Marketing Management

Marketing is a particularly practical business discipline. There may be many definitions of marketing, but all of them consider the customer to be the focus of decision-making, and all of them describe the dialogue between the producer and the customer—increasingly as it takes place in a global context. Marketing efforts vary, depending on the different circumstances within which they are practiced.

It is important to see marketing’s role in an overarching context, reaching beyond the organization to encompass the entire client and supplier system in an outward-looking way that matches corporate capabilities with the requirements of customers and permits them to acquire desired benefits most efficiently.

The various elements of marketing that are employed in marketing campaigns are known as the marketing mix and are often described in terms of the 4 Ps: product, price, place, and promotion. This mix can be applied not just to the goods sector but also to services and the nonprofit arena. The implementation of the marketing mix, however, is complex due to multiple decision-makers and an enormous flow of information, the interaction of multiple decision factors on the part of buyers, and global demand and supply linkages.

In light of the need to exercise growing responsiveness to changing societal demands and expectations in areas such as the environment and ethics and the expanding ability of marketers to use technology, focusing on the double bottom-line-oriented approach to understand and contribute to the needs of customers and the overall socioeconomic and ecological setting where a company operates its business, a new marketing paradigm is emerging in which marketers are poised to become the strategic leaders of the corporate supply system.

In general, the use of plans conveys a number of advantages: (1) consistency, (2) responsibility, (3) communication, and (4) commitment.

The corporate plan should contain three main components:

Corporate objectives, which are usually more complex than just financial targets, should reflect the corporate mission (including customer groups, customer needs, and technologies), which may reflect a strong corporate vision.

The starting point of the marketing planning process is the marketing audit, the output of which may be one or more fact books, covering a wide range of questions about internal (“product”-related) and external (“environmental,” as well as market) factors, and the marketing system itself, as well as the following basic questions:

This step will lead to the production of marketing objectives and subsequently to marketing strategies (typically covering all elements of the 4 Ps).

A suggested structure for the marketing plan document itself might be as follows:

All these detailed plans should be, as far as possible, (1) number-based and “deadlined,” (2) briefly described, and (3) practical. These programs must be controlled, particularly by the use of budgets, for which the overall figures may be derived by (1) affordability, (2) percentage of revenue, (3) competitive parity, or (4) zero-based budgeting.

Finally, the actual performance of the marketing strategy needs to be examined. The most important elements of marketing performance are (1) sales analysis, (2) market share analysis, (3) expense analysis, (4) financial analysis, and (5) relationship analysis. Although much of the relationship analysis may not be quantifiable, it has become an increasingly important determinant of a company’s long-term success.

An understanding of the environment is important for the marketer. Social, technological, economic, political, and ecological factors can have a major impact on the firm’s opportunities and threats. Key social and cultural elements to consider are the redefinition of occupations, a societal trend toward postmaterialism, and major demographic shifts. In the area of technology, the outlook for marketers is likely to be thoroughly changed by transformations in information processing and the subsequent shifts in business practices as well as the emergence of new materials, new biotechnological products, and growing environmental concerns. In the economic area, increasing globalization, regional integration, and exchange rate effects represent major influences on marketing practice. The political environment is characterized by legislative and regulatory actions that influence the firm but that can also be influenced by the firm. However, the political arena is also increasingly defined by the activities of special interest groups whose actions can have a major effect on firms. Furthermore, the marketer is likely to be required, either by regulation or by good marketing sense, to take into account various stakeholders beyond the shareholders if the firm and its products are to remain acceptable to society at large. The ecological background of the target market also needs to be considered, in order to satisfy the contemporary ethical customers.

To deal with the environment, the firm must first analyze and understand it. Such analysis can be accomplished by environmental scanning, Delphi studies, and scenario building. To understand the competition, however, the firm must evaluate more specific issues such as market structure, products and production processes, and industrial changes taking place.

