You would be shocked now to understand that in 2015 not all companies have adopted marketing concept as the leading business philosophy. It is sort of shameful not to have marketing orientation nowadays. Marketing is trendy, marketing specialists are on demand, marketing departments are emerging. Managers at least will not sacrifice their dignity to actually admit they have heard what marketing is but don’t have a clear idea of its functions, and they may be managing a marketing oriented company, but may as well not. It is somehow imposed to think that marketing and the marketing perspective became somewhat standard within business functions. The matter of fact is, only fraction of the businesses that are out there have adopted fully or at least to dominant over other concepts extent the marketing concept and approach in defining how they achieve competitive advantage.
A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. The notion of competitive advantage is highly influenced by Michael Porter’s seminal book Competitive advantage (1985) and was further developed by Hamel and Prahalad in their book Competing for the future (1994). The knowledge from both is incorporated in the various articles, most prominently in the Marketing Strategy section.
In fact in the majority of businesses marketing is left somewhat supplementary to the core business functions of manufacturing, finance, sales. Managers see marketing as a function to support company’s sales, rather than sales as an integral part of marketing. Furthermore managers and regular employees, and society as a whole see marketing as simply sales, advertising and promotion. Which are in fact, just fractions in the field of the modern marketing. On the other hand being simultaneously well and widely acknowledged and somewhat marginalized and neglected on the table where decisions are made marketers get even more furious in demanding their worth to management. And doubt it not, it is in fact the case, truly successful businesses have marketing concept as a corner stone to their philosophy regardless whether they have or don’t a huge marketing department. Marketing philosophy may simply lie in the culture of their organization, management and processes. Above all marketing is a philosophy, way of thinking, that capsulate in creating values and beliefs among organization and shapes its culture. But it is not the only business philosophy, we would say that the successful business philosophy and hence culture depends on many different aspects: to start from the business capabilities, the type of goods, type of industry and market, the external environment, the nature of business transaction and exchange, managerial style and so on. However the purpose of this particular paper is to show different concepts in contemporary business. And to show managers where to put emphasis, so they create a balanced mix that is most suitable for their business. We do not see marketing as the only or the most important value creator or source of competitive advantage, but we do see it as an additional maybe not exploited enough source of competitive advantage. We do saw many managers that thought understanding marketing is something they naturally possess and marketing seen marketing as something companies certainly employ. And we do saw these companies fail or disappear altogether from the market. They remain or become too internally focused, too arrogant, too ignorant or just unlucky to survive.
To make it more vividly clear, so one could actually realize that his organization may well be closer to other concepts rather than marketing conception, we put the main business philosophies on a graph. The horizontal axis defines internal or external orientation. In other words orientation towards the company or towards the market. All concept are discussed for both – their positive and negative impact.
Production Concept
Companies that adopt this concept put production and manufacturing at the heart of their business models. Usually their main goal is economies of scale which will reduce the costs and maximize profits. Their main concern is how to reduce the costs. Product design and quality may be neglected. This concept is adopted by many manufacturers in the commodity sector. It may well be utilized by business in the raw materials sector. There is one very important assumption that has to be true so this concept let alone may lead to competitive advantage and it is demand surplus supply. For example a wheat producer, may concentrate on the production of the wheat given the fact he has a guaranteed market and everything manufactured will be realized. But, the real problem comes if demand isn’t bigger than supply. In this case the company has to think of better ways to gain advantage and win customers.
Product Concept
A product oriented company will focus mainly to design and manufacture high quality, highly functional and reliable products that are superior to competitors’ products. The product concept has its fantastic examples of success. Its roots are linked to marketing, as the product and product decisions are central to marketing. Furthermore recent trends in strategic marketing start to somewhat revert their view and promote internal orientation for some of the strategic decisions. We will also be promoting these strategic theories of core competences, resource-based-view, so beware. And if you think about it the product concept has nothing wrong in it assumptions. It promotes innovation and high quality. There are many successful businesses that had the product concept embedded in their culture, the brightest example Apple, which during the years came up with many star products. But it wasn’t until they adopted the marketing philosophy as another pillar of their business so they became such a success. In fact every company that manufactures a product or is designing a service should be somewhat product oriented to an extent that it improve its product or services, strive for innovation and seek excellence in quality. We believe every business should pass through that stage. However the product concept alone leads to a deadly trap for each business. The biggest drawback laying in the notion of marketing myopia. We have a special paper on that subject, but at the briefest the problem is that product oriented company become too preoccupied with the product itself rather than with customers’ needs and wants. They tend to define competitors as companies producing the same product; customers are segmented and targeted based on different products in the product line. Product substitutes or disruptive innovations are hardly anticipated and the business is less prepared for such anomalies in the industry. Developing strategic options is harder. Many of the products never reach the market. Many customers’ related aspects such as perceived value, price tolerance, buyer behaviour, customer preferences remain mysterious. The product concept we shall say is necessary but isn’t sufficient ingredient to the successful business model.
The Sale Concept
This is probably the concept where the most companies reside. Once the good or high quality products are there, the company employs skillful people to sell them. Traditional marketers shall point out all the negatives associated with this particular concept. Companies that employ the selling concept focus on the existing products and through means of selling and promotion seek high profits through sales volume. Aggressive sales may lead to pushing customers too hard to buy things that they don’t actually need or will not satisfy their needs. The sale alone is in the center of the business culture, customers and even production are neglected. Products that are most competitive in terms of price and ease of sale are promoted, regardless of the impact on the future. Company reputation may be harmed. Companies are seen as pure profit generators that disregard social and customers norms or concerns. Marketing intelligence exists but collected informally, in a non-structured manner and could be easily manipulated. Strategic options have short term implications, company competitive advantage is latent. These are all the damaging effects of pure sale concept adopted.
