Foundations of Marketing
Marketing is often used as an umbrella term for a wide variety of business activities, ranging from social media management and advertising to sales and customer service. A business is an organization that produces and distributes goods and/or services to customers, and businesses can range from small local companies to global corporations that sell products either face-to-face or online. A customer is the person or organization that purchases a good or service, while a consumer is the individual who actually uses the product, whether or not they paid for it. For example, a parent may purchase cereal, but their child is the consumer. Sales and marketing departments help businesses conduct market research, develop sales strategies, manage brands, and build customer relationships that attract and retain customers.
Marketing and Value Proposition
The truth of the matter is that a successful marketing strategy is deeply rooted in a firm’s ability to build positive relationships with consumers by consistently providing a high-quality product, exemplary service, and an outstanding customer experience. This ability is often referred to in the business world as the firms’ value proposition. In other words, what unique offerings does the company propose to the consumer to entice them to want to buy their products or services over the competition’s?
Successful businesses begin by identifying customers’ problems, needs, and wants before designing products or services that provide an effective solution. This is often referred to as achieving problem-solution fit. Because no business can effectively serve every possible customer, companies must decide which customers they want to serve and which needs they are best equipped to address.
In business, value refers to the benefit a product provides to customers, not simply its price. Value creation occurs when a product successfully solves a customer’s problem or satisfies a need or want. Value capture occurs when the business charges more for the product than it costs to produce, allowing the company to earn a profit. Pricing therefore plays an important role in determining how much of the value created becomes profit for the business.
Businesses seek to increase profits, fulfill their missions, and remain competitive over the long term by increasing revenue, reducing costs, or both.
If consumers are satisfied by a firms’ value proposition, they will organically create a certain level of brand awareness among their peers, and ultimately inspire a certain extent of brand loyalty. It’s easy to think of this as the reason why certain consumers instinctively refer to tissue paper as Kleenex©. That’s brand awareness. And if those consumers explicitly only purchase Kleenex© tissue papers, they are said to possess a high amount of brand loyalty.
Branding
The process of creating this identity is known as branding. Branding involves developing a unique identity that distinguishes a business or product from competitors, builds customer awareness, and encourages loyalty. A brand identity may be communicated through a name, logo, symbol, slogan, design, or combination of these elements, many of which are protected through trademarks. Businesses typically develop their brand identity around their vision and value proposition so that the brand appeals to its target customers. For example, a company whose value proposition focuses on fast delivery may create a brand identity that emphasizes speed and convenience. While many businesses invest heavily in branding, others sell generic products for customers who prioritize lower prices over brand names.
Marketing Mix
Before diving into the complexities of the wide and varying scope of marketing as a function within organizations, it is important to fully grasp the ever-critical Marketing Mix.
The Marketing Mix is essentially a firm’s attempt to optimize on its offerings of Products through effective Prices, Places, and Promotions. The Marketing Mix is utilized by firms in a wide variety of business channels, as companies have begun to realize that the best revenue and profit results are reached when there is a cohesive and effective marketing strategy in place.
Products
First, the firm must identify the products and services that best meet the needs and wants of its target market before developing, producing, and marketing them. This decision-making process takes place during the Product function of the Marketing Mix. Then, the firm needs to optimize the price of said products and services to coincide not only with what the target consumer is willing to pay, but also with what is profitable and sustainable for the business in the long run.
Price
Finding the proper balance between the elasticity of demand (how much the public is willing to pay) and profitability is a critical part of the Price function of the Mix. Next is typically when the firm begins severely scrutinizing and pinpointing possible strategies for the optimal physical placement of products, as well as the optimal geographical locations where the product needs to be sold (i.e. which retailers should carry the product).
Some businesses also practice price discrimination, meaning they charge different customer segments different prices for the same product based on factors such as age, location, or purchase timing. However, charging different prices based on protected characteristics such as race, sex, or nationality is illegal in many jurisdictions.
Place
The Place element of the marketing mix refers to where and how customers access a product, such as through retail stores, company-owned stores, club memberships, or online marketplaces. Place is determined by a business’s marketing (distribution) channels, which are the final stage of the supply chain responsible for delivering products to customers.
