Preliminary Consumer Buying Behavior Report

Learning Topic

Marketing

Definitions

One of the most important functional areas in business is marketing, as it deals with customers more than any other function. Companies such as Google, Swiss Bank, Deutsche Bank, Gucci, Airbus, Apple, McDonalds, and Toyota have a passion for understanding their customers and satisfying their needs in "well-defined target markets" (Kotler & Armstrong, 2014, p. 4). Basically, marketing is a managerial and social function through which companies and consumers create and exchange value.

The American Marketing Association (AMA) defines marketing as "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" (AMA, 2013, para. 1).

Kotler and Armstrong (2014) define marketing as the "process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return" (p. 5).

On the other hand, Kotler and Keller (2015) define marketing management as the science and art of selecting target markets, and the practice of acquiring, maintaining, and growing customers through the creation, delivery, and communication of superior customer value—all while maintaining profitability.

Remember, marketing is not selling; selling is just a component of marketing!

The Marketing Process

Selecting a product or a service to develop is a demanding process that requires cross-functional teams to research, select, develop, and launch new products. In addition, the company needs to evaluate the attractiveness of a new business. Sometimes the company may seek external help to develop a new product, as it may lack the necessary technical expertise, market knowledge, or resources, or may simply want to spread the financial risk involved (i.e., open innovation, or innovation using strategic alliances.)

The marketing process involves five steps (Kotler & Armstrong, 2014, p. 5):

1. understanding the marketplace and consumer needs and wants

2. designing a consumer-driven marketing strategy

3. constructing an integrated marketing program that delivers superior value

4. building profitable relationships and creating consumer satisfaction

5. capturing value from customers to create profits and customer equity

To effectively engage in the marketing process, a business needs to understand the following elements:

1. consumers

2. how to acquire market knowledge (primary and secondary research)

3. how to turn that knowledge into products that are needed and wanted by a group of consumers

4. how to create market offerings that not only create value for the consumer but profitability for the organization

5. how to accomplish these tasks while being socially responsible and engaging in ethical behavior

Furthermore, there are five major customer value themes (Kotler & Armstrong, 2014, p. XVI):

1. creating value for the consumer in order to capture value from them in return

2. creating and managing strong local and global value-creating brands

3. capitalizing on new marketing technologies, such social media (i.e., digital marketing)

4. assessing and managing return on marketing investment

5. sustainable global marketing

References

AMA. (2013). Marketing definition. Retrieved from www.ama.org

Kotler, P. & Armstrong, G. (2014). Principles of marketing (15th ed.). Upper Saddle River, NJ: Pearson.

Kotler, P., & Keller, K. (2015). Marketing management (15th ed.). Upper Saddle River, NJ: Pearson.

Resources

· What Is Marketing?

· Crafting a Digital Marketing Strategy

Learning Resource

Print

What is Marketing?

What makes a business idea work? Does it only take money? Why are some products a huge success and similar products a dismal failure? How was Apple, a computer company, able to create and launch the wildly successful iPod, yet Microsoft's first foray into digital audio players was a total disaster? If the size of the company and the money behind a product's launch were the difference, Microsoft would have won. But for Microsoft to have won, it would have needed something it has not had in a while—good marketing, so it could produce and sell products that consumers want.

So how does good marketing get done?

Defining Marketing 

Marketing is defined by the American Marketing Association as "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" (American Marketing Association, n.d.). If you read the definition closely, you see that there are four activities, or components, of marketing:

· creating—the process of collaborating with suppliers and customers to create offerings that have value

· communicating—broadly, describing those offerings, as well as learning from customers

· delivering—getting those offerings to the consumer in a way that optimizes value

· exchanging—trading value for those offerings

The traditional way of viewing the components of marketing is via the four Ps:

· product—goods and services (creating offerings)

· promotion—communication

· place—getting the product to a point at which the customer can purchase it (delivering)

· price—the monetary amount charged for the product (exchanging)

Introduced in the early 1950s, the four Ps were called the marketing mix, meaning that a marketing plan is a mix of these four components.

If the four Ps are the same as creating, communicating, delivering, and exchanging, you might be wondering why there was a change. The answer is that they are not exactly the same. Product, price, place, and promotion are nouns. As such, these words fail to capture all the activities of marketing. For example, exchanging requires mechanisms for a transaction, which consist of more than simply a price or place. Exchanging requires, among other things, the transfer of ownership. For example, when you buy a car, you sign documents that transfer the car's title from the seller to you. That's part of the exchange process.

Even the term product, which seems pretty obvious, is limited. Does the product include services that come with your new car purchase (such as free maintenance for a certain period of time on some models)? Or does the product mean only the car itself?

Finally, none of the four Ps describes particularly well what marketing people do. However, one of the goals of this book is to focus on exactly what marketing professionals do.

Value

Value is at the center of everything marketers do. What does value mean?

When we use the term value, we mean the benefits buyers receive that meet their needs. In other words, value is what the customer gets by purchasing and consuming a company's offering. Although the offering is created by the company, the value is determined by the customer.

Furthermore, our goal as marketers is to create a profitable exchange for consumers. By profitable, we mean that the consumer's personal value equation is positive. The personal value equation is

value = benefits received – [price + hassle].

Hassle is the time and effort the consumer puts into the shopping process. The equation reflects personal impressions, because each consumer will judge the benefits of a product differently, as with the time and effort he or she puts into shopping. Value, then, varies for each consumer.