After understanding these dimensions, the firm can achieve a successful strategic position through economies of scale, political clout, and captive distribution systems. Firms that are unable to win the competitive battle in the field of commerce in particular are increasingly seeking victory in the halls of government. Building and maintaining a successful position also require an understanding of the likely competitive response from adversaries and the different strategies that leaders and followers can employ. Overall, you should remember that as difficult as it may be to maintain a leadership position, it is even harder to be a profitable follower.

Focus on the buyer is the key dimension of marketing and is what sets the discipline apart from all other business fields. The marketer must therefore understand how buyers come to the decision to purchase a product. This decision-making process is a complex one, both for consumers who are end users and for industrial buyers. For consumers, the process includes the effects of experience, lifestyle, promotion, and price. More general factors influencing consumers may be culture, geography, social class, occupation, psychological factors, peer pressure, and the effect of globalization. Marketers have conducted a great deal of research to understand the consumer decision process better and, as a result, have developed the tools of lifestyle analysis and segmentation to be able to serve consumers more efficiently and more profitably.

On the industrial side, organizational purchasing is subject to a different set of influences, both because it is usually based on derived demand and because the decision is often split between decision-makers and influences. Other factors that affect buyers’ product acceptance are the diffusion of innovation, usage, and loyalty and the existence of a customer franchise.

This chapter explored the search for information about the customer and the market. This constitutes the listening part of the marketing dialogue. Marketing research is also needed to assist managers in the decision-making process and to analyze organizational performance. To be viable, however, the benefits derived from marketing research need to exceed the cost of conducting such research.

A systematic research approach will lead to the development of a Market Information System (MIS) that contains information both internal and external to the firm. Important internal data sources are performance analyses, sales reports, and employees’ ongoing experience. The more data the intelligence system receives and the more precisely the system can process the available data, the better it can serve the manager. It is therefore important to develop ways of entering nonnumerical reports, such as accounts from a sales conversation or information about customer interests. New technology can enable an MIS to alter communication and decision structures within a firm but also requires careful planning of information distribution and retention.

External information can be derived from either secondary or primary data. Secondary data, collected in response to someone else’s questions, are obtained through desk research and are available quickly and at low cost. The main sources of secondary data are internal databases, libraries, directories, newsletters, commercial information providers, trade associations, and electronic information services. To ensure their usefulness, the researcher must determine the quality of the data source, the quality of the actual data, and the compatibility of the data with information requirements. Primary data are collected directly on behalf of a specific research project. Typical ways of obtaining such data are through syndicated research—such as retail audits, panel research, or omnibus surveys—and custom research.

The first step of primary marketing research is to clearly define the objectives to ensure the usefulness of the research. Next, the research level needs to be decided. Exploratory research helps mainly in identifying problems, descriptive research provides information about existing market phenomena, and causal research sheds light on the relationships between market factors. The research approach then determines whether qualitative or quantitative data will be collected. Observation, in-depth interviews, and focus groups are primary techniques to yield qualitative data, which may be very insightful but are not fully generalizable and cannot be analyzed statistically. Quantitative data overcome these problems but require the systematic collection of large numbers of data. Experimentation and survey research are the primary research tools. Good survey research must concentrate on question design and structure to elicit useful responses. Data can then be collected by mail (postal mail or email); by using online applications, e.g., SurveyMonkey; by telephone; or in person after an appropriate sample frame is constructed. The data need to be analyzed with appropriate techniques to make the data set comprehensible, insightful, and useful for management. This usefulness is at the heart of the research report, which in essence is a communication process persuading recipients to use the information.

Forecasts predict what may happen, all other things being equal. Budgets go beyond these forecasts to incorporate the effects of an organization’s planned actions. Both may be

Forecasts need to be dynamic. In other words, changes in the environment require modification of forecasts. From them, budgets may be derived at the sales, production, and profit levels.

Forecasting is based on, and derived from, some other data sources; and it is conducted at three different levels. Macroforecasts look at total markets and may be derived from national or global data available from the OECD or the US government. However, the most important aggregate forecast for business is at the market or industry level. Microforecasts build on the predictions of individual or group (customer) behavior. Product forecasts may then be split into forecasts by product type and over time.

