Marketing involves activities:
- Creating value
- Communicating values
- Delivering value
- Building customer relationships
Creating value is not just developing products. However, companies also need to think about a unique selling proposition and what benefits consumers will get if they buy the company’s products. Research is key before developing a product and value proposition.
Communicating value is centered mainly on promotional activities. Companies must take consumers from exposure to awareness and attention to understanding, evaluation, retention, and action. In other words, this requires companies to engage in the stages in the AIDA model, namely:
Delivering value is about all it takes to ensure a customer is happy with their purchase. And in general, value delivery activities aim to get customers to get the right product, at the right price, in the right location, and at the right time.
- The right product: e.g., precisely as ordered, not defective or damaged.
- At the right price: for example, according to consumers’ willingness to pay.
- In the right location: available where customers are willing to buy.
- At the right time: available when the customer needs it.
Building customer relationships is about keeping consumers satisfied and willing to deal with the company. The company encourages customers to repurchase later and keeps them loyal. If successful, the money continues to flow to the company.
The marketing process includes the following:
- Understanding customers and markets
- Developing customer-driven marketing strategies
- Developing an integrated marketing plan
- Building long-term sustainable customer relationships
- Capturing value from customers
Understanding consumers and markets
This process includes identifying consumer needs and wants, including their tastes, preferences, and requirements. Next, companies develop consumer profiles to detail consumer information, including demographic, geographic, psychographic, and behavioral data.
Apart from consumers, the company must also understand the market in which it will sell its product, including its size and growth potential. It also includes who the company’s competitors are, their products, value proposition, and competitors’ strategies.
Developing integrated marketing strategy and marketing plan
It starts with market segmentation and targeting. Before developing a strategy, the company must choose which segments are suitable and decide which ones to serve. Then, the company develops positioning and strategy.
A customer-driven marketing strategy means meeting customer expectations and needs as a focus when a company develops a strategy. And it must be aligned with the strategy above it, the corporate strategy.
Michael Porter provides the basis for a corporate strategy to build a competitive advantage. He broadly divides the competitive strategy into two:
- Cost leadership
Marketing departments then translate the corporate strategy into their areas by developing marketing strategies and plans, which are centered around the following marketing mix:
- Product: features, quality, variety, design, brand name, packaging, and customer service.
- Price: prices, discounts, allowances, payment terms, and credit terms.
- Place: channel, location, coverage, inventory, transportation, and logistics.
- Promotion: advertising, sales promotion, personal selling, and public relations.
For example, a company adopts cost leadership as its competitive strategy. It is then translated into a marketing strategy and may involve the following choices:
- Product: standard features but still maintain quality.
- Price: relatively similar to the average competitors or slightly below if the cost structure supports it.
- Place: a mass distribution channel to reach as many consumers as possible.
- Promotion: mass advertising to attract many consumers, such as television or online.
Building long-term sustainable customer relationships
It is all about maintaining customer preference and loyalty. The company encourages customers to continue buying products and engage more deeply, such as recommending products to their friends or family.
Customer relationship management involves:
- Increase the value perceived by customers by highlighting product features and benefits.
- Increase customer retention by maintaining satisfaction and overcoming customer dissatisfaction.
- Engage customers more deeply, such as involving them in marketing communications.
- Give appreciation to customers, such as through incentives and prizes, or involve them in creating content for social media or designing new products.
Capturing value from customers
It is about gaining more profit and creating customer equity. Customer equity represents the discounted lifetime value contributed by customers to the company, which includes:
- Value equity
- Brand equity
- Relationship equity
Companies derive value from customers through the money they spend on purchases. In addition, customers also provide additional value through their referrals to others, which has the potential to lead to more purchases.
Marketing and its relationship with other business functions
Companies translate corporate strategy into their functional areas. Thus, the strategies in each business function must support the strategy above it (corporate strategy). In addition, they must also synergize with each other. For this reason, the marketing function is closely related to other business functions.
The relationship between the marketing function and the operations function
- Sales forecasts from the marketing department are forwarded to the operations department to prepare a production schedule.
- The marketing team identifies consumer needs and wants, proceeds to research and development to create prototypes, and finally, is handed over to the operations team to prepare the best techniques and technology for production, including logistics.
The relationship between the marketing function and the financial function
- Sales forecasts form the basis for the finance department to develop the company’s budget.
- The marketing department needs money from the finance department for daily operations.
- The marketing team may provide credit facilities or discounts to entice customers, requiring them to match their available budgets.
- The finance department helps collect money owed to customers and sometimes may decide to sell unpaid invoices to a factoring company because the company needs cash urgently.
The relationship between the marketing function and the human resource function
- The marketing department supports the human resources department in identifying staffing and recruitment needs.
- The human resources department also requires input from the marketing department for training, development, or firing.
- The human resources department is concerned with the marketing team being filled with the right talent and ensuring they are happy and productive.