One way to think of value is to imagine a meal in a restaurant. If you and three friends go to a restaurant and order the same dish, each of you will like it more or less depending on your personal tastes. Yet the dish was exactly the same, priced the same, and served exactly the same way. Because your tastes varied, the benefits you received varied. Therefore, the value varied for each of you. That's why we call it a personal value equation.

Value varies from customer to customer based on each customer's needs. The marketing concept, a philosophy underlying all that marketers do, requires that marketers seek to satisfy customer wants and needs. Firms operating with that philosophy are said to be market oriented. At the same time, market-oriented firms recognize that the exchange must be profitable for the company to be successful. A marketing orientation is not an excuse to fail to make profit.

Firms don't always embrace the marketing concept and a market orientation. Beginning with the Industrial Revolution in the late 1800s, companies were production oriented. They believed that the best way to compete was by reducing production costs. In other words, companies thought that good products would sell themselves. Perhaps the best example of such a product was Henry Ford's Model A automobile, the first product of his production line innovation. Ford's production line made the automobile cheap and affordable for many more people. The production era lasted until the 1920s, when production-capacity growth began to outpace demand growth, and new strategies were called for. There are, however, companies that still focus on production as the way to compete.

From the 1920s until after World War II, companies tended to be selling oriented, meaning they believed it was necessary to push their products by heavily emphasizing advertising and selling. Consumers during the Great Depression and World War II did not have as much money, so the competition for their available dollars was stiff. The result was this push approach during the selling era. Companies like the Fuller Brush Company and Hoover Vacuum began selling door-to-door, and the vacuum-cleaner salesperson position was created. Just as with production, some companies still operate with a push focus.

In the post–World War II environment, demand for goods increased as the economy soared. Some products, limited in supply during World War II, were now plentiful to the point of surplus. Companies believed that to compete, they had to sell different products than the competition, so many focused on product innovation. This focus on product innovation is called the product orientation. Companies like Procter & Gamble created many products that served the same basic function as one another, but with a slight twist or difference in order to appeal to a different consumer, and as a result products proliferated. But as consumers had many choices available to them, companies had to find new ways to compete. Which products were best to create? Why create them? The answer was to create what customers wanted, leading to the development of the marketing concept, and from about 1950 to 1990, businesses operated in the marketing era.

So what era would you say we're in now? Some call it the value era, a time when companies emphasize creating value for customers. Is that really different from the marketing era, in which the emphasis was on fulfilling the marketing concept? Maybe not. Others call today's business environment the one-to-one era, meaning that the way to compete is to build relationships with customers one at a time and to serve each customer's needs individually. For example, the longer you are a customer of Amazon, the more details they gain about your purchasing habits and the better they can target you with offers of new products. With the advent of social media and the empowerment of consumers through ubiquitous information from consumer reviews, there is clearly greater emphasis on meeting customer needs. But is that substantially different from the marketing concept?

Still others argue that this is the time of service-dominant logic, and that we are in the service-dominant logic era.

Service-dominant logic is an approach to business that recognizes that consumers want value no matter how it is delivered, whether it's via a product, a service, or a combination of the two.

Although there is merit in this belief, there is also merit to the value approach and the one-to-one approach, and all three beliefs are intertwined. Perhaps, then, the name for this era has yet to be decided.

Whatever era we're in now, most historians would agree that defining and labeling it is difficult. Value and one-to-one approaches are both natural extensions of the marketing concept, so we may still be in the marketing era. To make matters more confusing, not all companies adopt the philosophy of the era. For example, in the 1800s, Singer and National Cash Register adopted strategies rooted in sales, so they operated in the selling era forty years before it existed. Some companies are still in the selling era. Recently, many believed automobile manufacturers had fallen into trouble because they had been working too hard to sell or push product and not hard enough on delivering value.

Creating Offerings That Have Value

Marketing creates goods and services that the company offers at a price to its customers or clients. The entire bundle consisting of the tangible good, the intangible service, and the price is the company's offering. When you compare one car to another, for example, you can evaluate each of these dimensions—the tangible, the intangible, and the price—separately. However, you can't buy one manufacturer's car, another manufacturer's service, and a third manufacturer's price when you actually make a choice. Together, the three make up a single firm's offer.

Marketing people do not create the offering alone. For example, when the iPad was created, Apple's engineers were also involved in its design. Apple's financial personnel had to review the costs of producing the offering and provide input on how it should be priced. Apple's operations group needed to evaluate the manufacturing requirements the iPad would need. The company's logistics managers had to evaluate the cost and timing of getting the offering to retailers and consumers. Apple's dealers also likely provided input regarding the iPad's service policies and warranty structure. Marketing, however, has the biggest responsibility because it is their responsibility to ensure that the new product delivers value.

Communicating Offerings

Communicating is a broad term in marketing that means describing the offering and its value to your potential and current customers, as well as learning from customers what they want and like. Sometimes communicating means educating potential customers about the value of an offering, and sometimes it means simply making customers aware of where they can find a product. Communicating also means that customers get a chance to tell the company what they think. Today, companies are finding that to be successful, they need a more interactive dialogue with their customers. For example, Comcast customer service representatives monitor Twitter. When they observe consumers tweeting problems with Comcast, the customer service reps will post resolutions to their problems. Similarly, JCPenney has created consumer groups that talk among themselves on JCPenney-monitored websites. The company might post questions, send samples, or engage in other activities designed to solicit feedback from customers.

Mobile devices, like iPads and Droid smartphones, make mobile marketing possible too. For example, if consumers check in at a shopping mall on Foursquare or Facebook, stores in the mall can send coupons and other offers directly to their phones and computers.

