Current Issues in Marketing

¶ … Marketing

Identification and development of a rationale for a current issue in Marketing:-

The extensive embracing of the marketing concept by organizations is a comparatively new one. Sans one or two exclusions, writing on marketing is just crossing the fifty-year mark. However, during these fifty years the manner in which we think regarding marketing and its practice is undergoing a sea change. Marketing has advanced from a basic focus on 'giving the customers their requirements' to a pan-company orientation in which the particular potential of the business are focused around building and providing customer value to targeted market segments. (Relationship Marketing: Creating Stakeholder Value)

Marketing is analyzing, organizing, planning and controlling of the company's customer invading resources, policies and activities with an objective of fulfilling the needs and wants of selected customer groups at a profit. During the growth markets of the 1960s and 1970s, the challenge confronting the managers was to capture growth in demand at the earliest possible. This resulted in allowing them to concentrate on the volume and market share, or what is known as transactional approach to marketing. With the maturing of the markets in the final decades of the twentieth century, the importance slowly changed from the corporate goal of maximizing market share towards a concern with the 'quality of share' in appreciation of the reality that equal profits cannot be obtained from all customers. This had resulted in the idea that the goal of marketing is to create profitable and lasting relationships with chosen customers.

The main role of marketing in this new perspective is to find out what value propositions to build and who are the chosen customers who will be delivered this value. The market-oriented companies of the present era are really 'market-driven', in a sense that they are structured, organized and managed with the only objective of building and delivering value to the selected markets. Concepts and terminologies like customer intimacy, customer-centric and customer focus sum up the novel concept of the corporation as an entity which is present to provide value to carefully chosen market segments. This is not some philanthropic or idealistic view of the company who delivers customer satisfaction at any cost. But on the other hand it is the hard-edged business model which identifies that long-term profits have increased the scope of maximization through satisfied customers who are loyal to a particular company and spend more money on them. This is the cornerstone of the current issue in Marketing which is known as Relationship Marketing. (Relationship Marketing: Creating Stakeholder Value)

Marketing theory and practice is based till this day to the marketing-mix which is known as the 4Ps i.e. The product, price, promotion and place. These were the mechanisms which if exploited properly, would result in increased demand for the products of the company. Marketing management targeted to formulate strategies, which would optimize expenditure on the marketing mix in order to maximize sales. Nevertheless the basic concept of the marketing mix continues to be applicable in the present era in a manner that companies are required to comprehend and manage the influences on demand. But it is important to bear in mind that these original perspectives for marketing action were formulated in an exclusive setting. They appeared from the U.S. during a period of unparalleled growth and prosperity, and concentrated on the Fast Moving Consumer Goods -- FMCG sector.

Although the apparatus and mechanisms were developed in a particular period, and meant for particular products, the fundamental concepts of 4Ps of marketing were fast extended to the industrial, service and also for the voluntary sector. It was during the last years of 20th century that several of the fundamental doctrines of marketing were beginning to be doubted. The market environment has undergone a transformation since it was in the 1950s. In a lot of situations, consumers as well as customers were increasingly refined and less responsive to the conventional marketing pressures -- specifically advertisement. A more choice was available, to some extent due to globalization of markets and new sources of competition.

Besides, as a lot of markets had matured over the year's incremental growth was low or was absent. Due to this and a lot of pressures on profits, brand loyalty is weaker compared to what it was and plain vanilla marketing relying solely on the 4Ps is not likely to win or keep customers either in the consumer or industrial markets. The effectiveness of traditional marketing has come to be continuously challenged in various writings and conference papers with the headlines 'Is marketing dead'. It is against this pointer that the new genre of marketing thinking has come to be evident, and the concept Relationship Marketing has come to be applied to define the modified framework or paradigm. (Relationship Marketing: Creating Stakeholder Value)

My case for why this choice of issue is relevant for the marketing profession to consider:

Relationship Marketing applies the event-driven strategy of customer retention marketing but considers marketing as a process over a time period instead of separate unconnected events. Through shaping the marketing message and strategies to the Life Cycle of the customer, the Relationship Marketing approach attains a tremendous high customer satisfaction and becomes highly profitable. The Relationship Marketing process is normally defined as sequence of steps, and these are called by a number of names, depending on the marketing viewpoint and the nature of business, for instance operating from the 'relationship' angle from the starting point till the end. (Relationship Marketing)

