Transcript The Marketing Concept and Process Lecture 1 18 Nov. 2004

The Marketing Concept
and Process
Lecture 1
18 Nov. 2004
The Marketing Concept: What It Is and
What It Is Not
• The marketing concept has suffered in two
ways:
 First, it has been established as optimal
management philosophy when it is not necessarily
so in all instances, and
 Second, we can see many examples of poor
marketing practice that have been adopted in the
name of the marketing concept.
….It is time that we relearn the marketing concept.
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The Marketing Concept: What It Is and
What It Is Not
• The marketing concept
 Customer focus, profits, and
integration of organizational
efforts.
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The Marketing Concept: What It Is and
What It Is Not
 Customer orientation
Satisfying
its customers at a profit…
Determining the needs and wants of
target markets…
Discovering the wants of a target
audience and then creating the goods
and services to satisfy them…
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The Marketing Concept: What It Is and
What It Is Not
• Kotler’s social definition:
“Marketing is a social and
managerial process by which
individuals and groups obtain
what they need and want through
creating and exchanging products
and value with others.”
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The Marketing Concept: What It Is and
What It Is Not
Many Things Can Be Marketed!
• Goods
• Places
• Services
• Properties
• Experiences
• Organizations
• Events
• Information
• Persons
• Ideas
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What is Marketing?
Core Marketing Concepts
• Needs, wants,
and demands
• Marketing offers:
including
products,
services and
experiences
• Value and
satisfaction
• Exchange,
transactions and
relationships
• Markets
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The Marketing Concept: What It Is and
What It Is Not
• The conditions under which the
marketing concept offers the
proper guidance to the
marketer:
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The Marketing Concept: What It Is and
What It Is Not
 To the extent that the organization
relies on exchange as the means of
obtaining compliance with
organization’s needs, we describe that
organization as engaging in
“marketing”.
Strive
to understand exchange partners and
tailor offerings for them through what is
called the marketing mix (Borden 1964).
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The Marketing Concept: What It Is and
What It Is Not
• …it is important to recognize that under
some circumstances, the production
concept or the sales concept would be a
more appropriate management
philosophy for the organization than the
marketing concept.
 Can you give some examples?
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The Marketing Concept: What It Is and
What It Is Not
….customers are not necessarily good
sources of information about
their needs a decade from now…
…sometimes customers have to learn
about new technologies, beliefs, and
ways of behaving…
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The Marketing Myopia
• In 1960, Theodore Levitt wrote
"Marketing Myopia," a widely
quoted and frequently reprinted
Harvard Business Review article.
• Chapter eight in Theodore Levitt's
book - The Marketing Imagination
(New York: The Free Press, 1986).
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The Marketing Myopia
• What does the term marketing myopia
means?
• What were the evidence and examples
used to illustrate the notion of marketing
myopia?
• How is the self-deceiving cycle related to
marketing myopia?
• Is this notion of marketing myopia still
valid today, and explain?
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The Marketing Myopia
• Marketing myopia was initially
described as a firm's
shortsightedness or narrowness
when attempting to define its
business.
• The key question – “what business
are you in?”
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The Marketing Myopia
• Levitt cites the railroads and
Hollywood as examples of
"industries that have been and are
now endangering their futures by
improperly defining their purposes."
Their problem, he says, is they were
"product-oriented instead of
customer-oriented.“
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The Marketing Myopia
• Warning of the dangers of being
product-oriented rather than customeroriented - creating the Ford Edsel,
New Coke or smokeless cigarettes, as it
were, rather than products consumers
wanted.
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The Marketing Myopia
• According to Levitt, "the
organization must learn to think
of itself not as producing goods
or services but as buying
customers, as doing the things
that will make people want to
do business with it."
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The Marketing Myopia
• Since its publication, corporate
leaders have moved from
product-orientation toward
market-orientation.
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The Marketing Myopia
Customer orientation has also been
considered as a type of marketing myopia.
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The Marketing Myopia
 Firms overemphasize the
satisfaction of customer wants and
needs and as a result ignore
competition.
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The Marketing Myopia
 Competitor orientation has been
proposed as a replacement for the
customer orientation; with this
orientation, a firm's strategy is
influenced by its competitors
(Oxenfeldt and Moore, 1978).
