This Chapter is aimed to serve as the general introduction to this thesis, reviewing the essence and modern concept of marketing and establishing the connection to online marketing concepts.
“Marketing – 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” (P. Kotler, 2005 p. 6)
What is to understand under the term “Marketing”? Many wrongly consider it to be solely sales and advertising. Truth is, sales are only the tip of the marketing iceberg and one of its numerous modern concepts.
Marketing appeared as a respond to the need to provide more close control over the sales management of the enterprises. Formation of marketing as a science started at the beginning of XX century as a subject in leading US universities, making the main focus on commerce and advertising. The result of practical implementation of marketing theory was the creation of the marketing department in large enterprises to conduct marketing research and provide services.
The modern concept of marketing implies a wide range of functions, along with sales and advertising, targeted on a deeper understanding of the cause and gaining of effective result. The chart of the core marketing concepts (P. Kotler, 2005 p. 6), shown below, illustrates the way all the marketing concepts are interlinked between each other, forming the closed circle, the general concept of marketing.
Figure : "Core marketing concepts"
1.1.1Needs, wants and demands
“Human needs – a state of felt deprivation” (P. Kotler, 2005 p. 8)
Maslow’s hierarchy of needs identifies 5 major groups of needs: psychological, safety and security, social, esteem and self-actualization, prioritized from low to high, as illustrated on the figure below. It is expected, that a human will first satisfy low-level needs, as psychological, safety and social, before satisfying high-level needs as esteem and self-actualization. (N. Capon, 2007 p. 96)
When a need it is not satisfied, it is usually eliminated. Therefore, a conclusion can be made, that people who have means to satisfy a need will do that, whereas people who don’t have the means will eliminate the need to fit to available resources.
Nevertheless, a choice is a result of complex interaction of cultural, social, personal and psychological factors. Some of the factors can be influenced and this is what a marketer can use to develop and evaluate the product, establish its distribution and sales promotion in a way to gain the strongest response from the target audience.
Figure : "Maslow's Hierarchy of Needs"
“Human wants – the form that a human need takes as shaped by culture and individual personality” (P. Kotler, 2005 p. 8)
To gain sufficient results an organization should constantly ask a question “what makes our customers behave the way they do”? People have a narrow amount of needs but almost an unlimited amount of “wants” they expose. And the specific of “wants” is evolving, under the influence of market expansion and appearance of more and more objects arousing interest. Nevertheless, people have to choose products corresponding to their financial abilities and balance the price – quality (or satisfaction) ratio. This is where a “want” turns into demand.
“Demands – human wants that are backed by buying power” (P. Kotler, 2005 p. 8)
Consumers can rank various consumption possibilities, determining their preferences for getting the best bundle offered for the amount of money they have. (Varian, 2010 p. 34)
1.1.2The market offering
People’s needs, wants and demands imply the existence of the offering to satisfy it.
“Market offer – some combination of products, services, information or experiences offered to a market to satisfy a need or want” (P. Kotler, 2005 p. 9)
If to look down on the theory of microeconomics, the market demand is dictated by the market price of the product or the bundle of products a consumer wants. Therefore, if the price on the desired product goes up, demand goes down and the other way round. Market offering or supply is linked to demand inversely, meaning that supply will grow with the growth of the price on the market, whereas demand will decline. The market price is set in the equilibrium point between demand and supply.
Not only products are considered as marketing market offering, also services, activities or benefits that are intangible and do not result in ownership of anything can be included. So, not making a mistake of just selling a product or service, a marketer is promoting a complete solution or experience for customers. (P. Kotler, 2005 p. 9)
“Customer value – the customer’s assessment of the product’s overall capacity to satisfy his or her needs” (P. Kotler, 2005 p. 10)
In other words, customers do not buy products; they are more interested in the solution the product will bring to an existing problem. For example, one trend in retail marketing in grocery business is category management, implying the challenge to manufacturers to prove to the retailers that brands add to the value of the category. If to put it very simple: the manufacturer makes potato crisps; the retailer merchandises salty snacks, when the customer just buys lunch. (G. Hooley, 2004 p. 24)
This leads us to the next point: customer satisfaction – the personal opinion of the product’s performance in comparison to the expectations. If the experience from the product is below the stated expectations, a customer feels dissatisfaction and the other way round. The perceiving of the product performance is very subjective, but if the customer is satisfied, he is more likely to repeat the purchase and tell others about the good experience. (P. Kotler, 2005 p. 10)
1.1.4Exchange, transaction and relationships
“Exchange – the act of obtaining a desired object from someone by offering something in return” (P. Kotler, 2005 p. 10)
Marketing as a matter occurs when people satisfy their needs through the process of exchanging a medium of exchange to the object of desire.
“Market – the set of all actual and potential buyers of a product or service” (P. Kotler, 2005 p. 11)
This is the finalizing concept, bringing the circle together. From this point of view, marketing is a working process on or with the market, the main target of which is to satisfy customers’ needs and wants.
If the entrepreneur paid enough attention to discovery and investigation of customers’ needs, development of the product, settlement of the appropriate price and establishment of the stable distribution channels, the sales should conduct. Then where is the main focus? The definition of marketing stated above implies marketing’s contribution to organization and its demands.
Modern successful companies have one common distinctive feature – they are very customer-oriented and strongly committed to marketing. It is essential, as even the very best, innovative and quality product will not gain success if it is not bringing superior value and high level of satisfaction to the customers. Therefore, customers are one of the most important components of the marketing process – creating value and satisfaction for the customers is considered to be the basis of modern marketing.
“Today, marketing must be understood not in the old sense of making a sale – ‘telling and selling’ - but in the new sense of satisfying customer needs.” (P. Kotler, 2005 p. 6)