The Marketing Concept –

Organizations must adapt to changing economic environments and meet competitive threats to prevent loss of market share, stagnation, and perhaps even bankruptcy. Some companies take an operations orientation. They are primarily concerned with cost cutting and production. Others are technology driven. They want to do something new and exciting. Both may founder because they ignore their customers or their competition.

The belief that organizational goals can be reached by satisfying customers has grown so much in importance among managers that it has become known as the marketing concept. The marketing concept is a business philosophy that maintains that the key to achieving organizational goals is to determine the needs of target markets and deliver the desired merchandise more efficiently than do competitors. This idea of focusing a whole organization on attending to customer needs has gained widespread acceptance among managers. Three important dimensions of the marketing concept that you must understand are these:

The basic idea of the marketing concept is to give customers what they want. This means that organizations must decide who their target customers are and then determine their wants and needs. The net result should be the creation of goods and services that satisfy customers’ expectations.

The advantages of a customer orientation seem so obvious that it is hard to understand why the concept has not been more widely adopted. However, some organizations still take a very narrow view of their mission, a problem that has been called marketing myopia. Banks, for example, once thought of themselves as protectors of their customers’ money. They hid behind bars, and their hours were 10:00 a.m. to 3:00 p.m. a few days a week. Following the marketing concept, banks have added branch locations that are open on Saturdays, have extended weekday hour, and feature drive-up windows. They have also installed 24-hour teller machines that dispense cash and perform other services to serve customers better. Now you can even do your banking over the internet.

A second dimension of the marketing concept suggests that marketing activities should be closely coordinated with each other and with the other functional areas of the organization. Under the marketing concept, sales, finance, production, and personnel all work together to satisfy the customers’ needs. With the production orientation, production emphasizes rigid schedules so that the costs could be kept low through long production runs. If the sales department said that a customer needed 21-day delivery of 100,000 cases of perfumed, two-color facial tissue in boutique boxes, the likely answer was that it couldn’t be done because it would raise the costs. Under the marketing concept, the major task of the production department is to learn how to rearrange schedules to meet customers’ needs at an acceptable cost. One result has been the emergence of flexible manufacturing systems.

In the past, marketing has emphasized sales goals, production has attempted to minimize costs, and R&D has been concerned with unique ways to apply technology. Although these objectives may be useful performance standards for individual departments, they are incompatible with the marketing concept, and it is unlikely that the goals of the firm will be achieved when they are pursued separately. The objective should be to operate each part of the firm in order to reach overall targets. The marketing concept has been a useful mechanism in helping to unify the independent functional areas to increase customer satisfaction and improve profits.

The third objective of the marketing concept is that behavior should be directed at achieving the goals of the organization. This means that marketing plans and corporate goals must be closely coordinated. Firms are focusing more and more on creating value for shareholders rather than simply accumulating profits. Nonetheless, short-term profitability remains a key objective for most firms. Activity Based Costing (ABC) expressly links the true cost of marketing, selling, and servicing each customer to determine how much profit each produces. One consequence is that firms do not treat all customers equally.

In the case of nonprofit organizations, objectives are usually stated more broadly. For example, one goal of the U.S. Army is to get recruits and reenlistments, municipal bus lines try to make their services as convenient as possible to maximize the number of passengers, and the goal of Big Brother – Big Sister programs is to get volunteers to contribute their time.

Organizations often have multiple goals. While community orchestras seek to enhance their audiences’ appreciation of music, they also must sell enough seats to meet their operating expenses. This means that they need to offer young people’s concerts to make sure that future generations will support the orchestra. Also community orchestras must balance their programs with a mix of new selections to educate customers and enough traditional favorites to maintain financial support.

One of the most successful advocates of the marketing concept is the highly profitable Wal-Mart retail chain. At Wal-Mart, customers come first and are welcomed at the door by people greeters; once inside, hourly employees (called associates) approach customers and ask how they can help, and checkout lines are kept short. The whole operation is designed o be responsive to customers’ needs. In addition, most senior managers spend four days a week on the road making sure that the vast number of stores are clean and operating smoothly. Wal-Mart helps to integrate company activities by sharing cost, freight, and profit margin data with department heads and hourly associates. Also, when the store’s profit goal is exceeded, the hourly associates share in the additional profit. To help control losses from damage and theft, Wal-Mart has instituted a shrinkage bonus when employees keep store losses below company goals. Group harmony is fostered by encouraging troubled employees to talk about their problems with management. Wal-Mart has shown that when employees work together to meet customers’ needs, they are better able to meet company sales and profit goals.

Marketing-driven firms must always keep in mind the interests of all the players with whom they interact: customers, channel members, competitors, regulators, and society as a whole. The ultimate success of a firm rests on obtaining sustainable competitive advantage based on long-run customer and channel franchises.

Quiz One