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Critical Definitions in Marketing

Market and Industry There are words we use in everyday language, and then there are the same words we use in a marketing context. We need to be much more precise as marketers than we do when we are talking to friends and family. So let’s take a look at these in our business context. Here’s the first few we need to think about: What is a market? We use this word often. We might think of the local store as a market. Often, even in many professional publications, the use of the word market is used to define the dollar size (or should I say “total revenue”) of what is sold in a given classification of goods, such as computers, automobiles, office furniture, or defense spending. However, this is not correct. Here is a good definition of a

market: “The market consists of all prospective customers for a given product, service, or idea. Customers can be purchasers who intend to resell the product or end users who intend to use or consume the product. The market can be categorized into separate groups called segments. When a producer appeals to a market or market segment, the producer must take into account the distinction

between the end user or consumer and the purchaser or decision maker(s). This is especially true in B2B models. The market may be individuals or organizations who are able to purchase the organization’s product. Each entity in the delivery chain will have different needs, so a complete market needs analysis must include all potential segments and all entities within each segment.” (Principles of Marketing, n.d.) Notice that this definition includes the word “customers.” That is the key word here. A market is simply, and only, those you sell to. So what do we call it when we are talking about that other market, the one where we talk about total revenue for a category of goods? Well, it isn’t a market after all. It is an industry. An industry is made up of all the competitors and the suppliers. Stated another way, “industries are broad groups of businesses or organizations with similar activities, products, or services” (O*Net, n.d., p.1). So, for instance, in furniture manufacturing, you might think of Steelcase, Ashley Furniture, and Masterbrand Cabinets. These companies, and more, are all part of the furniture manufacturing industry.

Cost and Price Many of us use the words “cost” and “price” interchangeably. But we cannot do that when we are in business, because each has a specific meaning. Let’s review what each is and why the definitions matter.

We can actually clear this up really quickly with a quote from a microeconomics text: “From the firm’s perspective, cost is what they pay for the inputs necessary to produce the product. Price is what the firm receives for selling the product. Thus, cost is a negative and price is positive; they are not the same thing” (Microeconomics, n.d., italics added).

Consumer and Business Customer Since we were able to clear that one up so quickly, let’s move on to two other bugaboos. That is the difference between a consumer and a business customer. You know that consumer behavior and business buying behavior tend to be different. But did you know that a business customer cannot be called a consumer? You’ll say, of course, that a business customer consumes. And of course, he or she does. However, in business, a consumer is always an individual that purchases a product or service for individual use. Thus, only those who are purchasing for themselves or their families can be called a consumer. We generally call businesses “customers” or “clients.” Here is some interesting information from Boundless.com. It shows why we may get confused by the root of the word by highlighting the word consume and consumer in italics.

• Consumer goods marketers sell to individuals who consume the finished product. • Business-to-business marketers sell to other businesses or institutions that consume the product

in turn as part of operating the business, or use the product in the assembly of the final product they sell to consumers.

• In addition, consumer goods marketers might employ emotional appeals and are faced with the constant battle of getting their product into retail outlets. Emotional appeals typically do not work with businesses.

That also means that buying behaviors are different between the two, and so are the segmentation methods. You can read more about those in traditional texts and additional readings generally available.

Personal Selling and Direct Marketing Personal selling is true one-on-one interactions between a salesperson and a customer.

Personal selling uses in-person interaction to sell products and services. This type of communication is carried out by sales representatives, who are the personal connection between a buyer and a company or a company’s products or services. Salespeople not only inform potential customers about a company’s product or

services, they also use their power of persuasion and remind customers of product characteristics, service agreements, prices, deals, and much more. In addition to enhancing customer relationships, this type of marketing communications tool can be a powerful source of customer feedback, as well.

Effective personal selling addresses the buyer’s needs and preferences without making him or her feel pressured. Good salespeople offer advice, information, and recommendations, and they can help buyers save money and time during the decision process.

