customer perceived value: October 2010

Marketing is the process by which companies create customer interest in goods or services. It generates the strategy that underlies sales techniques, business communication, and business developments.^[1] It is an integrated process through which companies build strong customer relationships and creates value for their customers and for themselves.^[1]
Marketing is used to identify the customer, to satisfy the customer, and to keep the customer. With the customer as the focus of its activities, it can be concluded that marketing management is one of the major components of business management. Marketing evolved to meet the stasis in developing new markets caused by mature markets and overcapacities in the last 2-3 centuries.^{[citation needed]} The adoption of marketing strategies requires businesses to shift their focus from production to the perceived needs and wants of their customers as the means of staying profitable.^{[citation needed]}
The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions.^[2] It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.^[2]
^{Further definitions}
Marketing is defined by the American Marketing Association (AMA) 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."[3] The term developed from the original meaning which referred literally to going to a market to buy or sell goods or services. Seen from a systems point of view, sales process engineering views marketing as "a set of processes that are interconnected and interdependent with other functions,[4] whose methods can be improved using a variety of relatively new approaches."
The Chartered Institute of Marketing defines marketing as "the management process responsible for identifying, anticipating and satisfying customer requirements profitably."[5] A different concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value.[6] In this context, marketing is defined as "the management process that seeks to maximise returns to shareholders by developing relationships with valued customers and creating a competitive advantage."[6]
Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science, allowing numerous universities to offer Master-of-Science (MSc) programmes. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at re-inventing itself and its vocabulary according to the times and the culture.

[edit] Evolution of marketing

Main article: History of marketing

An orientation, in the marketing context, related to a perception or attitude a firm holds towards its product or service, essentially concerning consumers and end-users. Throughout history marketing has changed considerably as consumer tastes are changing faster.[7]

[edit] Earlier approaches

The marketing orientation evolved from earlier orientations namely the production orientation, the product orientation and the selling orientation.[7][8]

Orientation	Profit driver	Western European timeframe	Description
Production^[8]	Production methods	until the 1950s	A firm focusing on a production orientation specializes in producing as much as possible of a given product or service. Thus, this signifies a firm exploiting economies of scale, until the minimum efficient scale is reached. A production orientation may be deployed when a high demand for a product or service exists, coupled with a good certainty that consumer tastes do not rapidly alter (similar to the sales orientation).
Product^[8]	Quality of the product	until the 1960s	A firm employing a product orientation is chiefly concerned with the quality of its own product. A firm would also assume that as long as its product was of a high standard, people would buy and consume the product.
Selling^[8]	Selling methods	1950s and 1960s	A firm using a sales orientation focuses primarily on the selling/promotion of a particular product, and not determining new consumer desires as such. Consequently, this entails simply selling an already existing product, and using promotion techniques to attain the highest sales possible. Such an orientation may suit scenarios in which a firm holds dead stock, or otherwise sells a product that is in high demand, with little likelihood of changes in consumer tastes diminishing demand.
Marketing^[8]	Needs and wants of customers	1970 to present day	The 'marketing orientation' is perhaps the most common orientation used in contemporary marketing. It involves a firm essentially basing its marketing plans around the marketing concept, and thus supplying products to suit new consumer tastes. As an example, a firm would employ market research to gauge consumer desires, use R&D to develop a product attuned to the revealed information, and then utilize promotion techniques to ensure persons know the product exists.

[edit] Contemporary approaches

Recent approaches in marketing is the relationship marketing with focus on the customer, the business marketing or industrial marketing with focus on an organization or institution and the social marketing with focus on benefits to the society.^[9] New forms of marketing also use the internet and are therefore called internet marketing or more generally e-marketing, online marketing, search engine marketing, desktop advertising or affiliate marketing. It tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing. Internet marketing is sometimes considered to be broad in scope, because it not only refers to marketing on the Internet, but also includes marketing done via e-mail and wireless media.

Orientation	Profit driver	Western European timeframe	Description
Relationship marketing / Relationship management^[9]	Building and keeping good customer relations	1960s to present day	Emphasis is placed on the whole relationship between suppliers and customers. The aim is to give the best possible attention, customer services and therefore build customer loyalty.
Business marketing / Industrial marketing	Building and keeping relationships between organizations	1980s to present day	In this context marketing takes place between businesses or organizations. The product focus lies on industrial goods or capital goods than consumer products or end products. A different form of marketing activities like promotion, advertising and communication to the customer is used.
Social marketing^[9]	Benefit to society	1990s to present day	Similar characteristics as marketing orientation but with the added proviso that there will be a curtailment on any harmful activities to society, in either product, production, or selling methods.
Branding	Brand value	2000s to present day	In this context, "branding" is main company philosophy and marketing is considered an instrument of branding philosophy.