Companies use many forms of communication, including advertising on the internet or television, on billboards or in magazines, through product placements in movies, and through salespeople. Other forms of communication include attempting to have news media cover the company's actions (part of public relations), participating in special events such as the annual International Consumer Electronics Show in which Apple and other companies introduce their newest gadgets, and sponsoring special events like the Susan G. Komen Race for the Cure.

Delivering Offerings

Marketing can't just promise value, it also has to deliver value. Delivering an offering that has value is much more than simply getting the product into the hands of the user; it also entails making sure the user understands how to get the most out of the product and that he or she is taken care of if service is required later on. Value is delivered in part through a company's supply chain. The supply chain includes a number of organizations and functions that mine, make, assemble, or deliver materials and products from a manufacturer to consumers. The actual group of organizations can vary greatly from industry to industry, and include wholesalers, transportation companies, and retailers. Logistics, or the actual transportation and storage of materials and products, is the primary component of supply-chain management, but there are other aspects of supply-chain management that we will discuss later.

Exchanging Offerings

In addition to creating an offering, communicating its benefits to consumers, and delivering the offering, there is the actual transaction, or exchange, that has to occur. In most instances, we consider the exchange to be cash for products and services. However, if you were to fly to Louisville, Kentucky, for the Kentucky Derby, you could pay for your airline tickets using frequent-flier miles. You could also use Hilton Honors points to pay for your hotel, and cash-back points on your Discover card to pay for meals. None of these transactions would actually require cash. Other exchanges, such as information about your preferences gathered through surveys, might not involve cash.

When consumers acquire, consume, and dispose of products and services, an exchange occurs. For example, via Apple's One-to-One program, you can pay a yearly fee in exchange for additional periodic product training sessions with an Apple professional. Each time a training session occurs, another transaction takes place. A transaction also occurs when you are finished with a product. For example, you might sell your old iPhone to a friend, trade in a car, or ask the Salvation Army to pick up your old refrigerator.

Disposing of products has become an important ecological issue. Batteries and other components of cell phones, computers, and high-tech appliances can be very harmful to the environment, and many consumers don't know how to dispose of these products properly. Some companies, such as Office Depot, have created recycling centers where customers can take their old electronics.

Apple has a web page where consumers can fill out a form, print it, and ship it to Apple along with their old cell phones and MP3 players. Apple then pulls out the materials that are recyclable and properly disposes of those that aren't. By reducing the hassle associated with disposing products, Office Depot and Apple add value to their product offerings.

Key Points

The focus of marketing has changed from emphasizing the product, price, place, and promotion mix to one that emphasizes creating, communicating, delivering, and exchanging value. Value is a function of the benefits an individual receives, and consists of the price the consumer paid and the time and effort the person expended making the purchase.

Check Your Knowledge

Question 1

What is the personal value equation?

value = benefits received – [price + hassle]

value = product + service

value = product + price + promotion + place

value = creating + communicating + delivering + exchanging

Correct! Value is a measure of what a customer receives in exchange for the money and time spent.

Incorrect. These are possible benefits, but value equation must include cost of money and time.

Incorrect. This is the original marketing mix dating to the 1950s.

Incorrect. This is the American Marketing Association’s more recent definition of the marketing mix.

Question 2

What is the American Marketing Association’s current definition of marketing?

value = benefits received – [price + hassle]

value = product + service

product, price, promotion, and place

creating, communicating, delivering, and exchanging

Incorrect. Value is a measure of what a customer receives in exchange for their money and time.

Incorrect. These are possible benefits, but value equation must include cost of money and time.

Incorrect. This is the original marketing mix dating to the 1950s.

Correct! This is the American Marketing Association’s more recent definition of the marketing mix.

Question 3

Identify the two marketing mix terms that relate to offerings.

product and creating

promotion and communicating

place and delivering

price and exchanging

Correct! Companies create products or services to offer to potential consumers.

Incorrect. Communicating, or promoting, a product or service comes after its creation.

Incorrect. Delivering a product or service to a place where it is useful to the consumer is the third element.

Incorrect. Exchanging a product or service for a given price is the final element.

Who Does Marketing? 

The short answer to the question of who does marketing is "everybody!" But let's take a moment and consider in greater detail how different types of organizations engage in marketing.

For-Profit Companies 

The obvious answer to the question, who does marketing? is for-profit companies like McDonald's, Procter & Gamble (the makers of Tide detergent and Crest toothpaste), and Walmart. For example, McDonald's creates a new breakfast chicken sandwich for $1.99 (the offering), launches a television campaign (communicating), makes the sandwiches available on certain dates (delivering), and then sells them in its stores (exchanging). When Procter & Gamble (P&G) creates a new Crest tartar-control toothpaste, it launches a direct-mail campaign in which it sends information and samples for dentists to offer to their patients. P&G then sells the toothpaste through retailers like Walmart, which has a panel of consumers sample the product and provide feedback through an online community. These are all examples of marketing activities.

For-profit companies can be defined by the nature of their customers. A business-to-consumer (B2C) company like P&G sells products to be used by consumers like you, while a business-to-business (B2B) company sells products to be used within another company's operations, as well as by government agencies and entities. To be sure, P&G sells toothpaste to other companies like Walmart (and probably to the army, prisons, and other government agencies), but the end user is an individual person.

Another way to categorize companies that engage in marketing is by the functions they fulfill. P&G is a manufacturer, Walmart is a retailer, and Grocery Supply Company is a wholesaler of grocery items that buys from companies like P&G in order to sell to small convenience store chains. Though they have different functions, all these types of for-profit companies engage in marketing activities. Walmart, for example, advertises to consumers.

