Chapter Six ? How do companies decide what products and ...

Author's Note
This Principles of Marketing e-text is my first effort at writing a
textbook. I have tried to gather and record the areas of marketing that
meet two goals. First, I have included the information that is most likely
to be used by a typical marketing student. Second, I have written about
principles of marketing that are true principles, that is, that are less
likely to change fundamentally in the foreseeable future. In choosing
material to cover, I have tried to consider the fact that most people who
learn this material do not have their primary professional responsibility
in marketing. Therefore, I have attempted to focus on material that will be
most helpful to those who will not work primarily in the marketing area. If
you learn this material and are not a marketing person at least it will
help you work more effectively with those who are in marketing and improve
your ability to be a better consumer.
I hope you enjoy your experience with this e-book. As with any project, I
will be trying to continuously change this book to meet the needs of its
users, so please let me know of any suggestions, recommendations you may
have particularly as they apply to your ability to learn and apply the
material presented.
Lexis F. Higgins, Ph.D.
lexishiggins@yahoo.com
Principles of marketing: An applied, collaborative learning approach Table of Contents Chapter One - What is marketing and how does it differ from sales,
advertising, and promotion?
Chapter Two - What is Marketing Management and what do product managers and
marketing managers do?
Chapter Three - How do we identify and understand markets?
Chapter Four - Why do we study buying behavior in Marketing and what have
we learned?
Chapter Five - How companies manage marketing research
Chapter Six - How do companies decide what products and services to market? Chapter Seven - Specific Challenges of Marketing High Technology
Chapter Eight - How is the pricing decision made? Chapter Nine - How do producers get their products and services to their
target customers? Chapter Ten - What are the options for promoting products and services?
Chapter Eleven - Creativity and Marketing
Chapter Twelve - What is the international market and why is it important? Chapter One - What is marketing and how does it differ from sales,
advertising, and promotion? Marketing is one of the most misunderstood and confusing terms used in
business. How would you define it? Think about what you believe marketing
is and write your definition down now: Marketing is: "_________________________________________________ _____________________________________________________________". Save this definition to compare it to other definitions of marketing we
cover later on. Why is the term "marketing" surrounded by confusion? First, the word 'marketing' means very different things to different people
in different industries. For example, a coal producer in Kentucky just
needs to understand what price the local buyer will be paying for the
product and s/he can then plan to 'market' (or just sell) the coal produced
to the local buyer. Second, think about how much different the above
situation is from another case in which 'marketing' must be done. Let's
say that you are a product-marketing engineer at Agilent Technologies and
your Product Marketing Manager has informed you that you will be
responsible for 'marketing' a new product that has been conceptualized by
engineers in the Research and Development (R&D) Department. Finally,
assume a good friend of yours who has invented a new way for people to wash
their car. She has asked you 'to market' her product for her. In all
three of these situations, the product has already been conceptualized and
produced. It won't help the individual marketer at all to consider how the
market will react to the product. In situation one, the coal miner must
just extract the coal from the ground and deliver it to a local coal broker
for sale. In situation two, the product manager at Agilent must first
figure out what the new product will be good for and who might want to buy
it. Finally, in situation three, your friend has already invented the
product; it just remains for you to figure out who the people are who wash
their own car and how to reach them. In all three situations, the marketer
is faced with coming up with a way to sell what has already been produced.
This definition of marketing, unfortunately, is how most people would
define marketing, that is, "Marketing is how an organization or individual
sells its product or service." Thus in this definition, marketing is
relegated to finding and exploiting a market of buyers for the product or
service. But is that how marketing practitioners and people who teach marketing
define it? Let's review some alternate definitions of marketing from the
business literature. The American Marketing Association's definition. The American Marketing
Association (AMA) is the leading organization in the U.S. representing the
academic side of marketing. The organization is comprised of and primarily
impacted by people who teach marketing at the college level. In 1948, the
AMA defined marketing as follows: "The performance of business activities directed toward, and incident to,
the flow of goods and services from producer to consumer or user."
(AMA, 1948). Note that the definition above focuses on the DISTRIBUTION aspect of
marketing and doesn't really include the 'Four P's': Product, price,
promotion, place (distribution). In 1985, the AMA definition was changed to "the process of planning and
executing the conception, pricing, promotion, and distribution of ideas,
goods, and services to create exchanges that satisfy individual and
organizational objectives." (AMA 1985) Compare these two definitions: How are they similar and how do they
differ?
Why do you think the AMA made the change in the definition of marketing? Now, compare the above discussion to YOUR definition of marketing. How do
the definitions differ from yours? How are they similar? Speaking of confusion, type in the key word "marketing" into your favorite
search engine on the internet and see what you find.
The Seven Steps in the Marketing Process
It is natural that people in different situations define marketing
differently. However, we will approach the definition of marketing by
first learning about the seven steps in the process of marketing. While
this process is not always followed, it is important that any student of
marketing understand what steps must be taken to be successful in a
marketing effort. The marketing process can be described in the following
seven steps: A. Understand the market wants/needs of interest
B. Based on relative size and needs of the market, select certain segments
of the market that are of the most interest to you and your organization
C. Thoroughly describe these segments based on their individual needs
D. Create a product or service that will meet the specific needs identified
E. Communicate the concept of the product or service to the targeted
customer in a way that makes sense to the customer
F. Deliver the product or service to the targeted customer in a way that
will be convenient to the customer
G. Solicit feedback from the customer about how your product or service
could be improved to meet the customers' needs even better
This process is applicable to most situations encountered by those wanting
to market a product or service. The process of marketing can be divided
into 'upstream' and 'downstream' activities. That is, steps A through D are
all 'upstream' activities that should be performed before a product
actually exists. Surely, there are many readers who will say, "Wait, this
won't work for me, I am like those people who you described at first, I
already HAVE a product to sell, I just need to find somebody to BUY IT!"
As marketers, we understand that many sellers don't have the option or
input to create a new product or service. However, this e-book is designed
for people who want to do marketing the right way. If you must pick up
the process after steps A, B, and C have already been performed, realize
that some steps have already been done, and you should check to see if they
have been done correctly.
Also note that marketing research plays an integral role in each of these
stages. That is, the organization that is truly focused on customer needs
must be driven by an active research effort. Definition of marketing we will use in this book Based on the seven-step approach to marketing, we will define marketing
as:
"The conceptualization and delivery of customer satisfaction" - the first
part of this definition would be covered in steps A through D in the
marketing process above and the final aspect 'delivery' would be
represented by steps E, F, and G. Of course, in order to deliver 'customer
satisfaction,' one must do customer research, thus step G will provide
feedback into the continuation of the seven-step marketing process over
time. Upstream and Downstream Marketing Activities in the Marketing Process What marketing activities are performed and how they are performed will
have a lot to do with how many choices you have in managing the steps
marketing process and the focus of the organization's marketing effort.
The organization will view the marketing function's responsibilities based
on the history of the organization and its orientation to doing business.
For example, there are several different orientations that organizations
use to a