What Is Marketing?

What Is Marketing?

Marketing is the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. It is far more than advertising or selling — it encompasses every activity connecting an organisation with its customers.

Marketing myopia occurs when sellers pay more attention to their specific products than to the benefits and experiences those products produce. A company drilling holes sells the holes, not the drill.

Core Marketing Concepts

• Needs — Basic human requirements: food, water, shelter, clothing, safety, belonging, esteem. Needs are not created by marketers; they are a fundamental part of human makeup.
• Wants — The form needs take as shaped by culture and individual personality. A person needs food but wants a sushi platter. Wants are shaped by society.
• Demands — Human wants backed by buying power. Many people want a luxury car, but only those with sufficient purchasing power create a market demand.
• Market offerings — Combinations of products, services, information or experiences offered to a market to satisfy a need or want.
• Value and satisfaction — Customers form expectations about value. Satisfaction occurs when perceived performance matches or exceeds expectations; delight occurs when it greatly exceeds them.
• Exchange — Marketing occurs when people decide to satisfy needs and wants through exchange: obtaining a desired object by offering something in return.

The Five-Step Marketing Process

1. Understand the marketplace and customer needs — Research needs, wants, demands and the marketing environment.
2. Design a customer-driven marketing strategy — Select a target market (segmentation and targeting) and choose a value proposition (positioning): What customers will we serve? How can we best serve them?
3. Construct an integrated marketing program (the 4Ps) — Transform strategy into action through product, price, place and promotion decisions.
4. Build profitable relationships — Deliver superior customer value and satisfaction to retain current customers and attract new ones.
5. Capture value from customers — Reap rewards in the form of sales, market share, profits and long-term customer equity.

The Marketing Mix: 4Ps

The marketing mix is the set of tactical tools a firm blends to produce the desired response in the target market:

• Product — Everything a company offers to satisfy a customer need. Includes physical features, quality, design, brand name, packaging, and after-sale services. The product must deliver the benefit the customer is seeking.
• Price — The amount customers must pay. Pricing signals quality and directly affects revenue. Common strategies: cost-plus pricing, price skimming (high initial price), penetration pricing (low initial price), value-based pricing, and psychological pricing (e.g. $9.99).
• Place (Distribution) — Activities that make the product available to target consumers. Includes channel selection (direct vs wholesalers vs retailers vs e-commerce), logistics, and coverage intensity (intensive, selective, exclusive).
• Promotion — Activities communicating the product and persuading customers to buy. Includes advertising, personal selling, sales promotion, public relations, and digital/social media marketing.

All four Ps must be integrated and aligned with the needs of the target market. A great product sold at the wrong price, in the wrong place, with the wrong promotional message will fail.

Customer Value and Satisfaction

Customer-perceived value is the customer's evaluation of the difference between all benefits and all costs of a market offering relative to competing offers:

• Total benefits = product benefits + service benefits + image benefits
• Total costs = monetary cost + time cost + energy cost + psychological cost

Customers who are merely satisfied may switch to a competitor. Delighted customers become loyal and are far more likely to become brand advocates — recommending the product to family, friends and social networks at no cost to the marketer.

Customer Relationship Management (CRM)

CRM is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Companies classify customers by profitability and projected loyalty:

• Strangers — Low profitability, low loyalty. Limited investment justified.
• Butterflies — Potentially profitable but not loyal. Aim to convert or enjoy short-term profitability.
• True Friends — Both profitable and loyal. Invest deeply to nurture and retain.
• Barnacles — Highly loyal but not very profitable. Reduce cost-to-serve or manage out.

Additional CRM tools: frequency marketing programs (reward frequent buyers) and club marketing programs (offer special member benefits and community).

The Changing Marketing Landscape

• Digital and social media marketing — Websites, apps, social platforms, email and video allow real-time engagement. Online social media enables marketers to link brands to trending topics and live events.
• Mobile marketing — Smartphones are ever-present, always-on, finely targeted and highly personal. Four in five smartphone users browse product info, compare prices and read reviews on their phones.
• Big data and AI — Big data allows deep consumer insights and personalisation. AI enables marketers to analyse data at speed and engage customers in real time throughout the buying process.
• Not-for-profit marketing — Organisations that seek surpluses (not profits) also apply marketing principles to further their missions.
• Sustainable marketing — Growing demand for companies to take responsibility for social and environmental impact. The societal marketing concept balances consumer wants, company profits and society's long-term interests.