Marketing is a term we hear all the time, but what is it exactly? This article outlines some core marketing concepts.
Essentially, marketing means creating, promoting, and delivering goods and services to consumers and businesses. Marketing activities are not limited to products you buy in a store. The scope of what is marketed is (perhaps surprisingly) vast. Goods, services, organizations, people, places, experiences, events, property, information and even ideas are marketed.
If you’d like a more formal definition, the American Marketing Association defines marketing in this way:
“Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
Target Markets and Market Segments
In the old days, a market was a place in town where buyers and sellers got together. Today, marketers view “the market” as those who buy, or might potentially buy. The sellers constitute “the industry”.
Consumers have varying tastes, desires and financial means. Not everyone likes the same car, lipstick or sofa. Marketers a long time ago decided to partition buyers into groups based on some general preferences. For example, if you’re selling corporate accounting software, your marketing efforts might target the “business community” as opposed to “preteens”.
Segmenting markets is not an exact science because no two people are exactly alike, and it’s impossible for a marketer to figure out what motivates everyone. But generalizations can be made to help come up with a profile of potential buyers. This relatively homogeneous group of buyers is referred to as a market segment.
Needs, Wants and Demands
Everyone needs certain basic things in order to survive. Food, clothing, shelter and air are examples. Besides the bare essentials, people have strong needs for things like recreation, social interaction and education. When your quest to fulfill a particular need is directed at an object, your need becomes a want. You need food, but you might want a slice of pizza.
If you have the ability and willingness to pay for a want, it becomes a demand. Many people want a summer mansion in the countryside or an 80 foot yacht, but few are able to pay for these products. Marketers are tasked with not only figuring out how many want a product offering, but also how many are willing and able to buy it.
Products and Brands
Products are offerings that people use to satisfy their needs and wants. A brand, is simply an offering from a “known” source. A brand’s image is the associations the offering creates in the mind of the consumer. Disney has a powerful brand image which can be associated to vacations, fun, movies and family. Companies work to build strong brand images.
Value and Satisfaction
A product’s success is tied to how much satisfaction and value it can deliver. There are costs associated to acquiring products. These costs may involve things other than just money, such as time or labor. When choosing between products, consumers will weigh the benefits (functional and emotional) the product provides with what it costs, and try to maximize this ratio. A consumer may choose the more expensive product if the perceived benefits associated with product are greater than the perceived cost increase. The marketer’s goal is to maximize value to the consumer.
Marketers use marketing channels to reach target markets. These channels are:
- Communication channels are used to send messages to, and receive messages from potential buyers. A few of these channels include billboards, newspapers, brochures, toll-free numbers, websites, and even employee facial expressions and clothing.
- Distribution channels are used to deliver the offering to the consumer. These channels include trucks, warehouses, distributors, wholesalers and retailers.
- Selling channels are used to facilitate the consumer purchase. This not only includes retailers but banks, credit card companies and insurance companies.
As you might imagine, finding the optimal channel mix is a major challenge for marketers.
Marketing channels involve connecting the marketer to the buyer. The supply chain on the other hand, is the term used to refer to the channel that begins with the basic raw materials required for a product to the final finished good brought to the final consumer. If we us the example of a car, the supply chain starts with the metal and other raw materials, moves on to the manufacturing of car components and car assembly, to the marketing channels that bring the car to the final consumer.
The marketing environment is what surrounds and effects the organization. This environment can be broken up into the “macro-environment” and the “micro-environment”.
- The micro-environment involves factors that affect the company directly. These include target customers, suppliers, distributors and the company itself.
- The macro-environment involves broader factors such as demographics, technology, politics and the state of the economy.
To better tailor product offerings, marketers pay close attention to the marketing environment.
A part of the marketing environment which draws a lot of attention from marketers is the competition, so we’ll give it it’s own heading. Competition includes any potential alternatives a buyer might consider. This includes similar products as well as substitutes. For example, as substitute for a car, a consumer might consider buying a motorcycle or a bus pass.
Marketing Mix (4 Ps)
A discussion of core marketing concepts wouldn’t be complete without an introduction to the marketing mix. Anyone who’s ever taken an introductory marketing course will remember the marketing mix as the “4 P’s of marketing”. Everything else may have been forgotten, but the 4 P’s seem to stick. They are the tools marketers use to bring about the desired responses from their target markets.
These tools can be thought of in terms of four broad groups (classified by marketing professor E. Jerome McCarthy) – product, price, place and promotion. Below are some examples of the marketing variables associated to each “P” in the marketing mix.
Product: Variety, design, quality, features, packaging, sizes.
Price: Listed price, payment terms, discounts
Place: Locations, inventory, transportation, channels
Promotion: Advertising, sales force, public relations
The 4 P’s of marketing are seen from the perspective of the marketer. It’s worthwhile noting that these concepts have their analogies from the perspective of the buyer. More recently, a marketer by the name of Robert Lauterborn has suggested the four P’s are mirrored by the customer’s four C’s.
Product → Customer solution
Price → Customer cost
Place → Convenience
Promotion → Communication