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The Marketing Concept and Process Le cture 1 18 Nov. 2004


The Marketing Concept: What It Is and What It Is Not • The ma rke ting conce pt ha s s uffe re d in two wa ys :  Firs t, it ha s be e n e s ta blis he d a s optimal management philosophy whe n it is not ne ce s s a rily s o in a ll ins ta nce s , a nd  S e cond, we ca n s e e ma ny e xa mple s of poor marketing practice tha t ha ve be e n adopted in the name of the marketing concept. ….It is time that we relearn the marketing concept.


The Marketing Concept: What It Is and What It Is Not

• The marketing concept  Cus tome r focus , profits , a nd inte gra tion of orga niza tiona l e fforts .


The Marketing Concept: What It Is and What It Is Not

 Cus tome r orie nta tion Satis fying

its c us to m e rs at a

p ro fit… De te rm ining the ne e ds and w ants o f targ e t m arke ts … Dis c o v e ring the w ants o f a targ e t audie nc e and the n c re ating the g o o ds and s e rv ic e s to s atis fy the m …


The Marketing Concept: What It Is and What It Is Not

• Kotle r’s s ocia l de finition:

“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.”


The Marketing Concept: What It Is and What It Is Not

Many Things Can Be Marketed! • Goods • S e rvice s

• P la ce s • P rope rtie s

• Expe rie nce s • Orga niza tions • Informa tion • Eve nts • P e rs ons • Ide a s


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


The Marketing Concept: What It Is and What It Is Not

• The conditions unde r which the ma rke ting conce pt offe rs the prope r guida nce to the ma rke te r:


The Marketing Concept: What It Is and What It Is Not  To the e xte nt tha t the orga niza tion re lie s on exchange a s the me a ns of obta ining complia nce with orga niza tion’s ne e ds , we de s cribe tha t orga niza tion a s e nga ging in “ma rke ting”. to unde rs tand exchange partners and tailo r o ffe ring s fo r the m thro ug h w hat is c alle d the marketing mix (Bo rde n 1964).

Striv e


The Marketing Concept: What It Is and What It Is Not • …it is importa nt to re cognize tha t under some circumstances, the production concept or the sales concept would be a more a ppropria te ma na ge me nt philos ophy for the orga niza tion tha n the marketing concept.

 Ca n you give s ome e xa mple s ?


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…


The Marketing Myopia • In 1960, The odore Le vitt wrote "Ma rke ting Myopia ," a wide ly quote d a nd fre que ntly re printe d Harv ard Bus ine s s Re v ie w a rticle . • Cha pte r e ight in The odore Le vitt's book - The Marketing Imagination (Ne w York: The Fre e P re s s , 1986).


The Marketing Myopia • Wha t doe s the te rm ma rke ting myopia me a ns ? • Wha t we re the e vide nce a nd e xa mple s us e d to illus tra te the notion of ma rke ting myopia ? • How is the self-deceiving cycle re la te d to ma rke ting myopia ? • Is this notion of ma rke ting myopia s till va lid toda y, a nd e xpla in?


The Marketing Myopia • Marketing myopia wa s initia lly de s cribe d a s a firm's s horts ighte dne s s or na rrowne s s whe n a tte mpting to de fine its bus ine s s . • The ke y que s tion – “what business are you in?”


The Marketing Myopia • Le vitt cite s the railroads a nd Hollywood a s e xa mple s of "indus trie s tha t ha ve be e n a nd a re now e nda nge ring the ir future s by improperly defining their purposes." The ir proble m, he s a ys , is the y we re "productoriented instead of customeroriented.“


The Marketing Myopia • Wa rning of the da nge rs of be ing product-orie nte d ra the r tha n cus tome r-orie nte d - cre a ting the Ford Eds e l, Ne w Coke or s moke le s s ciga re tte s , a s it we re , ra the r tha n products cons ume rs wa nte d.


The Marketing Myopia • According to Le vitt, "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."


The Marketing Myopia • S ince its publica tion, corpora te le a de rs ha ve move d from product-orie nta tion towa rd ma rke t-orie nta tion.


The Marketing Myopia Customer orientation has also been considered as a type of marketing myopia.


