MEC 408 - MARKETING MANAGEMENT INTRODUCTION

LEARNING AIMS At the end of this session you should: 1. 2. 3. Recognise the basic concepts associated with marketing a product or service. Understand the role of marketing in organisations. Be aware of the managerial aspects associated with developing a marketoriented organisation.

INTRODUCTION TO MARKETING _____________________________________________________________________ INTRODUCTION The term marketing has the distinction of being both widely used and widely misunderstood. The layman often perceives it as: * * * Promotion in shops and supermarkets * Exhibitions and Fairs Brochures and catalogues * Telephone and personal selling Advertising on TV, in the daily papers or posters

However, these are really only components of an organisations marketing effort. CONTEMPORARY MARKETING EXAMPLES GIVEN IN THE LECTURE

Watney, Mann & Trueman : Gillette : Arm & Hammer : The Sun :
DEFINITIONS

increase lager sales maintain market leadership extend material usage (toothpaste) increase readership

Marketing is the management process for identifying, Anticipating and satisfying customer requirements profitably The Chartered Institute of Marketing. Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organisational objectives. The American Marketing Association Both professional bodies suggest the broader involvement of marketing in an organisations business. Peter Drucker (1964, 1973), an American academic, gets more to the fundamental nature of marketing. There will always, one can assume, be a need for some selling. But the aim of marketing is to make selling superfluous. The aim of marketing is to know and understand the customer so well that the product or service fits him or her and sells itself. Ideally, marketing should result in a customer who is ready to buy. All that should be needed is to make the product or service available. Marketing is so basic that it cannot be considered a separate function. It is the whole business seen from the point of view of its final result, that is from the customers point of view. Business success is not determined by the producer but by the customer. In managerial terms, marketing demands an attitude of mind, which looks at the organisation from the customers perspective.

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________ Kenichi Ohmae (1982) introduces another essential dimension by pointing out that An organisation must gain, as efficiently as possible, a sustainable edge over its competitors. This recognises that organisations do not operate in isolation. Consequently a good marketing strategy should aim to get and maintain a competitive advantage. So marketing can be summarised as (Gilligan 1988):Looking at the organisation through the customers/consumers eyes, and organising it to meet their needs. Getting a competitive edge and keeping it. It is suggested that these two concepts apply to any type of business, including service and non-profit organisations. It is incorrect ct to associate marketing solely with products and manufacturing companies. MARKETING ORIGINS AND ADOPTION Elsby points out that nature practices its own form of marketing. Flowers advertise their source of nectar by colour and perfume. An exchange process occurs when bees take up the nectar and deposit pollen to fertilise the plant. Drucker (1964) suggests that the Mitsui family in Japan adopted the marketing concept as early as 1650 when it opened a shop which assembling the products of several craftsmen, farmers etc. under one roof in order to meet customers needs. Mitsui later designed and ordered products to meet their perception of customers tastes, in the same way that Marks and Spencer did in the past, and are now trying to do again. The earliest use of marketing in the West is attributed to an engineer called Cyrus McCormick. Not only did he invent the mechanical harvester in the 1800s but he also based his product development on an elementary form of market research; adopted flexible pricing policies, including credit terms; set up after sales service and parts distribution and installed a service network that also doubled up as field salesmen.

Fast Moving Consumer Goods Consumer Durables Industrial Equipment Industrial Commodities Service Industries Non-Profit Sector

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________ The marketing concept was adopted more quickly by Fast Moving Consumer Goods companies such as Proctor & Gamble, followed by consumer durable manufacturers such as General Electric and General Motors. The 1950s saw industrial product manufacturers adopting marketing, followed in the 1960/70s by material suppliers. The concept continued to spread during the 1980s and early 90s. Initially to service industries such as financial services then to non-profit organisations. As may be expected, marketing techniques have undergone continuous refinement. As we will see at the end of this module, this evolutionary process is continuing. European work increasingly stresses the importance of relationships in business (Gummesson 1999, Ford 1988) and e-commerce is reshaping major parts of many markets. MARKETING MYOPIA In 1960 Levitt accused some American companies of not defining their business correctly. He suggested that a railroad companys business was transportation not just running trains: Hollywood was in entertainment not just the movie business. He also pointed out that there was no such thing as a growth industry. These were only companies that had organised themselves and operated to create and capitalise on growth opportunities. He also identified traps that companies can fall into: The product is indispensable. More people in the population means more demand for the product. Bigger capacity plant results in more efficient production and so more business.

He pointed out that: New products kill off old ones; i.e. Creative Destruction. Business is a customer creating/satisfying process not a goods/services production process. A business doesnt just sell products or services, it does things that make customers want to deal with it. Sales concentrates on shifting the product. Marketing concentrates on satisfying the customers need with a product. Organisations need a leader with vision and his/her own will to succeed plus a clear view on where the business should go.

Fifteen years after the article was published Levitt looked back on its impact. He felt that it had made more impression on industrial/product companies than on other types. It was suggested the reasons were They had more to learn because they had been production oriented. They had known more about the product than the customers needs.

