Definition of marketing and management

The actual term ‘marketing’ is a creation of recent history and often associated with the dawn of the 20th century. However the actions of marketing had started thousands of years. There are many different definitions of marketing. For this purpose, marketing defined as the identification of customer wants and needs, adding value to products and services that satisfy those wants and needs, at a profit (Wysocki, 2001). Noted that this definition has three components: (1) the recognition of customer wants and needs, as the customer or end-user of the product or service is the most important actor in marketing, (2) one must add value that satisfies wants and needs to one’s product or service or the customer will not remain a customer for long, and (3) firms must make a profit to be sustainable in the long-run.

With an economic approach the emphasis is on products and services, sources of supply, the most commonly used channels of distribution and the functions performed during the marketing process (Cooke et al. 1992). Marketing covers all the business activities involved in getting commodities of all types, including services, from the producers and manufacturers to the final consumers. The main concern of marketing is the business steps through which goods progress on their way to the final consumption. This is especially true of the points in those stages at which change of ownership takes place (McNair et al. 1975). Marketing is the combination of activities designed to produce profit through ascertaining, creating, stimulating, and satisfying the needs and/or wants of a selected segment of the market (Eldridge, 1970).

In the early 1990s Kotler defined marketing as a managerial and social process by which individuals and groups get what they need and want through creating and exchanging products of value with others. By 2000 he had modified this to a societal process by which individuals and groups get what they need and want through creating, offering, and freely exchanging services and products of value with others. When comparing Kotler’s views with American Marketing Association (AMA) views; they are similar in many ways but it could be say that the AMA’s definition is more focused on financial in terms of transactions.

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In the 1960s, the American Marketing Association defines marketing as follows: “the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals.” Several ideas can be expressed in this definition. First, marketing is a managerial function which involve both planning and execution. Thus marketing is not a pool of unrelated activities but tasks that are planned and executed to achieve the goals identified. Second, marketing involves the management of specific elements or functions: product, pricing, promotion and distribution; where they constitute the work or material of what marketing is all about. The planning, execution and control of these activities are involved in the work of marketing. Third, marketing is goal-oriented. Its goal is to create exchanges that satisfy the objectives for both individual and organizational. Marketing’s concern is with customers and meeting a need in the marketplace. However, its concern is not just with any customers but those preselected by management as the market segments on which the company will concentrate. Thus, the focal point of an organization’s marketing activities is specific customers with their specific needs.

The marketing concept is a business orientation that focuses on satisfying customers’ need at acceptable levels of revenues and costs. In organizations looking for profit, acceptable levels of revenues and costs are defined in terms of a target return on investment; in organizations not looking for profit, the focus is on reaching a balance between revenues and costs. Organizations having a true “marketing orientation” focus on addressing the needs and wants of one or more targeted segments of the market.

2.2 Marketing Management

Marketing management is the conscious effort to achieve desired exchange outcomes with target markets. There are four goals of strategic marketing management that need to be understood to create profitable strategies: (1) to select reality-based desired achievement, (2) to effectively develop or modify business strategies, (3) to set priorities for operational change, (4) to improve a firm’s performance.

According to the American Marketing Association, marketing management is the “process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals”. In recent years, marketing management has increasingly focused on four key elements to enhance market share, profits and efficiency. These elements are quality, value, relationships and customers’ satisfaction.

Organization must achieve its objectives. That is why marketing management helps them in the task of influencing the level, timing and composition of demand. Marketing manager has many tasks to do because marketing management is essentially demand management. One of the important tasks is carrying out marketing research, planning, implementation and control to manage the demand. Marketers must make important decisions on target market, market positioning, product development, pricing, distribution channels, physical distribution, communication and promotion within marketing planning.

The marketing department is organised according to function, geographic area, products or customer markets because it take numerous forms. Another consideration is global organisation for firms that market goods or services in other countries. Marketers need to pay attention to the effect of globalization, technology and deregulation. Marketers can start with market segmentation and develop a market offering that is positioned in the target market. Clearly, marketing activities should be carried out efficiently, effectively and socially responsible marketing.

2.2.1 Introduction of Marketing Management in Retail Sectors

Retailing is the activities involved in selling goods or services directly to final consumers for personal, non-business use. A retailer or retail store is any business enterprise whose sales volume comes primarily from retailing. Any organization whether it is a manufacturer, wholesaler or retailer selling to final consumers is doing retailing. It does not matter how the goods or services are sold or where they are sold.

