Marketing: Market Activity

Marketing (from English marketing, «market activity») — an organizational function and a set of processes for creating, promoting and delivering a product or service to customers, and for managing relationships with them for the benefit of the organization . More briefly, marketing is an activity aimed at satisfying market needs for the purpose of extracting profit . In a broad sense, the purpose of marketing is to «identify and satisfy human and social needs»

Definitions of marketing

In modern literature there is a huge number of definitions of marketing. Let us cite a few of them:

Marketing is a type of human activity aimed at satisfying needs and wants through exchange.

— Philip Kotler, «Principles of Marketing», short course, 2007. — 656 p.

Marketing is a social process aimed at satisfying the needs and wants of people and organizations by ensuring free competitive exchange of goods and services that are of value to the buyer, etc.

— Jean-Jacques Lambin, «Strategic Marketing. A European Perspective» — St. Petersburg: Nauka, 1996. — 589 p.

Marketing, in its broad understanding, is a socio-managerial process through which individuals and groups of people obtain what they need by creating products and exchanging them.

— Golubkov E. P., «Marketing Research: Theory, Methodology and Practice». — Moscow: Finpress Publishing House, 2005. — 464 (339) p.

From a legal standpoint, marketing is the management of the market by suppliers and buyers of commodity products (including potential suppliers and buyers) with regard to the paid transfer of ownership rights to it.

— Prof., Doctor of Economics O. N. Dmitriev

Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services through exchange that satisfies the goals of individuals and organizations.

— American Marketing Association (AMA)

Marketing is a market philosophy, strategy and tactics of thinking and acting for participants in market relations: not only producers and intermediaries in commercial activity, but also consumers, as well as suppliers, practicing economists, scholars, entire organizations, right up to government bodies

— A. P. Pankrukhin, «Marketing»: a textbook for students majoring in 061500 «Marketing»/ Guild of Marketers. — 3rd ed. — Moscow: Omega-L, 2005. - 656 p.

History

In 1902, the first marketing courses were taught at US universities: Edward Jones — University of Michigan, Simon Litman — University of California, Berkeley, George M. Fisk — University of Illinois^[10].

In 1926, the National Association of Marketing and Advertising was created in the USA. On its basis the American Marketing Society was formed, and in 1973 this organization was renamed the American Marketing Association — AMA. Later, similar associations and organizations appeared in Western Europe, Canada, Australia and Japan.

Marketing subsequently developed within management as a synthesis of economic theory and the economics of individual sectors, gradually becoming its new philosophy. In the 1940s—1950s marketing merged with management theory, forming a new, market-oriented theory of management (so-called marketing management). Alongside sales, economists included in it a detailed analysis of the market, and then in the 1960s—1970s added programs for building long-term economic relationships with consumers (the CRM concept) and market segmentation. Later, methods of consumer lending, after-sales service and others were developed.

A new stage of marketing is proclaimed as strategic management based on the marketing approach, in which part of its functions are transferred to the strategic level^[11].

In the USSR, in the mid-1970s, a Marketing Section was formed under the USSR Chamber of Commerce and Industry. The All-Union Association was formed in 1990 and was renamed the All-Russian Marketing Association after the collapse of the USSR^[12].

Basic concepts of marketing

Below are the basic concepts of marketing:

• Need (Need) — a feeling of a perceived lack of something.
• Want (Want) — a need that has taken a specific form in accordance with the cultural level and personality of the individual.
• Demand (Demand) — a want backed by purchasing power.
• Product (Product) — anything that can satisfy a want or need and is offered to the market with the aim of attracting attention, acquisition, use or consumption.
• Exchange (Exchange) — the act of obtaining a desired object from someone by offering something in return.
• Transaction (Transaction) — a commercial exchange of values between two parties.
• Market (Market) — the set of existing and potential buyers of a product.
• Market segment (Market segment) — a large, clearly defined group of buyers within a market with similar needs and characteristics, as distinct from other groups in the target market.
• Suppliers (Suppliers) — subjects of the marketing system whose function is to provide partner organizations and other companies with the necessary material resources.
• Competitors (Competitors)— legal entities or individuals rivaling, i.e. acting as a rival to other business structures or entrepreneurs at all stages of organizing and conducting business activity.
• Intermediaries (Distributors) — legal entities or individuals who help manufacturing organizations promote, deliver to consumers and sell their products.
• Consumers (Consumers) — legal entities, individuals or their potential groups ready to purchase goods or services available on the market, and possessing the right to choose a product, a seller, and to set their own conditions in the buying and selling process^[13].
• Assortment (Assortment, range) — the composition of a firm's products sold, by group, kind, type, grade and brand. It is distinguished by breadth (the number of product groups) and depth (the number of models and kinds of brand within each group).
• Trademark (Trade mark) — a sign, symbol, words or a combination thereof that helps consumers distinguish the goods or services of one company from another.
• Competitive advantages (Competitive advantages) — factors determining a company's superiority over competitors, measured by economic indicators such as additional profit, higher profitability, market share, sales volume.
• Macroenvironment (Macroenvironment) — factors that influence a company's microenvironment. These include: demographic, economic, natural, scientific-technical, political and cultural factors.
• Company microenvironment (Microenvironment) — factors closely connected with the company and affecting its ability to serve its target customers. It includes: the company itself, intermediaries, suppliers, competitors, target consumers and contact audiences^[14].

