Reading: Lesson 4 - Nature of Marketing

10.4.A - Nature of Marketing

1. IMPORTANCE OF MARKETING

1. In our private enterprise economy, it is not always easy to match production and consumption. Individual managers make decisions about what they will produce, and consumers make decisions about what they want to purchase. For the economy to work well, producers and consumers need information to help them make their decisions, so that producers can provide the types and amounts of products and services that consumers are willing and able to buy. Marketing activities, when performed well, help to match production and consumption. Marketing is the set of activities that gets products from producers to consumers. From this basic definition, you may think that marketing is simply transporting products. However, it is much more than that. It includes packaging, developing brand names, and determining prices. Marketing even involves financing and storing products until customers purchase them. Also, most products require some type of promotion. Marketing managers are involved in all of these activities and many more.
   
2. A more detailed definition will provide a better description of modern marketing. The American Marketing Association 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. Marketing is the key tool in matching supply and demand. When marketing is successful, businesses can sell their products and services and consumers can purchase the things they want. Therefore, the goal of effective marketing is to create and maintain satisfying exchange relationships between buyers and sellers. Every consumer comes into daily contact with marketing. Whenever you see an advertisement on television or on the Internet, notice a truck being unloaded at a warehouse, or use a gift card to purchase a product, you are seeing marketing at work. Each retail store location, each form of advertising, each salesperson, and even each package in which a product is sold is a part of marketing. A great deal of business activity centers on marketing.
   
3. Millions of businesses worldwide engage in marketing as their primary business activity. Those organizations include retailers—businesses that sell directly to final consumers—and wholesalers—businesses that buy products from businesses and resell them to other businesses. The thousands of businesses that sell services, rather than products, are also included. In addition, advertising agencies provide promotional services, finance companies offer loans and other financial services, and transportation companies handle the shipment of products. All of these types of businesses as well as many others that support the marketing efforts of other businesses are directly involved in marketing.
   
4. Many businesses have marketing departments run by marketing managers. Marketing managers are responsible for coordinating marketing functions across departments to meet customer needs. For example, a marketing manager must ensure that market research, product design, and sales functions are all coordinated to reach company goals. There are a number of marketing career opportunities in advertising and sales promotion, customer service, credit, and insurance. Well over one-third of all people employed in the United States work in a marketing-related job or for a marketing-related business. Many consumer complaints today involve marketing activities. Misleading advertisements, poor customer service, high prices, and poor delivery are all marketing problems. Managers must be as careful in making marketing decisions as they need to be in producing a quality product.
   

2. NATURE OF MARKETING

1. When many people think of marketing, they think only of advertising and selling. However, many marketing activities must occur before a product can be advertised and sold. In the field of marketing, managers must understand the major marketing activities, the cost of marketing activities, and the role of marketing in business.
2. The following are the most common marketing activities:
   
   • Buying Obtaining a product to be resold. Buying involves finding suppliers that can provide the right products in the right quality and quantity at a price that allows a margin for resale.
   
   • Selling Providing personalized and persuasive information to customers to help them buy the products and services they need or want.
   
   • Transporting Moving products from where they were made to where consumers can buy them.
   
   • Storing Holding products until customers need them. Products are stored in locations such as on store shelves, in storage rooms, and in warehouses.
   
   • Financing Providing money to pay for the various marketing activities. Financing includes obtaining credit when buying and extending credit when selling.
   
   • Researching Studying buyer interests and needs, testing products, and gathering facts needed to make effective marketing decisions.
   
   • Risk taking Assuming the risk of losses that may occur from fire, theft, damage, or other circumstances.
   
   • Grading and valuing Grouping goods according to size, quality, or other characteristics, and determining an appropriate price for products and services.
   
   
3. Whether the product is a box of paper clips or huge generators for utility companies, businesses must perform all eight marketing activities as the product moves from producer to customer. Because performing these activities requires many people and special equipment, the cost of marketing a product is sometimes higher than the cost of making that product. In some instances, half or more of the price you pay for a product may result from marketing expenses. Although this amount may appear high, effective marketing spending contributes much to the success of products and businesses as well as to the satisfaction of customers. Good marketing makes the product or service available to customers when and where they want it.
4. Marketing’s role changes as environmental conditions change. Marketing has not always been an important part of business. In the early 1900s, business conditions were much different than they are now. Customers had only a few products to choose from and a limited amount of money to spend. Usually only a few producers manufactured a product, and the manufacturing processes were inefficient. Demand for many products was greater than the supply. As a result, many producers concentrated on making additional products in greater quantities. Under these conditions, firms were production-oriented; that is, decisions about what and how to produce received the most attention. Businesses did not have to worry a great deal about marketing. When production becomes efficient and more businesses offer similar products, competition among businesses increases. Each business has to work harder to sell its products to customers when customers have more options. Companies must emphasize distribution to get their products to more customers. In addition, advertising and selling become important marketing tools as businesses try to convince customers that their products are the best. Production may be considered the most important activity, but it is not enough for a business to be successful. Under these conditions, businesses may become sales-oriented; that is, they emphasize widespread distribution and promotion to sell their products.
5. In many product categories today, consumers realize they can choose from a wide range of goods and services. Many businesses are competing with one another to sell nearly identical products. But good managers realize that it is not enough just to produce a variety of products; they must produce the right products. Companies that produce what customers want and make buying easy for customers will be more successful than those that do not. Today, more and more businesses are focusing on customer needs. They have become customer-oriented; that is they direct the activities of the company toward satisfying customers. Keeping the needs of the consumer foremost in mind during the design, production, and distribution of a product is called the marketing concept. A company that has adopted the marketing concept has a marketing executive who is part of top management and is involved in many executive-level decisions, as illustrated in the Figure below. Marketing personnel work closely with the other people in the business to make sure the company keeps the needs of customers in mind in all operations. The company’s success is determined by more than current profits. Profit is important, but long-term success depends on satisfying customers so that they will continue to purchase from the company.