When retailers are establishing their overall marketing strategy, they make decisions about seven variables: location, merchandise, communications, price, services, physical attributes, and personnel. These variables are sometimes called the retailing mix.

There are several ways to classify retail institutions, none of which is mutually exclusive of the others: (1) in terms of their retailing mix, (2) in terms of store ownership, and (3) in terms of store location.

2.2.2 Marketing Research

Market research and marketing research are two different concepts. ‘Market’ research is simply research into a specific market. It is a very narrow concept. ‘Marketing’ research is a broad concept. It includes ‘market’ research, research into new products, and modes of distribution.

According to the American Marketing Association, marketing research links the consumer, customer and public to the marketer through information which is the information used to identify and define marketing opportunities and problems; generate, execute and evaluate marketing actions; supervise marketing performance; and improve understanding of marketing as a process. Marketing research prescribes the information required to deal with these issues, designs the methods for collect the information, manages and implements the process of data collection, analyses and communicates the findings and their implications.

In 2000, Palmer defines marketing research as about researching the whole of a process of company’s marketing. This explanation tells that marketing research is into the elements of the marketing mix, competitors, markets and everything to do with customers.

Marketing research provides information to reduce uncertainty. It helps focus decision making. Marketing research can be classified on the basis of either technique or function (Zikmund, 2003). Experiments, surveys and observational studies are just a few common research techniques. Classifying research by its purpose or function shows how the nature of the marketing problem influences the choice of methods. The nature of the problem will determine whether the research is explanatory, descriptive or causal.

2.2.2.1 Process of Marketing Research

The objective of marketing research is to facilitate the managerial decision-making process for all aspects of the firm’s marketing mix: pricing, promotion, distribution and product decisions. By providing the necessary information on which to base decisions, marketing research can reduce the uncertainty of a decision and thereby decrease the risk of making the wrong decision.

Marketing research involves a sequence of interrelated activities. The stages of the research process overlap continuously. Marketing research often follows a general pattern. The stages are (1) defining the problem, (2) planning a research design, (3) planning a sample, (4) collecting the data, (5) analyzing the data, and (6) formulating the conclusions and preparing the report.

Figure 1.0 portrays these six stages as a cyclical, or circular-flow, process. The circular-flow concept is used because the conclusions from research studies usually generate new ideas and problems that need to be investigated. In practice, the stages overlap chronologically and are functionally interrelated; sometimes the later stages are completed before the earlier ones.

Figure .0: Stages of the Research Process

Problem Discovery and Definition

The first step towards its solution is identifying the problem. The research task may be to clarify a problem, define an opportunity, or monitor and evaluate current operations. The concept of problem discovery and definition includes analysis of opportunities. The initial stage is problem discovery rather than definition.

Careful attention to the problem definition stage allows the researchers to set the proper research objectives. If the purpose of the research is clear, the chances of collecting necessary and relevant information and not collecting surplus information will be much greater.

To be efficient, marketing research must have clear objectives and definite designs. The word problem refers to the managerial problem and the information needed to help solve the problem. Defining the problem must go before determination of the purpose of the research. Once a problem area has been discovered, the marketing researchers can begin the process of defining it.

Research Design

A research design is a master plan. It concentrates the methods and procedures for collecting and analysing the needed information; it is a framework for the action research plan. The sources of information, the design technique, the sampling methodology and the schedule and cost of the research should be determined first.

The objective of the study, the available data sources, the urgency of the decision and the cost of obtaining the data will determine which method should be chosen. There are four basic design techniques

Surveys

It is the most common method of generating primary data. Information is gathered from a sample of people using questionnaire. The essential part is writing a list of questions and designing the format of the questionnaire. Researchers may choose to contact respondents by telephone or mail, on the internet or in person

Experiments

Experimentation allows investigation changes in one variable, while manipulating one or two other variables under controlled conditions. Experimental control provides a basis for alienating causal factors by eliminating outside, or exogenous, influences. An experiment controls conditions so that one or more variables can be manipulated in order to test a hypothesis.

Secondary Data

An example of secondary data study is the use of mathematical model to predict sales on the basis of past sales or a correlation with related variables. Formal secondary data studies have benefits and limitations similar to those of exploratory studies that use secondary data, but generally the quantitative analysis of secondary data is more sophisticated.

Observation

Observation can be mechanically recorded or observed by humans. Observation technique records behaviour without depending on reports from respondents. Observational data are often collected quietly and passively without a respondent’s direct participation.