Main tasks, goals and functions of marketing

One of the leading theorists on management issues, Peter Drucker, put it this way: «The aim of marketing is to make selling superfluous. Its aim is to know and understand the customer so well that the product or service fits him and sells itself».

— «Principles of Marketing», Philip Kotler.

The main tasks of marketing:

• Studying the market as such, studying consumers, the structure of firms, products, and analyzing the internal environment of enterprises.
• Researching, analyzing and evaluating the needs of real and potential consumers of the firm's products in areas of interest to the firm.
• Providing marketing support for the development of the firm's new goods and services.
• Analyzing, evaluating and forecasting the state and development of markets in which the firm operates or will operate, including research into competitors' activities and management of the quality and competitiveness of finished products.
• Organizing material and technical supply.
• Forming the firm's assortment policy.
• Developing the firm's pricing policy, developing a mechanism for changing prices under changing conditions.
• Participating in shaping the firm's market behavior strategy and tactics, including developing pricing policy.
• Selling the firm's products and services.
• Marketing communications.
• Service maintenance.
• Organizing incentives for buyers and consumers.

Marketing has 4 blocks of complex functions:

• the analytical function,
• the production function,
• the sales function,
• the management and control function.^[15]

Some specialists, in addition to these 4 functions, add one more: the forming function (persuading and stimulating)^[16].

The place of marketing among other organizational business processes

Marketing and management have similar terminology, but the meaning of the terms often differs. The reason for this is that marketing interacts with the external environment of business organizations, whose participants are independent and act in accordance with their own interests and goals. In contrast, management interacts with the internal environment, all elements of which are objects of control. Therefore, in management, leaders can purposefully direct and control the actions of subordinates, while in the external environment marketers consider influence and the development of interest among the audience to be the main type of impact. In the external environment, the source of decisions is the market situation, while in the internal environment it is the decisions of managers. Managers manage the organization's costs, i.e. what they can influence directly. Marketers, on the other hand, manage the organization's profit, which they influence indirectly, by offering consumers products in demand. In the internal environment, competition is perceived as a struggle, while in the external environment competitors focus on adapting to consumer demands.^[17]

Marketing methods

All the tasks and functions described above are carried out using the following marketing methods:

• analytics;
• surveys;
• observations;
• planning and forecasting;
• conducting A/B testing;
• developing pricing policy;
• informational methods;
• PR and advertising methods;
• personal selling;
• consulting;
• loyalty programs;
• propaganda

Marketing mix (marketing complex) 4P Theory

Elements of the marketing mix (4p)

Marketing mix — a set of marketing tools affecting consumer demand^[18][19], as well as the combined and coordinated use of these tools^[20].

Marketing theory and practice are based on the marketing complex. In its classical form, the marketing mix consists of four elements that make up different kinds of marketing policy: product, price, distribution and promotion policy. At the same time, the marketing complex represents a minimal algorithm for developing a marketing plan and analyzing a business's marketing activity.^[18]

According to one version, the term «marketing mix» was introduced in 1953 by Neil Borden, referencing the work of James Culliton. The now-canonical 4P (product, price, place, promotion) was proposed by Jerry McCarthy in 1960^[21][22].

