The Marketing Process

The Marketing Process

The marketing process consists of four steps. These four steps are all completed with the goal of creating value for your target customers. Some elements of the steps are performed continuously, such as monitoring the marketing environment. Some are done annually, such as the annual development of a marketing communications plan. Lastly, some of the steps, if done correctly, should last for decades, such as segmentation, targeting, and positioning.

Scanning the Marketing Environment

This is where you do your homework prior to developing marketing plans. Marketing textbooks speak of the “uncontrollable elements” facing the marketer, and these are the items that you need to study. The number of groups of these uncontrollable elements varies from one marketing textbook to another, but here’s a convenient list of the areas with which you need to be familiar:

· Economic factors

· Demographic elements

· Technological trends

· Political/legal events

· Social/cultural environment

· Competition

Many marketers rely upon their marketing intelligence people to monitor and report upon much of this information. Some of the elements, such as competition, are monitored on a daily basis; others, such as social/cultural elements, may be assessed only annually. Good marketing practice call for translating the environmental trends which may impact your business into opportunities and threats for a SWOT (Strengths / Weakness / Opportunities / Threats) analysis. A template for constructing a SWOT analysis is available. Just drop me a note at jhargrave.marketing@gmail.com

Marketing Strategy: Segmentation

Customers are different; they have different wants/needs. “One size fits all” is not a good approach to marketing because when you try to be everything to everyone, you end up being nothing.

There was a time when Coca-Cola only produced one product offering, the classic 6.5 ounce bottle. Perhaps customers’ wants/needs were less diverse. Today, Coca-Cola offers multiple sizes of its classic cola, brand extensions in the form of Diet Coke in multiple sizes, caffeine-free extensions, and a host of other flavors as alternative brands.

Henry Ford is perhaps the classic example of the mass marketer. “People can have a Model T in any color they want, as long as it’s black.” While Ford’s approach sold 15,456,868 Model T’s, it also nearly bankrupted the company as Henry waited until the company was on its knees to introduce the successor Model A.

Today marketers can’t afford to ignore the market segments in their product category. Your competitors are going to figure out what the market segments are. If you enter the market with a product or service that’s for everybody, your competitors are going to develop a market offering for each market segment. Because their offering is tailored to the customers in a given market segment, those customers will prefer your competitor’s offering and purchase it. Your competitors will take your customers away from you, segment by segment.

Because consumers are motivated by internal wants/needs, which are difficult to understand, segmentation in consumer goods categories can only be accomplished through marketing research. In business to business categories, the motivation of end-users is straight forward economics. Thus, their wants/needs vary by more easily understood factors, such as the size of the firm, application of the product or service, type of business, etc.

Marketing Strategy: Targeting

Targeting is nothing more than selecting those customers that you are going to serve; and, by extension, defining those you are not going to serve. Targeting is a concept that is difficult for some sales-oriented businesses to grasp. For the salesperson, making their quota and getting their bonus is the goal. Thus, any sale is good regardless if it’s to the wrong customers. But selling the wrong product to the wrong customers can get your brand in trouble as the product may not perform up to their expectations.

Professor Kotler tells us that selection of a target market segment should be based upon the attractiveness of the segment and your firm’s strengths and weaknesses. Attractiveness is conceptually easy to grasp. A segment being served by a few competitors is better than one served by many competitors; a growing segment is more attractive than a shrinking segment; a segment that holds the potential of your making a profit is more attractive than one that promises a loss, etc.

Recall that you were encouraged to construct a SWOT analysis in the Scanning the Marketing Environment section. In that SWOT analysis, you’ll list your firm’s strengths and weakness. Your strengths and weaknesses should help you determine which market segments you should target. For example, if a firm has a strength in product quality and a weakness in being the high cost producer in the category, that firm probably isn’t suited to serve segment customers who are overly price sensitive and will purchase based upon price.

Marketing Strategy: Positioning

The concept of brand positioning was popularized by two practitioners, Al Ries and Jack Trout, rather than academicians. They outlined the rules of brand positioning in a series of 1970’s articles published in the marketing trade magazine, Advertising Age, and a now classic book, Positioning: The Battle for Your Mind.