Sampling

Sampling involves any procedure that uses a small number of items or a portion of the population to make a final conclusion about the whole population. In other words, a sample is a subset from a larger population. The results of a good sample should have the same characteristics as the population as a whole. When errors are made, samples do not give accurate estimates of the population.

Specifying the target population is an important aspect of the sampling plan. The next sampling issue concerns the sample size. Usually larger samples are more accurate than smaller ones, but if probability sampling is done properly it will allow a small proportion of the total population to give a reliable measure of the whole.

The final sampling decision concerns on how to select the sampling units. For example, a cluster sampling procedure may reduce costs and make data gathering procedures more efficient. In determining the sampling plan, the researcher will have to select the most appropriate sampling procedure to meet the study objectives.

Data Gathering

Data may be gathered by humans or recorded by machines. Research techniques involve many methods of data gathering. The survey method requires some form of direct participation by the respondent. If an unobtrusive method of data gathering is used, the subjects do not actively participate.

The process of gathering data often has two phases: pretesting and the main study. A pretesting phase using a small subsample may determine whether the data gathering plan for the main study is a suitable procedure. Thus a small-scale pretest study provides an advance opportunity for an investigator to check the data collection form to minimise errors due to improper design. There is also a chance to discover confusing interviewing instructions. Tabulation of data from the pretest provides the researcher with a format for the knowledge that may be gained from the actual study.

Data Processing and Analysis

Editing and Coding

Editing involves checking the data collection forms of omissions, legibility and consistency in classification. The editing process corrects problems. Before the data can be tabulated, meaningful categories and character symbols must be established for groups of responses. The rules for interpreting, categorizing, recording and transferring the data to the data storage media are called codes.

Analysis

Analysis is the application of reasoning to understand the data that have been gathered. Analysis may involve determining consistent patterns and summarizing the relevant details revealed in the investigation. The appropriate analytical technique for data analysis will be determined by management’s information requirements, the characteristics of the research design and the nature of the data gathered.

Conclusions and Report

The conclusions and report preparation stage consist of interpreting the information and making conclusions for managerial decisions. The research report should effectively communicate the research findings. It cannot be overemphasised on the importance of effective communication. Research is only as good as its applications.

Marketing researchers must communicate their findings to a managerial audience. The written report serves another purpose as well: it is a historical document that will be a record that may be referred to later if the research is to be repeated or if further research is to be based on what has come before.

2.2.3 Marketing Plan (belum edit)

According to businessdictionary.com; planning defines as “basic management function involving formulation of one or more detailed plans to achieve optimum balance of needs or demands with the available resources”. The planning process (1) identifies the goals or objectives to be achieved, (2) formulates strategies to achieve them, (3) arranges or creates the means required, and (4) implements, directs, and monitors all steps in their proper sequence.

A marketing plan is defines as product specific, market specific, or company-wide plan that describes activities involved in achieving specific marketing objectives within a set timeframe. ‘It spells out who will do what, when, where and how, to achieve its ends.’ (Westwood). A market plan begins with the identification (through market research of specific) of specific customer needs and how the firm intends to fulfil them while generating an acceptable level of return. It generally includes analysis of the current market situation (opportunities and trends) and detailed action programmes, budgets, sales forecasts, strategies, and projected (pro-forma) financial statements.

The marketing plan operates at two levels: strategic and tactical. The strategic marketing plan lays out the target markets and the value proposition that will be offered, based on an analysis of the best market opportunities. The tactical marketing plan specifies the marketing tactics, including product features, promotion, merchandising, pricing, sales channels, and service

Marketing planning requires a careful examination of all strategic issues, including the business environment, the markets themselves, competitors, the corporate mission statement, and organisational capabilities. The resulting marketing plan should be communicated to appropriate staff, preferably through an oral briefing with questions and answers, to ensure it is fully understood.

2.2.3.1 Situation Analysis

This section consists of relevant background data on sales, costs, profits, the market, competitors, channels, and the forces in the macroenvironment. This information is used to carry out on a SWOT analysis. Then, management will review the main opportunities found in the SWOT analysis and identifies the key issues likely to affect the organization’s attainment of objectives.

A SWOT analysis combines the external and internal analysis to summarize the Strengths, Weaknesses, Opportunities and Threats.

External Environment Analysis (Opportunity and Threat Analysis)

In general, a business unit has to monitor key macroenvironment forces (demographic-economic, technological, political-legal, and social-cultural) and significant microenvironment actors (customers, competitors, distributors, suppliers) that affect its ability to earn profits. The business unit should set up a marketing intelligence system to track trends and important developments. For each trend or development, management needs to identify the associated opportunities and threats.