The Marketing Myopia  Firms ove re mpha s ize the s a tis fa ction of cus tome r wa nts a nd ne e ds a nd a s a re s ult ignore competition.


The Marketing Myopia  Competitor orientation ha s be e n propos e d a s a re pla ce me nt for the cus tome r orie nta tion; with this orie nta tion, a firm's s tra te gy is influe nce d by its compe titors (Oxe nfe ldt a nd Moore , 1978).


The Marketing Myopia The marketing myopia described by Levitt has also evolved into a planning myopia‌


The Marketing Myopia • Businesses need to take Levitt's idea to its ultimate end –  do not jus t s e ll a product, s e ll the s olution to a proble m.


The Marketing Myopia  Oil compa nie s ha ve followe d tha t s tra te gy by de ve loping minima rts in s e rvice s ta tions .  Digita l Equipme nt Corp. e a rne d one -third of its $7 billion in re ve nue from compute r ma inte na nce s e rvice s .  Ge ne ra l Motors Acce pta nce Corp. fina ncia l s e rvice s a ccounte d for $1 billion of the a utoma ke r's $4 billion in 1985 re ve nue s , a nd  Ge rbe r P roducts is ope ning da y ca re ce nte rs a s we ll a s a cquiring ba by-re la te d product compa nie s .  By re cognizing cus tome r ne e ds , the s e compa nie s ha ve us e d a va ila ble corpora te re s ource s to e nte r nonma nufa cturing s e gme nts of the ma rke t.


The Marketing Myopia The marketing myopia to the world market


The Marketing Myopia  Yve s Doz, J os e S a ntos a nd P e te r J . Willia ms on dra w on s ome e xa mple s of compa nie s tha t a re ma jor s ucce s s e s be ca us e the y s ought knowle dge in othe r countrie s , s uch a s ď ś Shis e ido ,

the Jap ane s e c o s me tic c o mp any that lo o ke d to Franc e to b e c o me o nc e ag ain a le ading p laye r. ď ś Little Sc andinav ian No kia o v e rto o k Mo to ro la in the e arly days o f the mo b ile w ars s imp ly b y m o nito ring the radar fo r e me rg ing p he no me na in marke ts aro und the w o rld.


The Marketing Myopia • Innova ting us ing loca l knowle dge , pe rfe cting your product a nd s e rvice to me e t the ne e ds of cus tome rs in your home ma rke t, a nd be nchma rking yours e lf a ga ins t dome s tic compe titors -e a ch of the s e ha s be come a high ris k s tra te gy.


The Marketing Myopia • Afte r a ll, ce llula r te le phony ha d be e n inve nte d in Ame rica -a t Be ll La bora torie s , a nd Motorola wa s a mong the firs t to ma s s produce mobile te le phone s . • S o the n, how did Nokia , a little -known ups ta rt from the e dge of the Arctic Circle le a ve Motorola be hind a nd ma na ge to be come the globa l le a de r in mobile te le phony? • Nokia was the first to see the potential of a cellphone as a fashion accessory from observations of its customers in Asia.


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 unde rs tood the ne e d for cus tomis e d ha nds e ts from its e xpe rie nce in Europe , whe re it firs t be ca me a ppa re nt tha t the re we re diffe re nt s e gme nts of us e rs . • Obs e rving pilot us e rs a cros s S ca ndina via , it wa s a mong the firs t to re cognis e tha t digita l te chnology could dra ma tica lly improve the functiona lity of mobile phone s . • And in China , India a nd Africa , it s a w tha t mobile phone s could pote ntia lly be come s ubs titute for wire line phone s .


The Marketing Myopia • While Nokia prospected the world for ins ight a bout promis ing te chnologie s , dive rs e cus tome r be ha vior a nd ne w wa ys to us e mobile phone s , Motorola continued to develop its products based on its knowledge of the customers and technologies in its U.S. backyard.