Brand positioning is the process of claiming for your brand the unique brand benefit that motivates your target customers to purchase in your product/service category. In consumer goods categories, the benefit should be either directly or indirectly related to the satisfaction of the target customers’ internal wants/needs. In business to business categories, the benefit should be economic.

Brand positioning was institutionalized by American package goods marketers. There is a somewhat standardized template that many package goods companies use to capture the relevant elements of brand positioning. There are two versions of this document: one for consumer product/service categories and a second for business to business product/service categories. Both the Consumer Brand Positioning Template and the Business to Business Brand Positioning Template are available to you; again, just drop me send me a note to jhargrave.marketing@gmail.com.

It is the brand positioning document that summarizes all of the segmentation, targeting, and positioning work for a given brand. This document should guide marketers in their tactical marketing mix decisions. It is an internal document that should be understood and embraced by everyone, both internal and external, who works with the brand – research and development, product design, manufacturing, logistics, sales, consumer relations, customer service, marketing communications suppliers, dealers, OEMs, etc.

The completion of the brand positioning work completes the strategic elements of marketing. With these strategic elements summarized in the brand positioning template, marketers have a strategic foundation for their tactical marketing mix actions. Too often, however, marketers complete the brand positioning template, file it away, and execute tactical marketing mix elements without any reference to this strategic foundation.

Marketing Tactics: The Marketing Mix

The concept of the marketing mix was developed by Professor Neil Borden in the 1950’s. It has long been agreed that there are four sets of elements that comprise the marketing mix. Each of these sets of elements should be executed so as to create value for your target customers. Careful adherence to your brand’s positioning document will help insure that each of your marketing mix decisions create value for your target customers.

By the 1960’s everyone agreed that there were four elements in the marketing mix, the product and service offering, channels of distribution, marketing communications, and pricing. During this time frame, a relatively young marketing professor at Michigan State University, E. Jerome McCarthy, authored an introductory marketing text entitled Basic Marketing: A Managerial Approach in which he referred to the marketing mix as the “4P’s”, product, place, promotion, and price. 4P’s or marketing mix, it’s the same concept.

The important concept to remember when working on the various elements of the marketing mix is that you have identified a target market segment in the marketing strategy steps of segmentation and targeting. In the marketing strategy step of positioning, you identified the unique brand benefit which will motivate your target customers to consider purchasing your brand. In each of the four elements of the marketing mix – product and service offering, channels of distribution, marketing communications, and pricing – you need to integrate and deliver your unique brand benefit to your target customers.

Monitoring and Control

Monitoring and control begins with establishing goals for your business. Many businesses establish financial and sales goals, but they make the mistake of establishing only financial and sales goals. The thought process operating in these businesses is if they sell their products and keep their costs under control, they’ll make a profit. This line of thinking assumes that the starting point of profitability is the sale. This is a short sighted assumption. A marketer makes a sale because a customer has made a purchase. The starting point is not the sale but the customer. (Always start with the customer and work backwards.) What made customers purchase the brand? Did they recently become aware of the brand? Do they believe that the brand delivers a unique brand benefit that will satisfy their wants/needs? The brand must have been available where they shopped, and it must have been priced at a point which they were willing to pay.

It’s marketing’s job to make target customers aware of their brand and move those target customers toward purchase. Thus, the starting point of a business obtaining its financial goals is not sales, it is what marketing accomplishes with its target customers. Sales goals are intermediate goals toward obtaining financial goals. If marketing is successful in moving its target customers toward purchase, it will make the job of sales easier. In the words of Theodore Levitt, “Marketing makes sales redundant.”

In addition to financial, sales, and marketing goals, a business usually has some internal goals which are totally within their control. These are things that the business has to do in order to run efficiently. Examples of such internal goals are inventory levels, fill rates, SKU counts, etc.

One can think of the goals of a business as being a hierarchy with the foundation being marketing activities, sales being an intermediate activity, and financial results as being the pinnacle. Examples of these objectives may be found below.

So What Has All of this Accomplished?

