What does a marketing department do? Marketing departments serve a variety of functions. First and foremost, marketers are responsible for keeping an eye on what people need and want, and then communicating these needs and desires to the rest of the organization. Marketing departments help develop pricing strategies and promote the products benefits to persuade customers that their firms’ products are the best. In addition, marketing departments are responsible for distributing products to customers at places and times most suitable to them. Lastly, they establish meaningful relationships with customers to gain their loyalty and ensure repeat business. Figure 12.1 outlines these functions. In this chapter, we will present some basic aspects of this important corporate function, including marketing strategies, the marketing mix, and consumer behavior. We will start by looking at how marketing has changed over time.

Figure 12.1

Functions of a Marketing Department

How has marketing evolved over time? Although the very functions of marketing have remained consistent over time, the nature of marketing has evolved over five general eras (see Figure 12.2):

Figure 12.2

The Evolution of Marketing

1. The production era

2. The sales era

3. The marketing era

4. The societal marketing era

5. The customer relationship era

Although each concept experienced a peak in popularity during a specific time period, today’s most successful marketing campaigns are a sophisticated combination of the best of each of the concepts.

What was the production era? From the industrial revolution until the 1920s, most companies focused solely on production—thus the production era evolved. The prevailing mind-set was that a good-quality product would simply sell itself, with little need to focus on customer desires. Such an approach worked for many organizations during this era because of strong demand and a limited supply of products. Whenever demand exceeds supply, it creates a seller’s market. This type of economic climate may have motivated Henry Ford to remark that his Model T cars could be painted “any color, so long as it’s black.”3

What was the sales era? From the mid-1920s through the early 1950s, technological advances accelerated production. In the first part of the era, however, the United States was in the middle of the Great Depression, during which unemployment was nearing 30 percent, and people bought only what they absolutely needed. Supply far exceeded the demand for most products, so the competition for customers was intense. Businesses focused on selling existing products and used aggressive sales tactics to “push” them, including door-to-door salesmen who sold everything from hairbrushes and vacuum cleaners to encyclopedias. Companies also began advertising heavily in all available forms of media. Thus began the sales era. During this era, marketing generally took place only after a product was developed and produced. Today, many people associate marketing with selling or advertising; however, it has become much more than that.

What was the marketing era? By the 1950s, production continued to expand more quickly than the demand for goods and services. In addition, there were more companies producing similar products competing for a buyer’s attention. This created a buyer’s market and the start of the marketing era. Soldiers returning from World War II were getting married, starting families, and willing to spend their money on goods and services. Consumers were beginning to tire of the “hard-sell” tactics companies were using to force them to buy products they didn’t necessarily want or need. Eventually, businesses began to realize that simply producing quality products and pushing them onto customers through clever advertising and promotional campaigns didn’t guarantee sales.

Companies needed to determine what customers wanted and then produce products that met those wants and needs as opposed to producing products and then trying to convince customers to buy them. The marketing concept changed the focus from finding the right customer for a product to producing the right product for a customer and doing it better than the competition. As you can see in Figure 12.3, the marketing concept also focuses on aligning all functions of the organization to meet or exceed the customer’s needs by providing superior products and customer service. In addition, the marketing concept focuses on satisfying customers over the long term.

Figure 12.3

The Marketing Concept

General Electric (GE) was one of the first companies to implement this new marketing strategy. GE’s 1952 annual report stated that GE would provide a product the customer wants at the price the person is willing to pay and have it delivered to him or her at the right time and location. To do this, GE’s marketing team had control of the product through all phases, including planning, production scheduling and inventory control, as well as sales, distribution, and servicing.4

The marketing concept requires a company to constantly take the pulse of changing customer preferences—sometimes even before they are expressed or known by the customer—and quickly adapt the products before competitors do. Companies such as Apple have had great success following this philosophy. Apple was a master of anticipating customers’ desires and fulfilling them with its range of iPods, iPod accessories, iPhones, iPads, mobile apps, and the Apple Watch.

Does marketing also take into consideration what is best for society? Companies began to realize that they must also consider the long-term interests of society. Societal marketing, an offshoot of the marketing concept and corporate social responsibility, began in the late 1960s and early 1970s. It challenged companies to profit by working for the benefit of both consumers and society. The Body Shop, a skin and cosmetics company, sells products made with only 100 percent natural ingredients. The company also actively does business with highly skilled but small-scale farmers, craftsmen, and rural cooperatives.5 Patagonia’s 2013 Black Friday campaign encouraged shoppers to rethink consumerism. Their “Don’t Buy This Jacket” advertisement articulated the actual environmental cost of producing the company’s best-selling jacket, and concluded, “There is much to be done … don’t buy what you don’t need.”6 Other industries are influencing healthy behavior and discouraging unhealthy practices, such as the new health-conscious menu additions at fast-food restaurants.

Is there a marketing philosophy that encourages customer loyalty? During the marketing era, firms focused on offering customized products to acquire customers. But in the late 1990s, the customer relationship era began, and organizations began focusing on continuing to satisfy customers over the long term by pleasing them after the sale. The result has been the creation of customer relationship management (CRM), the process of establishing long-term relationships with individual customers to foster loyalty and repeat business (see Figure 12.4). CRM combines customer service and marketing communications to retain customers to stimulate future sales of similar or supplementary products. For example, most stores send out e-mails with coupons and information about their sales and promotions or encourage folks to follow them on Facebook to receive promotions or deals. Amazon.com uses its massive database to automatically offer suggestions for future purchases to customers based on purchasing history or browsing interests. CRM enables a company to offer products tailored to specific customers’ needs and desires.