With the widespread use of personal computers, spreadsheets have become a useful forecasting tool to model many hypothetical “what if” scenarios. By developing many scenarios, you can determine which factors are sensitive to changes in the conditions under investigation.

The primary role of forecasting is risk reduction. You should note that risk can also be reduced by purchasing insurance against unfavorable events, diversifying into a portfolio of different products and markets, or adopting flexible manufacturing to better cope with unexpected changes in the market. Finally, thanks to internet use, many companies, emphasizing the needs of customers with an ability to satisfy and serve them quickly and efficiently, have begun to adopt the “build to order” model of sales fulfillment with no forecasting error rather than the traditional “build to forecast” model.

Markets can be defined in a number of ways, but for a marketer, the key definition is in defining who the customer is. Even so, there are different categories: (1) customers, (2) users, and (3) prospects. This categorization leads to the concepts of penetration and brand (market) share.

Within markets, there may be segments, which a producer may target to optimize the use of scarce resources. The viability of these segments depends on (1) size, (2) identity, (3) relevance, and (4) access. The identification of market segments requires a number of activities including (1) background investigation, (2) qualitative research, (3) quantitative research, (4) analysis, (5) implementation, and (6) segmentation/positioning. A major aid to positioning is usually offered by two-dimensional maps based on the two most critical dimensions identified by statistical analysis.

Branding is the most powerful marketing device for differentiation, which may, in effect, create a near monopoly. Once established, a brand name has a strong brand equity. Branding policies may be based on (1) company name, (2) family branding, and (3) individual branding. These policies may be developed further by brand extensions and multibrands, but this approach may be limited by cannibalism. Cobranding by companies that market complementary products helps fill market segments not met by them individually. Private brands and generic brands are also becoming increasingly important in price-sensitive markets.

The good or service as seen by the consumer constitutes much more than just a physical core product; all the intangibles that accompany the product form the package. The product audit is used to explore what this package comprises. The Ansoff Matrix looks at the four main growth strategies and demonstrates the increase in risk as a company moves from penetration of the known market to diversification into a totally unknown market.

The theory of the product life cycle says that the stages of introduction, growth, maturity, decline, and postmortem that a product goes through are to be reflected in the corresponding marketing mix. Even though most attention is focused on new product launches, most products are in the maturity stage, where they need careful management attention to either prolong their life cycle or to lead to graceful retirement.

A popular theoretical tool for structuring product portfolios is the Boston Consulting Group Matrix. Its four quadrants are based on market share and market growth: problem children (or question marks), stars, cash cows, and dogs. Because of its assumption of a significant product life cycle and economies of scale, the Boston Matrix may have less relevance than its advocates suggest. In any event, use of the matrix requires a sound understanding of the complex interrelationship between market growth rate and relative share.

The development of a product mix needs to consider both the width and depth of product lines and may require line stretching or line rationalization. In doing so, the firm must carefully consider the implications of such product policies on sales, profits, and relationships with customers and suppliers.

When using a strategy of market expansion, the firm must consider whether and how to standardize or adapt its products. In addition, attention must be devoted to packaging. No longer simply driven by product protection, packaging must reflect market requirements, promotional opportunities, and distribution considerations.

Services, whether related to goods or pure services, have distinctive features. In particular, they are more dependent on people, which necessitate more, and higher, standards of management. The intangibility of services means that the associated physical elements may be used for promotion, and strong branding is important. The lack of storage capacity may require new efforts at smoothing out demand fluctuations through personnel management or pricing strategies.

Overall, even though all elements of the marketing mix are equally important, the product is the most visible component and serves as the focal point for all marketing mix aspects.

Sources for generating new product ideas include customers and innovative imitation. In the Western approach, the product development process then is supposed to follow a number of formal steps, including gap analysis (for scanning and idea generation), strategic screening, concept testing, product development, product testing, test marketing, and product launch. A test market may take place in a television-viewing area, a test city, or a residential neighborhood. In industrial markets in particular, it may be restricted to test sites. All these approaches pose problems of effectiveness and cost while possibly offering competitors advance warning.

