appunti di marketing

Marketing

Marketing is a lot of things. It is the activity, set of institutions and processes to create, communicate, deliver offerings that have a value for customers, partners and society at large. This definition is given by the AMA, American Marketing Association. Creating values and communicating values are equally important, the delivery must be easy, values must be easily accessible. The values must be offered with physical products, experiences etc. This definition underlines that we are living in a time where companies must be responsible and think about not only about their profits and the satisfaction of customers, but also think about society at large (reduce pollution, build a fair environment for workers etc.). There is an increasing awareness from companies.

A value can’t be defined objectively, it is what the customer wants. The customer decides the value and the product is just a tool to create such value, it is not the final goal. The final goal is the value. The value is everything related to the product. The concept of value includes functional values (practical purposes, we don’t care about it that much nowadays), symbolic value (e.g., BMW manufactures excellent cars, but it is also a luxurious brand, so it brings symbolic values), experiential value (what you experience with that product. e.g., in Ikea we can identify many values from interaction with customer. We buy Ikea furniture because we need it but also because we like the style, it is aesthetically pleasing - emotional value. We may enjoy going there, it is fun, you have many things exposed and it is easy to browse, there are restaurants, there is a play area for kids, it is nice - going there gives experiential content. It may also be fun to assemble furniture), (e.g., Disney has a lot of experiential values).

The marketing disciplines monitor and try to understand how consumer’s habits and behavior change over time. The pandemic is a huge event that changed us drastically.

Production and distribution process

The production and distribution process starts with the first stage of the activity of suppliers of components that sell to the manufacturer of end product (big companies that we all know, for example Apple). Then, once the final product is produced, there is the distribution phase, sometimes manufacturers sell directly to retailers (shops that sell to final customers), in other cases they sell to the wholesaler who sells to retailers who sell to customers. The end of the process is represented by the final consumer who buys the product.

We have different types of marketing. The most important is the one that manages relationships between manufacturers and final consumers, consumer marketing; trade marketing governs the relationships between manufacturers and retailers or wholesalers and retailers (the tools used are different than the ones used in consumer marketing); business marketing is for the relationships between suppliers and manufacturers or wholesalers, it has nothing to do with consumers; retail marketing is just for the relationship between retailers and consumers.

Evolution of marketing

Marketing has not always existed, the concept was born around the 1970s. For the first time, companies were facing a problem: the volume of goods they were producing was higher than the demand of the market, so they had to find ways to convince consumers to buy those goods. From the beginning of the 20th century – 2nd industrial revolution, mass production – there was a series of innovations to have a huge number of products available for affordable prices, products like cars were available for the average American family. This is the era of the so-called production concept. It lasted for several decades, companies were focused on increasing volumes of production available at affordable prices.

Consumers did not care about quality or features, they only cared about affordability and availability. The focus was on production and distribution efficiency and consumers did not need to be convinced (this is what happens today with Covid-19 vaccines, everybody wants to get vaccinated and we don’t really care about which particular vaccine we’re getting or what is inside of it. Companies do not need any marketing, they just need to focus on improving efficiency to have a larger number of vaccines available).

The product concept implies that companies devoted their energies in making continuous improvement since consumers will favor products that offer the most quality, performance and innovative features. Then another change happened: the rise in average income and especially the increase in the average size of companies (to exploit economies of scale and produce with no costs), offer was higher than demand. There were large number of products but difficulty in selling.

The selling concept is the idea that consumers would not buy enough of the firm’s products unless it undertook a large scale selling and promotion effort. That was when companies realized that they needed to invest in pushing consumers to buy. These efforts did not really pay off, so we have the last stage we still live in today. Companies understood that the best way to sell and achieve organizational goals was not to start from the product and convince consumers to buy it, but to start from customers and understand what they wanted and needed.

In order to achieve profits, you start by knowing the preferences, needs and desires of customers and try to sell a value that is superior to the ones offered by your competitors. This is the marketing concept. Consumers choose products based on the values and satisfaction they can get from them. Companies must understand the values and how to deliver them through products.

According to the societal marketing concept, a company shall make good marketing decisions considering also consumers’ wants, the company’s requirements, consumers’ long-term interests and society’s long-run interests. A company that provides junk food satisfies the short-run interests but not the long-run interests of staying in good health. Companies are required to be held accountable for what they do, that is where the 3 Es of sustainability come from: ecological (marketing should not have any negative impact on the environment); equitable (shall not allow or promote inequality or social injustice); economic (should encourage long-term economic development opposed to short-term economic development).