[edit] Customer orientation

A firm in the market economy survives by producing goods that persons are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.
In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.^[10]
A formal approach to this customer-focused marketing is known as SIVA^[11] (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, placement, promotion) of marketing management.

Product	→	Solution
Price	→	Value
Place	→	Access
Promotion	→	Information

If any of the 4Ps had a problem or were not there in the marketing factor of the business, the business could be in trouble and so other companies may appear in the surroundings of the company, so the consumer demand on its products will become less.

[edit] Marketing mix C&C

This concept of marketing mix shows relations between Company and Customers: 5P&5C model.^{[clarification needed]}^[12]

Product	→	Consumer desire
Price	→	Cost
Place	→	Convenience
Promotion	→	Communication
People	→	Customer approach

The human factor is becoming a key competitive advantage and therefore the model 5C&5P is becoming significant in the 21st Century.^{[clarification needed]}

[edit] Organizational orientation

In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization. Information from an organization's marketing department would be used to guide the actions of other departments within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.
The production department would then start to manufacture the product, while the marketing department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a firm's finance department would be consulted, with respect to securing appropriate funding for the development, production and promotion of the product. Inter-departmental conflicts may occur, should a firm adhere to the marketing orientation. Production may oppose the installation, support and servicing of new capital stock, which may be needed to manufacture a new product. Finance may oppose the required capital expenditure, since it could undermine a healthy cash flow for the organization.

[edit] Herd behavior

Herd behavior in marketing is used to explain the dependencies of customers' mutual behavior. The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior.^[13] It shared mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct." The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart card technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Florida Institute of Technology researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts."Other recent studies on the "power of social influence" include an "artificial music market in which some 19,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay).

[edit] Further orientations

An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers, see also employer branding.
Diffusion of innovations research explores how and why people adopt new products, services and ideas.
With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of permission marketing such as branded content, custom media and reality marketing.

[edit] Marketing research

Main article: Marketing research

Marketing research involves conducting research to support marketing activities, and the statistical interpretation of data into information. This information is then used by managers to plan marketing activities, gauge the nature of a firm's marketing environment and attain information from suppliers. Marketing researchers use statistical methods such as quantitative research, qualitative research, hypothesis tests, Chi-squared tests, linear regression, correlations, frequency distributions, poisson distributions, binomial distributions, etc. to interpret their findings and convert data into information. The marketing research process spans a number of stages including the definition of a problem, development of a research plan, collecting and interpretation of data and disseminating information formally in form of a report. The task of marketing research is to provide management with relevant, accurate, reliable, valid, and current information.
A distinction should be made between marketing research and market research. Market research pertains to research in a given market. As an example, a firm may conduct research in a target market, after selecting a suitable market segment. In contrast, marketing research relates to all research conducted within marketing. Thus, market research is a subset of marketing research.

[edit] Marketing environment

Main article: Marketing environment

[edit] Market segmentation

Main article: Market segmentation

Market segmentation pertains to the division of a market of consumers into persons with similar needs and wants. As an example, if using Kellogg's cereals in this instance, Frosties are marketed to children. Crunchy Nut Cornflakes are marketed to adults. Both goods aforementioned denote two products which are marketed to two distinct groups of persons, both with like needs, traits, and wants.
The purpose for market segmentation is conducted for two main issues. First, a segmentation allows a better allocation of a firm's finite resources. A firm only possesses a certain amount of resources. Accordingly, it must make choices (and appreciate the related costs) in servicing specific groups of consumers. Furthermore the diversified tastes of the contemporary Western consumers can be served better. With more diversity in the tastes of modern consumers, firms are taking note of the benefit of servicing a multiplicity of new markets.
Market segmentation can be defined in terms of the STP acronym, meaning Segment, Target and Position.

[edit] Types of marketing research

Marketing research, as a sub-set aspect of marketing activities, can be divided into the following parts:

Primary research (also known as field research), which involves the conduction and compilation of research for the purpose it was intended.
Secondary research (also referred to as desk research), is initially conducted for one purpose, but often used to support another purpose or end goal.

