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marketing

[mahr-ki-ting]

marketing, in economics, that part of the process of production and exchange that is concerned with the flow of goods and services from producer to consumer. In popular usage it is defined as the distribution and sale of goods, distribution being understood in a broader sense than the technical economic one. Marketing includes the activities of all those engaged in the transfer of goods from producer to consumer—not only those who buy and sell directly, wholesale and retail, but also those who develop, warehouse, transport, insure, finance, or promote the product, or otherwise have a hand in the process of transfer. In a modern capitalist economy, where nearly all production is intended for a market, such activities are just as important as the manufacture of the goods. It is estimated in the United States that approximately 50% of the retail price paid for a commodity is made up of the cost of marketing.

Evolution of Modern Marketing

In a subsistence-level economy there is little need for exchange of goods because the division of labor is at a rudimentary level: most people produce the same or similar goods. Interregional exchange between disparate geographic areas depends on adequate means of transportation. Thus, before the development of caravan travel and navigation, the exchange of the products of one region for those of another was limited. The village market or fair, the itinerant merchant or peddler, and the shop where customers could have such goods as shoes and furniture made to order were features of marketing in rural Europe. The general store superseded the public market in England and was an institution of the American country town.

In the United States in the 19th cent. the typical marketing setup was one in which wholesalers assembled the products of various manufacturers or producers and sold them to jobbers and retailers. The independent store, operated by its owner, was the chief retail marketing agency. In the 20th cent. that system met stiff competition from chain stores, which were organized for the mass distribution of goods and enjoyed the advantages of large-scale operation. Today large chain stores dominate the field of retail trade. The concurrent advent of the motor truck and paved highway, making possible the prompt delivery of a variety of goods in large quantities, still further modified marketing arrangement, and the proliferation of the automobile has expanded the geographic area in which a consumer can make retail purchases.

Modern Marketing

At all points of the modern marketing system people have formed associations and eliminated various middlemen in order to achieve more efficient marketing. Manufacturers often maintain their own wholesale departments and deal directly with retailers. Independent stores may operate their own wholesale agencies to supply them with goods. Wholesale houses operate outlets for their wares, and farmers sell their products through their own wholesale cooperatives. Recent years have seen the development of wholesale clubs, which sell retail items to consumers who purchase memberships that give them the privilege of shopping at wholesale prices. Commodity exchanges, such as those of grain and cotton, enable businesses to buy and sell commodities for both immediate and future delivery.

Methods of merchandising have also been changed to attract customers. The one-price system, probably introduced (1841) by A. T. Stewart in New York, saves sales clerks from haggling and promotes faith in the integrity of the merchant. Advertising has created an international market for many items, especially trademarked and labeled goods. In 1999 more than $308 billion was spent on advertising in the United States alone. The number of customers, especially for durable goods, has been greatly increased by the practice of extending credit, particularly in the form of installment buying and selling. Customers also buy through mail-order catalogs (much expanded from the original catalog sales business of the late 1800s), by placing orders to specialized "home-shopping" television channels, and through on-line transactions ("e-commerce") on the Internet.

Services are marketed in much the same manner as goods and commodities. Sometimes a service, like that of a repair person or physician, is marketed through the same act that produces it. Personal services may also be brokered by employment agencies, booking agents for concert or theatrical performers, travel agents, and the like. Methods of marketing now include market research, motivational research, and other means of determining consumer acceptability of a product before the producer decides to manufacture and market it on a large scale. Market research, often conducted by means of telephone interviews with consumers, is a major industry in itself, with the top 50 U.S. marketing firms tallying revenues of $5.9 billion in 1998.

Bibliography

See J. Wilmshurst, The Fundamentals and Practice of Marketing (1984); E. Kaynak and R. Savitt, ed., Comparative Marketing Systems (1986); E. J. McCarthy and W. D. Perreault, Jr., Basic Marketing (10th ed. 1990); J. H. Ellsworth and M. V. Ellsworth, Marketing on the Internet (1997); L. E. Boone and D. L. Kurtz, Contemporary Marketing (9th ed. 1998).

