Reading: What is Marketing?

Marketing 101

When people think of Marketing, the first thing that usually comes to mind is Sales. But Marketing is more than Sales or even Advertising. Marketing includes a variety of activities, such as Public Relations, Sales Promotion, Advertising, Social Media, Pricing Distribution, and many more functions. The main goal of Marketing is to communicate, deliver, and create value to the consumer. The most successful companies spend an enormous amount of time and money studying the everyday lives of their customers. They examine the habits and needs of their customers, and then create products to fill a need. 

Here's an example. Think of all the bicycles being bought and sold around the world. Most of us don’t make our own bicycles, they're made by a variety of manufacturers like Trek, Schwinn, Mongoose, and Electra. Most bikes, however, do the same thing; they get the rider from one place to another. But a bike rider can choose from a wide assortment of models. They are designed in different sizes and with or without gears. Off-road bikes have large knobby tires. Kids and older people may want more wheels—to make balancing easier. Some bikes need baskets or even trailers for cargo. You can buy a basic bike for less than $50. Or you can spend more than $2,500 for a custom frame. This variety of styles and features complicates the production and sale of bicycles. Obviously, there is a lot that goes into the production and sale of bicycles. Here's a partial list of some things that a manager would take into consideration before and after deciding to sell a bicycle:

1. Analyze the needs of people who might buy a bike and decide if they want more or different models.
2. Predict what types of bikes—handlebar styles and types of wheels, brakes, and materials—different customers will want and decide which of these people the firm will try to satisfy.
3. Estimate how many of these people will want to buy bicycles, and when.
4. Determine where in the world these bike riders are and how to get the firm’s bikes to them.
5. Estimate what price they are willing to pay for their bikes and if the firm can make a profit selling at that price.
6. Decide which kinds of promotion should be used to tell potential customers about the firm’s bikes.
7. Estimate how many competing companies will be making bikes, what kind, and at what prices.
8. Figure out how to provide customer service if a customer has a problem after buying a bike.

Perreault, Jr., William; Cannon, Joseph; McCarthy, E. Jerome (2012-07-01). Essentials of Marketing, 13th edition (Page 5). McGraw-Hill Higher Education -A. Kindle Edition.

Marketing should begin with potential customer needs —not with the production process. Marketing should try to anticipate needs. And then marketing, rather than production, should determine what goods and services are to be developed—including decisions about product design and packaging; prices or fees; credit and collection policies; transporting and storing policies; advertising and sales policies; and, after the sale, installation, customer service, warranty, and perhaps even disposal and recycling policies. Perreault, Jr., William; Cannon, Joseph; McCarthy, E. Jerome (2012-07-01). Essentials of Marketing, 13th edition (Page 7). McGraw-Hill Higher Education -A. Kindle Edition.

This, however, doesn't mean that marketing is more important than production, accounting or financial concerns; marketing doesn't stand alone. However, because marketing interprets customers needs, it should provide direction and be a point of coordination for all other activities surrounding a product or service. 

Keep in mind that a marketing exchange is often part of an ongoing relationship, not just a single transaction. When marketing helps everyone in a firm really meet the needs of a customer before and after a purchase, the firm doesn’t just get a single 
sale. Rather, it has a sale and an ongoing relationship with the customer. Then, in the future, when the customer has the same need again—or some other need that the firm can meet—other sales will follow.

There are four basic elements of Marketing - Product, Place, Promotion, and Price. All four work together to target the desired consumer. A Product can be either a physical product or a service. Place is where the product or service is purchased. Price is the amount the consumer pays for the product. Promotion is the set of tools the company uses to get their message out to the consumer. 

The official definition of Marketing, according the the American Marketing Association, is a philosophy whose main focus is providing customer satisfaction. Marketing is 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. 

Marketing affects almost every aspect of your life every day. Marketing affects the choices you have among all the goods and services you buy, the stores where you shop, the radio and TV programs you listen to and watch. They are all possible because of marketing. 

Macro-Marketing

As we delve further into the concepts of marketing, we need to look at what is called macro-marketing. Macro-marketing is a social process that directs an economy’s flow of goods and services from producers to consumers in a way that effectively matches supply and demand and accomplishes the objectives of society.  Perreault, Jr., William; Cannon, Joseph; McCarthy, E. Jerome (2012-07-01). Essentials of Marketing, 13th edition (Page 8). McGraw-Hill Higher Education -A. Kindle Edition.