Multidisciplinary area

Marketing is the most multidisciplinary area: it includes economic science (our knowledge of the matching of supply and demand within industries owes much to the development of microeconomics), psychology (where the knowledge of consumer behavior comes from, especially for motivation research), social psychology (teenagers have the special need of being accepted by their group of friends, tend to adopt behaviors and styles that makes them more accepted: we are influenced by what other people buy), sociology (deals with groups of people, how they interact and behave and how different groups behave differently in terms of consumption based on age and gender – demographics – social positions within society – class – religious groups), anthropology (when we use qualitative approaches such as ethnography, netnography, observation).

Marketing building blocks

The three marketing building blocks are activities, actors and resources.

Activities: market research and analysis (monitor the environment), competitive intelligence (consumers and competitors), product development, design and planning (the creation of new products, services, experiences has to start from customers’ needs), pricing (e.g. for a flight you can find many different prices depending not only on the airline company but also on when you buy your ticket, if you buy an airplane ticket many months before the price is low but you can also catch a last minute offer. Companies apply complicated algorithms), communication design and planning (advertising, communicate the values, if you fail to communicate you fail in general), distribution design and planning, services to accompany the products (even for physical products services are needed. When you buy an iPhone, you buy a warranty that guarantees that if your smartphone has a problem replace or repair is free). The internal phase is for planning and monitoring, organization and human resources management.

Actors: marketing managers, product managers (responsible for a single product), category managers (responsible for a single category), new products manager (process of coming out with new products and services that must come out of a careful analysis of customers’ needs), communication, advertising, public relations and event manager, market research manager, sales manager, account managers, trade marketing manager and client administrator.

Resources: financial resources, warehouses, transports and logistics (tangible); brand (companies like Coca-Cola based their entire market value on the value of their brand, being the value the level of reputation that allows companies to be profitable), market knowledge, relational capital (the value of the relationships with suppliers, public administration etc.), social capital (it may deal with the good reputation to be respectable, caring about customers and the environment etc. Apple’s reputation was damaged when it came out that they were employing minor labor to assemble products. The scandal damaged the brand) (intangible); research, design, sales, services, communication (human).

Scope of marketing

Marketing is everywhere. The scope of marketing is of course physical goods, services, experiences (if you think about visiting a Disney amusement park), people (from celebrities to normal people we are more and more induced to rely on some sort of self-promotion, social media contributed to the promotion of the self also through personality), events, places, property rights, nonprofit organizations, information (with the advent of social media, real news coexist with fake news, traditional newspapers and new medias must rely on marketing to acquire new readers. Catchy titles and catchy unusual news are just to attract new readers), ideas, politics (politicians know how important communication on social media is, they care a lot about their public image in the eyes of electors whose preferences are analyzed, their staff monitors the reactions of the audience to every communication in order to increase approval with the next moves).

Core marketing concepts

The core marketing concepts are:

• Needs, wants and demands;
• Market offerings;
• Value and satisfaction;
• Exchanges and relationships;
• Markets.

Needs can be defined as a state of felt deprivation, lack of something, tension created by our own perceptive that we miss something. Needs are not created by marketing but by human beings themselves. What marketing does is discover these needs and provide solutions. A desire / want is the form that the human need takes, it is directed to a specific object that may satisfy that need. Thirst is a general need, Coca-Cola or orange juice are a want because they are directed towards a specific thing. Needs may be similar but wants can be very different from one person to another, they are heterogeneous as they are influenced by our personal tastes, habits, personality traits and are shaped by culture.

A demand is an aggregate of wants of many people. The desire must be accompanied by purchasing power. One of the most famous models to describe and analyze human needs is the Maslow’s hierarchy of needs. It is a pyramidal model. At the very bottom, there are our primary physiological needs that we all share not only as human beings but as animals. We need to eat, drink and sleep in order to stay alive. On the next level there are the safety needs, security, protection. On top of those we have social needs as we are social animals. Social needs imply that we need to feel a sense of belonging and social commitment (live together, form a family). Then we have the esteem needs, which include self-esteem, recognition, status. At the very top of the pyramid there is the need for self-actualization, self-development and realization, to become what you want to become. The basic point of the theory is that an individual cannot pursue higher level needs if the lower ones are not satisfied.