The main objective of environmental scanning is to discern new marketing opportunities. A marketing opportunity is an area of buyer need or potential interest in which a company can perform profitability. Opportunities can take many forms and marketers have to be good at spotting them.

Some developments in the external environment represent threats. An environmental threat is a challenge posed by an unfavourable trend or development that would lead, in the absence of defensive marketing action, to deterioration in sales or profit. Threats are viewed as problems that focus on the weaknesses and which can create a potentially negative situation. Threats should be classified according to seriousness and profitability of occurrence.

Once management has identified the major threats and opportunities facing a specific business unit; it can characterize that business’s overall attractiveness.

Internal Environment Analysis (Strength and Weakness Analysis)

Each business needs to evaluate its internal strengths and weaknesses. The business does not have to correct all its weaknesses, nor should it gloat about all its strengths. It is up to whether the business should limit itself to those opportunities where it possesses the required strengths or whether it should consider better opportunities where it might have to acquire or develop certain strengths.

Strength is an asset or a resource that can be used to improve a community’s competitive position. A weakness is just the opposite, a resource or capability that may cause the community to have a less competitive position. For instance, empty commercial space or unattractive vacant buildings are categorized as weaknesses.

Opportunities are in need to look for that play to the strengths. Decision on what to do about threats to the business and how to overcome important weaknesses must be made. SWOT analysis might help to identify the most promising customers to target.

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Figure .0: SWOT Analysis

2.2.3.2 Marketing Objectives

Once SWOT analysis has been conducted, the objective is the starting point of the marketing plan. The SWOT analysis results will inform objectives. The purposes of objectives include:

To enable a company to control its marketing plan

To help to motivate individuals and teams to reach a common goal

To provide an agreed, consistent focus for all functions of an organization

SMART is a mnemonic used in project management at the project objective setting stage. It is a way of evaluating if the objectives that are being set are appropriate for the individual project. A SMART objective is one that is Specific, Measurable, Achievable, Relevant and Time-bound.

2.2.3.3 Target Market

A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise. A well-defined target market is the first element to a marketing strategy. The target market and the marketing mix variables of product, place(distribution), promotion and price are the two elements of a marketing mix strategy that determine the success of a product in the marketplace.

Segmentation is essentially the identification of subsets of buyers within a market that share similar needs and demonstrate similar buyer behaviour. The starting point for discussing segmentation is mass-marketing. In mass marketing, the seller engages in the mass production, mass distribution, and mass promotion of one product for all buyers. The argument for mass marketing is that it creates the largest potential market, which leads to the lowest costs, which in turn can lead to lower prices or higher margins. There are four levels of market segmentation: (1) segments, (2) niches, (3) local areas, and (4) individuals.

Market segment can be built up in many ways. One way is to identify preference segments. Three different patterns can emerge: (1) homogenous preferences – a market where the consumers have roughly the same preferences. The market show no natural segments, (2) diffused preferences – a market where the consumers vary greatly in their preferences, and (3) clustered preferences – the market might reveal distinct preference clusters, called natural market segments.

Market segments can be identified by classifying consumers demographically. The customers in any one segment have different needs, attitudes, and preferences. This has led the market researches to advocate a needs-based market segmentation approach. Roger Best proposed the seven-step approach as shown in Table 1.0.

Market segmentation must be done periodically because segments change. One way to discover new segments is to investigate the hierarchy of attributes consumers examine in choosing a brand. This process is called market partitioning. Companies must monitor potential shifts in the consumers’ hierarchy of attributes and adjust to changing priorities.

The hierarchy of attributes can reveal customer segments. One can identify those who are type/price/brand dominant as making up a segment; those who are quality/ service/type dominant as making up another segment. Each segment may have a distinct demographics, psychographics, and mediagraphics.

Table .0: Steps in Segmentation Process

Segmentation process

Description

Needs-Based Segmentation

Group customers into segments based on similar needs and benefits sought by customer in solving a particular consumption problem.

Segment Identification

For each needs-based segment, determine which demographics, lifestyles, and usage behaviours make the segment distinct and identifiable (actionable).

Segment Attractiveness

Using predetermined segment attractiveness criteria (such as market growth, competitive intensity, and market access), determine the overall attractiveness of each segment.