The emphasis with macro-marketing is not on the activities of individual organizations. Instead, the emphasis is on how the whole marketing system works. This includes looking at how marketing affects society and vice versa. An effective macro-marketing system delivers the goods and services that consumers want and need. It gets products to them at the right time, in the right place, and at a price they’re willing to pay. It keeps consumers satisfied after the sale and brings them back to purchase again when they are ready. That’s not an easy job—especially if you think about the variety of goods and services a highly developed economy can produce and the many kinds of goods and services consumers want.

Effective marketing in an advanced economy is difficult because producers and consumers are often separated in several ways. You may love your cell phone, but you probably don’t know when or where it was produced or how it got to you. The people in the factory that produced it don’t know about you or how you live. In addition, most firms specialize in producing and selling large amounts of a narrow assortment of goods and services. This allows them to take advantage of mass production with its "economies of scale," which means that as a company produces larger numbers of a particular product, the cost of each unit of the product goes down. Yet most consumers only want to buy a small quantity; they also want a wide assortment of different goods and services. These “discrepancies of quantity” and “discrepancies of assortment” further complicate exchange between producers and consumers. That is, each producer specializes in producing and selling large amounts of a narrow assortment of goods and services, but each consumer wants only small quantities of a wide assortment of goods and services.
The purpose of a macro-marketing system is to overcome these separations and discrepancies. The “universal functions of marketing” help do this. 

Functions of Marketing

The universal functions of marketing are buying, selling, transporting, storing, standardization and grading, financing, risk taking, and market information. They must be performed in all macro-marketing systems. How these functions are performed—and by whom —may differ among nations and economic systems. But they are needed in any macro-marketing system. Let’s take a closer look at them now. 

Any kind of exchange usually involves buying and selling. The buying function means looking for and evaluating goods and services. The selling function involves promoting the product. It includes the use of personal selling, advertising, customer service, and other direct and mass selling methods. This is probably the most visible function of marketing. The transporting function means the movement of goods from one place to another. The storing function involves holding goods until customers need them. Standardization and grading involve sorting products according to size and quality. This makes buying and selling easier because it reduces the need for inspection and sampling. Financing provides the necessary cash and credit to produce, transport, store, promote, sell, and buy products. Risk taking involves bearing the uncertainties that are part of the marketing process. A firm can never be sure that customers will want to buy its products. Products can also be damaged, stolen, or outdated. The market information function involves the collection, analysis, and distribution of all the information needed to plan, carry out, and control marketing activities, whether in the firm’s own neighborhood or in a market overseas.

Producers and consumers sometimes handle some of the marketing functions
themselves. However, exchanges are often easier or less expensive when a marketing
specialist performs some of the marketing functions. For example, both producers and
consumers may benefit when an intermediary —someone who specializes in trade
rather than production—plays a role in the exchange process. Retailers and wholesalers are examples of intermediaries. Intermediaries can help to make the whole macro-marketing system more efficient and effective.

A wide variety of other marketing specialists may also help smooth exchanges between
producers, consumers, or intermediaries. These specialists are collaborators —firms
that facilitate or provide one or more of the marketing functions other than buying or
selling. These collaborators include advertising agencies, marketing research firms,
independent product-testing laboratories, Internet service providers, public warehouses,
transporting firms, communications companies, and financial institutions (including
banks).

The growth of the Internet has brought more opportunities for producers and consumers to make exchanges. In the Internet world this is called e-commerce. E-commerce refers to exchanges between individuals or organizations—and activities that facilitate these exchanges—based on applications of information technology. Internet-based intermediaries—like Amazon.com and eBay.com—help cut the costs of many marketing functions. Other marketing specialists have popped up online: Search engines like Google facilitate information search, PayPal reduces consumer risks associated with paying for goods purchased online, and chat-based customer service firms help any company provide 24/7 customer support. Collectively, developments in e-commerce have significantly increased the efficiency and effectiveness of our macro-marketing system. 

From a macro-marketing viewpoint, all of the marketing functions must be performed by someone—an individual producer or consumer, an intermediary, a marketing collaborator, or, in some cases, even a nation’s government. No function can be
completely eliminated. However, from a micro viewpoint, not every firm must perform all
of the functions. Instead, responsibility for performing the marketing functions can be shifted and shared in a variety of ways. Further, not all goods and services require all the functions at every level of their production. “Pure services”—like a plane ride—don’t need storing, for example. But storing is required in the production of the plane and while the plane is not in service. Regardless of who performs the marketing functions, in general they must be performed effectively and efficiently or the performance of the whole macro-marketing system will suffer.