Grocery Supply Company salespeople will call on convenience store owners to take orders and will build in-store displays. P&G might help Walmart or Grocery Supply Company with templates for advertising or suggest special cartons to use in an in-store display, but all the companies are using marketing to help sell P&G's toothpaste.

Similarly, all the companies engage in dialogue with their customers to understand what to sell. For Walmart and Grocery Supply, the dialogue may result in changing what they buy and sell. For P&G, customer feedback may yield a new product or a change in pricing strategy.

Nonprofit Organizations 

Nonprofit organizations also engage in marketing. When the American Heart Association (AHA) created a heart-healthy diet for people with high blood pressure, it bound the diet into a small book, along with access to a special website that people could use to plan their meals and record their health-related activities. The AHA then sent copies of the diet to doctors to give to patients. When does an exchange take place, you might be wondering? And what does the AHA get out of the transaction?

From a financial standpoint, the AHA does not directly benefit. Nonetheless, the organization is meeting its mission, or purpose, of getting people to live heart-healthy lives and considers the campaign a success when doctors give the books to their patients. The point is that the AHA is engaged in the marketing activities of creating, communicating, delivering, and exchanging. This won't involve the same kind of exchange as a for-profit company, but it is still marketing.

When a nonprofit organization engages in marketing activities, this is called nonprofit marketing.

Some schools offer specific courses in nonprofit marketing, and many marketing majors begin their careers with nonprofit organizations.

Government entities also engage in marketing activities. For example, when the US Army advertises to parents of prospective recruits, sends brochures to high schools, or brings a Bradley Fighting Vehicle to a state fair, the army is engaging in marketing. The US Army also listens to its constituencies, as evidenced by recent research aimed at understanding how to serve military families more effectively. One result was advertising aimed at improving parents' responses to their children's interest in joining the army. Another was a program aimed at encouraging spouses of military personnel to access counseling services when their spouse is serving overseas.

Similarly, the Environmental Protection Agency (EPA) runs a number of advertising campaigns designed to promote environmentally friendly activities. One such campaign promoted the responsible disposal of motor oil instead of simply pouring it on the ground or into a storm sewer.

There is a difference between these two types of activities. When the army is promoting the benefits of enlisting, it hopes young men and women will join the army. By contrast, when the EPA runs commercials about how to properly dispose of motor oil, it hopes to change people's attitudes and behaviors so that social change occurs. Social marketing, which can be done by government agencies, nonprofit institutions, religious organizations, and others, is conducted in an effort to achieve certain social objectives. Convincing people that global warming is a real threat via advertisements and commercials is social marketing, as is the example regarding the EPA's campaign to promote the responsible disposal of motor oil.

Individuals

If you create a résumé, are you using marketing to communicate the value you have to offer prospective employers? If you sell yourself in an interview, is that marketing? When you work for a wage, you are delivering value in exchange for pay. Is this marketing, too?

Some people argue that these are not marketing activities and that individuals do not necessarily engage in marketing. (Some people also argue that social marketing really isn't marketing either.) What do you think? Can individuals market themselves and their ideas?

Key Points

Marketing can be thought of as a set of business practices that for-profit organizations, nonprofit organizations, government entities, and individuals can use. When a nonprofit organization engages in marketing activities, this is called nonprofit marketing. Marketing conducted in an effort to achieve certain social objectives is called social marketing.

Ask Yourself

· What types of companies engage in marketing?

· What is the difference between nonprofit marketing and social marketing?

· What can individuals do for themselves that would be considered marketing?

Why Study Marketing?

Products don't sell themselves. Generally, the "build it and they will come" philosophy doesn't work. Good marketing educates customers so that they can find the products they want, make better choices about those products, and extract the most value from them. In this way, marketing helps facilitate exchanges between buyers and sellers for the mutual benefit of both parties. Likewise, good social marketing provides people with information and helps them make healthier decisions for themselves and others.

Of course, all business students should understand all functional areas of the firm, including marketing. There is more to marketing, however, than simply understanding its role in the business. Marketing has a tremendous impact on society.

Marketing Delivers Value 

Marketing not only delivers value to customers, it also creates value for the firm as it develops a reliable customer base and increases its sales and profitability. Franklin D. Roosevelt, the US president with perhaps the greatest influence on our economic system, once said, "If I were starting life over again, I am inclined to think that I would go into the advertising business in preference to almost any other. The general raising of the standards of modern civilization among all groups of people during the past half century would have been impossible without the spreading of the knowledge of higher standards by means of advertising" (Famous Quotes and Authors, n.d.). Roosevelt referred to advertising, but advertising alone is insufficient for delivering value. Marketing finishes the job by ensuring that what is delivered is valuable.

Marketing Benefits Society 

Marketing benefits society in general by improving people's lives in two ways. First, as we mentioned, it facilitates trade. As you have learned, or will learn, in economics, being able to trade makes people's lives better. Because better marketing means more successful companies, jobs are created. This growth generates wealth for workers, who are then able to make purchases, which, in turn, creates more jobs.

The second way marketing improves the quality of life is through the function of the value-delivery approach in creating choices for consumers. When you add all the marketers together who are trying to deliver offerings of greater value to consumers and are effectively communicating that value, consumers are able to make more informed decisions about a wider array of choices. From an economic perspective, more choices and smarter consumers are indicative of a higher quality of life.

Marketing Costs Money

Marketing can sometimes be the largest expense associated with producing a product. In the soft drink business, marketing expenses account for about one-third of a product's price—about the same as the ingredients used to make the soft drink itself.