It's taken a while to get to this point. The marketing process and the marketing mix are going to be the organizational structure into which we're going to organize our marketing guides. It's my intent to post one marketing guide per week starting with the "scanning the marketing environment" category. As I move forward, you'll see for some categories I have multiple guides. For other categories, I may have only one or none. Some of the guides have been noted by contributors to the marketing body of knowledge. Others, I have observed in the course of my 40 year adventure in marketing. You are welcome and encouraged to suggest marketing guides that you have learned in your professional experience.

Coming Up in Next Week's Post

We have our organizational framework so next week we'll start with the first of our marketing guides.

Some References

Al Ries and Jack Trout, Positioning: The Battle for Your Mind (New York, NY: McGraw-Hill Companies, Inc.), 2001.

E. Jerome McCarthy, Basic Marketing: A Managerial Approach (Homewood, IL: Richard D. Irwin), 1960.

What is Marketing? Part 1

Philip Kotler, the leading marketing academician of our time and author of the leading MBA marketing text, Marketing Management, has said, “Marketing is the art of creating genuine customer value.” Although Professor Kotler has appropriately described the marketer’s job as creating value, this quote -- taken by itself -- leaves one with the impression that marketing is an art form.

Marketing as an Art

Of course, Professor Kotler is correct; marketing is an art. In art, one uses personal judgment and creativity to produce a desired result. Marketing does require good personal judgment and creativity. What business activity isn’t made better with the application of good personal judgment and creativity?

Many companies, especially in business-to-business categories, act as if marketing were only an art. They staff their marketing departments with engineers and sales people who have good personal judgment and creativity. “Joe’s a bright young man who’s done well in research and development. Let’s put him in the marketing department and see how he does.”

Note, however, that these same companies don’t make the mistake of putting Fred, the marketing manager, in the research and development department. They understand that there are qualifications, such as a degree in engineering or one of the physical sciences, to succeed in research and development. Yet these same companies fail to understand that there should be qualifications for marketing positions. Willem Burgers, Philips Electronics Chair Professor of Marketing at China Europe International Business School, has written an entertaining book about this phenomenon entitled The Marketing You Never Knew.

Many marketers are frustrated by their company’s failure to recognize that there is a body of marketing knowledge that their marketing employees should have. You will find not only engineers and sales people in the marketing departments of some companies; you’ll also find lawyers and physicians. Engineers, sales people, lawyers, and physicians can be competent marketing professionals if they learn the body of knowledge. If they fail to do so, they are just “playing” marketing manager.

The Evidence of Success or Failure

Why does this double standard exist? Perhaps it’s because of the weakness of the evidence of success or failure in marketing when compared to many other functional areas. Fred, the marketing manager, is moved to research and development. It quickly becomes obvious that Fred is incapable of doing the job. His new product designs are full of flaws and impossible to manufacture. There is concrete evidence that Fred is a failure.

So how’s Joe doing after moving from research and development to marketing? It’s difficult to say. The outcome of marketing, creating value for customers by getting them to buy, is attributable to many different marketing actions. It’s difficult to say that Joe’s decisions yielded optimal results because no one knows what optimal results are. Sales volume may be up by 10%, but that may be the result of the market being up. Joe may have introduced a new package design that was predominately red and sales increased by 5%. But what would have happened if the package had been predominately green? Would sales have increased? If so, how much? By 10%? We’ll never know. It’s just not certain whether Joe is a success or a failure.

Marketing as a Science

Returning to Professor Kotler’s definition of marketing, marketing is more than an art form. Marketing is also body of knowledge, an academic discipline. That’s why colleges and universities can offer degrees in marketing, why non-academic organizations offer public marketing training courses. Going further, marketing, in addition to being an art form, is a science. Returning to Professor Kotler:

But science is also important to marketing. Marketers produce interesting findings through marketing research, market modeling, and predictive analytics. Marketers are using marketing models to make decisions and guide their investments. They are developing marketing metrics to indicate the impact of their activities on sales and profits.

