electric streetcars! In relation to technical quality it can be understood how easily an engineer can be lured into thinking that her or his idea of quality is consonant with that ascribed by the consumer. In a personal discussion with some MBA students who worked in the Scottish knitwear industry they heatedly supported their view that UK consumers would prefer the superior technical quality of their product to the inferior quality provided by Benetton. They were motivated by the discussion to conduct research to prove their point. Unfortunately for them, they found that consumers preferred the technically inferior product, especially when they knew the price difference.

Table 1.1 Marketing orientation

Table 1.2 Relations between efficiency and effectiveness

Levitt (1960) focuses attention on to the double-edged relations between efficiency and effectiveness. While efficiency is good, one should be careful not to under or over-engineer a product, as in the knitwear example described above, but instead to give the customer what she or he wants. Related to this is the orientation to technology. Technology, too, undoubtedly can be a good thing, but it may be tempting for managers to implement technological solutions that do not take into account user requirements. Levitt’s insight has been developed into a two-by-two matrix which is illustrated in Table 1.2. A company that is inefficient and ineffective will fail to survive because it produces goods that are relatively expensive, that consumers do not particularly want. Even though a company is efficient and produces goods at a low relative cost, still it will go out of business if it does not produce goods that customers want. Marketers argue that it is only when firms act effectively by making things that people want that the firm stands any chance of surviving into the long term.

Implementing a marketing orientation

Do marketing managers agree with the academics about what a marketing orientation is? In studying this Kohli and Jaworski (1990: 3) first had to construct a composite definition to describe the academic view. They found that academic definitions of marketing orientation are organized according to three core ‘pillars’ which underpin them all. These comprise customer focus, co-ordinated marketing and profitability. The authors asked marketing managers what they thought of the categories that the academics had decided upon by conducting a field study. Marketing managers agreed that the marketing concept is about a customer focus; however, they also mentioned something that the academics had not taken account of, which was that they took actions on the basis of market intelligence. In hindsight it seems obvious that a marketing manager will not simply be concerned with the task of ascertaining the current and future needs of customers, but will be doing so within an environment which is regulated and subject to competition. Co-ordinated marketing was not mentioned by many marketing managers, although the co-ordination of market intelligence was seen to play an important role. Finally, managers perceived profitability to be an outcome of market intelligence and customer focus.

Are marketing-oriented firms more successful?

Over the years marketing academics have sought to ascertain whether firms which are marketing-oriented are more successful than those which are not. Another focus for enquiry has been the overall extent to which firms have embraced the marketing concept.

Hooley and Lynch (1985) studied the marketing characteristics of high and low-performing companies based on a basket of indicators including profitability, market share and return on equity. They found that a number of marketing-related activities differentiated high-performance companies from their counterparts. Higher-performing companies were more likely to be found in growth markets; to be proactive in planning; to work more closely with other departments, including the finance department, and to spend more on market research.

Narver and Slater (1990) took strategic business units (SBUs) in the US as the focus of their study. They sought not only to understand the links, if any, between market orientation and profitability but, furthermore, to see if there were any differences between commodity (raw materials) businesses, such as water and minerals extraction, and non-commodity businesses. Market orientation was operationalized in terms of three components: customer orientation, competitor orientation and degree of inter-functional orientation. The authors found that for commodity businesses those with the highest marketing orientation showed higher profitability than the businesses in the mid-range. Interestingly, they found that those SBUs that were lowest in marketing orientation were also more profitable than the midrange businesses. The authors sought to explain this by arguing that the low marketing orientation companies were highly cost-focused and, consequently, were likely to be more profitable on that basis. For non-commodity companies the authors found that businesses with the highest level of market orientation achieved the highest levels of profitability and those with the lowest orientation the lowest profitability.

DEVELOPMENTS IN MARKETING THEORY

While the above seems to indicate that those firms that embrace the marketing concept are more successful than others, to what extent has this been embraced by business? At the dawn of the 1960s there was a lot of satisfaction if not smugness among marketing academics amid a general feeling that most firms were identifying and satisfying people’s needs and not merely selling things to them. It was felt that marketing had at last come of age, having moved through a series of ‘phases’ from a ‘mass distribution’ or ‘production era’ to ‘aggressive selling’ and now to a genuine ‘marketing orientation’, such that by the 1960s it was considered unAmerican for a company not to practise the marketing concept (Lipson and Paling, 1974; Stidsen and Schutte, 1972). Imagine then the shock, horror and disappointment of marketing academics to what happened later in the 1960s. It is difficult now to comprehend the scope of the change and, in particular, the widespread disaffection of the young with respect to much that concerned business and marketing in particular. In one year only 8 per cent of Harvard graduates decided to elect for business careers (Gartner and Riessman, 1974). Marketing, especially selling and advertising, was singled out as the most controversial and most criticized single zone of business (Bauer and Greyser, 1967: 2). In addition to this criticism, i...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Tables
• Case Studies
• Preface
• Acknowledgements
• Abbreviations
• Introduction
• 1 Marketing: Development and Scope of the Subject
• 2 Strategic Marketing and the Planning Process
• 3 Consumer Buyer Behaviour
• 4 Industrial Buyer Behaviour
• 5 Marketing Research
• 6 Segmentation Targeting and Positioning
• 7 Branding
• 8 Product
• 9 Pricing
• 10 Promotion
• 11 PLACE: CHANNELS OF DISTRIBUTION
• 12 Virtual Marketing
• 13 Marketing Planning and Implementation
• NOTES
• Answers to Review Questions
• References