Some people argue that society does not benefit from marketing when it represents such a huge chunk of a product's final price. In some cases, that argument is justified. Yet when marketing results in more informed consumers receiving a greater amount of value, the cost is justified.

Marketing Offers People Career Opportunities

Marketing is the interface between producers and consumers, shouldering the responsibility for both making money for the company and delivering satisfaction to customers. In addition, because marketing can be such an expensive part of a business and is so critical to its success, companies actively seek strong marketing employees. There are a variety of jobs available in the marketing profession. The following positions represent only a few of the opportunities available in the field.

· marketing research—Personnel in marketing research are responsible for studying markets and customers in order to understand what strategies or tactics might work best for firms.

· merchandising—In retailing, merchandisers are responsible for developing strategies regarding what products wholesalers should carry to sell to retailers such as Target and Walmart.

· sales—Salespeople meet with customers, determine their needs, propose offerings, and make sure that the customer is satisfied. Sales departments can also include sales support teams who work on creating the offering.

· advertising—Whether it's for an advertising agency or inside a company, some marketing personnel work on advertising. Television commercials and print ads are only part of the advertising mix. Many people who work in advertising spend all their time creating advertising for electronic media, such as websites and their pop-up ads, podcasts, etc.

· product development—People in product development are responsible for identifying and creating features that meet the needs of a firm's customers. They often work with engineers or other technical personnel to ensure that value is created.

· direct marketing—Professionals in direct marketing communicate directly with customers about a company's product offerings via channels such as e-mail, chat lines, telephone, or direct mail.

· digital media—Digital media professionals combine advertising, direct marketing, and other areas of marketing to communicate directly with customers via social media, the web, and mobile media (including texts). They also work with statisticians in order to determine which consumers receive which message, and with IT professionals to create the right look and feel of digital media.

· event marketing—Some marketing personnel plan special events, orchestrating face-to-face conversations with potential and current customers in a special setting.

· nonprofit marketing—Nonprofit marketers often don't get to do everything listed previously, as nonprofits typically have smaller budgets. But their work is always very important as they try to change behaviors without having a product to sell.

A career in marketing can begin in a variety of ways. Entry-level positions for new college graduates are available in many of the roles previously mentioned.

A growing number of CEOs are people with marketing backgrounds. Some legendary CEOs, like Ross Perot and Mary Kay Ash, got their start in marketing. More recently, CEOs like Mark Hurd, CEO of Oracle, and Jeffrey Immelt at GE, are showing how marketing careers can lead to the highest position of an organization.

Criticisms of Marketing 

Marketing is not without its critics. We already mentioned that one reason to study marketing is because it is costly, and business leaders need to understand the cost/benefit ratio of marketing in order to make wise investments. Yet that cost is precisely why some criticize marketing. Some allege that if that money could be put into research and development of new products, perhaps the consumers would be better satisfied. Or, some critics argue, prices could be lowered. But marketing executives do not intentionally waste money on marketing, and are always on the lookout for less expensive ways to have the same performance.

Another criticism is that marketing creates wants among consumers for products and services that aren't really needed. For example, fashion marketing creates demand for high-dollar jeans when much less expensive jeans can fulfill the same basic function. Taken to the extreme, consumers may take on significant credit card debt to satisfy wants created by marketing, with serious negative consequences. When marketers target their messages carefully so an audience that can afford such products is the only group reached, such extreme consequences can be avoided.

Key Points

By facilitating transactions, marketing delivers value to both consumers and firms. At the broader level, this process creates jobs and improves the quality of life in a society. Marketing can be costly, so firms need to hire strong employees to manage their marketing activities. Being responsible for both making money for your company and delivering satisfaction to your customers makes marketing a great career.

Ask Yourself

· Why study marketing?

· How does marketing provide value?

· Why does marketing cost so much? Is marketing worth it?

· What is the main cost of marketing?

Themes in Marketing 

We previously discussed marketing as a set of activities that anyone can do. Marketing is also a functional area in companies, just like operations and accounting. Within a company, marketing might be the title of a department, but some marketing functions, such as sales, might be handled by another department. Marketing activities do not occur separately from the rest of the company, however.

As we have explained, pricing an offering, for example, will involve a company's finance and accounting departments in addition to the marketing team. Similarly, a marketing strategy is not created solely by a firm's marketing personnel. Instead, it flows from the company's overall strategy.

Everything Starts with Customers

Most organizations start with an idea of how to serve customers better. Apple's engineers began working on the iPod by looking at the available technology and thinking about how customers would like to improve the availability and affordability of their music, through downloading.

Many companies think about potential markets and customers when they start. John Deere, for example, founded his company on the principle of serving customers. When admonished for making constant improvements to his products even though farmers would take whatever they could get, Deere reportedly replied, "They haven't got to take what we make and somebody else will beat us, and we will lose our trade" (John Deere, n.d.). He recognized that if his company failed to meet customers' evolving needs, someone else would.

Here are a few mission statements from other companies. Note that they all refer to their customers, directly or indirectly. Note also how these are written to inspire employees and others who interact with the company.

Company Mission Statements

IBM

· IBM

· Coca-Cola

· McDonald’s

· Merck

· IBM

· Coca-Cola

· McDonald’s

· Merck

IBM

IBM will be driven by these values:

· Dedication to every client's success.

· Innovation that matters, for our company and for the world.

· Trust and personal responsibility in all relationships. (IBM, n.d.)