4P

• Product (product, also called «the good»^[18]) — anything that can satisfy some need (physical objects, services, people, enterprises, activities, ideas). As soon as a product is priced and enters the market, it becomes a good. Therefore the term «good» is used interchangeably with the term «product». Components included in the «product» element:
  • the good as such (offered for sale and possessing quality characteristics that satisfy buyers' needs)^[18]
  • the trademark (a symbol that in consumers' minds is associated with a product or firm) — a stereotype of the perception of a product or firm that has been artificially instilled in consumers' minds^[18]
  • packaging (a tool used for targeted messaging to people and for stimulating action toward purchasing the product)^[18]
  • services (benefits/conveniences — either sold separately or provided in connection with the purchase of the product without a direct link to it)^[18]
  • warranty (an indicator of a product's conformity to the consumer properties declared for sale)^[18][19]
  • after-sales service (warranty service — a marketing tool for building trust in the product and encouraging its purchase) — intended to respond to buyers' awareness of such availability (stimulates purchase of the product) and to satisfaction from using the product (stimulates repeat purchases of the same brand)^[18]
• Price (price) — price is understood as the amount of money requested for a product or service, or the sum of benefits and values that a consumer is willing to sacrifice in exchange for acquiring a particular product or service. Components included in the «price» element:
  • pricing (the process of determining the price of a good at which it is offered for sale)^[18]
  • discount (a tool for encouraging buyers to purchase a product — consists in lowering the price of the product offered for sale)^[18]
• Place (place, also called «distribution»^[18], «distribution channel»^[18]) or methods of distribution or bringing the product to the consumer — the main content of the marketing mix element «bringing the product to the consumer» is choosing the optimal scheme for delivering the product from producer to consumer, its physical implementation (organizing transportation, storage, cargo handling), as well as after-sales (service) support for consumers. Components included in the «price» element:
  • distribution channels (movement, distribution) — the trajectory of a product's movement from producer (supplier) to end consumer. The length of a channel is characterized by the number of intermediaries between supplier and consumer. There is usually a correspondence between distribution channels and market segments. Marketing's tasks include managing channel efficiency, understood as their throughput capacity.^[18]
  • the distribution process — the process of moving a product from supplier to consumer. The distribution process is determined by the terms and parameters of the supply contract (agreement): the method and type of delivery, batch size, terms and method of payment, delivery frequency. Marketing's tasks include reconciling the needs and wants of all participants in distribution channels with the aim of achieving maximum economic benefit. The distribution process is handled by marketing logistics.^[18]
• Promotion (promotion) — a set of various activities for conveying information about a product's merits to potential consumers and stimulating their desire to buy it (advertising, PR, personal selling, sales promotion)^[23]). Components included in the «price» element:
  • direct (personal) sales (making a sale through direct communication between seller and buyer)^[18]
  • advertising (promotion of a product or service that is carried out not personally by the seller, but is paid for by them) — creates and promotes a favorable image of the product or service^[18]
  • publicity^[18] (PR, public relations) — activity that creates a favorable image of a firm or trademark. As a rule, methods and tools are used that are not provided for by the Russian Federation's Law «On Advertising»^[18]
  • sales promotion - processes that are not direct sales, advertising or publicity, and are aimed at creating incentives for employees' work and/or counterparties' activity, such as methods of moral and material encouragement of employees and counterparties, motivating them to achieve and exceed planned sales targets. For example, bonuses, gifts, benefits, certificates and letters of appreciation.^[18]

Development of the 4P theory

Sometimes other elements starting with the letter P are included in the marketing complex.

In 1981, Booms and Bitner, developing the concept of marketing in the services sector, proposed supplementing the marketing mix with three additional Ps^[24]:

• People (people) — all people directly or indirectly involved in the process of providing a service, for example employees and other customers.
• Process (process) — the procedures, mechanisms and sequences of actions that ensure the provision of a service.
• Physical evidence (physical evidence) — the environment or setting in which a service is provided, as well as any tangible objects used in the course of service or conveying certain information to the consumer.

Based on the marketing mix, models such as «4A», «4C» and «4D» also emerged, as well as Michael Porter's «Five Forces» model.

Jagdish Sheth drew marketers' attention to the main criteria that guide a consumer's choice: awareness, acceptability, affordability and accessibility.

Robert Lauterborn proposed the 4C concept, according to which the four «Ps» of the supplier company correspond to the four «Cs» of the consumer [Customer, cost, convenience, communication].

Thomas Gad became the founder of the 4D branding theory, in which D stands for Dimension (dimension). There are four dimensions in this model: functional, social, mental and spiritual.

Marketing management concepts

A marketing concept represents a scientifically grounded plan (project) for organizing an activity in general and/or marketing activity in particular, based on a specific guiding idea, an effective strategy, and the necessary operational tools for conducting business in order to achieve the results defined by the enterprise's strategic plan^[25], or more simply, it is a set (a unified complex) of the basic views and methods of doing business aimed at achieving a company's strategic goals: satisfying the customer and making a profit.