Common Personal Selling Techniques

Common personal selling tools and techniques include the following:

• Sales presentations: in-person or virtual presentations to inform prospective customers about a product, service, or organization

• Conversations: relationship-building dialogue with prospective buyers for the purposes of influencing or making sales

• Demonstrations: demonstrating how a product or service works and the benefits it offers, highlighting advantageous features and how the offering solves problems the customer encounters

• Addressing objections: identifying and addressing the concerns of prospective customers, to remove any perceived obstacles to making a purchase

• Field selling: sales calls by a sales representative to connect with target customers in person or via phone

• Retail selling: in-store assistance from a sales clerk to help customers find, select, and purchase products that meet their needs

• Door-to-door selling: offering products for sale by going door-to-door in a neighborhood • Consultative selling: consultation with a prospective customer, where a sales representative (or

consultant) learns about the problems the customer wants to solve and recommends solutions to the customer’s particular problem

• Reference selling: using satisfied customers and their positive experiences to convince target customers to purchase a product or service

Personal selling minimizes wasted effort, promotes sales, and boosts word-of-mouth marketing. Also, personal selling measures marketing return on investment (ROI) better than most tools, and it can give insight into customers’ habits and their responses to a particular marketing campaign or product offer.

Direct Marketing

Direct marketing activities bypass any intermediaries and communicate directly with the individual consumer. Direct mail is personalized to the individual consumer, based on whatever a company knows about that person’s needs, interests, behaviors, and preferences. Traditional direct marketing activities include mail, catalogs, and telemarketing. The thousands of “junk mail” offers from credit card companies, bankers, and charitable organizations that flood mailboxes every year are artifacts of direct marketing. Telemarketing contacts prospective customers via the telephone to pitch offers and collect

information. Today, direct marketing overlaps heavily with digital marketing, as marketers rely on email and, increasingly, mobile communications to reach and interact with consumers.

The Purpose and Uses of Direct Marketing

The purpose of direct marketing is to reach and appeal directly to individual consumers and to use information about them to offer products, services and offers that are most relevant to them and their needs. Direct marketing can be designed to support any stage of the AIDA model, from building awareness to generating interest, desire, and action. Direct marketing, particularly email, also plays a strong role in post-purchase interaction. Email is commonly used to confirm orders, send receipts or warrantees, solicit feedback through surveys, ask customers to post a social media recommendation, and propose new offers.

Direct marketing is an optimal method for marketing communication in the following situations:

• A company’s primary distribution channel is to sell products or services directly to customers • A company’s primary distribution method is through the mail or other shipping services to send

directly to the customer • A company relies heavily on sales promotions or discounts, and it is important to spread the

word about these offers to consumers • An advertisement cannot sufficiently convey the many benefits of a company’s product or

service, and so a longer marketing piece is required to express the value proposition effectively • A company finds that standard advertising is not reaching its target segments, and so better-

targeted marketing communications are required to reach the right individuals; for example, using direct mail to reach wealthier people according to their affluent zip code

• A company sells expensive products that require more information and interaction to make the sale

• A company has a known “universe” of potential customers and access to contact information and other data about these customers

• A company is heavily dependent on customer retention, reorders and/or repurchasing, making it worthwhile to maintain “permissioned” marketing interaction with known customers

Licenses and Attributions: Marketing/Introduction Text is available under the Creative Commons Attribution-ShareAlike License CC licensed content, Original Why It Matters: Production. Authored by: Steven Greenlaw and Lumen Learning. License: CC BY: Attribution

Boundless.com: Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.

Direct Marketing. Authored by: Lumen Learning. License: CC BY: Attribution

Screenshot Mobile Advertisement. Provided by: Lumen Learning. License: CC BY: Attribution

Screenshot Target Baby Registry. Provided by: Lumen Learning. License: CC BY: Attribution

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CC licensed content, Shared previously

• Personal Selling, From Boundless Marketing. Provided by: Boundless. Located at: https://www.boundless.com/marketing/textbooks/boundless-marketing-textbook/personal- selling-and-sales-promotion-14/personal-selling-90/value-of-personal-selling-449-4027/. License: CC BY-SA: Attribution-ShareAlike

• Phone call. Provided by: CWCS Managed Hosting. Located at: https://www.flickr.com/photos/122969584@N07/13780153345/. License: CC BY: Attribution

• Communicating to Mass Markets, from Introducing Marketing. Authored by: John Burnett. Project: Global Text. License: CC BY: Attribution

• Email Marketing. Authored by: RaHuL Rodriguez. Located at: https://www.flickr.com/photos/rahulrodriguez/9162677329/. License: CC BY-SA: Attribution- ShareAlike

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