By these definitions, an example of primary research would be market research conducted into health foods, which is used solely to ascertain the needs/wants of the target market for health foods. Secondary research, again according to the above definition, would be research pertaining to health foods, but used by a firm wishing to develop an unrelated product.
Primary research is often expensive to prepare, collect and interpret from data to information. Nonetheless, while secondary research is relatively inexpensive, it often can become outdated and outmoded, given it is used for a purpose other than for which is was intended. Primary research can also be broken down into quantitative research and qualitative research, which as the labels suggest, pertain to numerical and non-numerical research methods, techniques. The appropriateness of each mode of research depends on whether data can be quantified (quantitative research), or whether subjective, non-numeric or abstract concepts are required to be studied (qualitative research).
There also exists additional modes of marketing research, which are:

Exploratory research, pertaining to research that investigates an assumption.
Descriptive research, which as the label suggests, describes "what is".
Predictive research, meaning research conducted to predict a future occurrence.
Conclusive research, for the purpose of deriving a conclusion via a research process.

[edit] Marketing planning

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Main article: Marketing plan

The area of marketing planning involves forging a plan for a firm's marketing activities. A marketing plan can also pertain to a specific product, as well as to an organization's overall marketing strategy. Generally speaking, an organization's marketing planning process is derived from its overall business strategy. Thus, when top management are devising the firm's strategic direction or mission, the intended marketing activities are incorporated into this plan. There are several levels of marketing objectives within an organization. The senior management of a firm would formulate a general business strategy for a firm. However, this general business strategy would be interpreted and implemented in different contexts throughout the firm.

[edit] Marketing strategy

The field of marketing strategy encompasses the strategy involved in the management of a given product.
A given firm may hold numerous products in the marketplace, spanning numerous and sometimes wholly unrelated industries. Accordingly, a plan is required in order to manage effectively such products. Evidently, a company needs to weigh up and ascertain how to utilize effectively its finite resources. As an example, a start-up car manufacturing firm would face little success, should it attempt to rival immediately Toyota, Ford, Nissan, Chevrolet, or any other large global car maker. Moreover, a product may be reaching the end of its life-cycle. Thus, the issue of divest, or a ceasing of production may be made. With regard to the aforesaid questions, each scenario requires a unique marketing strategy to be employed. Below are listed some prominent marketing strategy models, which seek to propose means to answer the preceding questions.

[edit] Marketing specializations

With the rapidly emerging force of globalization, the distinction between marketing within a firm's home country and marketing within external markets is disappearing very quickly. With this occurrence in mind, firms need to reorient their marketing strategies to meet the challenges of the global marketplace, in addition to sustaining their competitiveness within home markets.^[14]

[edit] Buying behaviour

A marketing firm must ascertain the nature of the customers buying behaviour, if it is to market its product properly. In order to entice and persuade a consumer to buy a product, marketers try to determine the behavioural process of how a given product is purchased. Buying behaviour is usually split in two prime strands, whether selling to the consumer, known as business-to-consumer (B2C) or another business, similarly known as business-to-business (B2B).

[edit] B2C buying behaviour

This mode of behaviour concerns consumers, in the purchase of a given product. As an example, if one pictures a pair of sneakers, the desire for a pair of sneakers would be followed by an information search on available types/brands. This may include perusing media outlets, but most commonly consists of information gathered from family and friends.If the information search is insufficient, the consumer may search for alternative means to satisfy the need/want. In this case, this may be buying leather shoes, sandals, etc. The purchase decision is then made, in which the consumer actually buys the product. Following this stage, a post-purchase evaluation is often conducted, comprising an appraisal of the value/utility brought by the purchase of the sneakers. If the value/utility is high, then a repeat purchase may be bought. This could then develop into consumer loyalty, for the firm producing the pair of sneakers.

[edit] B2B buying behaviour

Relates to organizational/industrial buying behavior.^[15] The term "B2B" stands for Business to Business. B2B marketing in its most simple definition is when one business markets a product or service to another business. B2C and B2B behavior are not exact, as similarities and differences exist. Some of the key differences are listed below:
In a straight re-buy, the fourth, fifth and sixth stages are omitted. In a modified re-buy scenario, the fifth and sixth stages are precluded. In a new buy, all aforementioned stages are conducted.

[edit] Use of technologies

Marketing management can also note the importance of technology, within the scope of its marketing efforts. Computer-based information systems can be employed, aiding in a better processing and storage of data. Marketing researchers can use such systems to devise better methods of converting data into information, and for the creation of enhanced data gathering methods. Information technology can aid in improving an MKIS' software and hardware components, to improve a company's marketing decision-making process.
In recent years, the netbook personal computer has gained significant market share among laptops, largely due to its more user-friendly size and portability. Information technology typically progress at a fast rate, leading to marketing managers being cognizant of the latest technological developments. Moreover, the launch of smartphones into the cellphone market is commonly derived from a demand among consumers for more technologically advanced products. A firm can lose out to competitors, should it refrain from noting the latest technological occurrences in its industry.
Technological advancements can facilitate lesser barriers between countries and regions. Via using the World Wide Web, firms can quickly dispatch information from one country to another, without much restriction. Prior to the mass usage of the Internet, such transfers of information would have taken longer to send, especially if via snail mail, telex, etc.