Figure 12.4

Customer Relationship Management

Customer loyalty programs revolve around learning as much as possible about customers and their shopping behaviors so as to create a meaningful one-on-one interaction with each of them. Often a firm’s sales force gathers specific customer information to create a customer database outlining their wants, needs, and preferences. Other companies use CRM software to personalize communications to their customers.

How do not-for-profit organizations market their products? Many not-for-profit organizations also have an interest in marketing. Rather than a product or a service, these organizations look to market an event, a cause, a place, or a person. Not-for-profits, such as the Sierra Club and the Red Cross, rely on marketing to raise awareness of and increase donations to their causes. Countries, states, and cities run marketing campaigns to attract tourists and businesses to their locations. You may be familiar with the public service advertising campaigns run by the Ad Council, such as the “Buzzed Driving Is Drunk Driving” campaign.7

Is it possible to market a person? Political parties market candidates for elected office. Agents market their celebrity clients on television shows, cereal boxes, and magazine covers. We market ourselves when we interview for a job. You may have marketed yourself for acceptance to your college or university.

Regardless of what is being marketed, the essence of marketing remains the same: delivering value to customers and managing customer relationships. The only differences between marketing practices are the stakeholders involved and their objectives.

How do sellers benefit from marketing? A company benefits by successful marketing through increased sales. As long as sales revenue exceeds production and marketing costs a profit is generated. Profits enable the organization to not only sustain itself but also to prosper and continue to provide value to customers.

How does society benefit from marketing? Society in general benefits from successful marketing because scarce resources are more efficiently channeled into the production of goods and services most desired by society. The market mechanism ensures that resources, such as raw materials and labor, flow into the production of the goods and services in greatest demand and away from low-value products with declining demand.

How do investors and employees benefit from marketing? Investors receive financial rewards for investing in organizations with good marketing departments that help increase a firm’s success. Consequently, when investors earn higher returns, more investment capital flows to those businesses. Employees benefit from successful marketing because their jobs and livelihoods are more secure. In addition, new job opportunities are created as production expands to satisfy the growing demand.

How does marketing benefit consumers? As consumers, we have many needs—food, clothing, housing, medical care, and transportation, to name a few. Marketers respond to needs in an effort to satisfy them, but sometimes they also can create needs. Subway and Quiznos go to great lengths to convince you to buy their sandwiches to satisfy your need for food, just as Toyota and Ford try to convince you to purchase their vehicles to fulfill your transportation needs. When needs are satisfied, utility is created.

Are there different types of utility? There are five kinds of utility that marketing provides to customers (see Figure 12.5):

• Form utility. When raw materials are used to form a product and that product takes on a form that is useful to the customer, such as a swimsuit made from fabric and supplies.

• Task utility. When someone performs a service for someone else, such as when a seamstress alters a swimsuit.

• Time utility. When a business makes a product available at a time when it is most needed, such as having the swimsuit available in time for summer.

• Place utility. When a product is made available for purchase at a place that is convenient for buyers, such as when the swimsuit is stocked and placed on display at your local department store.

• Ownership utility. When a store transfers ownership to the customer by selling the swimsuit.

Figure 12.5

Marketing Generates Five Types of Utility for Customers

How is a product’s value measured? Whenever a business satisfies a need or a want, it creates value for a customer. But how do customers measure value? The value of a product is the ratio of a product’s benefits to its costs. Benefits far exceed costs for a high-value product. A low-value product has few benefits in relation to its costs. Successful marketers find ways to increase the value customers get—by either increasing the real or perceived benefits of a product or minimizing customers’ costs by reducing product price or maximizing the consumer convenience. Organizations that offer the highest-valued products win the most customers and thrive. Those organizations that offer low-value goods and services lose market share or go out of business entirely.

What are the criticisms of marketing? Over time, certain social shortcomings have emerged from marketing techniques. Some of the questionable tactics include price gouging (setting a price that is widely considered unfair), high-pressure selling, the production of shoddy or unsafe products, planned obsolescence (the manufacturer plans for a product to becomes outdated after a period of time), poor customer service, the misuse of customer information, confusing and deceptive labeling, and hidden fees and charges.

Let’s consider some examples of the costs to society of questionable marketing:

• Misuse of personal information. Marketing often involves the collection of customers’ personal information. Companies track what people do online and conduct marketing surveys to determine the marital status, annual income, age, sex, race, and other characteristics of current and prospective customers. Information brokers collect and sell user data for targeted ads and market research. The Internet has become a hotbed for this type of activity. Many of us feel violated when this personal information is not adequately protected or is resold without our permission.

• Hidden fees. Many of us feel taken advantage of when we must pay hidden fees and charges not included in the advertised price. Products that require additional parts or shipping and service fees often make customers upset.

• Consequences of purchase. Unscrupulous marketers sometimes take advantage of people who are not knowledgeable about certain features of a product. To what extent is it reasonable to hold buyers responsible for being aware of the consequences of their purchases? This is especially important when purchasing expensive or sophisticated goods and services, such as a car or taking out a mortgage on a home. Similar concerns emerge when marketing is directed at children.

The many criticisms of marketing should not be taken lightly. They help explain the strong support for laws protecting consumers and other regulations governing business behavior. Too often the social costs of marketing stem from unethical business practices. As we discussed in Chapter 3, all companies should have a code of ethics and policies in place to curb unethical behavior within their organizations. However, not all companies do, which allows for questionable products to be marketed or questionable marketing tactics to be used. On its website, the AMA has a posted a statement of ethics that contains guidelines on ethical norms and values for marketers.