The market offerings are combinations of products, services, information or experiences offered to a market to satisfy a need or a want. The customer perceived value is the customer’s evaluation of the difference between all the perceived benefits and costs of a market offer with respect to other competing offers. The customer’s satisfaction depends on the extent to which per product’s perceived value is above or below the customer’s expectations.

An exchange is a single market transaction. It is the act of obtaining a desired object by offering something in return, the customer buys something wherever, it gives something (the price) and gets something in return (the product). What companies want is to build and maintain relationships with loyal customers involving a product, a service, an idea. Here is the difference between exchanges, simple transactions, and relationships. It is more important to have loyal customers that will periodically buy from you instead of trying to maximize exchanges. Strong relationships are built by consistently delivering superior customer value. Markets are defined by the set of actual and potential buyers of a product, they share a need or want that can be satisfied through exchange relationships. Sometimes there may be marketing intermediaries between companies and final consumers.

Marketing process

The marketing process consists of 5 steps. The first step is the analysis and understanding of the marketplace and customers’ needs and wants. Companies search for information of what consumers and competitors are doing in order to detect any change before the others. This is what market analysts do. The internet 1.0 was the phase with no social media and the role of the user was passive. It was made of web pages and the user could only jump from one page to another, “surf” on the internet. Internet 2.0 defines the second generation of the internet revolution, characterized by social media and active productivity of contents. There is a huge difference in the way of collecting data.

The second step is to design a coherent market strategy (distribution, communication, appropriate prices) with a customer driven approach. You identify the segments of customers in the market and choose one or more than one that you think you can serve better as your target. Once the target is selected, the value proposition must be formed (core set of values or benefits that you as a company want to convey and deliver to customers to satisfy their needs) and an efficient way to communicate these values must be found (formula of value proposition). Why should customers choose me instead of someone else? This is called positioning, to position a market offer refers to the strategy of a company to have its brand to occupy a specific spot in the mental space of consumers.

The next step is to prepare an integrated marketing plan and program, which is supposed to give superior values with respect to the competitors or the customers’ judgment. The marketing mix consists of deciding the product that will be the market offering that will satisfy needs, deciding the price, dealing with distribution to make the chosen product available, promoting and communicating the offering to the target. The communication campaign does not only refer to advertising but also to what you post on social media, specific events, if you sponsor sport events etc.

It is important to build loyalty and engagement, aimed at creating profits and customer quality. Customer relationships management is the process of building and maintaining profitable customer relationship by delivering superior customer value and satisfaction. It may happen that at some point a customer gets disappointed, but you need to have a plan B to make up for the failure quickly and efficiently. It has been shown that if the disservice gets solved quickly and efficiently the customer may be even happier than if the disservice hadn’t occurred.

The goal is to capture value from customers both via the current sales and the expectation of the future sales that a customer will generate if satisfied, as the pre-condition for loyalty is satisfaction. A satisfied customer buys more. You can estimate the customer’s lifetime value, the entire value that you will be able to extract from the customer providing that this customer will remain loyal to you. It will translate into growth in market share, the ability to control the market and impose conditions to your competitors. (The customer expected value is the one before purchase or consumption, the perceived value is the one after purchase or consumption).

Marketing environment

The marketing environment of a business consists of all the actors and forces outside marketing that affect market management’s ability to build and maintain a successful relationship with targeted customers. There is a distinction between internal and external environment. The internal environment is company-specific, everything that stays inside the company, and it includes owners, managers, workers, machines, materials etc. The well-functioning of the internal environment is fundamental to have a good relationship with the external environment: for example, badly treated employees are less likely to deliver a good work in the production of goods that will be delivered to the public. The external environment is further divided into macro (includes everything out of the microenvironment, larger societal forces that indirectly affect the activity and society as a whole) and micro (specific to each single business, consists of factors engaged in production, distribution and promotion).

The PESTEL analysis (political, economic, social, technological, environmental and legal) is included in the macroenvironment. The company and all the other actors operate in a macroenvironment of forces and elements that create both threats and opportunities. The political environment is made of laws, government agencies, pressure groups that limit or influence organizations and individuals. The changes in politics are extremely influential for economic activities. Although most of the times it is uncontrollable, changes and activities must be moni