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What is marketing?
What is marketed (scope of marketing)?
What is a market (where does marketing take
place, markets and competition)?
Company orientation toward the marketplace
The age of customer capitalism
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Needs and wants
Facilitate Exchange
“Marketing is 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.” AMA, 2008.
Einar Breivik, einar.breivik@nhh.no
07.07.2010
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Marketing as Exchange
Marketing as Tactics
◦ 4 P framework
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Marketing as Value Delivery
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”Sense and respond” Haeckel (2004), not “make
and sell”
Marketing process as any activity which
generates or uses information about customers
to organize and deploy resources for providing
solutions to customer problems (Webster 2002)
and hence…..
Marketing is any business process that gathers
and disseminates information about customers,
guides value creation and delivery with
information about customers, or produces
information evaluated and used by customers.
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What customer value : What is our reason to
be?
Customer expectations (what do customers
want?)
Core competencies (how can we match this?)
Selecting target markets (heterogeneity, not
all customers and firms are created equal)
Einar Breivik, einar.breivik@nhh.no
07.07.2010
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Value-defining processes
◦ What customer value is at the core of our business?
◦ Analyzing market opportunities
 Market research (study of customer needs, preferences, expectations, buying
behavior, etc.)
 Analysis of the firm’s core competencies
 Selecting target markets and positioning
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Value-developing processes
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Product development and product management
Design of distribution channel
Developing pricing strategy
Developing value proposition (communication strategy)
Sourcing strategy, vendor selection
Value-delivering processes
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Managing distributions and logistics
Order-entry, credit, post-sales services
Advertising and sales promotions
Product upgrades and recalls, Applications engineering, Customer training
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What is marketed?
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Goods
Services
Events
Experiences
Persons
Places
Properties
Organizations
Information
Ideas
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The only valid definition of business purpose is to create a
customer.
What the business thinks it is producing is not as important
as what the customers think they are buying; what they
consider to be ’value’ is decisive.
Any business has only two basic functions: marketing and
innovation; all the rest are costs.
It is not enough to entrust marketing to the sales
department.
The aim of marketing is to understand the customer so well
the product or service fits him or her and sells itself.
Marketing is the whole business seen from the point of
view of its final result, that is, from the customer’s point of
view.
“Marketing is too important to be left to
marketing people” Frederick E. Webster
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Markets
◦ A collection of buyers and sellers who transact over
a particular market offering
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Competition
◦ Neoclassical explanation
◦ Resource-Advantage explanation (Hunt & Morgan
1995)
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Perfect competition
◦ Demand is homogenous for every industry’s
products
◦ Consumers assumed to have perfect information
(which also is costless)
◦ Consumers motivated by utility maximization (self
interest)
◦ Firms objective profit maximization
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Role of marketing: ”creators of market
imperfections”
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Reexamines foundations of perfect
competition
◦ Demand is heterogeneous and dynamic within
industries (product classes)
◦ Consumers assumed to have imperfect information
(and obtaining information comes at a cost)
◦ Consumers motivated by constrained self interest
◦ Firms objective superior financial performance
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Role of marketing
◦ Market opportunity analysis (identifying needs
based on customer value, segments)
◦ Selecting target markets
◦ Developing marketing strategies to deliver
customer value
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Production Concept
Product Concept
Selling Concept
Marketing Concept
Societal Marketing Concept
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Idea of mass market
Consumers prefer products that are widely
available and inexpensive
Focus on efficiency (in production)
Typical for growing markets (ex. Industrial
revolution, scientific management)
◦ T-Ford
◦ Refrigerators in their infancy
◦ Calculators
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Quality, performance, innovative features,
enough to sell products?
Defining your business by the product you
sell rather than by what your customer needs
is the classic “Better Mousetrap” trap. Just
because you build it does not mean they will
come.
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Saturated markets, compete for attention
Requires demand stimulation
Role of the customer?
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Marketing today includes the obligation to
examine societal issues as well
Customers have a life after the purchase
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Define business in terms of need satisfied
instead of product made (Levitt, 1960)
Movies
Railroads
Xerox
Coke
Kodak
.
.
Einar Breivik, einar.breivik@nhh.no
07.07.2010
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Managerial capitalism (Berle & Means 1932)
◦ Managers substituted for owners – entrepreneurs
not good CEOs
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Customer capitalism (Martin 2010)
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(Jensen & Meckling 1976, Theory of the Firm:
Managerial Behavior, Agency Costs and Ownership
Structure)
Owners were getting short shrift from professional
managers, who enhanced their own financial well-being
rather than that of the shareholders. This was bad for
shareholders and wasteful for the economy. Hence, CEO’s
had to confirm to the idea of maximizing shareholder
value. Typically you could see arrangements such as
stock-based compensations to align interests of senior
managers and shareholders.
Einar Breivik, einar.breivik@nhh.no
07.07.2010
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Can not simultaneously maximize two different things (shareholder
value and customer satisfaction)
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It is possible to maximize shareholder value given a minimum hurdle for
customer satisfaction and vice versa, but not both
Shareholder maximization
◦ Shareholders have a residual claim on a firm’s assets and earnings
◦ Hence, the value of their shares is the discounted value of all future cash
flows minus payments to other claimants
◦ Since the future is unknowable, potential shareholders must estimate what
that cash flow will be, their collective expectations about the future
determine the stock price
◦ Also, subject to future optimism and pessimism -> Stock markets more
volatile than the earnings of the companies in them
◦ What should managers do?
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Satisfaction maximization
◦ Focus on customer value
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High levels of customer satisfaction grow
shareholder value
Customer satisfaction positively associated
with credit ratings and negatively associated
with debt costs
Customer
Wants +
Needs
R&D
OFFERING
Marketing
Concept
Environment
Product
Segmentation
Positioning
Promotion
Distribution
Service
New
Customers
Satisfaction
Retention
Rate
Competition
Customer
Base
Value of
Customer
Lost to
Competition
Brand
Equity
Value of
The Firm
“On Balance Sheet”
Einar Breivik, einar.breivik@nhh.no
07.07.2010
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Kotler, P. & K.L. Keller: Ch. 1 & Ch. 2
Webster, F.E. (2002): ”The Role of Marketing and
the Firm”, in Handbook of Marketing (eds. B.A.
Weitz & R. Wensley), SAGE, 66-82.
Haeckel, S.H. (2004): ”Peripheral Vision: Sensing
and Acting on Weak Signals Making Meaning out of
Apparent Noise: The Need for a New Managerial
Framework”, Long Range Planning, 37, 181-89.
Hunt, S.H. & R.M. Morgan (1995): ”The Competitive
Advantage Theory of Competition”, Journal of
Marketing, 59(April),1-15
Martin, Roger (2010): ”The Age of Customer
Capitalism”, Harvard Business Review, JanuaryFebruary, 58-65.