Text 1.

Marketing: Definition and Structure

What is marketing?
There are many ways of defining marketing. Some of them are more complicated and long-winded than others. P.
Kotler (Marketing Management, Prentice Hall, 1977) described marketing as 'a human activity directed at satisfying
needs and wants through exchange processes'. Here, he is emphasising the importance of exchange, i.e. payment.
Marketing has also been described as a complete system of business activities designed to plan, promote and distribute
goods and services to target markets, where they are desired and/or needed. Note the difference between needs and
wants/desires. A need is something that is necessary to existence. It fulfils the achievement of physiological needs: the
basic requirements for sustaining life, such as food, water, warmth, clothing and shelter. A want is something that a
consumer would like to have, but is not necessary for survival, such as ice cream or a trip to an amusement park.
To put it simply, marketing is best described as discovering what the potential consumers want and then
supplying it (at a profit).
'At a profit' is in parentheses because profit is usually, but not always, one of the main objectives of a business. In
certain state-owned, or charitable, organisations, it may be that the aim is still to find out what the consumers want
and then to supply it, but making a profit may not be an essential part of the equation.
The role and importance of marketing
All organizations market themselves. They may not do so intentionally, but simply by producing goods and services and by
dealing with customers, they are involved in marketing. If this is the case, then it is better that firms should have a carefully
planned marketing strategy rather than a slapdash approach. For a number of years, it was assumed that marketing was only
really important for firms dealing in fast-moving consumer goods (FMCGs), but now it is realized that it is also essential for
firms dealing in services and manufacturing. Indeed, organizations such as charities, hospitals, art galleries and even
universities are now marketing themselves fairly aggressively.
Marketing is of extreme importance, since it covers many of the functions of management Design, production,
pricing, promotion and distribution are key areas in almost all organisations and they are all under the umbrella or
influence of marketing.
Marketing in the UK and Europe has only really grown in importance since the end of the 1950s. The main reason
for this rise in the importance of marketing is that, before this time, people did not have the disposable income
available to demand a large range of products. Since the recovery following World War II, demand has grown and
many businesses have arisen to satisfy that demand. Also, as incomes have risen, people have satisfied many of their
product needs and now demand a far greater number of services than they once did. This accounts for the greater
supply of restaurants, travel agents and leisure facilities.
The demand for more products and services has led to the emergence of a great number of businesses and brands.
In addition, in the UK, there is now more competition from abroad, especially from Europe, following membership of
the EU. This increased competition has made marketing all the more important to firms if they wish to survive.
With the improvements in average incomes, fashion has become more important and people's tastes tend to change
more frequently. Lifestyles have altered and demands have changed. For example, there is now a whole health and fitness
industry, with products ranging from aerobics classes to vitamin tablets. These changes in tastes, fashion and lifestyles are
another reason why marketing has become so much more important in recent times.
In the time period we are considering, there have been exceedingly rapid changes in technology. So many products
that are now taken for granted were not available 30 years ago, such as mobile telephones, personal computers and CD
players. These new and improved products have had to be marketed and now, of course, consumers expect new
.advances in technology and improvements in products at all times and it is up to the marketers to provide and sell the
products. Fear of obsolescence is a much greater worry these days than in times gone by
To summarise, the role of marketing is immense. It involves all areas of an organization and successful companies
are those that know what their customers really want and then set about supplying it.
Market orientation and product orientation
Marketing focuses on consumer needs and wants and, in modern-day management, it is the consumer who drives product
development and production more than the product developer. This is known as a market- or consumer-orientated
approach. On the whole, the days of developing a product and then finding a market, a product-orientated approach,
are disappearing. However, this still happens to an extent and there are a number of approaches that put the
consumer, or market, last:
o Product-orientated businesses invent and develop products in the belief that they will then find consumers
to purchase them. They believe that they know what the customers want and that if they produce a
product of good enough quality, then it will be purchased. This sort of pure research and development is
becoming rarer, but there will always be a place for it to some extent. Firms in certain industries, such as
pharmaceuticals and electronics, have to operate in this way to survive. The industries are so innovative
that to stand still is to risk going out of business.
o Production-orientated businesses concentrate their efforts on efficiency producing high-quality, relatively
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cost-efficient products. The belief is that the products will find a market if the price is relatively low and
the product is of a high enough quality. Although production-orientated firms are not as prevalent as other
types, they do exist, especially in areas where quality, or safety, are of great importance, such as bottledwater plants or the making of crash helmets. +
o Sales-orientated businesses tend to produce a product and then concentrate upon different selling
techniques and skills, so that they can then clear their supplies. It is argued that some pyramid selling firms
work in exactly this fashion
All of the above approaches take little notice of the consumer and are much more interested in product production
and selling techniques.
