[1]Marketing is the management process responsible for identifying, anticipating and satisfying customer
requirements profitably.
[2] The commercial functions involved in transferring goods from producer to consumer.
Marketing activities are numerous and varied because they basically include everything needed to get a
product off the drawing board and into the hands of the customer. One look at our Marketing Mall
Directory shows that the broad field of marketing includes activities such as designing the product so it
will be desirable to customers, using tools such as marketing research and pricing, and promoting the
product so people will know about it, using tools such as public relations, advertising, marketing
communications, and exchange with the customer (through sales and distribution).
It is important to note that the field of marketing includes sales, but it also includes many other functions.
Many people mistakenly think that marketing and sales are the same -they are not.
"Marketing is a social and managerial process by which individuals and groups obtain what they need
and want through creating and exchanging products and value with others." (Kotler & Armstrong 1987)
The mission of marketing is satisfying customer needs. That takes place in a social context. In developed
societies marketing is needed in order to satisfy the needs of society's members. Industry is the tool of
society to produce products for the satisfaction of needs.
There are broad and narrow definitions of marketing. Different types of approaches to marketing are
needed when analysing the possibilities to improve marketing.
Marketing has a connective function in society. It connects supply and demand or production and
consumption. At micro-level, marketing builds and maintains the relationship between producer and
consumer.
At business unit level, marketing can have an integrative function. It integrates all the functions and
parts of a company to serve the markets.
The narrowest definition is to see marketing as a function of a business enterprise between production
and markets taking care that products move smoothly from production to customers.
2.2. The societal function of marketing
In modern society production and consumption are apart from each other. Marketing connects them. From
the societal point of view, marketing is a philosophy which shows how to create effective production
systems and consequently prosperity.
Business is a subsystem of society, which has both a social and an economic role. Thus, a company must
operate in a way that will make possible the production of benefits for society and, at the same time,
produce profits for the company itself. (Davis, K. et al. 1980) The role of marketing in society means also
responsibilities. In addition to economic and social responsibility, ecological responsibility is nowadays
emphasized. According to some definitions, environmental responsibility is part of social responsibility.
Improvement of marketing is related to the changing emphases of economic, social and environmental
responsibility. Good paster and Matthews (1982) analyse three patterns of
thought which can be distinguished for a company's social responsibility: 1. The invisible hand; 2. The
hand of government; and 3. The hand of management.
1. The invisible hand view (promoted by e.g. Milton Friedman) concludes that the only social
responsibilities of business organizations are to make profits and to obey laws. Free and competitive
market-place will ensure the moral behaviour of companies. The common good is best served when
individuals and organizations pursue competitive advantage.
2. The hand of government view (promoted by e.g. John Kenneth Galbraith) concludes that companies
are to pursue rational and purely economic objectives. It is the regulatory hand of the law and political
process which guides these objectives towards common good.
3. The hand of management view (presented by Goodpaster & Matthews) would put the responsibility of
a company's actions into the hands of the company itself. It is concluded that the moral responsibilities of
an individual may be projected into an organization, and that the concepts of an individual's responsibility
and a company's responsibility are largely parallel. Therefore, organizations should be no less or no more
responsible than ordinary persons.
The development of marketing is clearly related to adopted values which may be seen in the patterns of
thought mentioned above.
Marketing was born out of a need to take better into consideration the demand factors in production
planning. The function of marketing is to channel information of consumer needs to the production and
satisfaction of needs to consumers. The basic power of marketing is the aspiration to produce and sell only
that kind of products which have demand. Marketing integrates the whole company to serve this demand.
Marketing aims at effective production systems, where information is transmitted effectively between
production and consumption.
Customer Equity
Consider the issues
Facing a typical brand manager, product manager, or marketingoriented CEO:
How do I manage the brand? How ill my customers react to changes in the
product or service offering? Should I raise price? What is the best way to
enhance the relationships with my current customers? Where should I focus my
efforts? Business executives can answer such questions by focusing on
customer equity—the total of the discounted lifetime values of all the irm’s
customers. A strategy based on customer equity allows firms to trade off
between customer value, brand equity, and customer relationship
management. We have developed a new strategic framework, the Customer
Equity Diagnostic, that reveals the key drivers increasing the firm’s customer
equity. This new framework will enable managers to determine what is most
important to the customer and to begin to identify the firm’s critical strengths
and hidden vulnerabilities. Customer equity is a new approach to marketing
and corporate strategy that finally puts the customer and, more important,
strategies that grow the value of the customer, at the heart of the organization.
For most firms, customer equity is certain to be the most important
determinant of the longterm value of the firm. While customer equity will not
be responsible for the entire value of the firm (eg, physical assets, intellectual
property, and research and development competencies), its current customers
provide the most reliable source of future revenues and profits. This then should
be a focal point for marketing strategy. Although it may seem obvious that
customer equity is key to longterm success, understanding how to grow
and manage customer equity is more complex. How to grow it is of utmost
importance, and doing it well can create a significant competitive advantage.
There are three drivers of customer equity—value equity, brand equity, and
relationship equity (also known as retention equity). These drivers work
independently and together. Within each of these drivers are specific, incisive
actions or levers, the firm can take to enhance its overall customer equity
EXECUTIVE
B r i e f i n g
Customer equity is critical to a firm’s longterm success. We developed a strategic
marketing framework that puts the customer and growth in the value of the customer at
the heart of the organization. Using a new approach based on customer equity—the total
of the discounted lifetime values of all the firm’s customers—we describe the key drivers
of firm growth: value equity, brand equity, and relationship equity. Understanding these
drivers will help increase customer equity and, ultimately, the value of the firm finally,
relationship equity becomes crucial in situations where customer action is required to
discontinue the service. For many services (and some product continuity programs),
customers must actively decide to stop consuming or receiving the product or service (e.g.,
book clubs, insurance, Internet service providers, negative option services). For such
products and services, inertia helps solidify the relationship. Firms providing these types of
products and services have a unique opportunity to grow relationship equity by
strengthening the bond with the customer. As with value and brand equity, the importance
of relationship equity will vary across industries. The extent to which relationship equity
will drive your business will depend on the importance of loyalty programs to your
customers, the role of the customer community, the ability of your organization to
establish learning relationships with your customers, and your customer’s perceived
switching costs. Answer the questions in the Customer Equity Diagnostic framework to
see how important relationship equity is to your customers.
A New Strategic Approach
We have now seen how it is possible to gain insight into the key drivers of customer equity
for an individual industry or for an individual firm within an industry. Once a firm
understands the critical drivers of customer equity for its industry and for its key
customers, the firm can respond to its customers and the marketplace with strategies that
maximize its performance on elements that matter. Taken down to its most fundamental
level, customers choose to do business with a firm because (a) it offers better value, (b) it
has a stronger brand, or (c) switching away from it is too costly. Customer equity provides
the diagnostic tools to enable the marketing executive to understand which of these three
motivators is most critical to the firm’s customers and will be most effective in getting the
customer to stay with the firm, and to buy more. Based on this understanding, the firm can
identify key opportunities for growth and illuminate unforeseen vulnerabilities. In short,
customer equity offers a powerful new approach to marketing strategy, replacing product
based strategy with a competitive strategy approach based on growing the longterm value
of the firm.
• Introduction
• Demand: Wants, Needs, and Red Meat
• Demand Change!
• Back to the Curve
• Supply: You Want It, We Got It
• Change Supply!
• Equilibrium: Mr. Demand, Meet Mr. Supply
• It's Not Just a Good Idea, It's The Law
In a market economy, everything has a price, and buyers—those with the demand—always want the price
to be lower. Meanwhile, sellers—those with the supply—want the price to be higher.
In general, the lower the price of a given product or service, the greater the quantity people will be willing
to buy. The higher the price of the product or service, the lower the quantity that people will be willing to
buy. People buy more hamburgers than caviar, more costume jewelry than diamonds, more Chevrolets
than BMWs.
Let's assume that a large supermarket chain sells beef (a fairly safe assumption). Let's further assume that
it has experimented with various prices and has gathered the following data, here arranged into what
economists call a demand schedule.
EconoTalk
A demand schedule shows the quantity of a product that people will buy (or demand) at a series of
specific prices. A demand curve shows the same information in graphic form.
The demand schedule shows the quantity of a product that people will buy (demand) at a series of specific
prices. Holding all other things equal, the lower the price, the greater the quantity of beef people will buy.
Conversely, the higher the price, the lower the quantity of beef people will buy.
First, we are assuming that the price of beef is rising or falling and that the prices of all other goods are
not. That is, we are assuming that the price of beef is rising or falling relative to the price of other goods.
We make this assumption because if, say, the price of chicken were rising or falling, this might not be the
demand schedule for beef. (I'll explain why in a moment.)
Second, we are assuming that no factors other than price are affecting demand. There have been no reports
of Mad Cow disease in Kansas, which would surely lower demand for beef. There are no new scientific
studies telling us to eat more beef because it is rich in iron and makes us healthier, which would increase
demand. Assuming that all other things remain equal may be unrealistic (actually, it is unrealistic), but it
lets us analyze the effect of price on demand.
If we plot the data—prices and quantities—from the demand schedule on a chart, we get a picture of the
demand for beef as shown in Figure 4.1. The demand curve slopes downward because as the price
increases, the quantity of beef demanded decreases. A downward sloping demand curve holds true for
most—but not all—types of products and services. There's an inverse relationship between price and
demand: The higher the price, the lower the quantity demanded. The lower the price, the higher the
quantity demanded.
It may seem obvious that people will buy more of a product when the price decreases and less when the
price increases. However, they do so for two reasons. First, many people who never buy a product because
it is too expensive will buy it if the price falls far enough. For instance, many seafood lovers never buy
lobster because it's just out of their price range. If the price of lobster fell substantially, they would start
buying it. Second, many people who already buy a product will buy more of it if the price decreases. If the
price of lobster fell substantially, lobster lovers would buy it more often.