LogoHEADING
MARFIN The Marketing Manager

IV. Marketing Analysis and
     Strategy Development

  1. Market
  2. Market Share
  3. Product
  4. Price
  5. Distribution
  6. Communication
  7. Promotion

A short introduction to Marketing

History

Marketing is a business philosophy. The marketing era began in the 1950's when a robust post-war economy started outproducing demand and competition intensified for the purchasing dollars of the consumer. Prior to the marketing era were the production era and the selling era.

Production  >>>  Selling  >>>  Marketing

The world was in the production era before the industrial revolution and automation could produce enough products and services to meet demand. When goods are in short supply, the task of an industry is to produce as much as possible. The selling era came about after World War II when the production of goods outstripped demand. The challenge for indus¬try then became to find buyers for already produced products. However, even good salespeople found that some products just could not be sold, no matter how much effort went into the attempt. The solution to this problem was marketing since its aim is to make selling easy, even, if it does not eliminate it completely.

Marketing is based on the assumption that goods and services which satisfy consumer needs will sell themselves. See the long lines in front of an Apple store when a new model of iPhone is being introduced or when a new Harry Potter book is becoming available in the bookstores. The seller's task is thus to find out what consumers want before production and adjust the product accordingly.

As a discipline, marketing came into prominence when the major packaged goods firms like General Foods and Procter and Gamble developed the product manager system and emphasized understanding of the principles of marketing. Subsequently marketing was applied for durable goods and automobiles and next it spread to services like airlines, insurance and banking. Today, marketing is applied everywhere: health care, environment protection, political campaigns, etc.

The major purpose of marketing is to represent the consumers' perspective in business decisions, and as such, relies heavily on research. Market research helps managers to better understand consumer needs, attitudes and product usage patterns. The aim of a marketing campaign is to influence consumers' selection of a particular product and a particular brand.

The Marketing Concept

The marketing concept holds that the key to achieving organizational goals is in
determining the needs and wants of target markets and delivering the desired
satisfaction more effectively and efficiently than the competition. It starts and ends with the consumer. "The Consumer is the King!" – we all know this slogan. A good marketer starts with analyzing the market, then defines the consumer need and satisfies it: cheaper, better or in a different way than the competitors.

The marketing concept benefits both the manufacturer and the consumer. By making products that consumers want, manufacturers substantially reduce their risk of not being able to sell their goods. Consumers also benefit because manufacturers spend a lot of time and effort to find out what they want and compete with one another to better satisfy those wants. The result of this competition is better quality products at lower prices.

The marketing concept has itself undergone development – refinement – since its inception. We differentiate among:

Mass Marketing when the seller mass-produces, mass-distributes, and mass-promotes one product to all buyers. At one time, Coca-Cola produced only one drink for the whole market, hoping it would appeal to everyone. The argument for mass marketing is that it should lead to the lowest costs and prices and create the largest potential market. Henry Ford used to say: “People can buy any car they want as long as it was black.”

Product-differentiated Marketing. Here the seller produces two or more products that exhibit different features, styles, quality, sizes, and so on. General Motors realized that since Ford offered only black cars, it could establish a brand for itself by offering cars in different colors. The next phase in marketing Coca Cola was to sell the traditional coke packaged in different sizes and containers. They were designed to offer variety to buyers rather than appeal to different market segments.

Target marketing. Here the seller distinguishes between market segments, selects one or more of these segments, and develops products and marketing mixes tailored to each segment. For example, Coca Cola today sells Diet Coke and Zero Coke next to its traditional product in order to meet the needs of diet conscious consumers.

Personalized marketing (data-driven marketing) is the latest, a more sophisticated application of target marketing. In this case, companies take advantage of the vast number of available databases on the internet. Using digital analyses, companies are able to deliver personalized messages and product offerings to current or potential customers.

