Marketing consists of the strategies and tactics used to identify, create and maintain satisfying relationships with customers that result in value for both the customer and the marketer.

 

"The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return.

 

Marketing Definition Dissected

Let’s examine our definition of marketing in a little more detail by looking at the key terms.

Strategies and Tactics - Strategies are best explained as the direction the marketing effort takes over some period of time while tactics are actionable steps or decisions made in order to follow the strategies established. For instance, if a company’s strategy is to begin selling its products in a new country, the tactics may involve the marketing decisions made to carry this out. Performing strategic and tactical planning activities in advance of taking action is considered critical for long-term marketing success.

Identify - Arguably the most important marketing function involves efforts needed to gain knowledge of customers, competitors, and markets (i.e., where marketers do business). We will see throughout this tutorial how marketing research is utilized in all decision areas.

Create - Competition forces marketers to be creative people. When marketers begin new ventures, such as building a new company, it is often based around something that is new (e.g., a new product, a new way of getting products to customers, a new advertising approach, etc.). But once something new is launched innovation does not end. Competitive pressure is continually felt by the marketer, who must respond by again devising new strategies and tactics that help the organization remain successful. For marketers, the cycle of creating something new never ends.

Maintain - Today’s marketers work hard to insure their customers return to purchase from them again and again. Long gone (see our discussion of History of Marketing below) are the days when success for a marketer was measured simply in how many sales they made each day. Now, in most marketing situations, marketing success is evaluated not only in terms of sales figures but also by how long a marketer retains good customers. Consequently, marketers’ efforts to attract customers do not end when a customer makes a purchase. It continues in various ways for, hopefully, a long time after the initial purchase.

Satisfying Relationships - A key objective of marketing is to provide products and services that customers really want AND to make customers feel their contact with the marketer is helping build a good relationship between the two. In this way the customer becomes a partner in the transaction, not just a source of revenue for the marketer.

Value for Both Customer and Marketer - Value refers to the perception of benefits received for what someone must give up. For customers, value is most often measured by how much benefit they feel they are getting for their money, though the value one customer feels may differ from what another customer feels even though they purchase the same product. On the other side of the transaction, the marketer for a for-profit organization may measure value in terms of how much profit they make for the marketing efforts and resources expended. For a successful marketing effort to take place both the customer and the marketer must feel they are receiving something worth while in return for their efforts. Without a strong perception of value it is unlikely a strong relationship can be built. Throughout this tutorial we will emphasize value and show ways marketers build value into the products they offer.

What Marketers Do

In order to reach the goal of creating a relationship that holds value for customers and for the organization, marketers use a diverse toolkit that includes (but is not limited to) making decisions regarding:

1. Target Markets – markets consist of customers identified as possessing needs the marketer believes can be addressed by its marketing efforts
2. Products – consists of tangible (e.g., goods) or intangible (e.g., services) solution to the market’s needs
3. Promotion – a means for communicating information about the marketing organization’s products to the market
4. Distribution – the methods used by the marketer that enable the market to obtain products
5. Pricing – ways for the marketer to set and adjust the cost paid by the market to obtain products
6. Supporting Services – additional options that enhance a product’s value

While these decisions are shown with a number, the order of decision-making does not necessarily follow this sequence. However, as we will discuss, in almost all cases marketers should first identify target markets (#1) prior to making decisions #2 through #6 (commonly called the Marketing Mix) since these decisions are going to be directed toward satisfying the desired target markets.

Each option within the marketer’s toolkit is tightly integrated with all other options so that a decision in one area could, and often does, impact decisions in other areas. For instance, a change in the price of a product (e.g., lowering the price) could impact the distribution area (e.g., requires increased product shipments to retail stores).

Additionally, options within the toolkit are affected by factors that are not controlled by the marketer. These factors include economic conditions, legal issues, technological developments, social/cultural changes, and many more. While not managed in the way marketers control their toolkit, these external factors must be monitored and dealt with since these can cause considerable harm to the organization. Ignoring outside elements also can lead to missed opportunities in the market especially if competitors are the first to take advantage of the opportunities. As part of the strategic and tactical planning process discussed above it is wise for marketers to pay close attention to the environment outside the organization.