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The Marketing Myopia
The marketing myopia described by Levitt
has also evolved into a planning myopia…
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The Marketing Myopia
• Businesses need to take Levitt's idea to
its ultimate end –
 do not just sell a product, sell the solution
to a problem.
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The Marketing Myopia
 Oil companies have followed that strategy by
developing minimarts in service stations.
 Digital Equipment Corp. earned one-third of its $7
billion in revenue from computer maintenance
services.
 General Motors Acceptance Corp. financial
services accounted for $1 billion of the
automaker's $4 billion in 1985 revenues, and
 Gerber Products is opening day care centers as well
as acquiring baby-related product companies.
 By recognizing customer needs, these companies
have used available corporate resources to enter
nonmanufacturing segments of the market.
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The Marketing Myopia
The marketing myopia to
the world market
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The Marketing Myopia
 Yves Doz, Jose Santos and Peter J.
Williamson draw on some examples of
companies that are major successes because
they sought knowledge in other countries,
such as
 Shiseido,
the Japanese cosmetic company that
looked to France to become once again a leading
player.
 Little Scandinavian Nokia overtook Motorola in
the early days of the mobile wars simply by
monitoring the radar for emerging phenomena in
markets around the world.
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The Marketing Myopia
• Innovating using local knowledge,
perfecting your product and service
to meet the needs of customers in
your home market, and
benchmarking yourself against
domestic competitors-each of these
has become a high risk strategy.
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The Marketing Myopia
• After all, cellular telephony had been invented in
America-at Bell Laboratories, and Motorola was
among the first to massproduce mobile telephones.
• So then, how did Nokia, a little-known upstart from
the edge of the Arctic Circle leave Motorola behind
and manage to become the global leader in mobile
telephony?
• Nokia was the first to see the potential of a cellphone
as a fashion accessory from observations of its
customers in Asia.
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The Marketing Myopia
• Nokia has the ability to plug into knowledge about
new technologies and emerging customer needs from
every corner of the world.
• It understood the need for customised handsets from
its experience in Europe, where it first became
apparent that there were different segments of users.
• Observing pilot users across Scandinavia, it was
among the first to recognise that digital technology
could dramatically improve the functionality of mobile
phones.
• And in China, India and Africa, it saw that mobile
phones could potentially become substitute for wireline phones.
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The Marketing Myopia
• While Nokia prospected the world for insight
about promising technologies, diverse
customer behavior and new ways to use
mobile phones, Motorola continued to
develop its products based on its knowledge of
the customers and technologies in its U.S.
backyard.
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The Marketing Myopia
• The result: Motorola missed the shift to digital mobile
telephony and the growing strength of the European
GSM standard. It didn't see the potential to turn the
phone into a fashion icon; it was slow to take on
board the new ways mobiles were being used and to
recognise that a broader, but more fragmented user
base would spell the end of "one-size-fits-all"
products.
• This myopic approach to competition, and the failure
to engage fully with the rest of the world and capture
the potential of global markets and the innovative
ideas in them, would cost Motorola dearly.
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The Marketing Myopia
The types of marketing myopia can be
classified along two dimensions:
1. the management's definition of the firm, and
2. the firm's business environment perspective.
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The Marketing Myopia
• The second dimension concerns the firm's
business environment perspective. In essence,
these firms have an inward orientation toward
that industry.
• Firms with a single-industry perspective are
preoccupied with the actions and reactions of
immediate competitors.
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The Marketing Myopia
• In addition, they are considered to have inbred
management. Some managers have spent the greater
part of their professional careers in one industry.
• Inbred management is not necessarily undesirable, but
it is potentially detrimental when it fosters the
contention that it can learn nothing from firms in
other industries, and it keeps its firm perceptually
insulated from such other firms.
• For example, managers of the cold breakfast cereal
firm may be concerned only with the actions and
reactions of other cold cereal firms.
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The Marketing Myopia
• Firms with a multi-industry perspective,
on the other hand, have a broader view
of the market.
• While they are concerned with
immediate competitors, they also realize
that firms in other industries can serve as
sources of innovative strategies as well as
being potential competitors.