The Marketing Myopia • The result: Motorola missed the shift to digita l mobile te le phony a nd the growing s tre ngth of the Europe a n GS M s ta nda rd. It didn't s e e the pote ntia l to turn the phone into a fa s hion icon; it wa s s low to ta ke on boa rd the ne w wa ys mobile s we re be ing us e d a nd to re cognis e tha t a broa de r, but more fra gme nte d us e r ba s e would s pe ll the e nd of "one s ize -fits -a ll" products . • This myopic approach to competition, a nd the fa ilure to e nga ge fully with the re s t of the world a nd ca pture the pote ntia l of globa l ma rke ts a nd the innova tive ide a s in the m, would cos t Motorola de a rly.


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.


The Marketing Myopia • The s e cond dime ns ion conce rns the firm's bus ine s s e nvironme nt pe rs pe ctive . In e s s e nce , the s e firms ha ve a n inwa rd orie nta tion towa rd tha t indus try. • Firms with a s ingle -indus try pe rs pe ctive a re pre occupie d with the a ctions a nd re a ctions of imme dia te compe titors .


The Marketing Myopia • In a ddition, the y a re cons ide re d to ha ve inbre d ma na ge me nt. S ome ma na ge rs ha ve s pe nt the gre a te r pa rt of the ir profe s s iona l ca re e rs in one indus try. • Inbre d ma na ge me nt is not ne ce s s a rily unde s ira ble , but it is pote ntia lly de trime nta l whe n it fos te rs the conte ntion tha t it ca n le a rn nothing from firms in othe r indus trie s , a nd it ke e ps its firm pe rce ptua lly ins ula te d from s uch othe r firms . • For e xa mple , ma na ge rs of the cold bre a kfa s t ce re a l firm ma y be conce rne d only with the a ctions a nd re a ctions of othe r cold ce re a l firms .


The Marketing Myopia • Firms with a multi-indus try pe rs pe ctive , on the othe r ha nd, ha ve a broa de r vie w of the ma rke t. • While the y a re conce rne d with imme dia te compe titors , the y a ls o re a lize tha t firms in othe r indus trie s ca n s e rve a s s ource s of innova tive s tra te gie s a s we ll a s be ing pote ntia l compe titors .


The Marketing Myopia • S uch ma na ge me nt is s a id to be cros s -bre d, in tha t ma na ge rs ma y ha ve e xpe rie nce in a broa d ra nge of indus trie s or the y a re willing to le a rn from firms fa cing s imila r s itua tions in othe r indus trie s . • Firms with a multi-indus try pe rs pe ctive a re outwa rdly orie nte d a nd not pe rce ptua lly ins ulte d from othe r indus trie s .


The Marketing Myopia • The combina tion of the two dime ns ions produce s a ma trix with four type s of firms :


The Marketing Myopia 1. classic myopia, with a productde finition/s ingle -indus try pe rs pe ctive , 2. competitive myopia, with a cus tome r-de finition/s ingle -indus try pe rs pe ctive , 3. efficiency myopia, with a productde finition/multi-indus try pe rs pe ctive , 4. innovative myopia, with a cus tome r-de finition/multi-indus try pe rs pe ctive .


The Marketing Myopia • Ma rke ting ma na ge rs who wis h to a chie ve the innovative firm orientation s hould:

1. ta ke a ge ne ric vie w of the ir firm or indus try, 2. monitor othe r indus trie s , 3. e nga ge in be nchma rking to de te rmine the obje ctive s for re le va nt a re a s of ma rke ting, 4. re cruit ma rke ting pe ople , a nd 5. be fle xible e nough to a pply unique s olutions to proble ms .


Case Study Amazon.com • Strong sales, no • Provides great profits selection, good value, • Customer-driven discovery and to its core convenience • Each customer’s • A true online experience is unique community Discussion : Will Amazoncom . Survive?


What is Marketing? • Ma rke ting is ma na ging profita ble cus tome r re la tions hips  Attracting new customers  Retaining and growing current customers

• “Ma rke ting” is NOT s ynonymous with “s a le s ” or “a dve rtis ing”


Marketing Management • Marketing management is “the a rt a nd s cie nce of choos ing ta rge t ma rke ts a nd building profita ble re la tions hips with the m.”  Creating, delivering and communicating superior customer value is key.


Marketing Management • Cus tome r Ma na ge me nt:  Marketers select customers that can be served well and profitably.