It is worth remembering the major caveats mentioned in ► Sect. 9.1, “Introduction.” Brand stability implies that there should be more emphasis on the further development of existing brands than on totally new ones, contrary to conventional teaching. The Japanese approach is to launch many new products without following any of the stages of testing described here.

Much of pricing theory is derived from economics, especially from supply and demand theory. This information is encapsulated in the famous demand and supply curves. The price is set by the point where the curves intersect. The degree to which demand is susceptible to price changes (price elasticity of demand) is another concept borrowed from economics but very useful to marketers.

Pricing new products offers a different set of challenges. In general, the two main opposing strategies are:

Practical pricing policies for existing brands may include cost-plus pricing, target pricing, historical pricing, product line pricing, competitive pricing, market-based pricing, and selective pricing. The price can also be a major factor in determining a product’s or service’s image, ranging from quality price to budget price.

Prices may also be set at levels that are judged to be “psychologically” appropriate ($9.95, for instance). Other ways of achieving a price effect may lie with other parts of the offer, such as product bundling, at one extreme, and charging separately for “options,” at the other. Alternatively, price may be negotiated, as it often is in capital goods markets.

Distribution channels take on various functions of the manufacturers because they can perform them more efficiently. Depending on the type of product and type of consumer, they can range from the zero level, where the contact between manufacturer and end user is direct, to multiple levels, from producer to wholesalers and retailers. The choice of channel is an important one because it has major strategic implications and is difficult to change. Within the channel choice, decisions also need to be made about channel compensation and control. To a large degree, effective channel management depends on close information linkages. The use of information analysis at the retail level increasingly makes other channel members dependent on these information sources. Overall, channel members need to add value to the distribution process—or be eliminated. This also applies to the purchasing process, which is an integral part of distribution, albeit an internally focused one.

Supply chain management benefits from a systems view of corporate activity and includes the development of close relationships with both suppliers and customers. Effective coordination between parties reduces cost and provides for competitive advantage through approaches such as just-in-time (JIT) delivery, electronic data interchange (EDI), and early supplier involvement (ESI). Production, transportation, facility, inventory, and communication decisions are the key areas within logistics, all of which require trade-offs and collaborative action among participants. Even though the optimizing activities of a firm provide for some benefits, competitive differentiation occurs mainly through coordination with other companies.

The firm may evaluate transportation based on transit time, reliability, and cost and achieve operational improvements, but a strategic collaborative approach with customers and suppliers can deliver even greater benefits. Such collaboration can include the use of third-party logistics providers. Logistics can also play a major role in making the firm more environmentally responsive by designing reverse distribution systems for the recycling of merchandise and by devising distribution processes that minimize risk and damage to the environment.

All channel and supply chain efforts are designed to increase customer service. The intent is to delight the customer. It is therefore important to understand the importance of customer complaints. Such complaints should be encouraged so that the firm learns early on about potential problem areas. In addition, they need to be resolved quickly so that customers are willing to return. Good customer service requires the orientation and commitment of the entire corporate culture so that the customer notices at each point of contact with the firm that customer service thinking is a part of the organization.

Advertising represents the talking part of the dialogue referred to in ► Sect. 12.2. In practice, this process is much more complex, as is hinted at by the encoding/decoding model.

Advertising, however, is just one element of the promotional mix, which includes personal selling and word of mouth, particularly in the case of services. It may be just as applicable to many nonprofit organizations. It is also, increasingly, a vehicle for corporate promotion. In all these cases, it is a pull technique (persuading consumers to pull the product through retailers) rather than a push technique (selling by sales promotions, for instance, into the channels).

Media selection and buying require specialist knowledge and skills but essentially aim to achieve satisfactory (cumulative) coverage with the requisite opportunities to see (OTS) at an economic cost. Although different markets may require different kinds of media to accomplish the same advertising objective, globally minded companies are increasingly employing pattern standardization or globally standardized ads to develop a global image for their products and to reduce advertising costs [57].

