MARKETING TERMINOLOGY, CONCEPTS AND DEFINITIONS

Timeframe: 16 hours

Learning outcome: Explain marketing terminology, concepts and definitions.

Recommended reading:

Ending the war between sales and marketing (Kotler, Rackham, & Krishnaswamy, 2006) pp. 68-78.

Multimedia: • Starbucks intends to spread its influence across China. China Beverage News. (AFP, April

13, 2012)

• Starbucks Marketing Secrets [Video clip] (VideoMarketingMlps, 2010)

Section overview:

To anyone having read the introduction of this study guide, it is quite apparent that marketing, more than any other business function, deals with the customer. Marketing is about managing profitable customer relationships. Marketing is all around us – shopping malls, billboards, magazines, newspapers, television, radio, email and many more media – but what is marketing all about? It is much more than meets the eye. Marketing is about a spider web of companies delivering a variety of activities in order to compete for the customer’s attention. The central idea underpinning marketing is matching a company’s capabilities with the wants of a customer in order to achieve the objectives of both parties. This will be discussed in this section of the guide.

What is Marketing?

What does marketing mean? Is it selling, advertising or marketing? Is it tangible (see it, touch it) or intangible (a feeling)? Marketing takes on various definitions. Let us have a look at some of them:

Marketing is the activity, set of instructions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners and society at large. [Marketing is] anticipating and satisfying consumer needs by means of mutually beneficial exchange processes, and doing so profitably and more effectively than competitors by means of efficient managerial processes.

(Source: Lamb et al., 2010: 5) Marketing takes on several aspects and these are illustrated in Figure 2.

FIGURE 1: THE MARKETING CORE CONCEPTS

(Source: Kotler and Keller, 2009:52)

The process can be described as follows (Kotler and Keller, 2009:52-54 ):

Needs, wants and semands

Needs arise from a state of felt deprivation of some basic satisfaction; Wants are desires to satisfy these needs; and demands are wants for specific products backed up by the ability and willingness to buy them.

Market offering

This is any product or service that can be offered to fulfil a need or want. We use the term “product” for tangible or physical objects – e.g. a can of coke – and the term “service” for intangible products – e.g. a lawyer’s services.

Customer value and satisfaction

Customer value is the customer’s expectation of a product’s overall capacity to satisfy their need – usually measured in cost. Customer satisfaction relates to how well a product has met this expectation. Key to developing and managing customer relations is value and satisfaction.

Exchange, transaction and relationships

People obtain products through self-production, coercion, begging or exchange. Marketers use the concept of exchange, in which a transaction exists and consists of a trade of values between two parties. Relationships develop as a result of a marketer trying to build a long-term, “win-win” relationship with customers.

Needs Wants

Demands

Market Offering

Customer Value

Satisfaction

Exchange Transaction Relationship

Markets

Markets

A market consists of all the potential customers, sharing a particular need or want, who might be willing and able to engage in exchange to satisfy that need or want.

FIGURE 2: GOOD MARKETING IS NO ACCIDENT

(Source: AFP, 2012)

Refer to the photo above reflecting Starbuck’s signage in China. China is a nation of tea drinkers. How has Starbucks managed to change the behaviour of Chinese people to choose coffee over tea? Please refer to the article below to assist you to answer the question (scroll down until you find the relevant article): AFP (April 13, 2012) Starbucks intends to spread its influence across China. China Beverage News. Accessed 7 October 2012. <http://chinabevnews.wordpress.com/category/starbucks-china/page/2/>

For an overview of marketing concepts, watch the clip below:

• Starbucks marketing Secrets [Video clip] (VideoMarketingMlps, 2012: http://il.youtube.com/watch?v=UfmKSsL3Lg0&feature=related

What is marketed? Table 1 describes ten types of marketing entities.

TABLE 1: TEN TYPES OF MARKETING ENTITIES

Goods These are the bulk of most countries’ production and marketing efforts and include physical goods such as cars, fridges and TVs.

Services As economies evolve, activities also become focused on production of service providers such as airlines, hotels, car rental firms and bankers.

Events Time-based events such as trade shows, the theatre and global events such as the Olympics and World Cups.

Experiences Companies create, stage and market experiences – e.g. Walt Disney’s Magic Kingdom – and this is called experiential marketing.

People Celebrity marketing is a major business in which high-profile celebrities such as actors, musicians and sports stars are used to endorse products or services.

Places Cities and provinces are marketed to attract tourists, business and new residents. Think of Las Vegas, a piece of desert, how was that marketed?

Properties Ownership rights of physical property (buildings and land) or financial (stocks and bonds).

Companies Building a brand creates value. Companies strive to build a strong image in the minds of their targeted customers creating a corporate identity; e.g. Woolworths.

Information Marketing of information through textbooks, virtual sources, magazines; e.g. schools and universities to data companies.

Ideas “Friends don’t let friends drive drunk” or “Don’t drink and Drive”. Who markets this? (Source: Kotler & Keller, 2009: 46)

Marketing Philosophies

There are six philosophies, each with a specific paradigm that emerged during the development of the discipline of marketing, according to which companies conduct their marketing activities. These are discussed in Table 2.

TABLE 2: THE SIX MARKETING PHILOSOPHIES

Production Concentrates on the internal production or manufacturing capabilities of an institution instead of on the wants and requests of consumers.

Product This starts once the institution has sorted out their production-related problems and consequently

shifted their attention from improving production processes to improving features and product quality.

Selling This starts when institutions have improved their production capabilities and increased their capacity in

such a way that they have surplus goods they cannot sell. So buyers have to be found for the growing inventory in many warehouses.

Customer This is a positive reaction to a purchase decision or product after purchase. It is the result of a purchase, and is in essence a judgment of need satisfaction.

Societal This acknowledges that an institution exists not only to satisfy consumer needs and wants, and to meet

the institution’s objectives, but also to preserve or improve individuals’ and society’s long-term best interests.

Relationship This highlights the forming long-term partnerships with customers. Institutions build relationships with customers by offering value and providing satisfaction consistently.

(Source: Lamb et al, 2010:12-14)

Marketing versus Sales

Selling is only the Tip of the Iceberg

People often confuse marketing and selling even though they differ substantially. The five characteristics illustrated in Figure 4 below will help you to understand the differences between these two concepts.

FIGURE 3: DIFFERENCES BETWEEN MARKETING AND SALES

(Source: Lamb et al., 2010: 17)

Marketing

Sales

Company Focus

Outward towards

conusmers' needs

Inward towerds

company's needs

Business Orientation

Satisfy the

customer

Sell goods and

services

Primary Goal

Profits through

customer

Maximise sales

volume

Achieving the Goal

Marketing coordination

Intensive promotions

Target Market

Targeted groups

Universe

“There will always 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 them 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.”

Peter Drucker