Facebook, Google and other social media offer new and exciting dimensions to develop personalized marketing approaches. If we surf the web today, tomorrow, when we go on line again, somewhere on the screen the product that we searched for previously will appear. This is data-driven, personalized internet marketing.

Which type of marketing to adopt? is the first question of the planner. The answer will depend on the product and the overall market environment. Target marketing is the most sophisticated way a marketer can approach the market, consequently, it is also the most expensive. The introduction of social media made consumer targeting substantially less expensive and more precise.

The stages of marketing usually correspond to the stages of the product life cycle. In the introductory phase, we often use mass marketing; in the growth phase product differentiated marketing; and in the mature phase target marketing.

The Marketing Mix

The Marketing Mix is a combination of the tools of marketing that a company can use to influence the demand for its product. The tools encompass the so-called "4Ps": product, price, place and promotion.

The "4P" classification was first suggested by E. Jerome McCarthy. This approach views the marketing process from the company's point of view. It defines the product to be produced, sets selling prices, distributes the product with an accompanying communications strategy.

The first P is product which stands for the "goods and service" combination that a company offers for sale. It is more than just the physical product which is characterized by features, quality and color. It includes additional intangible features, like warranty, money back guarantee, or in case of internet purchases free shipping and returns.

The second is price which is the amount that customers pay for the product retail, wholesale, discount. It is more than the price tag in many categories. It can be fees, retainers, or in case of banking minimum balance requirements. Services, such as phone, TV or now even software are marketed by offering different monthly plans.

Place stands for all the company's actions which make the product available to customers: the use of wholesalers, retailers, mail order, discounters or the internet. It also includes transportation, replacement policy or measures undertaken to guarantee regular supply.

Promotion stands for the various activities under¬taken by a company to communicate the merits of its products and to persuade target customers to buy them. To this end, companies buy advertising, employ salespeople, set up sales promotions, and arrange publicity for their products. Today, a company's website is the starting point for developing a communication strategy.

In 1990 Robert Lauterborn renamed the 4Ps to 4Cs. He replaced the product with customer needs, price with cost, place with convenience and promotion with communication. Today, some marketeers speak even of 4Es (experience, everyplace, evangelism, exchange) emphasizing customer experience, and 4Vs (validity, value, venue, vogue) concentrating on customer value.

Despite all the new trends, the good old 4P is still the term that is used most widely. The letters are irrelevant, it is the understanding of the concept that is the most important. If we define each P properly and widely enough, then all the dimensions that the new letters claim to introduce are already included.

Many marketing failures can be traced back to a lack of coordination among the 4Ps. Market positioning gives the guidelines for the harmonization of these variables of the marketing mix. It determines who our target customers will be, what their needs are, how much they are prepared to pay for the product and where they want to buy it. (See section Product.)

Four Ps or five Ps? That is the question. The 4Ps are the core elements of the marketing mix. They are the tools that marketers have at their disposal to design a winning strategy. Their role is very similar to the role of the four suits in card games. Whether you win or lose will depend on how you define and mix and use the four Ps.

But what is a winning strategy? It's a strategy that enables a company to achieve its sales and share targets. The fifth P is the profit, the financial reward, that a successful marketing campaign has to realize.

The fifth P differs in character from the four Ps. While the four Ps are the tools that the planner can mix in different ways with the aim of achieving a certain goal, the fifth P is the result of the campaign. It shows the success or failure of the applied combination of the marketing mix.

The MARFIN name (a combination of the words marketing and financial) itself was created to emphasize this correlation. The MARFIN system is based on the assumption that each set of marketing mix will result in a different profit level…. the key to find the right harmony between the profit expectation of management and the targeted sales and share growths of the marketing manager.

The MARFIN marketing management system strongly believes that the fifth P, the potential financial gain of a marketing campaign, should always play an essential role when developing a marketing strategy. Marketing campaigns should not be developed in a vacuum. They are a critical part of the overall corporate strategy. Understanding this correlation will be crucial when negotiating the size of the marketing budget.