The Columbia Electronic Encyclopedia Copyright © 2004.
Licensed from Columbia University Press

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marketing board

Organization set up by a government to regulate the buying and selling of a certain commodity within a specified area. The simplest type of board is designed to carry out market research, promote sales, and furnish information; it is usually financed by a fee levied on all sales of the product concerned. Examples include the Sri Lanka Tea Board and the Ghana Cocoa Board. Other boards are empowered to regulate terms and conditions of sale, usually by establishing packing standards and quality analysis. The primary goal of most marketing boards is to stabilize prices, especially of products intended for the export market, where price fluctuations are often extreme. The boards may raise average prices through manipulation of commodity flows, with the objective of maintaining reasonably high levels of demand at all times. Marketing boards such as the Washington State Apple Commission are used for products whose perishability requires that outlets be set up in advance. Seealso cartel.

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Encyclopedia Britannica, 2008. Encyclopedia Britannica Online.

marketing

Activities that direct the flow of goods and services from producers to consumers. In advanced industrial economies, marketing considerations play a major role in determining corporate policy. Once primarily concerned with increasing sales through advertising and other promotional techniques, corporate marketing departments now focus on credit policies (see credit), product development, customer support, distribution, and corporate communications. Marketers may look for outlets through which to sell the company's products, including retail stores, direct-mail marketing, and wholesaling. They may make psychological and demographic studies of a potential market, experiment with various marketing strategies, and conduct informal interviews with target audiences. Marketing is used both to increase sales of an existing product and to introduce new products. Seealso merchandising.

Learn more about marketing with a free trial on Britannica.com.

Encyclopedia Britannica, 2008. Encyclopedia Britannica Online.

Marketing

In popular usage, "marketing" is the promotion of products, especially advertising and branding. However, in professional usage the term has a wider meaning of the practice and science of trading. The American Marketing Association (AMA) states, "Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.

Marketing practice tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, which are often discovered through market research.

The scientific study of marketing is a wide and heavily interconnected subject with extensive academic publications. Marketing methods are also informed by many of the social sciences, particularly psychology, sociology, and economics. Anthropology is also a small, but growing influence. Market research underpins these activities. Through advertising, it is also related to many of the creative arts. The marketing literature is also infamous for re-inventing itself and its vocabulary according to the times and the culture.

Four Ps

In the early 1960s, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, also at the Harvard Business School in the early 1960s, suggested that the Marketing Mix contained 4 elements: product, price, place and promotion.

Product: The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
Pricing: This refers to the process of setting a price for a product, including discounts. The price need not be monetary - it can simply be what is exchanged for the product or services, e.g. time, energy, psychology or attention.
Promotion: This includes advertising, sales promotion, publicity, and personal selling, branding and refers to the various methods of promoting the product, brand, or company.
Placement (or distribution): refers to how the product gets to the customer; for example, point of sale placement or retailing. This fourth P has also sometimes been called Place, referring to the channel by which a product or services is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.

These four elements are often referred to as the marketing mix, which a marketer can use to craft a marketing plan.

The four Ps model is most useful when marketing low value consumer products. Industrial products, services, high value consumer products require adjustments to this model. Services marketing must account for the unique nature of services.

Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions.

As a counter to this, Morgan, in Riding the Waves of Change (Jossey-Bass, 1988), suggests that one of the greatest limitations of the 4 Ps approach "is that it unconsciously emphasizes the inside–out view (looking from the company outwards), whereas the essence of marketing should be the outside–in approach". Nevertheless, the 4 Ps offer a memorable and workable guide to the major categories of marketing activity, as well as a framework within which these can be used.

Seven Ps

As well as the standard four P's (Product, Pricing, Promotion and Place), services marketing calls upon an extra three, totaling seven and known together as the extended marketing mix. These are:

People: Any person coming into contact with customers can have an impact on overall satisfaction. Whether as part of a supporting service to a product or involved in a total service, people are particularly important because, in the customer's eyes, they are generally inseparable from the total service . As a result of this, they must be appropriately trained, well motivated and the right type of person. Fellow customers are also sometimes referred to under 'people', as they too can affect the customer's service experience, (e.g., at a sporting event).
Process: This is the process(es) involved in providing a service and the behaviour of people, which can be crucial to customer satisfaction.
Physical evidence: Unlike a product, a service cannot be experienced before it is delivered, which makes it intangible. This, therefore, means that potential customers could perceive greater risk when deciding whether to use a service. To reduce the feeling of risk, thus improving the chance for success, it is often vital to offer potential customers the chance to see what a service would be like. This is done by providing physical evidence, such as case studies, testimonials or demonstrations.