Coca-Cola

Everything we do is inspired by our enduring mission:

· To refresh the world in body, mind, and spirit.

· To inspire moments of optimism through our brands and our actions.

· To create value and make a difference everywhere we engage. (Coca-Cola Company, n.d.)

McDonald’s

To be our customers' favorite place and way to eat (McDonald's, n.d.).

 

Merck

To provide innovative and distinctive products and services that save and improve lives and satisfy customer needs, to be recognized as a great place to work, and to provide investors with a superior rate of return (Merck & Co., n.d.).

 

Not all companies create mission statements that reflect a marketing orientation. Note Apple's mission statement: "Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple continues to lead the industry in innovation with its award-winning computers, OS X operating system and iLife and professional applications. Apple is also spearheading the digital media revolution with its iPod portable music and video players and iTunes online store, and has entered the mobile phone market with its revolutionary iPhone" (Apple, Inc, 2009). This mission statement reflects a product orientation, or an operating philosophy based on the premise that Apple's success is due to great products and that simply supplying them will lead to demand for them. Apple, and for that matter, many other companies, have fallen prey to thinking that they knew what a great product was without asking their customers. In fact, Apple's first attempt at a graphic user interface (GUI) was the LISA, a dismal failure.

The Marketing Plan 

The marketing plan is the strategy for implementing the components of marketing: creating, communicating, delivering, and exchanging value. Once a company has decided what business it is in and expressed that in a mission statement, the firm then develops a corporate strategy. Marketing strategists subsequently use the corporate strategy and mission and combine that with an understanding of the market to develop the company's marketing plan.

Marketers also want to know their customers—who they are and what they like to do—so as to uncover this information. Generally, this requires marketing researchers to collect sales and other related customer data and analyze it. In this pursuit, there are three important goals: understanding the customer's wants and needs, understanding how the customer wants to acquire, consume, and dispose of the offering, and determining what makes up their personal value equation.

Once this information is gathered and digested, the planners can work to create the right offering. Products and services are developed, bundled together at a price, and then tested in the market. Decisions have to be made about when to alter the offerings, add new ones, or drop old ones. These decisions are the focus of the next set of chapters and are the second step in marketing planning.

Following the material on offerings, we explore the decisions associated with building the value chain. Once an offering is designed, the company has to be able to make it and then be able to get it to the market. This step, planning for the delivery of value, is the third step in the marketing plan.

The fourth step is creating the plan for communicating value. How does the firm make consumers aware of the value it has to offer? How can it help them recognize that value and decide that they should purchase products? These are important questions for marketing planners.

Once a customer has decided that her personal value equation is likely to be positive, she will decide to purchase the product. That decision still has to be acted on, however, which is the exchange. As exchanges occur, marketing planners then refine their plans based on the feedback they receive from their customers, as well as what their competitors are doing and how market conditions are changing.

The Changing Marketing Environment

We previously mentioned that the view of marketing has changed from a static set of four Ps to a dynamic set of processes that involve marketing professionals as well as many other employees in an organization. The way business is being conducted today is changing, too, and marketing is changing along with it. There are several themes that underscore these changes.

· ethics and social responsibility—Businesses exist only because society allows them to. When businesses begin to fail society, society will punish them or revoke their license. The crackdown on companies in the subprime mortgage–lending industry is one example. These companies created and sold loans (products) that could only be paid back under ideal circumstances, and when consumers couldn't pay these loans back, the entire economy suffered greatly. Scandals such as these illustrate how society responds to unethical business practices. However, whereas ethics require only that you do no harm, the concept of social responsibility requires that you actively seek to improve the lives of others. Today, people are demanding businesses take a proactive stance in terms of social responsibility, and companies are being held to ever-higher standards of conduct.

· sustainability—An example of social responsibility, sustainability involves engaging in practices that do not diminish the earth's resources. Coca-Cola, for example, is working with governments in Africa to ensure clean water availability, not just for manufacturing Coke products but for all consumers in that region. Further, the company seeks to engage the participation of American by offering opportunities to contribute to clean-water programs. Right now, companies do not have to engage in these practices, but because firms represent the people behind them (their owners and employees), forward-thinking executives are seeking ways to reduce the impact their companies are having on the planet.

· service-dominant logic—You might have noticed that we use the word offering a lot instead of the term product. That's because of service-dominant logic, the approach to business that recognizes that consumers want value no matter how it is delivered—whether through a tangible product or through intangible services. This emphasis on value drives the functional approach to value that we've taken—that is, creating, communicating, delivering, and exchanging value.

· metrics—Technology has increased the amount of information available to decision makers. As such, the amount and quality of data for evaluating a firm's performance is increasing. Earlier in our discussion of the marketing plan, we explained that customers communicate via transactions. Although this sounds both simple and obvious, better information technology has given us a much more complete picture of each exchange. Cabela's, for example, combines data from Web browsing activity with purchase history in order to determine the likely next-best offer. Using data from many sources, we can build more-effective metrics that can then be used to create better offerings, better communication plans, and so forth.

· a global environment—Every business is influenced by global issues. The price of oil, for example, is a global concern that affects everyone's prices and even the availability of some offerings. We already mentioned Coke's concern for clean water. But Coke also has to be concerned with distribution systems in areas with poor or nonexistent roads, a myriad of government policies and regulations, workforce availability, and many more issues associated with selling and delivering Coke around the world. Even companies with smaller markets source some or all their offerings from companies in other countries or else face some sort of direct competition from companies based in other countries. Every business professional, whether working in marketing or elsewhere, needs some understanding of the global environment in which companies operate.