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The Marketing Myopia
• Such management is said to be cross-bred, in
that managers may have experience in a broad
range of industries or they are willing to learn
from firms facing similar situations in other
industries.
• Firms with a multi-industry perspective are
outwardly oriented and not perceptually
insulted from other industries.
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The Marketing Myopia
• The combination of the two
dimensions produces a matrix
with four types of firms:
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The Marketing Myopia
1. classic myopia, with a productdefinition/single-industry perspective,
2. competitive myopia, with a
customer-definition/single-industry
perspective,
3. efficiency myopia, with a productdefinition/multi-industry perspective,
4. innovative myopia, with a customerdefinition/multi-industry perspective.
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The Marketing Myopia
• Marketing managers who wish to
achieve the innovative firm orientation
should:
1.take a generic view of their firm or industry,
2.monitor other industries,
3.engage in benchmarking to determine the
objectives for relevant areas of marketing,
4.recruit marketing people, and
5.be flexible enough to apply unique solutions to
problems.
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Case Study
Amazon.com
• Strong sales, no
• Provides great
profits
selection, good
value, discovery
• Customer-driven to
and convenience
its core
• Each customer’s
• A true online
experience is unique community
Discussion: Will Amazon.com Survive?
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What is Marketing?
• Marketing is managing profitable
customer relationships
 Attracting new customers
 Retaining and growing current
customers
• “Marketing” is NOT synonymous
with “sales” or “advertising”
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Marketing Management
• Marketing management is “the art
and science of choosing target
markets and building profitable
relationships with them.”
 Creating, delivering and
communicating superior customer
value is key.
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Marketing Management
• Customer Management:
 Marketers select customers that can
be served well and profitably.
• Demand Management:
 Marketers must deal with different
demand states ranging from no
demand to too much demand.
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Marketing Management
Marketing Management
Management Orientations
• Production
concept
• Product concept
• Selling concept
• Marketing
concept
• Societal marketing concept
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CRM
• CRM – Customer relationship
management . . .
“is the overall process of building
and maintaining profitable
customer relationships by
delivering superior customer
value and satisfaction.”
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CRM
• It costs 5 to 10 times MORE
to attract a new customer than
it does to keep a current
customer satisfied.
• Marketers must be concerned
with the lifetime value of the
customer.
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer value/satisfaction
 Perceptions are key
 Meeting/exceeding
expectations creates
satisfaction
• Loyalty and retention
 Benefits of loyalty
 Loyalty increases as
satisfaction levels increase
 Delighting consumers
should be the goal
• Growing share of customer
 Cross-selling
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer equity
 The total combined
customer lifetime
values of all
customers.
 Measures a firm’s
performance, but in
a manner that looks
to the future.
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CRM
Key Concepts
• Attracting,
retaining and
growing customers
• Building customer
relationships and
customer equity
• Customer relationship
levels and tools
 Target market typically
dictates type of
relationship
Basic relationships
 Full relationships

 Customer loyalty and
retention programs
Adding financial benefits
 Adding social benefits
 Adding structural ties

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Marketing Challenges
• Technological advances, rapid
globalization, and continuing social
and economic shifts are causing
marketplace changes.
• Major marketing developments can
be grouped under the theme of
Connecting.
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Advances in computers,
telecommunications,
video-conferencing, etc.
are major forces.
 Databases allow for
customization of
products, messages and
analysis of needs.
• The Internet
 Facilitates anytime,
anywhere connections
 Facilitates CRM
 Creates marketspaces
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Selective relationship
management is key.
 Customer profitability
analysis separates
winners from losers.
• Growing “share of
customer”
 Cross-selling and upselling are helpful.
• Direct sales to buyers
are growing.
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Partner relationship
management involves:
 Connecting inside
the company
 Connecting with
outside partners
 Supply
chain
management
 Strategic alliances
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Marketing Challenges
Connecting
• Via technology
• With customers
• With marketing
partners
• With the world
• Globalization
 Competition
 New opportunities
• Greater concern for
environmental and
social responsibility
• Increased marketing
by nonprofit and
public-sector entities
 Social marketing
campaigns
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