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This report highlights the concept of sustainable approach to marketing, i.e. green marketing and tries to understand the constraints if any, for marketers to align with green marketing while developing marketing strategies. In its approach, the report introduces the various eras of marketing to relate profitability of organisations with consumer behaviour. It then goes further to explain service dominant logic and relationship marketing, which is the current era or marketing and relates social responsible behaviour of consumers to marketing approach of organisations. The report finally makes a conclusion and recommendation to marketers in their approach for development of profitable marketing.
EVOLUTION OF MARKETING -
Here we are looking at the evolution of marketing to understand how consumer behaviour, organisational objectives and thus the marketing constraints have changed over time. This will also help us understand that every era saw the consumer behaviour change and thus the approach to market products and services. Hence, marketing has had different constraints in every era. It can also be inferred that organisations by and large have always looked at marketing as a tool to deliver value to its consumers in a profitable manner. Any commercial organisation cannot exist without being profitable; hence this objective has not changed over the eras. What really has changed is the approach to marketing, given the constraints and change in consumer behaviour in each of these eras.
Marketing with its existence today seems to be a fairly modern phenomenon, despite the fact that its roots go back into the nineteenth century. Evolution of marketing can be classified into four different eras -
Production Oriented: The main focus of companies in this era was to reduce the cost of production. Companies adopted the strategy of lowering manufacturing costs and sharing the benefits by offering the goods at lower prices to customers. Unfortunately, chaotic economic conditions from late 1920s through the 1940s caused failure to many companies who have adopted production-oriented technique which resulted in further evolution in this era.
Sales Oriented: In this era the prime focus of the companies was on sales of the goods produced by them. They adopted various selling techniques to increase the awareness and hence chances of selling the goods to potential customers. This approach was developed by the prevailing economic conditions then. Due to the downturn in the economic conditions and a steep fall in the disposable income of consumers the sales of the companies started falling with current marketing strategy and the further evolution took place.
Consumer Oriented: Post World War II firms started realising the need to understand which products they should manufacture to meet the consumer requirements. In the beginning of 1960's many firms started adopting this customer oriented marketing strategy and such firms were called as marketing company. In such companies marketing department used to set the agenda for the whole firm. This approach suggests that firms can attain a profitable position by satisfying consumer needs which can be achieved by four P's product, pricing, promotion and placing. In current economic conditions some thought of taking this concept one step further by creating a long term relationship with their customer to gain a profitable position which gives birth to the next era.
Relationship Oriented: In Relationship marketing organisation built a long-term relationship with its existing customers in order to retain them and promote the repeat purchase. Philip Kotler (1997), points out that the cost of acquiring a new customer is approximately five times the cost of retaining an existing customer satisfied. Relationship marketing helps building a mutually profitable condition for both firm as well as the customer by increasing the customer loyalty and hence gaining a repeat purchase from an existing customer.
SERVICE DOMINANT LOGIC (SDL) AND RELATIONSHIPS -
The concept of Service dominant logic was introduced by Stephen Vargo and Robert Lusch in 2004 in an award winning article of Journal of Marketing entitled "Evolving to a New Dominant Logic for Marketing". As per Vargo and Lusch, service is the dominant logic for marketing. The most appealing thing about this concept is that it reaches back to a reference point which has been common in all different eras of evolution - the consumer need.
In contrast to the old marketing logic (which largely focused on separating producer from consumer to achieve maximum profit) Service Dominant Logic (SDL) focused on creating a co-relation between the producer and the consumer. Not only between consumers and producers, SDL also takes into consideration the relationship or value created by a supplier and any other network partner, as they all collectively co-create a value for the consumer through a process. S-D logic defines service as the use of core competencies of a firm such as skills and knowledge through various processes and goods for the benefit of consumers. As per this concept the organisational and societal objectives can be achieved by satisfying consumer requirements.