Traditionally, marketing theory distinguishes the following marketing concepts, which developed as economic conditions changed:

• The production concept (the production concept) holds that consumers will favor products that are widely available and affordable in price, and consequently management should concentrate its efforts on improving production and increasing the efficiency of the distribution system.
• The product concept (product concept) holds that consumers will show interest in products offering the highest quality, best performance characteristics and features, and consequently the organization should focus its energy on continuously improving the product.
• The selling concept (selling concept) holds that consumers will not buy the firm's goods in sufficient quantities unless it undertakes sufficient efforts in the sphere of sales and promotion.
• The marketing concept (marketing concept) holds that the key to achieving the organization's goals is determining the needs and wants of target markets and ensuring the desired satisfaction more effectively and productively than competitors. The focus of attention in the marketing concept is not the product but the firm's customers, with their needs and wants. In doing so, the firm earns profit through creating and maintaining customer satisfaction.
• The societal marketing concept (societal marketing) holds that the firm's task is to establish the needs, wants and interests of target markets and to ensure the desired satisfaction more effectively and productively (than competitors) while simultaneously preserving and strengthening the well-being of the consumer and of society as a whole.^[26]

This concept was formed relatively recently, after it was concluded that the pure marketing concept was insufficient from the standpoint of environmental protection, natural resource scarcity and a number of other socio-ethical problems. Ultimately, the pure marketing concept does not address the problems of possible conflicts between the buyer's needs and their long-term well-being. The societal marketing concept requires a balance of three factors: the firm's profits, buyers' needs, and the interests of society.

• The relationship marketing concept (relationship marketing) — the core idea of relationship marketing is that the object of marketing management becomes not an aggregate transaction, but relationships (communications) with the buyer and other participants in the buying and selling process.

«Relationship marketing — the practice of building long-term, mutually beneficial relationships with key partners interacting in the market: consumers, suppliers, distributors, in order to establish lasting, privileged relationships».

— P. Kotler^[27][28]

• The international marketing concept (international marketing) — a concept that provides for systematic, continuous, active work in the international market at various stages of promoting products and services to the consumer. A distinguishing feature of international marketing is a full and clear orientation toward the foreign consumer, a striving to satisfy their needs and wants^[29].
• The holistic marketing concept^[30] is based on the planning, development and implementation of marketing programs, processes and activities with regard to their breadth and interdependence. Holistic marketing recognizes that everything matters in marketing and that a broad, integrated approach is often necessary. Holistic marketing includes four components: relationship marketing, integrated marketing, internal marketing and socially responsible marketing. Thus, holistic marketing is an approach that attempts to recognize and balance the various competencies and complexities of marketing activity.
• The brand management concept — a new direction in marketing management theory — brand management^[31].

Marketing research

Marketing research (marketing research) — the systematic and objective identification, collection, analysis, dissemination and use of information to improve the effectiveness of identifying and solving marketing problems (opportunities).

The marketing research process (marketing research process) — a set of actions consisting of six stages, each of which has its own task, the solving of which is necessary to conduct marketing research. They include problem definition, developing an approach to solving the problem, formulating a research plan, conducting field work, preparing and analyzing data, and preparing and presenting a report^[32].

• Problem identification research (problem identification research) — research undertaken to help identify non-obvious problems, either existing ones or those that may arise in the future. This type of research provides information regarding the marketing environment and helps diagnose the problem.
• Problem solving research (problem solving research) — research undertaken to help solve specific marketing problems.

Marketing Information System (Marketing Information System — MIS) — a formalized procedure for obtaining, analyzing, storing and disseminating on a regular basis the information necessary for those responsible for making marketing decisions (provides information continuously, rather than only on the basis of research conducted from time to time).

According to generally accepted views, four interested parties are involved in the marketing research process: the marketing researcher themselves, their client, the respondent, and the public.

The marketing research process includes the following stages and procedures^[33]:

• defining the objectives and goals of the research:
  • identifying the need to conduct marketing research,
  • defining the objectives,
  • formulating the goals of the marketing research,
• developing a research plan:
  • selecting methods for conducting marketing research,
  • determining the type of information required and the sources for obtaining it,
  • determining methods for collecting the necessary data,
  • developing data collection forms,
  • developing a sampling plan and determining the sample size,
• implementing the research plan:
  • data collection,
  • data analysis,
• interpreting the results obtained and communicating them to management (preparing and presenting a final report).

Data collection methods used in marketing research can be classified into two groups: quantitative and qualitative.