Four New Ps

Personalization: It is here referred customization of products and services through the use of the Internet. Early examples include Dell on-line and Amazon.com, but this concept is further extended with emerging social media and advanced algorithms. Emerging technologies will continue to push this idea forward.
Participation: This is to allow the customer to participate in what the brand should stand for; what should be the product directions and even which ads to run. This concept is laying the foundation for disruptive change through democratization of information.
Peer-to-Peer: This refers to customer networks and communities where advocacy happens. The historical problem with marketing is that it is “interruptive” in nature, trying to impose a brand on the customer. This is most apparent in TV advertising. These “passive customer bases” will ultimately be replaced by the “active customer communities”. Brand engagement happens within those conversations. P2P is now being referred as Social Computing and is likely to be the most disruptive force in the future of marketing.
Predictive modeling: This refers to algorithms that are being successfully applied in marketing problems (both a regression as well as a classification problem).

Product

Steps in product design

Design and development of product ideas.
Selection of and sifting through product ideas.
Design and testing of product concept.
Analysis of business instead of product concept.
Design and testing of emotional product.

Packaging

Requirements of good packaging

Functional - effectively contain and protect the contents
Provide convenience during distribution, sale, opening, use, reuse, etc.
Be environmentally responsible
Be cost effective
Appropriately designed for target market
Eye-catching (particularly for retail/consumer sales)
Communicate attributes and recommended use of the product and package
Compliant with retailers' requirements
Promotes image of enterprise
Distinguishable from competitors' products
Meet legal requirements for product and packaging
Point of difference in service and supply of product.
For a perfect product, perfect colour.

Forms of packaging

Specialty packaging — emphasizes the elegant character of the product
Packaging for double-use
Combination packaging two or more products packaged in the same container
Kaleidoscopic packaging — packaging changes continually to reflect a series or particular theme
Packaging for immediate consumption — to be thrown away after use
Packaging for resale — packed, into appropriate quantities, for the retailer or wholesaler

Trademarks

Significance of a trademark

Distinguishes one company's goods from those of another
Serves as advertisement for quality
Protects both consumers and manufacturers
Used in displays and advertising campaigns
Used to market new products

Brands

A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings. A brand represents the consumers' experience with an organization, product, or service.

A brand has also been defined as an identifiable entity that makes a specific promise of value.

Branding means creating reference of certain products in consumers mind.

Co-branding involves marketing activity involving two or more products.

Pricing

Pricing refers to the amount of money exchanged for a product. This value is determined by utility to the consumer in terms of money and/or sacrifice that the consumer is prepared to give for it.

Objectives

Increase sales volume
Increase revenue
Achieve or increase profits
Increase or maintain market share
Eliminate competition
Achieve advantages of mass production

Factors influencing price-determination

Production and distribution costs
Substitute goods available
Normal trade practices
Fixed prices
Reaction of distributors
Reaction of consumers
Nature of demand:

elastic/inelastic

Form of market:

Steps to determine price

Determine market share to be captured
Set up price strategy
Estimate demand
Evaluate competitors' reactions

Distribution (Place)

Channels

Manufacturer to consumer (most direct)
Manufacturer to wholesaler to retailer to consumer (traditional)
Manufacturer to agent to retailer to consumer (current)
Manufacturer to agent to wholesaler to retailer to consumer
Manufacturer to agent to consumer (ex : DCL,AMWAY )

Manufacturers

Reasons for direct selling methods

Manufacturer wants to demonstrate goods.
Wholesalers, retailers and agents not actively selling.
Manufacturer unable to convince wholesalers or retailers to stock product.
High profit margin added to goods by wholesalers and retailers.
Middlemen unable to transport.
It also lets the consumer to be able to know how it works.