Key Points

A company's marketing plan flows from its strategic plan. Both begin with a focus on customers. The essential components of the plan are understanding customers, creating an offering that delivers value, communicating the value to the customer, exchanging with the customer, and evaluating the firm's performance. A marketing plan is influenced by environmental trends such as social responsibility, sustainability, service-dominant logic, the increased availability of data and effective metrics, and the global nature of the business environment.

Ask Yourself

· Why does everything start with customers? Or is it only marketing that starts with customers?

· What are the key parts of a marketing plan?

· What is the relationship between social responsibility, sustainability, service-dominant logic, and the global business environment? How does the concept of metrics fit?

References

American Marketing Association. (n.d.). Definition of marketing. Retrieved from http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx?sq=definition+of+marketing

Apple, Inc. (2009). Apple's app store downloads top 1.5 billion in first year. Retrieved from http://www.apple.com/hk/en/pr/library/ 2009/07/14apps.html

Coca-Cola Company. (n.d.). Mission, vision & values. Retrieved from http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html

Famous Quotes and Authors. (n.d.). Franklin D. Roosevelt quotes and quotations. Retrieved from http://www.famousquotesandauthors.com/authors/franklin_d__roosevelt_quotes.html

IBM. (n.d.). About IBM. Retrieved from http://www.ibm.com/ibm/us/en

John Deere (n.d.). John Deere: A biography. Retrieved from http://www.deere.com/en_US/compinfo/history/johndeere2.html

McDonald's. (n.d.). Our company. Retrieved from http://aboutmcdonalds.com/mcd/our_company/mcd_faq/student_research.html#1

Merck & Co. (n.d.). The new Merck. Retrieved from http://www.merck.com/about/Merck%20Vision%20Mission.pdf

Licenses and Attributions

Chapter 1: What Is Marketing? from Marketing Principles is available under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported license without attribution as requested by the site’s original creator or licensee. UMUC has modified this work and it is available under the original license.

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Crafting a Digital Marketing Strategy

Any activity with an end goal (whether it’s winning a war, building a city, or selling a product) should have a blueprint in place for every person in the organization to follow. In digital marketing, however, there is no single definitive approach—each business must create its own roadmap. However, there are questions you can use to guide the process.

A strategy needs to cover who you are, what you are offering and to whom, and why and how you are doing so. The steps and questions below cover what an organization should be aware of when creating and implementing a strategy that will meet its marketing objectives and solve its challenges.

Step 1: Examine the Context 

The first step in crafting a successful strategy is to examine the context of the organization and the various stakeholders:

· What is the context in which you are operating (PESTLE factors) and how is this likely to change in the future?

· Who are you, why does your brand matter, and what makes your brand useful and valuable?

· Who are your customers, and what needs, wants, and desires do they have?

· Who are your competitors? These may extend beyond organizations that compete with you on the basis of price and product and could also be competition in the form of abstracts such as time and mindshare.

Thorough market research will reveal the answers to these questions.

Step 2: Examine Your Value Exchange 

Once you have examined the market situation, the second step is an examination of your value proposition or promise. In other words, what unique value can your organization add to that market? It is important to identify the supporting value-adds to the brand promise that are unique to the digital landscape. What extras, beyond the basic product or service, do you offer to customers?

The internet offers many channels for value creation. However, the value depends largely on the target audience, so it is crucial to research your users and gather insights into what they want and need.

Content marketing is the process of conceptualizing and creating this sort of content. Examples of value-based content include a DIY gardening video for a hardware brand, a research paper for a business analyst, or a funny infographic for a marketing company.

Step 3: Establish Digital Marketing Goals 

When setting your digital marketing goals, there are three key aspects to consider: objectives, key performance indicators (KPIs), and targets. Let’s look at each one in turn.

Objectives 

Objectives are essential to any marketing endeavor. Without them, your strategy would have no direction and no end goal or win conditions. It’s important to be able to take a step back and ask several questions:

· What are you trying to achieve?

· How will you know if you are successful?

Objectives need to be SMART:

· specific—The objective must be clear and detailed, rather than vague and general.

· measurable—The objective must be measurable so that you can gauge whether you are attaining the desired outcome.

· attainable—The objective must be something that is possible for your brand to achieve, based on available resources.

· realistic—The objective must also be sensible and based on data and trends; don’t exaggerate or overestimate what can be achieved.

· time-bound—Finally, the objective must be linked to a specific timeframe.

Key Performance Indicators 

Key performance indicators (KPIs) are the specific metrics or pieces of data that you will look at to determine whether your tactics are performing well and meeting your objectives. For example, a gardener may look at the growth rate, color, and general appearance of a plant to evaluate whether it is healthy. In the same way, a marketer will look at a range of data points to determine whether a chosen tactic is delivering. KPIs are determined per tactic, with an eye on the overall objective.

Targets 

Finally, targets are the specific values that are set for your KPIs to reach within a specific time period. If you meet or exceed a target, you are succeeding; if you don’t reach it, you’re falling behind on your objectives and you need to reconsider your approach (or your target).

Example of Digital Marketing Goals

SMART objective:  Increase sales through the eCommerce platform by 10 percent within the next six months.

KPIs:

· Search advertising—number of search referrals; cost per click on the ads

· Facebook brand page—number of comments and shares on campaign; specific posts

Targets:

· Search advertising—one thousand search referrals after the first month, with a 10 percent month-on-month increase after that

· Facebook brand page—50 comments and 10 shares on campaign-specific posts per week

Step 4: Establish Tactics and Evaluation 

Tactics are the specific tools or approaches you will use to meet your objectives, for example, a retention-based email newsletter, a Facebook page, or a CRM implementation. As a strategy becomes more complex, you may have multiple tactics working together to try to achieve the same objective. Tactics may change (and often should), but the objective should remain your focus.