• De ma nd Ma na ge me nt:  Marketers must deal with different demand states ranging from no demand to too much


Marketing Management Marketing Management Management Orientations • Selling • Production concept concept • Marketing • Product concept concept • Societal marketing concept


CRM • CRM – Customer relationship management . . .

“is the ove ra ll proce s s of building a nd ma inta ining profita ble cus tome r re la tions hips by de live ring s upe rior cus tome r va lue a nd s a tis fa ction.”


CRM • It cos ts 5 to 10 time s MORE to a ttra ct a ne w cus tome r tha n it doe s to ke e p a curre nt cus tome r s a tis fie d. • Ma rke te rs mus t be conce rne d with the life time va lue of the cus tome r.


CRM Key Concepts • Attrac ting , re taining and g ro w ing c us to m e rs • Building c us to m e r re latio ns hip s and c us to m e r e q uity

• Cus tome r va lue /s a tis fa ction  P e rce ptions a re ke y  Me e ting/e xce e ding e xpe cta tions cre a te s s a tis fa ction • Loya lty a nd re te ntion  Be ne fits of loya lty  Loya lty incre a s e s a s s a tis fa ction le ve ls incre a s e  De lighting cons ume rs s hould be the goa l • Growing s ha re of cus tome r  Cros s -s e lling


CRM Key Concepts • Attrac ting , re taining and g ro w ing c us to m e rs • Building c us to m e r re latio ns hip s and c us to m e r e q uity

• Cus tome r e quity  The tota l combine d cus tome r life time va lue s of a ll cus tome rs .  Me a s ure s a firm’s pe rforma nce , but in a ma nne r tha t looks to the future .


CRM Key Concepts • Attrac ting , re taining and g ro w ing c us to m e rs • Building c us to m e r re latio ns hip s and c us to m e r e q uity

• Cus tome r re la tions hip le ve ls a nd tools  Ta rge t ma rke t typica lly dicta te s type of re la tions hip Bas ic re latio ns hip s  Full re latio ns hip s 

 Cus tome r loya lty a nd re te ntion progra ms Adding financ ial b e ne fits A dding s o c ial b e ne fits A dding s truc tural tie s 


Marketing Challenges • Te chnologica l a dva nce s , ra pid globa liza tion, a nd continuing s ocia l a nd e conomic s hifts a re ca us ing ma rke tpla ce cha nge s . • Ma jor ma rke ting de ve lopme nts ca n be groupe d unde r the the me of Connecting .


Marketing Challenges Connecting • Via te c hno lo g y • With c us to m e rs • With m arke ting p artne rs • With the w o rld

• Adva nce s in compute rs , te le communica tions , vide o-confe re ncing, e tc. a re ma jor force s .  Da ta ba s e s a llow for cus tomiza tion of products , me s s a ge s a nd a na lys is of ne e ds .

• The Inte rne t

 Fa cilita te s a nytime , a nywhe re conne ctions  Fa cilita te s CRM  Cre a te s ma rke ts pa ce s


Marketing Challenges Connecting • Via te c hno lo g y • With c us to m e rs • With m arke ting p artne rs • With the w o rld

• S e le ctive re la tions hip ma na ge me nt is ke y.  Cus tome r profita bility a na lys is s e pa ra te s winne rs from los e rs .

• Growing “s ha re of cus tome r”  Cros s -s e lling a nd ups e lling a re he lpful.

• Dire ct s a le s to buye rs a re growing.


Marketing Challenges Connecting • Via te c hno lo g y • With c us to m e rs • With m arke ting p artne rs • With the w o rld

• P a rtne r re la tions hip ma na ge me nt involve s :  Conne cting ins ide the compa ny  Conne cting with outs ide pa rtne rs  Sup p ly

c hain m anag e m e nt  Strate g ic allianc e s


Marketing Challenges Connecting • Via te c hno lo g y • With c us to m e rs • With m arke ting p artne rs • With the w o rld

• Globa liza tion  

Compe tition Ne w opportunitie s

• Gre a te r conce rn for e nvironme nta l a nd s ocia l re s pons ibility • Incre a s e d ma rke ting by nonprofit a nd public-s e ctor e ntitie s  S ocia l ma rke ting ca mpa igns

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