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________

SUMMARY Marketing is not just a management function but a business philosophy that should be adopted by the whole organisation. However, achieving it may not be easy. In practice an organisations marketing activities are influenced by five competing managerial philosophies. Production Orientation This philosophy focuses on the organisations resources rather than the needs of the marketplace. The emphasis is to lower the cost of producing the product or service. Product Orientation This focuses on improving the organisations existing product or service. Sales Orientation This assumes that aggressive selling that will make people buy more goods and services. Societal Marketing Orientation This stresses the responsibility of organisations to ensure that their products or services should also maintain or enhance societys long term interests. Organisational Orientation This emphasises the organisations bureaucracy, systems and paperwork. (Andreason 1982).

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________ Marketing Orientation This believes that the key to achieving the organisations goals is determining the needs and wants of target markets and delivering the desired satisfactions more effectively than competitors (Kotler 1994). Although market orientation appears to be a simple idea, implementation can be difficult and produce significant managerial strains. Ideally, the marketing effort should be coordinated both within the commercial function and throughout all the other parts of the organisation. This leads to the concept of internal marketing, where all the employees are trained and motivated to serve the customer well. As we will see later, this is particularly important in service organisations where the employees actually become part of the service, in what Gronroos (1984) has called interactive marketing. These ideas lead to the view that because customers are the key to profitability then the traditional organisational chart needs inverting, with customers at the top, followed by the front line staff who serves them and then the management but the management must also maintain contact with the customers.

REFERENCES Drucker PF, (1964) Managing for Results Heinemann. Drucker PF, (1973) Management: Tasks, Responsibilities, Practices. New York. Harper & Row. Ford D, (1998) Managing Business Relationships. Wiley. Gilligan (1988) Private communication. Gummesson E, (1999) Total Relationship Marketing. Butterworth Heinemann. Kotler P, (1994) Marketing Management Analysis, Planning, Implementation and Control. Prentice Hall. Levitt T, (1960) Marketing Myopia. Harvard Business Review. July-Aug 1960. Levitt T, (1975) Marketing Myopia 1975: Business Review. Sept-Oct. 1975. Retrospective Commentary. Harvard

Mercer D, (1992) Marketing. Blackwell Business Ohmae K, (1982) The Mind of the Strategist McGraw Hill.

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________ Mini Case Study

Elmfield Metals plc

It was only 7.30 a.m. when Bill Betts turned into the hotel car park, but he saw that three other directors had already arrived. A wry smile crossed his face as he visualised them deciding how to handle their new managing director over breakfast. He had met this before. Most people object to outsiders coming in and telling them what to do. The company was in a bad way. It was founded just after the Second World War, when you could sell everything you could make. It had survived the 1970s recession, but its financial position started to decline in the early 1990s and it was now going downhill fast. It was a family firm and the head of the family had brought Bill in to turn it round. Bill knew how to improve the situation, but this would require changes that the other directors and their departments had to own. Just forcing his ideas on the organisation would not work. The first step was to get all the directors away from their office for two days to discuss the situation in the relaxing environment of an isolated country hotel. Everyone could have his or her say. However, he would carefully steer the meeting towards his solution and everyone round the table would share the final decisions. Nothing must go wrong. Details were important, which is why he had come an hour and a half early to make sure that the room was laid out with a circular table as requested and all the facilities were there. The long case clock in the hall struck nine. Bill called the meeting to order. You all know why we are here, he said. We have to stop the company bleeding to death and start the recovery. We cant go on loosing money. Customers are moving away from us and our market share is falling. The only way out in the short term is to increase our sales to existing customers and develop sales to new ones. We need to become more market oriented. Youre damn right, Bill, said the Marketing Director. Ive always said my department should be more involved with the business. Dont be daft, said the Financial Director. All your department is good at is spending money on glossy brochures that dont work. Mind you, if our manufacturing costs go any higher we wont have anything to spend on marketing. Thats unfair, replied the Manufacturing Director. My costs have risen because of the lousy bonus deals that the Human Resource Management Department negotiated without involving me.

Introduction to Marketing

August 2011

INTRODUCTION TO MARKETING _____________________________________________________________________ Bill knew that the bonus deals had also been departmentally based. They reflected the number of components made rather than how many were sold. Consequently, there was an incentive to make for stock, leading to high stocking costs. Youve all forgotten the most serious problem, said the R&D Director. Our product is becoming outdated because we arent spending enough on research and development. Dont agree, said the Manufacturing Director. Our product is OK. I dont really know what you and your people do, other than have your heads in the clouds. The sales department is even worse. They dont understand the product, they cant sell and they only get orders at lousy prices or impossibly short lead times. These two departments should be at the centre of the business, where the action really is, part of my manufacturing management team. This led to a vitriolic attack on virtually all departments by the Sales Director. Nothing and no one was spared. Manufacturing costs, product design, product quality, poor delivery performance, lack of commercial appreciation by R&D, Inflexible financial policies, poorly trained staff all came under fire. Bill decided it was time to have a break for coffee. When they returned he looked around and decided it was time to start doing something positive. Look, he said, Over the last hour or so you have demonstrated most of the reasons why we are in such a bad shape. The most worrying thing, however, is that none of you have mentioned the two key things that influence the success of our company. Questions 1. 2. 3. What are the two key things that Bill said had been ignored? What is wrong with Elmfield Metals? What would you do if you were Bill Betts?

Introduction to Marketing

August 2011