Many digital tools and tactics are available once you have defined your digital marketing objectives. Each tactic has its strengths. For example, acquisition (gaining new customers) may best be driven by search advertising, while email is one of the most effective tools for selling more products to existing customers.

The table below expands on some of the most popular tactics available to digital marketers and their possible outcomes.

Common Tactics and Their Outcomes
Tactic	Outcome
SEO—This is the practice of optimizing a website to rank higher on the search engine results pages for relevant search terms. SEO involves creating relevant, fresh and user-friendly content that search engines index and serve when people enter a search term that is relevant to your product or service.	Customer retention and acquisition—SEO has a key role to play in acquisition, as it ensures your organization’s offering will appear in the search results, allowing you to reach potential customers. A site that is optimized for search engines is also a site that is clear, relevant and well designed. These elements ensure a great user experience, meaning that SEO also plays a role in retention.
Search advertising—In pay-per-click or search advertising, the advertiser pays only when someone clicks on their ad. The ads appear on search engine results pages.	Sales, customer retention, and acquisition—The beauty of search advertising is that it is keyword based. This means an ad will come up in response to the search terms entered by the consumer. It therefore plays a role in sales, acquisition and retention. It allows the advertiser to reach people who are already in the buying cycle or are expressing interest in what they have to offer.
Online advertising—Online advertising covers advertising in all areas of the Internet – ads in emails, ads on social networks and mobile devices, and display ads on normal websites.	Branding and acquisition—The main objective of display advertising is to raise brand awareness online. It can also be more interactive and therefore less disruptive than traditional or static online advertising, as users can choose to engage with the ad or not. Online advertising can be targeted to physical locations, subject areas, past user behaviors, and much more.
Affiliate marketing—Affiliate marketing is a system of reward whereby referrers are given a finder’s fee for every referral they give.	Sales and branding—Online affiliate marketing is widely used to promote eCommerce websites, with the referrers being rewarded for every visitor, subscriber or customer provided through their efforts. It is a useful tactic for brand building and acquisition.
Video marketing—Video marketing involves creating video content. This can either be outright video advertising, or can be valuable, useful, content marketing.	Branding, customer retention, and value creation—Since it is so interactive and engaging, video marketing is excellent for capturing and retaining customer attention. Done correctly, it provides tangible value— in the form of information, entertainment or inspiration—and boosts a brand’s image in the eyes of the public.
Social media—Social media, also known as consumer-generated media, is media (in the form of text, visuals and audio) created to be shared. It has changed the face of marketing by allowing collaboration and connection in a way that no other channel has been able to offer.	Branding, value creation, and participation—From a strategic perspective, social media is useful for brand building, raising awareness of the brand story and allowing the consumer to become involved in the story through collaboration. Social media platforms also play a role in building awareness, due to their shareable, viral nature. They can also provide crowdsourced feedback and allow brands to share valuable content directly with their fans.
Email marketing—Email marketing is a form of direct marketing that delivers commercial and  content-based messages to an audience. It is extremely cost effective, highly targeted, customizable on a mass scale and completely measurable—all of which make it one of the most powerful digital marketing tactics.	Customer retention and value creation—Email marketing is a tool for building relationships with potential and existing customers through valuable content and promotional messages. It should maximize the retention and value of these customers, ultimately leading to greater profitability for the organization as a whole. A targeted, segmented email database means that a brand can direct messages at certain sectors of their customer base in order to achieve the best results.

Once the objectives and tactics have been set, these should be cross-checked and re-evaluated against the needs and resources of your organization to make sure your strategy is on the right track and no opportunities are being overlooked.

Step 5: Ongoing Optimization 

It is increasingly important for brands to be dynamic, flexible, and agile when marketing online. New tactics and platforms emerge every week, customer behaviors change over time, and people’s needs and wants from brands evolve as their relationships grow. The challenge is to break through the online clutter to connect with customers in an original and meaningful way.

This process of constant change should be considered in the early stages of strategy formulation, allowing tactics and strategies to be modified and optimized as you go. After all, developing a digital marketing strategy should be iterative, innovative, and open to evolution.

Understanding user experience and the user journey is vital to building successful brands. A budget should be set aside upfront for analyzing user data and optimizing conversion paths.

Social thinking and socially informed innovation are also valuable and uniquely suited to the online space. Socially powered insight can be used to inform strategic decisions in the organization, from product roadmaps to service plans. Brands have moved from a mere presence in social media to active use, aligning it with actionable objectives and their corresponding metrics. This is critical in demonstrating return on investment (ROI) and understating the opportunities and threats in the market.

Managing the learning loop (the knowledge gained from reviewing the performance of your tactics, which can then be fed back into the strategy) can be difficult. This is because brand cycles often move more slowly than the real-time results you will see online. It is therefore important to find a way to work agility into the strategy, allowing you to be quick, creative, and proactive, as opposed to slow, predictable, and reactive.

Licenses and Attributions

2.7 Crafting a Digital Marketing Strategy from eMarketing: The Essential Guide to Marketing in a Digital World, 5th Edition by Rob Stokes and the Minds of Quirk is available under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported license. © 2008, 2009, 2010, 2011, 2013 Quirk Education Pty (Ltd). UMUC has modified this work and it is available under the original license.