Marketing not a hard physical science like chemistry or physics. Rather, it’s a soft science, a social science, a people science like psychology or sociology. As a social science, the body of knowledge that is marketing is made up of generalizations or principles or guides that hold true most of the time.

As you follow this blog, your natural instinct will be to think of the exceptions to each game rule. However, challenge yourself to absorb the guides discussed in this blog. Ask yourself, “Does this apply to my product/service category? Does it apply to my brand?” You’ll find that most, if not all, the guides apply to your marketing situation.

More from Professor Kotler

Professor Kotler recognizes that marketing is more than an art form:

I would not say that marketing is more of an art, a craft or a science but rather that it has all these elements operating.

So let’s modify Professor Kotler’s definition to “Marketing is the art, craft, and science of creating genuine customer value.” Let’s also go two steps further to make sure we all understand what we’re saying in this definition. Let’s address two questions: who’s the customer and what is value?

Who’s the “Customer”?

Many companies don’t sell directly to the businesses or individuals who buy the company’s brand, use their brand, and return to the market to buy once again. These companies employ intermediate middlemen in their channels of distribution who resell their products. These middlemen may be called wholesalers, distributors, jobbers, dealers, retailers, mass merchandisers, original equipment manufacturers, etc.

These companies’ sales forces call upon these intermediate middlemen; and for the sales force, these intermediate middlemen are customers. However, these are not the customers to whom Professor Kotler is referring. The intermediate middlemen are lower case “c” customers. The customers to whom Professor Kotler is referring are the businesses or individuals who buy the company’s brand, use their brand, and return to the market to buy once again -- the end-users. If the marketer focuses on and successfully creates value for end-users, those end-users will develop a preference for and repurchase the company’s brand. This, in turn, will give the company the leverage of their brand over the intermediate middlemen in the channel of distribution. The end-user is the upper case “C” Customer. In the1950’s the marketing rally cry was, “The customer is king!” Let’s make sure that the coronation is for these end-users who drive our business.

A word of caution: If your company is sales oriented -- that is, dominated by sales people pursuing volume – the focus tends to be on the direct customer rather than the end-user. The focus on the direct customer is so strong and so much a part of the culture that even disciplined marketing professionals are at risk of losing their focus on the end-user.

What is Value?

Some older marketing textbooks define marketing as the process of satisfying customers’ wants/needs. This definition has generally fallen out of favor as it seems to infer that marketing is an instrument for social good (which it is) rather than a business function (which it also is).

A Digression

Note that this definition does not make a distinction between wants and needs. Whether a customer really needs something or they merely want it is a moral judgment. Marketing is a business process. Processes are neither moral nor immoral; only people can be moral or immoral. When one makes a judgment of whether another individual really needs something or they merely want it, they are putting themselves on an elevated moral plane making ethical decisions for others. Thus, the phrase “wants/needs” is used in this blog.

Returning to the “satisfaction of wants/needs”, if a marketer satisfies a customer’s wants/needs, the marketer creates value for that customer. Thus, we can define value as the satisfaction of customer wants/needs. In return for the value that marketers create for customers, we ask our selling price. The selling price is the value that we deliver to our management. We create value for our customers and return value to our company. This justification of our selling price makes value more appealing in a definition of marketing as opposed to satisfying wants/needs.

The marketing process and a marketing driven company always starts with the end-user and works backwards. What are the wants/needs of my target customers? This is a fundamental concept that’s easy to understand, but it is very difficult to internalize to the extent that it instinctively guides one in decision making. We all get so immersed in the product/service category in which we work that even the best marketers often begin with their product rather than the customer’s wants/needs.

Choose the Value

Provide the Value

Communicate the Value

Starting with the customer, what are the various segments of potential customers in the market; which of these segments do you want to serve; and what value are you going to create for your target customers? One schematic of the marketing process that illustrates the customer starting point divides the process into three steps: (1) Choose the Value, (2) Provide the Value, and (3) Communicate the Value.

The customers’ wants/needs as the starting point brings us to the key distinction between consumer marketing and business-to-business marketing. Consumers have different wants/needs than businesses. Because consumers’ wants/needs are different from businesses’ wants/needs, many consumer goods marketing tactics don’t work in business-to-business. Conversely, many business to business marketing tactics don’t work in consumer goods marketing.