Reasons for indirect selling methods

Manufacturer does not have the financial resources to distribute goods.
Distribution channels already established.
Manufacturer has no knowledge of efficient(specific) distribution.
Manufacturer wishes to use capital for further production.
Too many consumers in a large area; difficult to reach.
Manufacturer does not have a wide assortment of goods to enable efficient marketing.
Direct on-selling advantages.

Wholesalers

Reasons for using wholesalers

Bear risk of selling goods to retailer or consumer
Storage space
Decrease transport costs
Grant credit to retailers
Able to sell for the manufacturers
Give advice to manufacturers
Break down products into smaller quantities

Reasons for bypassing wholesalers

Limited storage facilities
Retailers' preferences
Wholesaler cannot promote products successfully
Development of wholesalers' own brands
Desire for closer market contact
Position of power
Cost of wholesalers' services
Price stabilisation
Need for rapid distribution
Make more money

Ways of bypassing wholesalers

Sales offices or branches
Mail orders
Direct sales to retailers
Travelling agents
Direct Orders
Specific channel

Agents

Commission agents work for anyone who needs their services. They do not acquire ownership of goods but receive del credere commission.
Selling agents act on an extended contractual basis, selling all of the products of the manufacturer. They have full authority regarding price and terms of sale.
Buying agents buy goods on behalf of producers and retailers. They have an expert knowledge of the purchasing function.
Brokers specialize in the sale of one specific product. They receive a brokerage.
Factory representatives represent more than one manufacturer. They operate within a specific area and sell related lines of goods but have limited authority regarding price and sales terms.

Marketing communications

Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. There are distinct stages in converting strangers to customers that govern the communication medium that should be used.

Advertising

Paid form of public presentation and expressive promotion of ideas
Aimed at masses
Manufacturer may determine what goes into advertisement
Pervasive and impersonal medium

Functions and advantages of successful advertising

Task of the salesman made easier

Objectives

Maintain demand for well-known goods
Introduce new and unknown goods
Increase demand for well-known goods/products/services

Requirements of a good advertisement

Attract attention (awareness)
Stimulate interest
Create a desire
Bring about action

Eight steps in an advertising campaign

Market research
Setting out aims
Budgeting
Choice of media (television, newspaper/magazines, radio, web, outdoor)
Choice of actors (New Trend)
Design and wording
Co-ordination
Test results

Personal sales

Oral presentation given by a salesman who approaches individuals or a group of potential customers:

Live, interactive relationship
Personal interest
Attention and response
Interesting presentation

Sales promotion

Short-term incentives to encourage buying of products:

Instant appeal
Anxiety to sell

An example of this is coupons or a sale. People are given an incentive to buy, but it does not build customer loyalty, nor encourage repeat buys in the future. A major drawback of sales promotion is that it is easily copied by competition. It cannot be used as a sustainable source of differentiation.

Marketing Public Relations (MPR)

Stimulation of demand through press release giving a favourable report to a product
Higher degree of credibility
Effectively news
Boosts enterprise's image

Customer focus

Many companies today have a customer focus (or customer 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.

A formal approach to this customer-focused marketing is known as SIVA (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, place, promotion) of marketing management.

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

The four elements of the SIVA model are:

Solution: How appropriate is the solution to the customer's problem/need?
Information: Does the customer know about the solution? If so, how and from whom do they know enough to let them make a buying decision?
Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?
Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery?

This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader - the journal of the Marketing Society in the UK.

The model focuses heavily on the customer and how they view the transaction.

Product focus

In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that a profitable market segment(s) exists for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation (Such as Nintendo who constantly change the way Video games are played). Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.

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 (employer branding).
Diffusion of innovations research explores how and why people adopt new products, services and ideas.
A relatively new form of marketing uses the Internet and is called Internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It typically 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.
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.
The use of herd behavior in marketing.

The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. Mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct" were shared. 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-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 .

Marketing is also used to promote the businesses products and is also a great way of promoting the business its self.

Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 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).