This unique combination of firm capabilities and consumer needs creates a long term customer loyalty for the organisation which helps it achieve the competitive advantage. In current market scenario it is much easier and profitable to maintain existing relationships and derive more value out of them than acquire new customer base. This has also been proved by the results of various research and analysis done on this subject. While one time customers are highly volatile subjected to immense competition in every industry, the relationship customers are far more likely to have a greater loyalty as they are prepared to pay that premium product price provided they get a worthwhile service for the premium price paid. New customers are less profitable. Advertising and sales promotion costs have to be spent to generate sales leads and produce trial purchases. This raises the marketing expenses associated with attracting, qualifying, and serving new customers. New customers also generally buy less because they are in evaluation stage and have not yet fully committed themselves to the business or its products. This lowers both the annual revenue and the margin produced by each new customer. (Roger J. Best, 2005, p. 14)
Here service dominant logic plays an important role as it focuses on creating a value to the consumer in terms of services offered by the organisation. Service dominant logic adopts a symmetric exchange of information both across the organisations and consumers also within the organisation between different departments and groups (internal customers). The concept of symmetric exchange of information focuses on sharing all the necessary and relevant information with the other entity which could help them make a better and well informed decision. As per the current global market conditions, symmetrical exchange of information becomes as essential part of global networking because any organisation which is not transparent and trustworthy in terms of its services will automatically be driven out of the system. This concept also suggests a fair treatment at the same level to both the entities involved in the transaction.
This aspect of service dominant logic suggests that there should be a more openness in sharing the relevant information with the consumer about any service offered to the consumer. This is in turn will create high potential of customer loyalty towards the services provided by the organisation. Retaining a customer is more cost effective way of increasing revenues rather than spending on sourcing new customers. Marketing strategy focusing on existing customer base rather than new acquiring new one is known as Defensive marketing strategy. This strategy permits a company to produce most of the company's revenue without investment in new customers. There is another type of marketing which can be referred as offensive marketing which totally focuses on investing in acquiring in new customers. It basically uses the tools of four P's which are Product, placing, pricing and promotion. It focuses on increasing the frequency of purchase by consumers. This strategy works on attracting the dissatisfied customers of competitors. In the current business scenario organisations are more inclined towards the defensive marketing which uses the basic concept of service dominant logic and customer relationships.
For example - MBNA America is a Delaware-based credit card company that in the early 1990's became concerned with customer dissatisfaction and defection. All three hundred employees of the firm got together to work on the problem and develop methods to deliver better customer service to enhance customer satisfaction level. At the time, MBNA America had a 90% customer retention rate. After a continuous superior customer servicing and high levels of customer satisfaction and retention they could only raise customer retention to 95%. This 5% increase may seem to a very insignificant increase, but its impact on the profits of the firm was a sixteen-fold increase. This helped moving up the ladder of industry ranking rapidly from a 38th position to 4th. Hence their marketing strategies in accordance to customer behaviour approach and retaining existing customer paid off in increasing tremendously high profitability. (Roger J. Best, Market-Based Management, 2005, p. 12)
With increase in better value creation for the consumer through service dominant approach of marketing the job of marketers gets easy in creating a profitable marketing strategy. Hence it can be said that service dominant logic in developing more profitable marketing strategies is a helpful factor rather than a constraint considering the existing consumer behaviour.
MARKETING AND CORPORATE SOCIAL REPONSIBILITY -
Corporate social responsibility (CSR) is a topic of "hot debate" in the business world today. On the one hand, a rapidly growing number of companies are "neck deep in social responsibility initiatives, spending billions, tackling everything from AIDS in Africa to deforestation in Brazil" (Yang 2007, p. 109; see also Bonini, Mendonca, and Oppenheim 2006). Managers presume that good corporate social performance (CSP) earned by engaging in the right initiatives (e.g., cause-related marketing, corporate philanthropy, green marketing, minority support programs) enhances firm performance. CSR refers to the programs or initiatives in which a firm engages (e.g., cause-related marketing), CSP refers to stakeholders' assessments of those programs and/or initiatives. Other scholarly research (Barnett 2007; McWilliams and Siegel 2001) has similarly distinguished between CSR and CSP.
Indeed, existing research has suggested that CSP delivers various benefits that marketers covet, such as customer satisfaction and loyalty, customer-firm identification, and favourable firm image (Brown and Dacin 1997; Luo and Bhattacharya 2006), all of which help boost firm performance, according to proponents of CSR. On the other hand, scepticism abounds regarding the merits of CSR. Along with the rise in CSR initiatives, there has been a growing number of contemptuous voices.
According to the economic "Friedman-esque" view, shareholders entrust managers with their investment solely to maximize long-term returns, not so that managers can use the proceeds to underwrite their urge to better the world (Friedman 1970). Indeed, because social responsibility programs not only can be costly but also can compete for a firm's limited financial resources with other critical marketing instruments, such as advertising and research and development (R&D), critics claim that CSP does not improve the firm's long-term stock wealth.(Journal of Marketing, Vol. 73 (November 2009), 198-213)
It may be argued time and again, that marketing has a larger social role to play than the one for economic benefit. However, one would agree that role of any commercial establishment is to make profit without which its existence will be endangered. In such a case if the firm appears to be playing a social role, it is mainly to align its policies with consumer behaviour. The consumer today is much more socially responsible than in the past. This can be attributed to the outburst of social issues over the last few decades. Thus to ensure consumption by a socially responsible consumer, it is necessary to sell in a socially responsible manner. This is more of alignment to consumer behaviour and less of a constraint since it has not reduced the profitability but only influenced change in the marketing strategies (irrespective of their consequences on the environment).