The main media are newspaper, television, radio, movies, billboards, and cyberspace. In recent years, an explosive growth of personal computer users with modems has created an electronic form of advertising media through the internet, Prodigy, and other cyberspace linkages. This form of communication promises to create a more personalized, two-way interactive advertising that spans across national boundaries in the near future.

Advertising budgets determine whether or not to use an advertising agency. Use of an advertising agency represents a strategic decision because the success of the organization will depend largely on the success of that agency. Therefore, careful agency selection is important.

As a method of promotion, precision marketing is likely to expand significantly because of the explosive growth of the internet and data collection techniques needed to drive it. Precision marketing is best evidenced by direct mail activity and telesales.

Sales promotion should be used almost exclusively in support of other promotional activities because it offers essentially short-term gains, whether or not it takes the form of price-based promotions. Despite its limited effectiveness, however, this form of promotion accounts for a greater proportion of the overall spending than advertising.

Trade shows and sponsorships are specialized activities that may have much to offer to some organizations because of their dual benefit of demonstration and interaction.

Public relations is a neglected resource in most organizations. In terms of press relations, it offers a very cost-effective vehicle for promotion. In terms of corporate relations, it is the vehicle for dealing with many of the contacts with the external environment, in both a reactive and a proactive way.

In most organizations, the main marketing resource is the salesforce. This resource is qualitatively different than almost all other marketing activities because of its dependence on relationships between individuals. The role of the salesforce mainly covers prospecting, selling, and supporting.

The building block of a sales organization is the territory, which may be defined by geography, by industry, and by product. Territory plans should, at least in theory, take into account annual costs (including direct and indirect expenses/overheads, which may be high, as well as salary and commission) and annual calls available, which may be as low as 200 per year.

The overall sales personnel plan may, however, be derived in a number of ways:

The whole of the selling operation revolves around the individual sales professional, whose role holds many similarities to management in general:

The last aspect, the customer interface, may represent the major investment of the organization, although it may be unrecognized.

The territory sales plan will include:

Prospecting (generating new customers) is a numbers game: The more mailings sent out, the more prospects, and ultimately customers, will be generated. On the other hand, much of the work of sales professionals revolves around industrial sales. This type of sales employs long-term sales campaigns to multiple personnel in an organization. Accordingly, relationship marketing and account planning are important activities—and with them project management skills.

Sales team management is a specialized form of human resource management, but it differs in terms of recruitment, motivation, control, and training. Motivation is usually linked to compensation (commission), although other factors, such as leadership, may be the main requirement for a sales manager. Sales managers should also be aware that because sales activities are local activities, they tend to be strongly affected by cultural differences (e.g., shopping habit, negotiation style) around the world, making it difficult, if not impossible, for the international marketing manager to integrate overseas sales operations. The development of an effective sales organization requires salesforce objectives and salesforce strategy adapted to local differences and calls for careful recruiting, training, supervising, motivating, and compensating of local salespeople.

Two major forces are reshaping sales management. First, a recent trend toward downsizing and restructuring across corporate America, and increasingly around the world, has put mounting pressure on sales personnel to perform more effectively. Second, the computer revolution has ushered in an officeless working environment for many sales professionals with the aid of laptop computers, modems, and fax machines. Although these tools allow sales professionals to allocate more time to traveling and visiting their clients and new prospects, managing them effectively has become increasingly an important issue.

Remaining vigilant in changes in the diverse market environment is instrumental to proactively meet customers’ needs, wants, and expectations. In this chapter, we have first discussed environmental changes from the contexts of technological environment, financial environment, regulatory environment, societal environment, geopolitical environment, competitive environment, and the outbreak of COVID-19 and the subsequent pandemic. Second, we have discussed how marketers could plan for their product, price, place, and promotion strategies to respond to such market environmental changes. Finally, we have discussed how marketers and customers are interdependent in pursuing their individual goal and presented an overview on ethical consumers and sustainability concerns, ethical consumers, expanding marketing mix, cross-cultural customers and the global village as single market, some ongoing changes in marketplace, and how marketers become change agents in the marketplace. It is important for marketers to explore customers’ latent needs to become successful change agents.