Businesses may use direct channels, where they sell directly to customers through company-owned stores or websites, or indirect channels, which use intermediaries such as wholesalers and retailers. When selecting distribution channels, businesses compare factors such as cost, profitability, customer experience, and the ability to reach their target customers. Direct channels provide greater control over pricing and the customer experience, while indirect channels often expand market reach by leveraging the expertise and networks of distribution partners.
Promotions
Customers still want to know they are being treated fairly and wish to feel as if they are getting decent deals, especially when they first take the risk of trying or testing a new product or service. A big aspect of attracting customers initially is delivering them a large amount of value through “can’t miss” Promotions. It is critical to know which types of promotions will attract which types of customers, and if that customer matches your target demographic. For example, mailed paper coupons will reach and entice stay-at-home parents and senior citizens. However, digital coupons, online referral codes, and free shipping deals will attract younger consumers, such as millennials, who are more familiarized with the e-commerce (aka online shopping) experience.
A marketing campaign is a coordinated effort to promote a product or service using one or more promotional tools. The promotional mix includes five primary tools:
- Media advertising
- Personal selling
- Sales promotion
- Direct marketing
- Public relations
Businesses choose different promotional tools depending on their objectives. Media advertising is useful for reaching large audiences with the same message, while direct marketing delivers targeted messages to specific customers. Public relations focuses on building a favorable public image through activities such as press releases and media coverage rather than directly generating sales.
Marketing to Different Channels
The function of marketing at its core is to make a business’ product or service more relevant and desirable, as well as ultimately transform that product or service from a desire to a necessity for the targeted market. The end customer can vary widely in identity, goals, and desires.
Business to Consumer
For example, business-to-consumer marketing focuses mostly on conveying the value proposition of the brand’s product or service directly to the end consumer. Business to consumer marketing is by far the most popular of the different types of marketing channels, simply because of the sheer amount of businesses that provide a product or service directly to the consumer. Think of this as the neighborhood pizza shop. They sell pizzas directly to customers, not through a wholesaler or another retailer.
Business to Business
Business-to-business marketing is different, however, in that businesses sell their products or services directly to other businesses. An easy example of business-to-business marketing is a payroll company providing a small business with payroll services and human resources tools. Business-to-consumer (B2C) businesses typically reach customers through channels such as websites, company-owned stores, and retail stores, while business-to-business (B2B) companies often sell through industrial distributors, wholesalers, or specialized sales teams. Furthermore, industrial marketing tactics usually involve wholesalers or distributors and typically entail the selling of raw materials, parts, and components that businesses use to manufacture finished products for consumers.
Non-profit to Consumer
Nonprofit marketing is extremely dependent on brand and issue awareness, which are all deeply rooted in the education of the public. An extremely effective example of nonprofit marketing campaign in recent years has been the “Truth about Smoking” campaign, which has resulted in a sharp decrease of the smoking rate among teens from 23% in 2000 to 6% today. Most nonprofit marketing is mildly aligned with or supported by the government, as this type of marketing tends to tackle public safety concerns and alleviate the financial burden of epidemics on the already strained federal budget. This is the reason why it is said that government marketing can be quite effective in raising awareness regarding many issues, as well as civil epidemics.
Marketing and the Internet
Most companies today are savvy enough to realize that some of the best outcomes come from utilizing and heavily endorsing electronic marketing efforts, as more and more of the world gains stable access to the world-wide web. Over the last ten years, the importance of marketing has grown within organizational structures due to the immense amount of globalization occurring. Plus, the more countries that join the industrialized world, the more opportunities that will be available for their domestic businesses to grow their sales internationally. Therefore, a great brand presence online can be extremely beneficial in courting customers from all over the world. Businesses are no longer limited to their physical locations, or even posting advertisements on the local newspaper in the hopes of receiving the necessary foot traffic to keep their doors open. They now have the opportunity and ability to tap and capitalize on a much wider market of consumers, all thanks to the many ways in which firms can market their products and services online. Digital marketing continues to evolve through websites, social media, search engines, email marketing, online advertising, and mobile applications. These tools allow businesses to reach customers around the world while measuring campaign performance more accurately and often at a lower cost than many traditional advertising methods.