16. Evolution of Marketing Production Orientation Sales Orientation Consumer Orientation Relationship Orientation 1850 1950 Today 1908 Model T 1 st Sold 1929 Great Depression 1945 World War II Ends Seller’s Market Buyer’s Market 1980’s Global Competition 1980 1930
The definition of Marketing according to the American Marketing Association (AMA).
Marketing is an organizational function (along with HR, Finance, etc), as well as specific processes (such as assembling, pricing, and promoting) undertaken by the organization. This leads to the development of products, services, ideas, which in turn leads to the fulfillment of organizational goals (such as profits).
Marketing is much more than just developing, advertising, and selling a product, it is about creating value for customers, which in turn keeps customers coming back again and again. Repeat customers allow the organization to produce profits (or to meet other organizational goals). Value is derived from the economic concept of utility, which is the satisfaction one receives from owning or consuming a product or service.
Needs are necessities to meet urgent requirements. A want is a desire for something that is not essential. Food is a need, but a desire for ice cream is a want. Marketing can be used to turn a want into a perceived need (many feel that a cell phone is a need). Marketing can also be used to stimulate demand through advertising (one element of marketing).
Creating value for customers (through understanding their wants and needs) allow a business to develop stronger customer relationships and build loyalty from customers. Companies build customer relationships through its customer relationship management (CRM) activities. To know which customers to build relationships with, companies need to understand a Customers Lifetime Value, which is the projected sales and profits a customer is expected to generate for the company.
Marketing has evolved from a production orientation , in which businesses produced the type of products that they wanted to produce, to today’s relationship (or marketing) orientation . In the production era, there were few competitors and customers had limited information, generating sales revenue was relatively straight forward. Henry Ford exemplified the production orientation by proclaiming buyers could have any color car they wanted as long as it was black. The Great Depression changed things dramatically since there were fewer buyers in the market companies had to actively pursue sales, ushering in the era of Sales Orientation . In the Sales Orientation companies took the position that whatever they produced they would find a way to sell. In this period firms relied on advertising and personal selling (sales promotion) to create demand. The end of World War II brought changes to the economy in the form of buyers expecting more from the products they bought. Companies that oriented toward the customer began out performing those that continued focusing on the product or sales orientations. In the Consumer Orientation period companies were seeking ways to discover, and satisfy, the wants and needs of customers. Market research became a priority in most companies in an effort to uncover unmet needs. This era continued until the 1980’s when competition began expanding globally. In order to make a connection with customers firms began to focus on developing relationships in hopes of generating loyalty. In the Relationship Orientation period, companies are seeking ways to deliver value to customers in an effort to long-term relationships. Companies may spend more in the short-term, but companies look at these costs as investments for the long-term. Building on this idea, many companies have begun implementing a Social Responsibility orientation in order to connect more deeply with customers. The premise is that customers will seek out companies that conducting business in an ethical fashion.
The functions that marketing performs fall under 3 categories: Exchange, physical, and facilitating. Exchange functions are those which promote and enable transfer of ownership of products. These include pricing and promotion (selling, PR, advertising). Physical functions allow for the flow of goods from producer to consumer, which includes the Place (distribution) of the 4 P’s. The physical function takes into account shipping, warehousing, and packaging. Facilitating functions are those actitivies that assist in the execution of the Exchange and Physical functions. Examples includes marketing information processing (research, customer relationship management) and after-sales servicing.
The principal role that marketing undertakes is the management of the 4 P’s of marketing. These include developing products and the firms product portfolios, setting prices, establishing distribution points (place), and stimulating demand through promotional activities. Taken together the 4 P’s are referred to as the marketing mix.
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