The Role of Marketing

As we’ve seen the key objective of an organization’s marketing efforts is to develop satisfying relationships with customers that benefit both the customer and the organization. These efforts lead marketing to serve an important role within most organizations and within society.

At the organizational level, marketing is a vital business function that is necessary in nearly all industries whether the organization operates as a for-profit or as a not-for-profit. For the for-profit organization, marketing is responsible for most tasks that bring revenue and, hopefully, profits to an organization. For the not-for-profit organization, marketing is responsible for attracting customers needed to support the not-for-profit’s mission, such as raising donations or supporting a cause. For both types of organizations, it is unlikely they can survive without a strong marketing effort.

Marketing is also the organizational business area that interacts most frequently with the public and, consequently, what the public knows about an organization is determined by their interactions with marketers. For example, customers may believe a company is dynamic and creative based on its advertising message.

At a broader level marketing offers significant benefits to society. These benefits include:

• Developing products that satisfy needs, including products that enhance society’s quality of life
• Creating a competitive environment that helps lower product prices
• Developing product distribution systems that offer access to products to a large number of customers and many geographic regions
• Building demand for products that require organizations to expand their labor force
• Offering techniques that have the ability to convey messages that change societal behavior in a positive way (e.g., anti-smoking advertising)

Characteristics of Modern Marketers

As we’ve seen, marketing is a critical business function that operates in an environment that is highly scrutinized and continually changing. Today’s marketers undertake a variety of tasks as they attempt to build customer relationships and the knowledge and skill sets needed to perform these tasks successfully are also varied.

So what does it take to be a successful marketer? Obviously, at the center of a successful marketing career is an understanding of the important concepts that are discussed in the Principles of Marketing Tutorials. But basic marketing knowledge is just the beginning, for today’s marketers must possess much more. Among the most important knowledge and skills needed to be successful are:

Basic Business Skills

Marketers are first and foremost business people who must perform necessary tasks required of all successful business people. These basic skills include problem analysis and decision-making, oral and written communication, basic quantitative skills, and working well with others.

Understanding Marketing’s Impact

Marketers must know how their decisions will impact other areas of the company and others business partners. They must realize that marketing decisions are not made in isolation and that decisions made by the marketing team could lead to problems for others. For example, making a decision to run a special sale that significantly lowers the price of a product could present supply problems if the production area is not informed well in advance of the sale.

Technology Savvy

Today’s marketers must have a strong understanding of technology on two fronts. First, marketers must be skilled in using technology as part of their everyday activities. Not only must they understand how basic computer software is used to build spreadsheets or create slide presentations, but in a world where information overload is a problem marketers must investigate additional technologies that can improve their effectiveness and efficiency, such as multifunction cellphones, GPS navigation services and web-based productivity applications. Second, marketers must understand emerging technology and applications in order to spot potential business opportunities as well as potential threats. For instance, the rapid growth of search engines requires marketers to firmly understand how these fit within an overall marketing strategy.

The Need for a Global Perspective

Thanks in large part to the Internet, nearly any company can conduct business on a global scale. Yet, just having a website that is accessible to hundreds of millions of people worldwide does not guarantee success. Marketers selling internationally must understand the nuances of international trade and cultural differences that exist between markets.

Information Seeker

The field of marketing is dynamic. Changes occur continually and often quickly. Marketers must maintain close contact with these changes through a steady diet of information.

In the remaining parts of the Principles of Marketing Tutorials we explore in further detail the key concepts and strategies that are consistent across nearly all industries and marketing jobs. While reading the tutorial will not guarantee marketing success, it will certainly offer the foundation needed to be a Modern Marketer.

Marketing research is the function that links the consumer, customer, and public to the marketer through information. This information is used to identify and define marketing opportunities and problems; to generate, refine, and evaluate marketing actions; to monitor marketing performance; and to improve understanding of the marketing process. Marketing research specifies the information, manages and implements the data-collection process, analyzes the results, and communicates the findings and their implications. Marketing research is concerned with the application of theories, problem-solving methods, and techniques to identify and solve problems in marketing. In order to offset unpredictable consumer behavior, companies invest in market research.