Another cautionary note: Don’t confuse the value that you are going to deliver to your target customers with the price that they are willing to pay to get that value. Value and price paid are two separate items.

Next Post

In the next post I’ll discuss the difference in value in consumer goods categories versus business-to-business categories. Stay tuned, and let me know what you think of the first two posts.

Some References

Philip Kotler and Kevin Lane Keller, Marketing Management, 13^th Edition (Upper Saddle River, NJ: Pearson Prentice Hall), 2008.

William Burgers, The Marketing You Never Knew (New York: Amsterdam Press), 2004.

Re: Value

“The cynic knows the price of everything and the value of nothing. “ Oscar Wilde

Welcome!

If you’re reading this, you must have an interest in marketing. For me, marketing is more than an interest; it is a passion. For the past 40 years, I’ve studied, practiced, and taught marketing. I always tell my workshop participants that they should listen to me because in my career I’ve made every mistake that one can make. I think that I’ve learned something from all those mistakes; and, maybe, I can help you avoid the same mistakes.

Why Marketing Guides?

Marketing is more than a business function, more than a business orientation. It is an academic discipline, a body of knowledge. The reason that colleges, universities, and professional training organizations can teach marketing is that there is a body of knowledge that is transferable from one business to another or from one product/service category to another. This body of knowledge is made up of principles which are fundamentals that generally hold true from one business or product/service category to the next. These principles, or guides as I’m going to call them, will form the basis of this blog. Periodically, I will add and discuss a marketing guide. Your comments would be welcomed.

Marketing as Science

More than an academic discipline, marketing is a science. It’s not a hard physical science like chemistry or physics. Rather, it’s a soft social science – a people science -- like psychology or sociology. The body of knowledge that governs hard physical sciences is composed of physical laws. Physical laws are generally regarded as universal truths, but physical laws are just theories -- theories to which there are no known exceptions. As an example, in physics prior to the 20th century, the atom was regarded as the smallest particle of matter and considered to be indivisible. That was the physical law because no one had found an exception to it. The discovery of nuclear fission negated that physical law.
The body of knowledge making up soft social sciences, such as marketing, is comprised of principles or guides. Unlike physical laws, one can readily find exceptions to principles or guides. Although they generally hold true, they don’t always hold true. How often do these principles or guides hold true? Pulling a number from mid-air, say 80% of the time.

The use of the word “principles” in marketing has fallen out of favor. Courses which were once entitled Principles of Marketing are now called Introduction to Marketing or Marketing Fundamentals. Additionally, most textbooks avoid the use of the word principles. Why? My classroom experience makes me believe it’s because whenever a principle is stated, one immediately thinks of the exception. With the mind focused on the exception, belief in the principle is never internalized.
Despite the word being out of fashion, principles or guides of marketing do exist, and it is the purpose of this blog to relate some of these marketing guides to marketing practitioners. This blog is not intended to be a scholarly work written to impress academicians, but a practical guide for marketers and their bosses.

Applicability of Guides

Many businesses recruit new graduates fresh from university marketing degree programs, and begin the process of beating everything they’ve learned about marketing out of them while repeating over and over, “That doesn’t apply here; our business is different.”

Admittedly, each business and each product/service category does have its unique characteristics. Additionally, there can be substantial differences in the marketing process in consumer categories versus business to business categories. However, marketing consultants with experience across multiple categories will tell you marketing is mostly the same from one business to the next. How much is mostly? Again, pulling a number from mid-air, say 80%. Because marketing is mostly the same from one business to the next and from one product category to the next, marketing guides will generally apply to all businesses.

Next Post

The next post will be a discussion of the ultimate objective of marketing as a business process. After that, we'll develop the framework into which the marketing guides will be structured. It is the marketing planning framework; the steps which should be followed in developing a marketing plan. Stay tuned, and let me know what you think of the concept of marketing guides.

Re: Marketing Guides

“Know the rules, so that you can break them properly.” Mark Twain