Market-orientated firms put the consumer/customer first. The business will attempt to produce what the
consumers want, rather than try to sell them a product that they do not really want to buy. Market orientation is the
most common form of marketing these days and the reasons for it were very well described by Robert Heller, in his
book The Supermarketers. He said,
It's quite misguided to pursue the technology-push policy - a delusion with much industrial blood on its hands.
The myth goes that if you make a better mousetrap the world will beat a path to your door. It has been disproved
again and again, never more comprehensively than by the total defeat of competitors who had genuinely stolen
technological marches on IBM in mainframe computers ... Despite all such evidence, many allegedly marketing
orientated companies still operate on the mousetrap principle: improve the product, they think, and technology
push will create the sales.
In fact, success and survival in business depend upon the whole marketing process, which will be covered in this and
the next two chapters. Finding out what the consumer wants and then supplying it at a profit requires the following:
carrying out effective market research and identifying the target groups;
designing the product;
assessing the reaction of consumers to both the product and the packaging;
calculating a suitable price, related to costs of production and what consumers are willing to pay;
deciding upon a suitable promotional strategy;
organizing the distribution system that will be used to get the product to the market.
Marketing objectives
Objectives are what we attempt, or wish, to achieve. As should always be the case, the marketing objectives of a
business should relate to the hierarchy of objectives that the enterprise has. The hierarchy of objectives is:
mission statement;
long-term objectives;
short-term objectives;
departmental objectives;
set strategy;
set tactics.
The marketing objectives should come under the heading of departmental objectives and they should reflect the
aims of the whole organization and attempt to aid the achievement of the objectives above them in the hierarchy. The
marketing objectives are the outcomes that an organization is trying to attain through its marketing.
The long- and short-term objectives of the business will have an influence on the marketing objectives. For
example, if a firm is attempting to maximize profits, then the emphasis of the marketing strategy will reflect this. In
the same way, if a firm is attempting to enter a market and gain a sizeable market share, then its marketing objectives
will be different from the previous example.
It is fair to say that whatever the greater aims of an organization, its marketing objectives will normally be achieved
through an appropriate blending of marketing variables. These make up the marketing mix. Marketing objectives
would normally involve six aspects and we can look at each of these in turn.
Market segmentation
The marketing objectives of a business ought to include an analysis of which market segments the firm wishes to
operate in and which market segments they might aim for in the future. It is unusual for a firm to be large enough to
attempt to satisfy all of a market, unless the market is a relatively small, usually specialist, one. Because of this, firms
usually identify their prime market segments and one of their objectives would be to enter those segments. Thus, a
shoe company may decide to aim at the sports shoe and leisure wear segments of the shoe market. They may hope,
in time, to move into the work boots segment.
Market share
Once markets, or market segments, have been identified, then firms will normally set objectives relating to the
amount of market share that they might hope to gain. Thus, the shoe firm above might set themselves a target of
achieving 5% of the sports shoe market and 10% of the leisure shoe market within a period of three years. Obviously,
if these market-share objectives are achieved, then new ones emerge. The firm will have to decide whether to attempt
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to maintain its share, increase the share or move into a new market.
Product development and product range
Firms must set objectives relating to the type, and range of products or services that they wish to develop. This will
give them specific areas upon which to focus. In the beginning, our shoe firm might decide to try to develop three
different styles of sports shoe and a range of beach shoes. In some ways, the more specific the product development,
the more the market is being segmented.
Price versus quality analysis
Objectives may be set balancing the quality of the product against the price for which it can be sold. Quality will
obviously have an effect upon cost and this, in turn, affects price. Put the other way around, the price that a business
thinks it can get for a product may put a restraint on costs and quality. For example, an objective of the shoe firm may be
to make the best quality pair of training shoes that can be sold below a price of 30. No-one would pretend that they
would be the best shoes on the market, but the point would be that they were the best quality available at that price.