Increased customer focus, demands for resource productivity, and increased domestic and international competition has prompted an increased emphasis on marketing research. Managers cannot always wait for information to arrive in bits and pieces from marketing departments. They often require formal studies of specific situations. For example, Dell Computer might want to know a demographic breakdown of how many and what kinds of people or companies will purchase a new model in its personal computer line. In such situations, the marketing department may not be able to provide from existing knowledge the detailed information needed, and managers normally do not have the skill or time to obtain the information on their own. This formal study, whether performed internally or externally, is called marketing research.

The marketing research process consists of four steps: defining the problem and research objectives, developing the research plan, implementing the research plan, and interpreting and reporting the findings.

DEFINING THE OBJECTIVES

The marketing manager and the researcher must work closely together to define the problem carefully and agree on the research objectives. The manager best understands the decision for which information is needed; the researcher best understands marketing research and how to obtain the information.

Managers must know enough about marketing research to help in the planning and to interpret research results. Managers who know little about the importance of research may obtain irrelevant information or accept inaccurate conclusions. Experienced marketing researchers who understand the manager's problem should also be involved at this stage. The researcher must be able to help the manager define the problem and to suggest ways that research can help the manager make better decisions.

Defining the problem and research objectives is often the hardest step in the research process. The manager may know that something is wrong without knowing the specific causes. For example, managers of a retail clothing store chain decided that falling sales were caused by poor floor set-up and incorrect product positioning. However, research concluded that neither problem was the cause. It turned out that the store had hired sales persons who weren't properly trained in providing good customer service. Careful problem definition would have avoided the cost and delay of research and would have suggested research on the real problem.

When the problem has been defined, the manager and researcher must set the research objectives. A marketing research project might have one of three types of objectives. Sometimes the objective is exploratory—to gather preliminary information that will help define the problem and suggest hypotheses. Sometimes the objective is descriptive—to describe things such as the market potential for a product or the demographics and attitudes of consumers who buy the product. Sometimes the objective is casual—to test hypotheses about cause-and-effect relationships.

DEVELOPING THE RESEARCH PLAN

The second step of the marketing research process calls for determining the information needed, developing a plan for gathering it efficiently, and presenting the plan to marketing management. The plan outlines sources of secondary data and spells out the specific research approaches, contact methods, sampling plans, and instruments that researchers will use to gather primary data.

A marketing researcher can gather secondary data, primary data, or both. Primary data consists of information collected for the specific purpose at hand. Secondary data consists of information that already exists somewhere, having been collected for another purpose. Sources of secondary data include internal sources such as profit and loss statements, balance sheets, sales figures, and inventory records; and external sources such as government publications, periodicals, books, and commercial data. Primary data collection requires more extensive research, more time, and more money. Secondary sources can sometimes provide information that is not directly available or would be too expensive to collect.

Secondary data also present problems. The needed information may not exist. Researchers can rarely obtain all the data they need from secondary sources. The researcher must evaluate secondary information carefully to make certain of its relevance (fits research project needs), accuracy (reliably collected and reported), currency (up to date enough for current decisions), and impartiality (objectively collected and reported). Researchers must also understand how secondary sources define basic terms and concepts, as different sources often use the same terms but mean slightly different things, or they attempt to measure the same thing but go about it in different ways. Either way, the result can be that statistics found in secondary sources may not be as accurate or as relevant as they appear on the surface.

RESEARCH APPROACHES

Observational research is the gathering of primary data by observing relevant people, actions, and situations. Observational research can be used to obtain information that people are unwilling or unable to provide. In some cases, observation may be the only way to obtain the needed information.

Survey research is the approach best suited for gathering descriptive information. A company that wants to know about people's knowledge, attitudes, preferences, or buying behavior can often find out by asking them directly. Survey research is the most widely used method for primary data collection, and it is often the only method used in a research study. The major advantage of survey research is its flexibility. It can be used to obtain many different kinds of information in many different marketing situations. In the early and mid-1980s, some cola companies created a taste test against their competitors. This is an example of survey research. Participants were allowed to taste different cola brands without knowing which was which. The participant then decided which brand was preferred.