[edit] Services marketing

Services marketing relates to the marketing of services, as opposed to tangible products. A typical definition of a service (as opposed to a good) is thus:

The use of it is inseparable from its purchase (i.e. a service is used and consumed simultaneously)
It does not possess material form, and thus cannot be smelt, heard, tasted, or felt.
The use of a service is inherently subjective, in that due to the human condition, all persons experiencing a service would experience it uniquely.

As examples of the above points, a train ride can be deemed as a service. If one buys a train ticket, the use of the train is typically experienced concurrently with the purchase of the ticket. Although the train is a physical object, one is not paying for the permanent ownership of the tangible components of the train.
Services (by comparison with goods) can also be viewed as a spectrum. Not all products are pure goods, nor are all pure services. An intermediary example may be a restaurant, where the waiter service is intangible, but the food is tangible.

[edit] See also

[edit] References

^ ^a ^b Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2008). "Marketing defined". Principles of marketing (5th ed.). p. 7. http://books.google.com/books?id=6T2R0_ESU5AC&lpg=PP1&pg=PA7#v=onepage&q=&f=true. Retrieved 2009-10-23.
^ ^a ^b Kotler, Philip; Gary Armstrong, Veronica Wong, John Saunders (2008). "Marketing defined". Principles of marketing (5th ed.). p. 17. http://books.google.com/books?id=6T2R0_ESU5AC&lpg=PP1&pg=PA7#v=onepage&q=&f=true. Retrieved 2009-10-23.
^ "Definition of Marketing". American Marketing Association. http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx. Retrieved 2009-10-30.
^ Paul H. Selden (1997). Sales Process Engineering: A Personal Workshop. Milwaukee, WI. p. 23.
^ "Definition of marketing". Chartered Institute of Marketing. http://www.cim.co.uk/resources/understandingmarket/definitionmkting.aspx. Retrieved 2009-10-30.
^ ^a ^b Paliwoda, Stanley J.; John K. Ryans. "Back to first principles". International Marketing: Modern and Classic Papers (1st ed.). p. 25. http://books.google.com/books?id=dwZz2eHBCjUC&lpg=PP1&pg=PA25#v=onepage&q=&f=false. Retrieved 2009-10-15.
^ ^a ^b Kotler, Philip; Kevin Lane Keller (2009). "1". A Framework for Marketing Management (4th ed.). Pearson Prentice Hall. ISBN 0136026605.
^ ^a ^b ^c ^d ^e Adcock, Dennis; Al Halborg, Caroline Ross (2001). "Introduction". Marketing: principles and practice (4th ed.). p. 15. http://books.google.com/books?id=hQ8XfLd1cGwC&lpg=PP1&pg=PA15#v=onepage&q=&f=true. Retrieved 2009-10-23.
^ ^a ^b ^c Adcock, Dennis; Al Halborg, Caroline Ross (2001). "Introduction". Marketing: principles and practice (4th ed.). p. 16. http://books.google.com/books?id=hQ8XfLd1cGwC&lpg=PP1&pg=PA16#v=onepage&q=&f=true. Retrieved 2009-10-23.
^ "Marketing Management: Strategies and Programs", Guiltinan et al., McGraw Hill/Irwin, 1996
^ Dev, Chekitan S.; Don E. Schultz (January/February 2005). "In the Mix: A Customer-Focused Approach Can Bring the Current Marketing Mix into the 21st Century". Marketing Management 14 (1).
^ Rotschedl, Jiri (2010). (in Czech)Moderní řízení (Prague: Economia): p. 46-47. ISSN 0026-8720.
^ "Swarming the shelves: How shops can exploit people's herd mentality to increase sales?". The Economist. 2006-11-11. p. 90.
^ Joshi, Rakesh Mohan, (2005) International Marketing, Oxford University Press, New Delhi and New York ISBN 0195671236
^ "Chapter 6: Organizational markets and buyer behavior". Rohan.sdsu.edu. http://www-rohan.sdsu.edu/~renglish/370/notes/chapt06/index.htm. Retrieved 2010-03-06.

customer perceived value

Saturday, October 30, 2010

Marketing