Sales performance, revenue and profit
Marketing objectives may be set relating to sales (in either volume or revenue terms), revenue gained from specific
products or profit gained from particular products.
Distribution strategy
Objectives may be set in terms of how well distributed, or 'placed1, the product is going to be. A large pharmaceutical
firm may aim to have its products in every chemist shop in the country within a space of two years, or a coffee shop
chain may aim to have an outlet in every town with a population over 20,000 in the South East of England.
Segmenting the marketing
Market segmentation is a vital element of marketing. It is customer orientated and is thus consistent with the concept
of marketing. It occurs when the total demand in a market is analysed, so that specific sets of buyers, with distinct
characteristics, can be identified.
Once this has been done, then it is possible to design products and services that will apply directly to specific
market segments. After this, it is possible to design marketing plans that will then aim the specific products directly at
the segments chosen. The act of market segmentation enables organisations to:
define their markets accurately;
position various products and brands in the right market area;
identify gaps in the market that might be successfully filled;
make more efficient use of marketing resources.
There are three commonly used bases for segmenting markets. The first of these categories is geographic. Consumer
tastes may vary between different geographical areas and so it may be appropriate to offer different products and to
market them in alternative ways in each area. For example, large national breweries offer different brands of beer to
different areas of the country, even though they could offer a single brand. They will also promote the products in
different ways, because they realize that there are regional differences in attitudes and consumers' tastes.
The second basis for segmentation is demographic, i.e. relating to the science of population statistics. This is the
most commonly used basis for segmentation and is usually based upon such factors as sex, age, income or ethnic
background. For example, manufacturers of washing powders will aim different brands of their products at different
ages of consumers. Some brands, such as Bold, will be aimed at the younger end of the market and others, such as
Daz, will be aimed at slightly older customers. The promotional strategy for each product is then devised to appeal
specifically to the targeted market segments.
The third basis is psychographic, which in turn can be split into three main areas: social class, personality
characteristics and lifestyles. There are a number of ways of defining social class. One of the most common is to split
the population into upper class, upper middle class, lower middle class, upper lower class and lower lower class. These
classes are sometimes classified by letters. An individual's social class will have a great influence upon his or her
purchasing patterns in many product categories.
In theory, personality characteristics should be very influential. One would expect an aggressive person to have
different purchasing patterns from a timid person. The same could be said for impulsive people as opposed to very
cautious people. In reality, such personality characteristics are very difficult to identify specifically and to measure
accurately. However, many firms especially in their advertising, still do, attempt to appeal to consumers who have
particular personality traits. Thus, we see products aimed at outgoing young people who wish to pursue all sorts of
relatively dangerous outdoor activities, such as skydiving or bungee-jumping. Even though it is not possible to
measure the market segment accurately, the seller knows that it is there, believes that it is large and is aiming at it.
Lifestyle is a very broad term and often overlaps with personality characteristics. Lifestyles tend to relate to activities
undertaken, interests and opinions, rather than personality traits.
There are a number of advantages to segmenting the market:
It enables the division of the market into distinct areas at which the product can be more specifically aimed.
Small firms, which could not compete in the whole market, are able to concentrate on one or two smaller
segments.
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It is possible to design and produce goods and services that are specifically matched to the demand of a more
distinct group of consumers. There are, however, a number of disadvantages. First, there are higher production
costs, because it is obviously more expensive to produce a range of products, all aimed at different market
segments, than it is to produce a single product aimed at all potential customers. The second disadvantage
relates to this point as well. If there is a range of products on offer, then there will be a need for higher levels of
stockholding, which will have obvious cost implications. Finally, promotional costs will rise as different
strategies are required for different markets and administration costs will also increase as many more products
are produced and marketed.

Activities
1. What is marketing?
2. Using the Internet and other sources describe how you account for the increase of marketing in the last 40
years?
3. What is the role and importance of marketing?
4. How does marketing fit in with the other activities of a business?
5. Explain the difference between production-oriented marketing and consumer-oriented marketing.
6. Try to identify products that might be production-oriented and sales-oriented.
7. What are the possible marketing objectives?
8. How can marketing lead to the achievement of overall business objectives?
9. What is the connection between price and quality?
10. Why is market segmentation important?
11. Describe bases for segmenting markets.
12. Learn the definitions and translation of the 15 words underlined in the text.