Marketing goods and services
The difference between goods and services
Products marketed are broadly divided into two:
Goods represent tangible products. We can see or touch them. In addition, they can also be transferred or transported to a different location. Some we can store for use or consumption at a later date.
Meanwhile, services represent intangible products. We cannot see or touch them. Instead, we can only feel their benefits.
Services differ from goods in the following aspects:
- Intangibility. We cannot see, touch, taste, or hear in the same way as goods.
- Inseparability. Services are produced and consumed at the same time. When you use a haircut service, the barber delivers the service when he shaves your hair.
- Heterogeneity. Service is unique each time it is experienced. Thus, a service provides a different experience even though we have used it many times.
- Perishability. We cannot store services or put them in a warehouse or elsewhere for future use. In addition, we cannot transfer services from one place to another.
Marketing goods and services
Marketing goods and services requires decisions and focus on different elements. Companies must think about product, place, price, and promotion for superior customer value when marketing goods. Product elements such as features and appearance are essential because goods can be seen physically.
Meanwhile, the marketing services strategy differs from goods because they are intangible. For example:
Product. Services require an added value to be competitive. For example, a barber provides free wi-fi to its customers.
In marketing goods, companies create value by converting raw materials into higher-value outputs, for example, by changing their shape. But it’s not with services. Creating value for services requires other supporting elements such as:
- People like frontline staff looks, skills, and charm.
- Processes such as convenience, accessibility, payment, and after-sales.
- Physical evidence includes cleanliness, design, room ambiance, and peripheral products.
Price. Setting prices for goods is relatively easy, for example, by adding a profit margin to the cost per unit. In contrast, setting service prices is relatively tricky and usually based on the effort or time spent.
Promotion. Companies promote goods by showing their form to consumers. However, they cannot promote services like that. Because it is intangible, companies need to articulate what the service benefits consumers and help them envision it.
Place. Goods can be transferred or transported from one location to another. However, services cannot. In these cases, companies need other supports such as buildings or tools. They try to design and decorate them to attract customers.
Product-oriented marketing focuses on developing superior products. This approach is typical for high-quality, highly differentiated, or high-tech products. As a result, they sell well on their own because consumers will demand them.
Market-oriented marketing develops products based on what the market needs and wants. It requires market research which is expensive but less risky as companies continually adapt to market trends such as tastes, habits, needs, and lifestyles. Under this approach, products better meet customer requirements, therefore more acceptable.
Asset-based marketing emphasizes the strengths and assets owned by the company to produce products. It gives a low weight to what the customer wants. The company uses a strong brand name and image to develop and market new products. For example, Coca-Cola relies on a solid brand reputation and an extensive distribution network to launch new products.
Social marketing applies marketing concepts to influence behavior and provide benefits to society. It directs people’s behavior in the desired direction, especially to bring about social change. It also often involves media coverage, movies, or celebrity endorsements.
Commercial marketing satisfies people’s needs profitably by selling needed products or services. It’s more about fulfilling what people want than changing what people want.
Marketing philosophy or concept
Marketing philosophy guides the company in meeting the customers’ needs and desires while achieving company goals. It considers three interests: company, customer, and society.
The marketing philosophy centers on five categories:
Production concept emphasizes price and availability. According to this philosophy, consumers favor products when they are widely available and inexpensive. Thus, companies focus on mass production and cost reduction, which can be achieved through standardization and economies of scale.
Product concept focuses on what the product should look like to satisfy consumers. It pays attention to non-price aspects such as quality, performance, or features. In other words, the company focuses on producing the best quality products.
Selling concept emphasizes the need to stimulate consumers to buy. Consumers will only buy products if the company undertakes large-scale selling and promotion efforts. Consumers must be persuaded to buy. In addition, this philosophy assumes the company has effective sales and promotion tools to stimulate more purchases.
Marketing concept emphasizes:
- Identify consumer needs and wants,
- Develop suitable products, and
- Preserve a long-term relationship with them
The company provides superior products to customers through coordinated marketing activities to gain profit.
Societal marketing concept emphasizes sustainability by compromising between short and long-term consumer interests. It’s a marketing concept, but it’s done in a way to maintain or increase well-being in the short and long term.
Explore More #MARKETING MANAGEMENT
- Introduction to Marketing
- Product vs. Market Orientation and Commercial vs. Social Marketing
- Marketing Objectives, Strategy, and Ethics
- Market and Its Features
- Consumer Behavior, Customer Service and Satisfaction
- Marketing Planning
- Market Targeting and Market Segmentation
- Market positioning, Target Marketing, and Product Strategy
- Sales Forecasting and Market Research
- Marketing Mix: Product
- Marketing Mix: Price
- Marketing Mix: Promotion
- Marketing Mix: Place
- Marketing Mix: People, Process, and Physical Evidence
- International Marketing
- Internet Marketing