Steve Jobs gives the finger to its rival IBM in what was the most famous war in hi-tech in the past decade
However we believe that selling is the ultimate business function. Such satanistic view upon sales and sale concept is unfair. Of course every extreme is dangerous. But well blended sales competence is a huge source of competitive advantage. Great example is IBM in their war with Apple. When IBM’s sales competencies and techniques (amongst other factors) paved the way to IBM PC and Microsoft success story that for the latter continues today. Furthermore personal selling is focal in the marketing concept and for many B2B companies it is the main media of communication with the customers. Sales people convey information in both directions, they communicate companies values, product quality, form positioning perceptions, and in the same time, gather intelligence for the market, competitors, industry. So we insist that a sale is the ultimate function of every business. But to avoid all the negatives the sale concept is simply not enough.
The Marketing Concept
The marketing concept promotes external orientation of the company. The company sees survival, competitive advantage and profitability through customer satisfaction. Customers are at the pivotal place. The whole business culture upholds the notion of the customer as the king, the most important stakeholder in the company. Marketing is seen as an integral part, if not leading part in strategy formulation. Market research is seen as important investment, marketing data as a source of competitive advantage. The company resources and current state is analysed and evaluated. The market and the Industry are also subject to an ongoing analysis. Different marketing tools are used to help managers better understand the present and predict the future. Company mission and vision statements are developed. The marketing mix is prepared for the different products and services. Markets are segmented, targeted and products are positioned. Product and services are branded; banding is seen as source of competitive advantage. Integrated Marketing Communication is developed as function of creating and communicating the value of the products or services to the customers. Personal selling, advertising, PR and other tools of the communication mix are devoted to support realization of the company`s product and form perceptual concepts in customers. Buying behaviour, decision making, loyalty, satisfaction, quality perception, value are seen as important concepts in understanding customers.
In fact pretty significant things happen within an organization in it adoption of the marketing concept. Usually, these happen gradually, there isn’t many purely production or product or sales oriented companies, all naturally if necessary of course tend to move towards more customer orientated business culture. Simply because there are very few monopolistic or oligopolistic structures out there. The fact is the lesser the competition, the easier for the business management to remain or to become internally orientated.
So the whole concept of marketing is fueled by the increased competition and supply exceeding the demand. Which is one of the many things marketing is accused of, is exactly promoting consumerism, for the sake of the purchase and corporate profits. Marketing is accused for developing fake wants and desires and respectively fake value. Furthermore, marketing is seen as the main obstruction for product development and innovation. Customers are extremely unlikely to envision break through innovation, the steam engine, the electric motor, the telephone, Ford`s model T, Walkman, iPhone, and many other innovation happen despite the market, not inspired by it. However it is unfair to blame marketing for suppressing innovation, to the contrary innovation is promoted. The notion of customer satisfaction implies on continual persistent developing of particular and new products. The tricky part is, marketing intelligence will reproduce itself amongst competitors, and hence uniqueness of breakthrough ideas is very unlikely. We have a special article devoted to innovation and marketing orientation.
Another major problem of marketing and contemporary business as a whole of course is pushing consumerism for the sake of profit. Let start with advertising pollution, on television, outdoor and so on. Encouraging purchases is seen negatively, and there are important environmental and ecological factors to be taken into consideration, as we tend to wastefully use our resources. Just one note, and its Apple again, it is a great company, but they would be very happy if everyone buys new iPhone every year, which isn’t very ecological considering the amount of precious metals included in the phone and the energy spend to mine and produce them. Planned obsolescence is standard across many industries. The furious pursuing of profits and high return on investment has plagued companies and marketing is also to be blamed – from BP Gulf of Mexico oil spill, through the numerous acres of destroyed tropical forest from Palmolive, to Nike sweatshops, businesses and marketing are blamed for total disregard of the social welfare. Recently marketing theories put a solid emphasis on social responsibility, ethics and environmental issues. The positive sign is that marketers recognize these problems and as they demand for substantial influence on decisions they also recognize their responsibility.
Societal Marketing Concept
Allegations on Nike sweatshop practices include exploiting child labour force, paying less than minimum wage, poor working conditions and other.
Provoked by the illnesses of the classical marketing concept, the social marketing concept is making its way through. The idea is, that unlike typical marketing which places centrally customers, customer value and customer satisfaction, the societal marketing companies will add customer and societal welfare as well. So far we have seen only fade attempts, mainly by big corporations, to integrate the concept in their business. Ten years ago it was mainly implemented through corporate social responsibility, but it was implemented as something remote to the core business. Which left companies being as “antisocial” as usually in their value generating processes, and using corporate social responsibility as PR. Now we see real attempts from companies to actually make their factories least impactful for the environment, develop ecological products, and put social welfare of their workforce and suppliers before corporate profits. Professor Michael Porter is one of the pioneers of that new business philosophy; he claims that purpose of the corporations must be redefined as creating shared value, not just profit. We wouldn’t to dig deeper, of course there is a whole section devoted on corporate social responsibility, ethics, and strategy as shared value.
RESOURCES:
Hamel, C., and Prahalad, C., K., (1994), “Competing for the future“, Harvard Business School Press
Jobber, D. (2010), Principles and Practice of Marketing, 6th edition, New York: McGraw-Hill Higher education
Porter, M., E., (1985), “Competitive advantage: creating and sustaining superior performance”, Free Press
Levvit, T. (1960), Marketing Myopia, Harvard Business Review, July-August 1960
