Literature Review Definition Of Marketing Marketing Essay

“Marketing is managing profitable customer relationships, the twofold goal of marketing is to attract new customers by promising superior value and to keep and grow current customers by delivering satisfaction” (Armstrong & Kotler, 2007 p. 5).

People often think marketing as selling and advertising, which is just a small part of marketing. ‘The marketer does a good job when he understands superior customer value, prices, distributes and promotes them effectively; the products will sell very easily then. This tells that selling and advertising are just a part of marketing as a marketing mix; a set of marketing tools that work together to satisfy customer needs and build customer relationships.’ (Armstrong & Kotler, 2007 p. 5).

Figure: A simple model of the marketing process

Source: Armstrong G and Kotler P, (2007, p. 6). Marketing: an introduction. 8th ed. Upper Saddle River: Pearson Education.

Marketing mix

According to Mohammed Rafiq and Pervaiz K. Ahmed (1995), the term marketing mix was first used by Borden and that it was suggested to him by Culliton’s (1948) description of a business executive as ‘mixer ingredients’. Borden did not define the marketing mix; it simply consisted of important elements of ingredients that make up a marketing programme (Borden, 1965, p. 389). McCarthy (1964, p. 35) refined this further and defined the marketing mix as a combination of all of the factors at a marketing managers command to satisfy the target market. Later McCarthy and Perreault (1987) together defined the marketing mix as the controllable variables that an organisation can co-ordinate to satisfy its target market, which is widely accepted as “the set of controllable marketing variables that the firm blends to produce the response it wants in the target market” (Kotler and Armstrong, 1989, p. 45). According to Jonathan Ivy (2008), marketing mix is a set of controllable marketing tools that an institution uses to produce the response it wants from its various target markets. Ronald E. Goldsmith (1999) stated that 4Ps was first formulated by McCarthy (1975) as a pedagogical tool to describe the chief tasks of marketing managers. Marketing managers must develop a systematic plan to sell to the customers after selecting a target market to create long-term relationships (Doyle, 1995). The marketing mix plan consists of 4Ps which consists of decisions about product, place, promotion and price (Goldsmith, 1999).

According to Bennet (1997), “the concept of marketing outlines a course for the organisation using controllable variables in an environment where many factors are uncontrollable, defined as the external market”. Kotler (1967) (cited by Bennet, 1997) broadened this classification into four namely, customer, environmental, competitive and marketing decision variables. Focussing on manufacturing industries, Borden (1964) identifies the four external forces on the organisation as consumer buying behaviour, trade behaviour, competitor’s position and behaviour and government regulations. Robins (1991) formulated “four Cs” which is an alternate mnemonic to the marketing mix formulated by McCarthy (1964). Four Cs are defined as Customers who buys goods and services in the market place, Competitors who provide the choice of alternative sources of supply, Capabilities and Company both of them refers to the organisation which has ability to satisfy customer needs. Gronroos (1984) proposes a concept of interactive marketing which was backed by Kotler (1991). This concept emphasizes the relationship between the employee and the customer and identifies it as the key factor in successful market making. Kotler (1991) argues that the employee-customer relationship is an important factor in the success of the market-making process. Booms and Bitner (1981) added three additional factors to the marketing mix elements proposed by McCarthy (1964) namely people, processes and physical evidence. This concept highlights that the model proposed by McCarthy (1964) might lead to too narrow focus on the internal variables, and does not include some of the process variables which is a part of marketing planning system (Bennet, 1997, p. 151). Lings (1999) argues for services industry 4Ps are in adequate and 7Ps marketing mix illustrates the importance of internal factors, as retail sector is not a service based industry traditional 4Ps marketing mix is used to represent the external factors (cited by Khanh & Kandampully, 2004). 4Ps makes the marketing easier handle for the managers in non service based industry; the components of traditional marketing mix can change a firm’s competitive position (Gronroos, 1994). Even with the deficiencies, the 4Ps remain a staple of the marketing mix (Kent and Brown, 2006).

According to the American Marketing Association (1985), “marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organisational objectives”. Kent (1986) states that the four Ps of the marketing mix as the “holy quadruple of the marketing faith written in tablets of stone”.

According to Armstrong and Kotler (2007) marketing mix tools are classified into four broad groups, called the four Ps of marketing: product, price, place and promotion. In order to deliver on its value proposition, the firm must first create a need-satisfying market offering (product). It must decide how much it will charge for the offer (price) and how it will make the offer available to the target customers (place). It must communicate with target customers about the offers and persuade them of its merits (promotion) (Armstrong and Kotler, 2007 p.53)

Baker & Hart (2008, p 463) the logic of 4Ps is straight forward; a supplier needs products, needs to price them, to promote them and distribute them to the place where the customer can buy them.

According to Dogra & Ghuman (2008) some of the variables associated with 4Ps are:

Price: price level, credit terms, price changes and discounts.

Product: features, packaging, quality and range.

Promotion: advertising, publicity, sales promotion and personal selling.

Place: inventory, distribution channels and number of intermediaries.

Figure: The four Ps of the marketing mix

Source: Armstrong G and Kotler P, (2007, p. 6). Marketing: an introduction. 8th ed. Upper Saddle River: Pearson Education.

Product

According to Armstrong and Kotler (2007), product can be defined as the goods and services is a combination the company offers to the target market. Belohlavek (2008) argues that a product or service is the element which satisfies the client’s needs. The product or service generates two types of relationships with the prospect: a functional and a linking one. The usefulness of the product bears a relationship with its benefits measured both objectively and subjectively. The product’s use value is fundamental to the purchasing decision process in its closing stage (Belohlavek, 2008 p.15).

For a competitive approach the company has to offer products that are unique and meet customer needs, wants and values. Maintaining the product uniqueness is difficult for a company since the product can be matched by competitors. The company must often compete on price, distribution, or promotion; in order to compete unless the product is of sound quality (Rea & Kerzner, 1997 p. 57).

Product variety

Pine (1993), product variety is defined as the number of different products offered to the customers (cited by Felipe Scavarda, Reichhart, Hamacher, Holweg, 2010). According to Bils & Klenow (2001) and Er & MacCarthy (2006) product variety is a new development and a trend in many industry sectors worldwide (cited by Felipe Scavarda, Schaffer, Jose Scavarda, Reis & Schleich, 2009). Product variety is an effective strategy to increase the market share as it enables the company to serve different kinds of customer segments and to satisfy the customer variety seeking behaviour (Tang, 2006). This involves different product features, packaging, or channels of distribution (Felipe Scavarda, Schaffer, Jose Scavarda, Reis & Schleich, 2009). Product variety strategy as a marketing strategy will result in sales growth, profits and meeting more specialised demands (Berry & Cooper, 1999). Kim & Chhajed (2000) argues that different kinds of product manufacturing results in a decrease in logistics performance or manufacturing performance. Lee & Billington (1994) also argues that product variety can result in higher forecast errors and lead to excessive inventory for some products and shortages for other products. If the product variety is to the optimal or to the appropriate level of variety, then product variety will result as economical efficient and will create positive marketing efforts (Lancaster, 1990).

According to Pine (1993) and da Silveira (1998), product variety enables the ability to customise products to customer needs and has been identified in achieving competitive advantage over other retailers (cited by Felipe Scavarda, Reichhart, Hamacher, Holweg, 2010). As product variety gives a broader product line and can lead to increased profitability (Kekre and Srinivasan, 1990). Product variety gives rise to the need to consider different products of the individual product variants, as different end items that are fundamentally different do not feature the same variety level for the individual (MacDuffie et al., 1996 & Koste and Malhotra, 1999).

Price

Belohlavek (2008) states that price is a conditioning element for buying a product; price only conditions a product but does not determine it, in accordance to the buyers income makes a monetary value of a given service or goods, which makes them reachable to the goods. Price is a factor which acts as a barrier which when reached in operational terms, that’s when the last stage of purchasing action is reached. Price is an element which determines a priority relationship with the value and opportunity creating access to the customer.

Kasper et al. (2000, p. 627), “pricing is an important management tool to achieve the objectives of the organization”. Similarly, Pellinen (2003, p.218) has suggested that “pricing is one of the most central management tasks for a service company”. It is also the only element of the marketing mix that generates revenues for a firm, while all the others (e.g. new product introductions, promotions) are associated with costs (Zeithaml et al., 2006) (cited by Indounas & Avlonitis, 2009).

Rea & Kerzner (1997) argues that the easiest way to reach and compete with the competitor is to match the price with the competitor. Price is one of the most important criteria that customers use when choosing between competing brands (Huber et al., 2001; Ta and Har, 2000) (cited by Indounas & Avlonitis, 2009).

Price is the sum of money customers has to pay to acquire the product; often customers buy the product negotiating the price for more accessibility, companies offer discounts to customers adjusting price to sustain the competitive situation (Armstrong & Kotler, 2007 p. 52).

Price Discount

According to Palazon & Delgado (2009), Customers are price sensitive and they often look for price related information. Manning et al., (2003), they are vigilant about any information about price and other pricing information (Kukar-Kinney et al., 2007) they spend a lot of time thinking about prices of products, always evaluating savings offered and the convenience by the price discount. Customers with lower levels of price consciousness and value, they are most likely to be influenced by the magnitude of the discount (Alford & Biswas, 2002) than the pecuniary value of the discount really offered. (Babin et al., 2007) customers are engaged in searching for more devoted to the task of shopping to the extent that a better price exists in another store. Hardesty & Bearden (2003) and Grewal et al., (1996) claims that when the promotional benefit is low, customers are not going to process information extensively about the promotion (price discount) as it has low pecuniary value. Similarly when the promotional benefit is high, customers are not sure about the product or the deal they are unlikely to process information extensively as there is less uncertainty about the product. Customers are predicted to analyse the deal moderately whether the benefit are high (Palazon & Delgado, 2009). Hardesty & Bearden (2003) and Grewal et al., (1996) states that if the promotional benefit is low or high the levels of information processing is low, but for moderate benefit levels information process is high. Chandrashekaran (2004) and Raghubir (2004) argue that high promotional benefits are always evaluated positively.

According to Madan & Suri (2001) there are different types of price promotions and short term price discounts have been used by the retailers to create short term demand for their products (Monroe, 1990 p 369). Retailers can sell the products very fast without much expensive when they are offering immediate savings to the customers. Short term price discounts are easier to execute and provide immediate price savings to the customers (Madan & Suri, 2001). Discounts actually increase the value to the customers and this happens at the intermediate levels of discounts and when the discounts are either very high or very low it decreases the value (Madan & Suri, 2001).

Promotion

“The most common promotion is a sale” (Levy & Weitz, 2007 p 433). Promotion is one of the key P’s in the marketing mix (Dibb et al., 1994).

The promotion strategy is used in increasing sales by creating differences in resources which results in a firm being able to outspend a competitor in advertisement, purchase displays, trade shows and other promotional methods (Rea & Kerzner, 1997 p. 58).

* According to Jennifer Rowley (1998), the objectives of any promotional strategy will be drawn from an appropriate mixture of the following roles of promotion; to:

increase sales;

maintain or improve market share;

create or improve brand recognition;

create a favourable climate for future sales;

inform and educate the market;

create a competitive advantage, relative to competitor’s products or market position;

improve promotional efficiency

* According to Jennifer Rowley (1998), an appropriate promotional mix must be created in order to meet the promotional objectives of any given promotion strategy. The promotional mix is the combination of different promotional channels that is used to communicate a promotional message. This will involve an appropriate selection from the range of tools that are available for use as part of the promotional mix. The tools in the promotional mix include:

Advertising. Any paid form of non-personal presentation and promotion of ideas, goods or services by any identified sponsor. The pages of professional newsletters and magazines are common avenues for advertising information products.

Direct marketing. The use of mail, telephone or other non-personal contact tools to communicate with or solicit a response from specific customers and prospects. Mail shots and leaflets inserted in professional magazines are used to promote information products.

Sales promotion. Short-term incentives to encourage trial or purchase of a product or service, such as discounts for access to a database over a limited time period.

Public relations and publicity. Programmes designed to promote and/or protect a company’s image, or those of its products, including product literature, exhibitions and articles about organisations’ products in professional or in-house newsletters.

Personal selling. Face-to-face interactions with one or more prospective purchasers, for the purpose of making sales. This is common within the business-to-business marketing transactions in the information industry, where sales representatives, often also with a support function, are common.

Sponsorship. Financial or external support of an event or person by an unrelated organisation or donor, such as is common in respect of the arts, sports and charities. Large organisations, such as major publishing groups like Reed Elsevier, or software houses, such as Microsoft, may engage in sponsorship, but public sector organisations, in education and libraries, are more likely to be the recipient of sponsorship.

Place

According to Kai Li & Hung Hung (2007), place is a marketing mix which describes whether the location is accessible and transport is convenient, place comes out as a heterogeneous phenomenon which is created by the company at each place combining resources; accessibility increases value to the customer. Kotler, et al., (2005) claims that place involves all activities of the company to make all products available to the customers.

According to Mason & Staude (2009), Place is the least changing marketing tactic. Distribution and availability are used in stabilising dimensions, communicating and creating a control as a link between supplier and customer, and reducing the probability to change suppliers, which actually stabilises the market. Backward and forward integration also reduce the uncertainty of retailer stocking the products, lowering the risks and stabilising the environment (Nilson, 1995).

According to Boyle & Proctor (2009), in the context of product sales, ”placement is actually distribution” (Biech, 2003). In social marketing, distribution can be defined as ”dissemination channels” (NWPHO, 2006). Clearly for dispersing channels to be effective they must be accessible to the target market (Boyle & Proctor, 2009).

Store location and layout

The location and atmosphere of a store communicates information about the service and pricing to the customer. The physical characteristics play an important role in a customer’s mind (Levy & Weitz, 2007 p 434). Store layout influences customer buying behaviour, stores can attract customers with their design and layout motivating them to make impulsive sales or give them a pleasant shopping experience (Levy & Weitz, 2007 p 491).

According to Davies & Rogers (1984), guy (1980), Jones & Simmons (1987) and Birkin et al., (2002) site selection and sales forecasting of retail stores are a important factor in retail management and retail geography (cited by Wood & Browne, 2007). Store location is used in sales forecasting for retail stores and for determining the optimal location and sales of the store (Clarkson et al., 1996; Smith & Sanchez, 2003). Superstores are one of the main formats through which food is sold increasing the money flow (IGD, 2005). The size of the stores is important and it is very expansive to open up a big store therefore accuracy in location planning is essential (Wrigley, 1996). Retail stores are dependent on the daily purchases made and regular weekly purchases this involves repeated car journeys from the customers’ homes, which requires space for parking near the store for easy access (Wood & Browne, 2007). The location of a store affects the customer with sociological and geographical factors (Wrigley, 1998; Meyer & Johnson, 1996; Rust & Donthu, 1995) (cited by Beyon, Griffiths, Marshall, Expert Systems (2002).

Pricing strategy

According to (Blythe, 2008 p 151), pricing a product is one of the most important issues for marketers; it is significant not only to the profit that is to be made but also to the quantity of products which are to be sold. Pricing also touches on all the elements of the marketing mix, pricing is the indication to the consumer of what a company expects in exchange; for the products being offered. Profitability of the company depends on the pricing strategy (Doyle & Stern, 2006 p 225).

“Price may become a proxy measure for product quality when buyers have difficulty in evaluating complex products” (Cravens & Piercy, 2006 p 316). Consumers are often confused in choosing a product; price helps them choose a product. A strategic viewpoint on pricing decisions may create new market space and opportunities for the company (Cravens & Piercy, 2006 p 317).

Figure: Steps in selecting a pricing strategy

Source: (Cravens & Piercy, 2006 p 321).

“A pricing strategy must be consistent with the retailer’s overall image (positioning), sales, profit, and return on investment goals” (Berman & Evans, 2007 p 498).

Various roles of Pricing

(Cravens & Piercy, 2006 p 320) Pricing has few important roles in the marketing program of a company. Some of the roles are:

Signal to the buyer

Price is the easiest way to directly communicate with the customer. When comparing with other brands price is a visible difference to the customer. Price is also used in positioning the brand to show its quality or instead give direct competition with other brands (Cravens & Piercy, 2006 p 320).

Instrument of competition

As the competitions between companies are high, Price is an element which can quickly attack competitiors. Price can also be used by a company to stay away from the competition if used strategically; pricing strategy is always related to competition with other brands or companies (Cravens & Piercy, 2006 p 320).

Improving financial performance

Using a pricing strategy wisely, companies can generate revenues by forecasting about a product or brand to increase the financial statement in the short term or in the long term in order to survive the global competition (Cravens & Piercy, 2006 p 320). pricing strategy has the biggest impact on the profit and loss statement of the company in the short run, Pricing is even more crucial in the long run; the primary purpose of business strategy is to offer consumers enhanced value so that price can be raised considerably above costs (Doyle & Stern, 2006 p 225).

Marketing program consideration

Companies pay a price for marketing, in order to maintain or penetrate in to the market. Price strategy is also used for promoting products (Cravens & Piercy, 2006 p 320).

Consumer behaviour

Blackwell, et al., (2006) defined consumer behaviour as “the activities people undertake when obtaining, consuming and disposing of products and services”. The activities are divided into three, they are: obtaining, consuming and disposing (Blackwell, et al., 2006 p. 4).

Obtaining

According to Blackwell, et al., (2006 p. 4) it is the process of purchasing or getting a product. This process includes comparing with other similar products, alternative brands and searching for more information of the product before obtaining it. Analysts often study these purchases in order to improve the understanding of the market; consumer buying behaviour is studied whether they are buying for themselves or as gifts, payment methods, and product transportation or delivery, how they get information about other alternative brands and how the brands influence the consumer’s product choices.

Consuming

According to Blackwell, et al., (2006 p. 4), it is the process or activity of using a product by the customer to his/her needs. Based on the consumption of the products researchers can study the consumer decisions whether the product is bought to be consumed in the office or at home, or for entertainment purpose or for its functional purpose, do they consume the product or do they dispose it without using it even once. Based on the consumption these buying behaviours are studied in order to understand the needs of the customers.

Disposing

According to Blackwell, et al., (2006 p.4), it is the process of getting rid of the product after its use or its packaging. And how do they dispose the product remains or the packaging, whether the packaging is biodegradable. Analysts think in the ecological point of view for this process.

Consumer buying behaviour

According to McCall, et al., (2009), purchasing decisions happen on daily basis and the most important factor influencing these decisions is the price of the product. For buying any product, price is often the most silent feature (Nagle and Holden, 2002). This can be used as an advantage to increase the overall sales by offering discounts (promotions) to the price sensitive customers (Soman, 1998).

According to Saha, et al., (2010), Consumer behaviour is the study of how individuals spend their available resources on consumption-related items. It includes the study of what they buy, why they buy it, when they buy it, where they buy it, how often they buy it, and how often they use it (Schiffman and Kanuk, 1996). The main objective of marketing in the consumer buying behaviour context is to satisfy the needs and wants of the target customer. As a subject consumer behaviour also deals with the factors that affect the buying behaviour of a consumer. The study of consumer behaviour gives a clear idea that how consumer select, buy, use and dispose the product, service, experiences to please the needs and requirements (Kotler, 2003).

Stimulus response model is the starting point of understanding consumer buying behaviour. The buyer’s characteristic and decision process leads to the purchase decision; a consumer’s buying behaviour is influenced by 4ps, cultural, social and personal factors (Kotler, 2003).

The role of marketing mix is also important in making the buying decision by any consumer. “The marketing mix consists of everything the firm can do to influence the demand for the product. The many possibilities can be collected into four groups of variables known as the ‘Four Ps’ that is product, price, place and promotion” (Saha, et al., 2010).

According to Mowat and Collins (2000), for successful development in business, the company needs to understand and meet the consumer needs and expectations (Douglas, 1993; Knox and Theisen, 1981). Store layout plays (place) an important effect in consumer behaviour besides price and consumer expectation (Kotler, 1973; Eroglu and Machleit, 1990; Bitner, 1992; Baker et al., 1993; Baker et al., 1994; Grewal and Baker, 1994; Simonson, 1999; Baker, et al., 2002) (cited by Vrechopoulos & Atherinos, 2009).

According to Solomon, et al., (2006), consumer purchase is a response to a problem and a customer goes through a series of steps in order to make a purchase. These steps can be described as (1) problem recognition (2) information search (3) evaluation of alternatives and (4) product choice. After the decision is made, the quality of that decision affects the finals steps in the process, when the learning occurs based on how well the choice worked out. The learning process influences the likelihood that the same choice will be made next time the need for a similar decision occurs (Solomon et al, 2007 p.258).

Brin (2004, p 85) argues that it is important to understand the characteristics of the consumers and their buying decision process in order to target them with the most appropriate and effective marketing methods, the management needs to understand and study this decision process on what particular product or service the consumers choose from; the brand they select, from which outlet they buy, what kind of product and the amount spent. It is useful to understand what influences the consumer (Brin, 2004 p 85). Some of the influences in buying roles in the consumer buying process are (Brin, 2004 p 85):

The initiator: the very first person who thinks about buying a product

The influencer: the person who influences other consumers in taking the final step of the buying decision

The decider: the person who takes the final decision

The buyer: the person who actually buys a product

The user: the customer.

There are different types of consumer buying behaviour, and the type of consumer buying behaviour changes according to the type of buying decisions. The main influence is the brands available to the consumer and the personal attachment towards the decision which influences the consumer to become a loyalty customer (Phillips, et al., 1994; p 85). Involvement can be a major factor in decision making; consumers often tend to develop a form of emotional attachments to products and most people would be familiar with the feeling of having fallen in love with a product, even when the product is totally unreasonable though the purchase may not have an important practical outcome for the consumer; the consumer’s future behaviour does not always materialise (Blythe, 2005 p 53, 54).

Low involvement, low price, low risk

High involvement,

High price, high risk

Few differences between brands

Brand loyal

Repeat purchasing

Influenced by price

And sales promotional

offers

Buying process is relatively quick because of the limited differences

Significant differences between brands

Brand switching but limited information gathering

Information gathering and processing is important. Purchase decision is important

Figure: Four types of buying behaviour

Source: Phillips, et al., (1994; p 85) (Adapted from Assael, 1985 & Kotler, 1988).

According to Kapoor & Kulshrestha (2009), Products convey different meanings to different people and this differing forms an attachment towards the products. According to Zaichkowsky (1985), attachment means the interest, the enthusiasm, the emotional level expressed by the consumer regarding a product (cited by Steichen & Terrien, 2009). The meaning of the product depends on the nature of the consumers rather than the nature of the products (Martin, 1998; Rochberg-Halton, 1981).

The consumer plays a role in his or her choices (Steichen & Terrien, 2009); the decisions are principally based on personal perception followed by the cues sent by the environment with personal interpretation (Fishbein and Ajzen, 1975; Fazio, 1985). These choices have different attributes, and some of them are very salient; the choice of salient attributes also depends on the personal characteristics of the consumer (Steichen & Terrien, 2009).

Based on Uncles and Ellis (1989) the interplay of costs and benefits affects the retailers in making huge gross margins, many retailers are establishing their own labels as a part of retailing today. This allows the retailer selling products under their own name to differentiate their products and stock, from other retailers. Also, allowing them to have a full control over product price, quality and stocks (cited by Rothe & Lamont, 1973; McGoldrick, 1984; Simmons & Meredith, 1984). This will actually generate higher gross margins. For competitive edge over other stores and brands, retailers hope to build a relationship with the customer by lowering price and offering consumers better value for money without narrowing the product range (Simmons & Meredith, 1984).

Customer relationship strategy

Relationships can obtain competitive advantage (Kanter, 1994; Kay, 1995; Huxham, 1996; Stone and Mason, 1997) (cited by Donaldson & O Toole, 2002). Customer relationship strategy is based on mutual trust with the customers creating long term relationships; many researches’ conclude that customer relationship strategy has increased the profit margin for many firms (based on Lawrence, 2002). Long-time customers are less costly to serve and smooth running of relationships are inexpensive and less resource intensive (Lawrence, 2002). Long term relationships benefit both the buyers and suppliers (Szmigin, 1998). For the strategy to be effective, the component elements should be inter-related. When there is a strong synergy between the component elements the strategy will be eff