SUSTAINABLE MARKETING -
Often we talk about the saving of natural resources which are depleting at a fast rate in order to give a better future to our forthcoming generations. This aspect is also one of the critical factors that marketers need to consider while developing a profitable strategy for an organisation. The question here is that are we asking too much from marketers given the various constraints and development of new theories in business context? The answer to this question depends upon the approach adopted by the organisation for marketing.
Various economic activities are originated and affected by the marketing strategies that creates and triggers consumption opportunities to meet human needs and requirements. However a marketing approach will only be appreciated if can lead to a sustainable development which implies that the current consumer needs should be fulfilled without affecting ability of resources to meet the consumer demands for future generation. Sustainable marketing approach can be best utilised to create more awareness amongst consumers, educating them on various benefit involved using more eco friendly products, service and activities and also by discouraging habits of consumers which can harm or damage the environmental conditions. The development of sustainable marketing approach helps companies enhance their brand image and equity. This is the reason why organisations are investing hugely on becoming more socially responsible because a failure in environment care can cause a big failure for the image of the company in market.
In organic food market companies can differentiate their products on these credentials which can encourage customers to pay a premium price for these products.
Firms can also enjoy various efficiency benefits by implements different relevant green practices at workplaces. A sustainable marketing approach also helps firms to attract investors for the reason that a company adopting green marketing appeals more to a rapidly growing segment of aware prospectors which helps improving the financial stability of the firm. Many leading global companies believe it is worth embracing green marketing, investing huge amounts of resource in addressing green issues, not only by reducing the damage they cause directly, but by engaging heavily in overt philanthropic environmental activities and proudly publishing 'green reports'. Honda, Shell, Marks & Spencer and the Cooperative Group are often quoted champions of this kind of activity, as a glance at their annual reports will show.
Sustainable marketing's role is not only to promote products which do not cause harm to the environment but also to develop products and services which can improve the existing poor environmental conditions.
The main target of developing a marketing strategy is always to focus on consumers to meet the expectations with respect to value that products adds to them and the services offered. A sustainable marketing strategy works best on consumers. The green consumer (a well informed and aware consumer) segment is growing at very fast pace in the current market conditions. With various advancements in technology and due to easy access to information through internet consumer today has become more informed and socially responsible.
A perfect socio-ecological product would be one which would become the consumer's first choice by meeting their consumption needs along with providing them a healthy sustainable environmental condition. It is critical here to understand that in this century consumer needs are not and can never be in conflict with the environmental needs. In fact today's modern consumer who very well knows his/her responsibilities towards nature and society demands and consumes the product which primarily fulfils this criteria.
Company's who make a shift towards these factors and develop a sustainable marketing strategy will not only help reducing pollution and improve environmental conditions. These companies will always have competitive advantage over the others which fail to adopt this approach. This in turn helps increasing the customer loyalty and retention because customers themselves prefer products which are more eco friendly and give a long term benefit. Hence for marketers to develop profitable strategies for a company sustainable marketing approach is a factor that works in favour of it rather than being a constraint.
In this article, we will be looking at the evolution of marketing and the constraints that marketers had in each of these eras. We are trying to look into the different aspects of marketing in the view of developing profitable marketing strategies. Companies adopt different corporate strategies to develop a sustainable approach to their marketing which can help them gain a long term profitable position in the market. We have also looked at various constraints that marketers need to deal with while developing a sustainable marketing approach. These constraints evolve with the development and progress in market, economy and consumer needs. For marketers, while the profit of the organisation is always the prime focus they also need to take care of other factors such as environmental factors and other corporate social responsibility which can affect the end result in a large way.
From the perspectives of brand equity, differentiation, resource efficiency, attractiveness to all stakeholders and regulation compliance, actively engaging in green marketing makes sound and demonstrable business sense. An authentic and coherent approach can deliver intangible and tangible business benefits, including internal (and external) value alignment, integrity and so cannot fail to deliver better bottom line revenues. The costs of not fully and overtly embracing green marketing, let alone of continuing environmentally harmful activities, are huge, especially considering the power of the modern media, and are far outweighed by the benefits of weaving a green marketing ethic in to the fabric of the company.
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