Whereas observation is best suited for exploratory research and surveys for descriptive research, experimental research is best suited for gathering causal information. Experiments involve selecting matched groups of subjects, giving them different treatments, controlling unrelated factors, and checking for differences in group responses. Thus, experimental research tries to explain cause-and-effect relationships.

RESEARCH CONTACT METHODS

Research may be collected by mail, telephone, e-mail, fax, or personal interview. Mail questionnaires can be used to collect large amounts of information at a low cost per respondent. Respondents may give more honest answers to more personal questions on a mail questionnaire than to an unknown interviewer in person or over the phone. However, mail questionnaires lack flexibility in that they require simply worded questions. They can also take a long time to complete, and the response rate—the number of people returning completed questionnaires—is often very low.

Telephone interviewing is the best method for gathering information quickly, and it provides greater flexibility than mail questionnaires. Interviewers can explain questions that are not understood. Telephone interviewing also allows greater sample control. Response rates tend to be higher than with mail questionnaires. But telephone interviewing also has its drawbacks. The cost per respondent is higher than with mail questionnaires, people may regard a phone call as more of an inconvenience or an intrusion, and they may not want to discuss personal questions with an interviewer. In the latter part of the 1990s, laws were also passed to guard against the invasion of privacy. If a person wishes to be taken off a solicitation or interview list, companies can be sued if they persist in calling.

Personal interviewing consists of inviting several people to talk with a trained interviewer about a company's products or services. The interviewer needs objectivity, knowledge of the subject and industry, and some understanding of group and consumer behavior. Personal interviewing is quite flexible and can be used to collect large amounts of information. Trained interviewers can hold a respondent's attention for a long time and can explain difficult questions. They can guide interviews, explore issues, and probe as the situation requires. The main drawbacks of personal interviewing are costs and sampling problems. Personal interviews may cost three to four times as much as telephone interviews.

SAMPLING PLAN

Marketing researchers usually draw conclusions about large groups of consumers by studying a relatively small sample of the total consumer population. A sample is a segment of the population selected to represent the population as a whole. Ideally, the sample should be representative so that the researcher can make accurate estimates of the thoughts and behaviors of the larger population. If the sample is not representative, it may lead the company to draw the wrong conclusions and misuse its resources.

The marketing researcher must design a sampling plan, which calls for three decisions:

1. Sampling unit—determining who is to be surveyed. The marketing researcher must define the target population that will be sampled. If a company wants feedback on a new basketball shoe, it would be wise to target active players and even professional players.
2. Sample size—determining the number of people to be surveyed. Large samples give more reliable results than small samples. Samples of less than 1 percent of a population can often provide good reliability, given a credible sampling procedure. Most commercial samples consist of between several hundred and several thousand respondents.
3. Sampling procedure—determining how the respondents should be chosen. To obtain a representative sample, a probability (random) sampling of the population should be drawn. This is a means of determining who is reached by the survey to ensure they are indeed a valid cross-section of the sampling unit. Choosing passersby on a street corner, for example, would not produce a random sample, whereas allowing a computer to pick names randomly from a relevant calling list probably would (depending on how the list was compiled). Probability sampling allows the calculation of confidence limits for sampling error.

RESEARCH INSTRUMENTS

In collecting primary data, marketing researchers have a choice of two main research instruments—the questionnaire and mechanical devices. The questionnaire is by far the most common instrument. A questionnaire consists of a set of questions presented to a respondent for his or her answers. In preparing a questionnaire, the marketing researcher must decide what questions to ask, the form of the questions, the wording of the questions, and the ordering of the questions. Each question should be checked to see that it contributes to the research objectives.

Although questionnaires are the most common research instrument, mechanical instruments are also used. Two examples of mechanical instruments are people meters and supermarket scanners. These techniques are not widely used because they tend to be expensive, require unrealistic advertising exposure conditions, and are hard to interpret.