Qualitative research (qualitative research) is unstructured and exploratory in nature, based on small samples, and may use popular qualitative methods such as focus groups (group interviews), word association (asking respondents to state their first impressions associated with the object under study) and in-depth interviews (one-on-one interviews that explore respondents' thoughts)^[32].

Quantitative research involves conducting various surveys based on the use of structured closed-ended questions, answered by a large number of respondents. The main task of quantitative research is to obtain a numerical assessment of the state of the market or respondents' reaction to a certain event. Such methods include door-to-door, street and telephone surveys, expert surveys, hall tests (testing and evaluation of a product concept, product, packaging, advertising concept, etc.), home tests (testing products in conditions close to real life), desk research (collection and analysis of secondary information), retail audits (analysis of assortment, prices, distribution and merchandising materials at retail outlets) .

Types of marketing

Depending on the stages of marketing's evolution, its spheres of application, and the nature of demand in the market for goods and services, such characteristics of marketing as kinds, forms and types of marketing are distinguished.

G. L. Bagiev and A. N. Asaul, in the book «Organization of Entrepreneurial Activity», give the following classification of marketing^[13]:

Depending on the type of activity of an individual person or organization, there can be: organizational marketing, individual personal marketing (ego-marketing), place marketing^[35], social marketing and others.

By sphere of application, consumer, industrial, investment marketing and services marketing are distinguished.

By sphere of exchange or territorial characteristic, national (regional, local) marketing and international (export, global, world) marketing are most often distinguished.

Depending on the purpose of the exchange and the results of a given activity, commercial and non-commercial marketing are distinguished.

However, individual schools of marketing (American, Scandinavian, Western European and others) classify marketing differently.

Below is a classification of marketing depending on the state of demand in the market and on market coverage.

Depending on the state of demand in the market

• Conversional marketing is applied under conditions of negative demand, when a significant part of the market does not accept the product and may even pay a certain price to avoid using it. The task of conversional marketing is to change consumers' negative attitude toward the product. The tools of conversional marketing are: reworking the product, more effective promotion of it, and price reduction.
• Stimulational marketing is associated with the existence of goods and services for which there is no demand due to complete indifference or lack of interest among consumers. A stimulational marketing plan should take into account the reasons for such indifference and identify measures to overcome it.
• Developmental marketing is associated with emerging demand for goods (services).
• Remarketing revives demand during a certain period of decline in the life cycle of goods or services.
• Synchromarketing is used under conditions of fluctuating demand. For example, seasonal consumption goods.
• Maintenance marketing is used when the level and structure of demand for goods fully correspond to the level and structure of supply.
• Counter-marketing is used to reduce demand that, from the standpoint of society or the consumer, is regarded as irrational (for example, alcoholic beverages, tobacco products).
• Demarketing is used to reduce demand for one's own product in a situation where demand exceeds supply and there is no possibility of increasing production volume. Such results can be achieved, for example, by raising the price of the product, reducing the volume of advertising, or reducing promotional efforts. The goal of demarketing (unlike counter-marketing) is not to destroy demand for the product, but merely to reduce it, balancing it with production capacity.
• Personal marketing — activity undertaken to create, maintain or change the public's behavior toward a specific person
• Innovation marketing — marketing activity aimed at creating market-oriented innovations. Innovation marketing represents a set of mechanisms for identifying goods and technologies that possess new properties and are aimed at creating, expanding or stabilizing the market for new goods and services. The level of novelty of an innovation in innovation marketing determines its innovative potential (competitiveness).
• Network marketing — a form of conducting non-store retail trade through personal selling.

Depending on market coverage

• Mass marketing presupposes orientation toward the widest possible range of consumers without regard for differences between them. (I produce what everyone needs). The company's goal is to set low prices, since the costs of mass production and promotion decrease.
• Concentrated (targeted) marketing — orientation toward a specific segment, trying to satisfy its needs as fully as possible (goods for newlyweds, funeral services). Advantages: the fullest possible satisfaction of needs, used by small companies. Disadvantages: the segment may unexpectedly shrink, limiting the company's possible growth.
• Differentiated marketing — a striving to capture a large share of the market as a whole while offering several varieties of the same product, differing in their consumer qualities, that can satisfy the needs of many segments (a dairy company, products of varying fat content, cheeses, curd cheese, yogurts). Advantages: satisfaction of needs.

Methods of analysis (marketing models)

Marketing models are used not only for marketing analysis, but also for communication between the marketing department and other departments: