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Chapter 2: An overview of marketing: history and theory - Coggle Diagram
Chapter 2: An overview of marketing:
history and theory
What is marketing ??
The aim of marketing is to create value for customers in order to capture value from customers in return.
we don't say "create products/services because we can market for (people, experience, etc.)
Marketing is engaging customers and managing profitable customer relationships.
Goals:
attract new customers by promising superior value
keep and grow current customers by delivering value and satisfaction
.
The shift in modern marketing from traditional "blasting" of messages to mass audiences to a more direct, personal, and interactive approach.
Marketers are now using a host of new digital tools—like websites, smartphone apps, blogs, online videos, and social media—to engage consumers directly.
The goal is to integrate the brand into the consumer's life and enrich their experiences
, essentially helping people
"live their brands."
Marketing Defined
Shift in Focus: Marketing is no longer just about making a sale, but about satisfying customer needs.
Ideal Outcome:
Effective marketing which includes understanding needs, creating superior customer value, and proper pricing, distribution, and promotion—should make products sell easily
. As management guru Peter Drucker stated,
"The aim of marketing is to make selling unnecessary."
The Marketing Mix: Selling and advertising are only a small part of the larger marketing mix, which is a set of tools used to engage customers and build relationships.
Broad Definition:
Marketing is a social and managerial process for individuals and organizations to get what they need and want through creating and exchanging value.
Business Definition: Marketing is defined as the process by which companies engage customers, build strong customer relationships, and create customer value.
‘Marketing is the activity, set of institutions, and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners, and society at large.’
(American Marketing Association, 2007)
• Marketing is a management process.
• Marketing is about giving customers what they want.
The Marketing process
Understand the marketplace and customer needs and wants
Design a customer value driven marketing strategy
Construct an integrated marketing program that delivers superior value
Engage customers, build profitable relationships, and create customer delight
Capture value from customers to create profits and customer equity
History of marketing
Founding the Field (1900–1920): Focus shifted from production (economics) to distribution.
Formalising the Field (1920–1950): Marketing separated from economics; growth of consumer goods, supermarkets, and the functional approach (supplying markets, facilitating exchange).
Paradigm Shift (1950–1980): Rise of mass marketing; managerial focus introduced concepts like marketing orientation, segmentation, the 4Ps, and branding.
Fragmentation of the Mainstream (1980–present): Influenced by Porter’s competitive advantage, game theory, and globalisation, leading to the rise of strategic marketing.
Vargo & Lusch (2004, 2008): Evolution of Marketing Logic
Early marketing had a goods-dominant logic, centred on tangible products and transactions.
From the 1950s, marketing management (4Ps) focused on decision-making and customer needs.
In the 1980s, relationship marketing and market orientation emerged.
Later, the field shifted to a service-dominant logic—seeing offerings as ways to create value through services and relationships, where consumers co-create value with firms.
Understanding the Marketplace and Customer Needs
(1) Customer Needs, Wants, and Demands
Needs:
States of felt deprivation (From
physical needs
for food, clothing, warmth, and safety; to
social needs
for belonging and affection; and
individual needs
for knowledge and self-expression.
They are not created they are a part of the human makeup
Wants:
The form human needs take as they are shaped by culture and individual personality.
Ex: An American needs food but wants a Big Mac, fries
Wants are shaped by one’s society and are described in terms of objects that will satisfy those needs.
Demands:
When backed by buying power, wants become demands
The role of the marketer is to bridge the gap between the want and the demand
Companies invest heavily in understanding customer needs and preferences through research, data analysis, and observation, with all employees including top management staying closely connected to customers.
(2) Market offerings---Products, Services and Experience
Market offerings include not only physical products but also
intangible services
like banking, airlines, and hotels. They can also consist of
people, places, organizations, information, and ideas
.
Ex: San Diego’s “Happiness Is Calling” campaign promotes the city’s attractions such as its beaches, bays, nightlife, and pleasant weather to encourage tourism.
Marketing Myopia:
the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products.
they are so taken with their products that they focus only on existing wants and lose sight of underlying customer needs. They forget that a product is only a tool to solve a consumer problem. (fallen in love with the product)
These sellers will be at risk if a new product comes around that serves the customer’s need better/ less expensively The customer will have the same need but will want the new product.
marketers look beyond the attributes of the products and services they sell. By orchestrating several services and products, they create brand experiences for consumers.
Ex: you don’t just visit Walt Disney World Resort; you immerse yourself and your family in a world of wonder, a world where dreams come true and things still work the way they should.
Ex: blackberry (BBM) vs whatsapp
(3) Customer Value and Satisfaction
Consumers choose among many products
based on their expectations of value and satisfaction
.
Expectations: too low won’t attract buyers, too high leads to disappointment. Customer value and satisfaction are essential for strong customer relationships.
Satisfied customers repurchase and spread positive word-of-mouth, while dissatisfied ones switch and complain. Marketers must balance expectations
(4) Exchanges and Relationships
Exchange
is the act of obtaining a desired object from someone by offering something in return. The marketer tries to bring about a response to some market offering.
The response may be more than simply buying or trading products and services.
A political candidate, for instance, wants votes; a church wants membership and participation; an orchestra wants an audience; and a social action group wants idea acceptance.
1975, Bagozzi’s classic article
Restricted exchange:
A direct two-party transaction (e.g., customer and salesperson).
Each party gives and receives something — money for goods/services.
Generalized exchange:
Involves three or more parties.
Benefits flow indirectly between participants.
Example: A department store donates benches to a bus company (for passengers).
Passengers benefit from benches (via the bus company).
Passengers then visit the department store after seeing ads — creating an indirect return.
There is no direct exchange, but a mutual exchange of interests among all parties.
Complex exchange:
A network of interlinked two-way exchanges.
Example: Manufacturer → Retailer → Customer → Consumer.
Each pair engages in reciprocal transactions, forming a multi-level exchange system.
Nature of Exchanges:
Exchanges vary from
immediate and reciprocal (clear goods-for-money transactions)
to ambiguous and delayed (value is exchanged over time).
Exchange can also be viewed as a process, involving multiple participants along a
value chain
, where each adds value before passing the offering to the next group.
Usefulness of Exchange Concepts for Marketers:
Understanding Exchange Type:
Marketers should identify whether an exchange is restricted, generalised, or complex to manage it effectively.
In generalised exchanges, marketers (like the department store in the example)
must consider both monetary and non-monetary benefits—such as improved brand image or public goodwill.
These exchanges can benefit multiple stakeholders, not just customers, which may be valuable for long-term relationships.
Managing Complex Exchanges:
Each party in a complex exchange (e.g., distribution channel) adds value but also costs.
Marketers need to evaluate whether intermediaries add sufficient value compared to their costs.
Direct sales (like buying online) can reduce intermediary costs but may sacrifice certain benefits (e.g., product experience) while offering lower prices and convenience.
(5) Markets
A
Market
is the set of actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfied through exchange relationships.
Marketing isn’t done only by sellers buyers also engage in marketing when they search for products, interact with companies, and make purchases. With digital tools and social media, consumers are now more empowered, making marketing a two-way process.
Designing a Customer Value-Driven Marketing Strategy and plan
Customer Value-Driven Marketing Strategy
marketing management
the art and science of choosing target markets and building profitable relationships with them.
Selecting Customers to Serve
The company must first decide whom it will serve. It does this by
dividing
the market into
segments
(bird-eye view) of customers (market segmentation) and
selecting
which segments it will go after (
target
marketing).
Marketing management isn’t about attracting all customers but about choosing specific groups the company can serve well and profitably. Different brands target different markets (Nordstrom focusing on affluent professionals and Dollar General on budget-conscious families).
*Marketing management involves managing both customers and demand effectively
.*
Choosing a Value Proposition
A company must determine how to serve its target customers by deciding how to differentiate and position itself in the market.
Its value proposition represents the benefits or values it promises to deliver to meet customer needs.
Marketing Management Orientations
Production Concept
consumers will favor products that are available and highly affordable.
Therefore, management should focus on improving production and distribution efficiency. Ex: China
However, it can lead to marketing myopia.
Companies adopting this orientation run a major risk of focusing too narrowly on their own operations and losing sight of the real objective—satisfying customer needs and building customer relationships
Ford in the early 1900s, with its adoption of assembly line manufacturing
Marketing management aims to create strategies that attract target customers and build profitable relationships
.
The key question is which guiding philosophy should shape these strategies.
Product Concept
consumers will favor products that offer the most in quality, performance, and innovative features.
Under this concept, marketing strategy focuses on making continuous product improvements.
However,
Focusing only on products can cause marketing myopia.
Even a superior product won’t sell without effective design, pricing, promotion, and distribution that meet customer needs.
For example, a company might build a better mousetrap, but customers may prefer other solutions like sprays or exterminators.
This approach was first adopted by General Motors (GM) in the 1930s, which gained market share from Ford in the 1930s by offering customers a diversified product line.
The Selling Concept
consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort "
pushing
"
typically practiced with unsought goods
(inside-out) Ex: Life insurance
However, This approach is risky because
it prioritizes short-term sales over building lasting, profitable customer relationships.
It focuses on selling what the company makes instead of meeting market needs, assuming customers will either like the product or forget their dissatisfaction—both of which are weak assumptions.
The Marketing Concept
holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.
A
customer-centered
sense-and-respond philosophy.
The job is not to find the right customers for your product but to find the right products for your customers.
(outside-in)
however, customers don’t know what they want or even what is possible. “Our goal is to lead customers where they want to go
before they know where they want to go.”
The Societal Marketing Concept
holds that marketing strategy should deliver value to customers in a way that maintains or improves both the consumer’s and society’s well-being.
calls for sustainable marketing, socially and environmentally responsible marketing that meets the present needs of consumers and businesses while also preserving or enhancing the ability of future generations to meet their needs.
shared value
, which recognizes that societal needs, not just economic needs, define markets.
The concept of shared value focuses on creating economic value in a way that also creates value for society.
https://drive.google.com/file/d/1EptH8FxYzvsSBz9xqSHz0VT27eqFUFa_/view?usp=sharing
Preparing an Integrated Marketing Plan and Program
A company’s marketing strategy defines which customers it will serve and how it will create value for them
. To deliver this value, it develops an integrated marketing program using the marketing mix, or the four Ps
Measuring Marketing Orientation (Kohli)
Purpose:
To create a framework (MARKOR) for assessing a firm’s marketing orientation—how customer-focused and responsive it is.
Three Core Components:
Intelligence Generation:
Collecting information about customer needs and market trends.
Multiple departments should contribute to this process.
Example: Meeting customers regularly to understand future needs.
Intelligence Dissemination:
Sharing market information across departments.
Example: Holding interdepartmental meetings to discuss market developments.
Responsiveness:
Acting on gathered intelligence by implementing marketing programmes.
Example statement: “Our business plans are driven more by technological advances than by market research.”
Agreement with this reflects a product orientation rather than a marketing orientation.
Managing Customer Relationships Capturing Customer Value
Engaging Customers and Managing Customer Relationships
Customer Relationship Management
is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, engaging, and growing customers
Customers choose the company that provides
the greatest perceived value
the difference between the benefits and costs of an offer compared to alternatives. However, they base their decisions on perceived value.
Customer satisfaction
The extent to which a product’s perceived performance matches a buyer’s expectations.
Companies seek to
delight
customers
by keeping realistic promises and then exceeding them
. Delighted customers tend to stay loyal, repurchase, and actively promote the brand “customer evangelists”
Customer Relationship Levels and Tools.
Companies build customer relationships at different levels based on their target market. For mass, low-margin consumers, brands like Tide use advertising, product experience, and social media to engage customers. For high-margin markets, companies form close partnerships with key clients, such as P&G working directly with major retailers.
To strengthen relationships, firms use loyalty and frequency programs that reward repeat customers—like Hilton’s Honors program, which allows guests to earn points
Customer Engagement and Today’s Digital and Social Media
Customer-engagement marketing
Making the brand a meaningful part of consumers’ conversations and lives by fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community.
Thus, marketers are now embracing not only customer relationship management but also
customer-managed relationships
in which customers connect with companies and with each other to help forge and share their own brand experiences
Empowered Consumers
Modern consumers are better informed, connected, and influential. They share their opinions and experiences widely, shaping brands’ reputations. Therefore,
companies must shift from marketing by intrusion (traditional ads) to marketing by attraction—creating valuable and engaging content that draws people in
.
Consumer-Generated Marketing
exchanges created by consumers themselves—both invited and uninvited— by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers
Partner Relationship Management
Working closely with partners in other company departments and outside the company to jointly bring greater value to customers.
Capturing Value from Customers
Creating Customer Loyalty and Retention
the aim of customer relationship management is to create not only customer satisfaction but also customer delight.
Keeping customers loyal makes good economic sense. Loyal customers spend more and stay around longer. Research also shows that it’s five times cheaper to keep an old customer than acquire a new one.
Customer lifetime value
The value of the entire stream of purchases a customer makes over a lifetime of patronage.
Growing
Share of Customer
Share of customer The portion of the customer’s purchasing that a company gets in its product categories.
banks want to increase “share of wallet.”
Companies want to not only create profitable customers but also “own” them for life, earn a greater share of their purchases, and capture their customer lifetime value
Building Customer Equity
Customer equity
The total combined customer lifetime values of all of the company’s customers.
The more loyal and profitable the customers, the higher the customer equity.
It’s often a better indicator of long-term success than sales or market share, which only show past performance, while customer equity points to future potential.
Companies should treat customers as valuable assets and aim to maximize customer equity — but not all customers are worth the same level of investment.
Strangers:
Low Low Don’t invest in them; make profit per transaction only.
Butterflies:
High Short-term Enjoy profitable but brief relationships; don’t try to make them loyal.
True Friends:
High High Build long-term relationships; invest to retain, delight, and grow them.
Barnacles:
Low High Try to increase profitability; if not possible, reduce service or drop them.
https://drive.google.com/file/d/1gRglXTDyo8vYxJCMfNhgyArkau97CRMu/view?usp=sharing
The Changing Marketing Landscape
We look at five major developments
The Digital Age: Online, Mobile, and social media marketing
Digital and social media marketing Using digital marketing tools such as websites, social media, mobile apps and ads, online video, email, and blogs to engage consumers anywhere, at any time, via their digital devices
Social Media Marketing
Online social media act as digital spaces where people connect, share information, and express moments from their lives.
For marketers, these platforms are ideal for real-time marketing — engaging consumers in the moment by linking the brand to:
🌍 Real-world events
💖 Personal occasions
🎗️ Social causes or current happenings
🔥 Trending topics
Mobile Marketing
Mobile marketing is the fastest-growing digital marketing platform because smartphones are:
📱 Always with consumers
🎯 Highly personal and precisely targeted
⏰ Always on and accessible anywhere
The Changing Economic Environment
There has been a shift in mindsets to become more thrifty and mindful, frugal consumption
Companies in all sectors adjusted their strategies to highlight practicality, durability, and value. Ex: Target "expect more pay less"
The Growth of Not-for-Profit Marketing
Even nonprofit and government organizations rely on marketing to raise awareness, attract funding, and inspire public engagement — proving that marketing is vital in every sector.
Rapid Globalization
Marketers are rethinking not only their customer relationships but also their relationship with the global marketplace.
Globalization has made almost every business — large or small — part of a worldwide network of trade, competition, and opportunity.
The marketing world is no longer local. Companies must think globally — whether they operate in a small town or across continents — because competition, customers, and opportunities now cross borders.
Sustainable Marketing-the call for more environmental and social responsibility
Marketers today must align their strategies with social responsibility, ethics, and environmental sustainability.
Consumers now expect brands to create value in ways that are good for people, communities, and the planet.
So, what is marketing ?? Pulling it together
The expanded marketing process emphasizes creating and capturing value. Modern marketing also requires the use of digital technologies, global awareness, and sustainable, socially responsible practices.
It begins with understanding customer needs and designing a customer-driven strategy through segmentation, targeting, differentiation, and positioning. The strategy is executed via an integrated marketing program—the 4 Ps—that delivers superior value. Firms then build strong customer and partner relationships to create satisfaction and loyalty. In return, they capture value in the form of profits and customer equity.