COLLECTING THE INFORMATION

The researcher must now collect the data. This phase is generally the most expensive and the most liable to error. In the case of surveys, four major problems arise. Some respondents will not be at home and will have to be replaced. Other respondents will refuse to cooperate. Still others will give biased or dishonest answers. Finally, some interviewers will occasionally be biased or dishonest.

CHARACTERISTICS OF GOOD MARKETING RESEARCH

Following are the characteristics of good marketing research

1. Scientific method. Effective marketing research uses the principles of the scientific method: careful observation, formulation of hypotheses, prediction, and testing.
2. Research creativity. At its best, marketing research develops innovative ways to solve a problem.
3. Multiple methods. Competent marketing researchers shy away from over-reliance on any one method, preferring to adapt the method to the problem rather than the other way around. They also recognize the desirability of gathering information from multiple sources to give greater confidence.
4. Interdependence of models and data. Competent marketing researchers recognize that the facts derive their meaning from models of the problem. These models guide the type of information sought and therefore should be made as explicit as possible.
5. Value and cost of information. Competent marketing researchers show concern for estimating the value of information against its cost. Value/cost evaluation helps the marketing research department determine which research projects to conduct, which research designs to use, and whether to gather more information after the initial results are in. Research costs are typically easy to quantify, while the value is harder to anticipate. The value depends on the reliability and validity of the research findings and management's willingness to accept and act on its findings. In general, the most valuable information tends to cost the most because it requires more intensive methods, but of course it is easy to spend a great deal of money on poorly conceived research.
6. Healthy skepticism. Competent marketing researchers will show a healthy skepticism toward assumptions made by managers about how the market works.
7. Ethical marketing. Most marketing research benefits both the sponsoring company and its consumers. Through marketing research, companies learn more about consumers' needs, and are able to supply more satisfying products and services. However, the misuse of marketing research can also harm or annoy consumers. There are professional ethical standards guiding the proper conduct of research.

PRESENTING THE RESEARCH PLAN

The last step in market research is the presentation of a formal plan. At this stage, the marketing researcher should summarize the plan in a written proposal to management. A written proposal is especially important when the research project will be large and complex or when an outside firm carries it out. The proposal should cover the management problems addressed and the research objectives, the information to be obtained, the sources of secondary information or methods for collecting primary data, and the way the results will help management decision making. A written research plan or proposal makes sure that the marketing manager and researchers have considered all the important aspect of the research and that they agree on why and how the research will be done.

MANAGEMENT'S USE OF MARKETING RESEARCH

In spite of the rapid growth of marketing research, many companies still fail to use it sufficiently or correctly. Several factors can stand in the way of its greater utilization.

1. A narrow conception of marketing research. Many managers see marketing research as only a fact-finding operation. The marketing researcher is supposed to design a questionnaire, choose a sample conduct interviews, and report results, often without being given a careful definition of the problem or of the decision alternatives facing management. As a result, some fact finding fails to be useful. This reinforces management's idea of the limited usefulness of some marketing research.
2. Uneven caliber of marketing researchers. Some managers view marketing research as little better than a clerical activity and reward it as such. Poorly qualified marketing researchers are hired, and their weak training and deficient creativity lead to unimpressive results. The disappointing results reinforce management's prejudice against expecting too much from marketing research. Management continues to pay low salaries, perpetuating the basic difficulty.
3. Late and occasional erroneous findings by marketing research. Managers want quick results that are accurate and conclusive. But good marketing research takes time and money. If they can't perceive the difference between quality and shoddy research, managers become disappointed, and they lower their opinion of the value of marketing research. This is especially a problem in conducting marketing research in foreign countries.
4. Intellectual differences. Intellectual divergences between the mental styles of line managers and marketing researchers often get in the way of productive relationships. The marketing researcher's report may seem abstract, complicated, and tentative, while the line manager wants concreteness, simplicity, and certainty. Yet in the more progressive companies, marketing researchers are increasingly being included as members of the product management team, and their influence on marketing strategy in growing.