Segment Profitability

Determine segment profitability

Segment Positioning

For each segment, create a “value proposition” and product-price positioning strategy based on that segment’s unique customer needs and characteristics.

Segment “Acid Test”

Create “segment storyboards” to test the attractiveness of each segment’s positioning strategy.

Marketing-Mix Strategy

Expand segment positioning strategy to include all aspects of the marketing mix: product, price, promotion, and place.

Source: Adapted from Robert J. Best, Market-Based Management (Upper Saddle River, NJ: Prentice Hall, 2000)

Two broad groups of variable are used to segment consumer market. Some researchers try to form segments by looking at consumer characteristics: geographic, demographic, and psychographic. Then they examine whether these customer segments exhibit different needs or product responses. Other researchers try to form segments by looking at consumer responses to benefits, use occasions, or brands. Once the segments are formed, the researcher sees whether different characteristics are associated with each consumer-response segment. The major segmentation variables – geographic, demographic, psychographic, and behavioural segmentation are summarized in Table 2.0.

Table .0: Major Segmentation Variables for Consumer Markets

Segmentation Variables

Groups

Geographic

Region, City or metro size, Density, and Climate

Demographic

Age, Family size, Family size cycle, Gender, Income, Occupation, Education, Religion, Race, Generation, Nationality, and Social Class

Psychographic

Lifestyle, Personality

Behavioural

Occasions, Benefits, User status, Usage Rate, Loyalty Status, Readiness stage, Attitude toward product

Once the firm has identified its market-segment opportunities, it has to decide how many and which ones to target. There are two factors to look at in evaluating different market segments: the segment’s overall attractiveness and the company’s objective and resources. Having evaluated different segments, the company can consider five patterns of target market selection:

Single-segment concentration – the firm gains a strong knowledge of the segment’s needs and achieves a strong market presence; and enjoys operating economies through specializing its production, distribution, and promotion

Selective specialization – the firm selects a number of segments, each objectively attractive and appropriate

Product specialization – the firm makes a certain product that it sells to several segments.

Market specialization – the firm concentrates on serving many needs of a particular customer group

Full market coverage – the firm attempts to serve all customer groups with all the products they might need where only very large firms can undertake a full market coverage strategy

2.2.3.4 Marketing Strategy

Marketing strategy consist of the analysis, strategy development, and implementation activities. Strategic marketing is a market-driven process of strategy development, taking into account a constantly changing business environment and the need to deliver superior customer value. The focus of strategic marketing is on organizational performance rather than a primary concern about increasing sales. Marketing strategy seeks to deliver superior customer value by combining the customer-influencing strategies of the business into a coordinated set of market-driven actions. Strategic marketing links the organization with the environment and views marketing as a responsibility of the entire business rather than a specialized function.

Marketing Mix

Target Market

Figure .0: The Four P Components of the Marketing MixMarketing mix is the set of marketing tools the firm uses to pursue its marketing objectives in the target market. McCarthy classified these tools into four broad groups that he called the four Ps of marketing: product, price, place and promotion. The particular marketing variables under each P are shown in Figure 3.0. Marketing-mix decisions must be made for influencing the trade channels as well as the final consumers.

The firm can change its price, sales force size, and advertising expenditures in the short run. It can develop new products and modify its distribution channels only in the long run. Thus the firm typically makes fewer period-to-period marketing-mix changes in the short run than the number of marketing-mix decision variables might suggest. The four Ps represent the sellers’ view of the marketing tools available for influencing buyers. From a buyer’s point of view, each marketing tools is designed to deliver a customer benefit. Robert Lauterborn suggested that the sellers’ four Ps correspond to the customers’ four Cs.

Winning companies will be those that can meet customer needs economically and conveniently and with effective communication.

provideFour Ps Four Cs

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provide

represent

Figure .0: The Four Ps and Cs of Marketing

The Product Life Cycle (PLC)

A company’s positioning and differentiation strategy must change as the product, market, and competitors change over time. To say that a product has a life cycle is to assert four things: (1) products have a limited life, (2) product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, (3) profits rise and fall at different stages of the product life cycle, and (4) products require different marketing, financial, manufacturing, purchasing, and human resource strategies in each life-cycle stage.

Most product life-cycle curves are portrayed as bell-shaped. This curve is typically divided into four stages: introduction, growth, maturity, and decline. The product life-cycle concept can be used to analyze a product category, a product form, a product, or a brand.

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Figure .0: Sales and Profit Life Cycles

Introductio

 

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