Through the application of the Relationship Marketing approach, programs have to be tailored for individual consumer groups and the stage or the process they are passing through as against to some type of database marketing in which everybody will get almost the same promotions, with maybe an alteration in the offer. The stage in the customer life cycle determines the marketing approach applied in the case of the customer. A single instance of this would be akin to sending fresh customers a 'Welcome Kit' that might contain an inducement to make a repeat purchase. Incase after passage of 60 days the consumer has not made a repeat purchase, it has to be followed with an Email discount. Hence, at this point of time, Relationship Marketing has to take help of yet another tool of modern marketing warfare i.e. Internet Marketing. And use is being made of the customer behavior over time --the customer Life Cycle to trigger the marketing approach. (Relationship Marketing)

Broadly two categories of Life Time Value -- LTV Assessment are available viz. absolute and relative. Calculation of the first one is difficult, but the second one is very easy and in a number of ways considered to be more powerful compared to the first. The most intricate element in calculating the LTV is arriving at a decision as to what constitutes a lifetime. LTV is the value of the customer over that of the Life Cycle. It is evident that Lifetime Value is non-existent in the absence of a Lifecycle. The concept of LTV has been badly misused and misunderstood since the last many years. It is not necessary to find out an absolute Life Time Value in the case of a customer or wait 'lifetime' to ascertain the value to use the concept in the management of customer value. (Calculating Life Time Value (LTV) or Life Time Customer Value (LCV)

At this point of time it is important to understand the meaning of Customer Life Cycle -- CLC. CLC is just the behavior of a customer with the company over time. It is seen that customer start a relationship with the company, and over a time frame they either take a decision to continue this relationship or put an end to it. During any point of this particular Life Cycle, the customer is either starting to be more or less probable to carry on doing business with the company and exhibits this likelihood through their interactions with the customer. If data is collected from these interactions like purchases made from e-commerce sites, page views this data can be used to predict the position of the customer in their Life Cycle which will show if the customer has more or less chances of doing business with the company. In case the company is able to predict where the customers are positioned in the Life Cycle, Return on Investment -- ROI can be maximized by targeting customer who have the highest possibility to buy the products of the company, attempting to 'save' customers having a waning interest, and not wasting money on customers who are not likely to do business with the company. (CRM and the Customer Life Cycles)

The next sphere to look forward is the High ROI Customer Marketing whose essence happens to be (i) Retaining the best and the most active customers and (ii) Increasing the value of majority of the customers. In case the methods for retaining and increasing the value of customers are money-losers, it will be unviable for the company to retain the customers. A customer's value-based marketing has to be profitable also. In order to keep and increase the value of customers, the company has to engage them through communication on an on-going basis. In case this is not done, the loyalty of the customers will go down and they will either stop considering buying from them and choose a rival who communicates with them. Customer retention gives results when it is made and the customer accepts new offers over a period of time. This process is a continuous renewal of the relationship with a customer.

The three elements to maximizing profits in case of customer marketing are (i) Structuring the offer to get the maximum profitable mix of response rate and the cost of the offer. (ii) Making and 'early warning system' so as to flag customers who have an increased chance to desert the company such that they can be targeted for special promotions. This is done through tracking customer behavior. (iii) Recognizing customer acquisition practices which optimize the value of new customers arriving into the business in the first place. On an ideal basis, it would need to have a consistent way to find out the chances of a customer to respond so that the most profitable offer can be determined and presented to each customer prior to sending out the promotion. (High ROI Customer Marketing)

Aspects of marketing theory are germane to my issue

The various aspects of marketing theory that are germane to my issue are the Customer Relationship Management. -- CRM. In a lot of manner, CRM constitutes the functional face of the one-to-one movement; and CRM symbolizes the business philosophy needed to achieve the one to one marketing vision. Regrettably a lot of people see CRM which is in fact a strategy with the tools and software that let a company to execute a strategy. Along these lines, CRM has been grouped according to the functionality of the software tools. These are (i) Analytical CRM that uses data modeling and profiling to achieve CRM objectives (ii) Collaborative CRM which applies the tools to directly engage and communicate with the customers (iii) Operational CRM which is the back end system that integrates the business and supply the products.

However, in practice, few companies have the CRM idea operating about the manner in which they would like. The problem lies in the absence of experience in using customer data to operate a business. A lot of people had hopes that they will be able to automate their marketing, however handling customer data needs experienced human inputs also. It not a top-down approach but rather a bottoms-up approach and a lot of companies who began at the top have gained experience utilizing customer data with simple proven methods like pre-CRM prior to taking on data mining and other very intricate tasks. (Data-Driven Marketing Program Descriptions: CRM (Customer Relationship Management)

Even though the marketers understood the role that customer relationship has to play, advances on the technological front markedly the newly developed CRM tools gave it a further impetus. The importance of being nearer to the customer is being restated regularly. The marketing manages are being relentlessly showered with messages from the CRM technology regarding the manner in which technology is able to usher in a revolutionary change in the way they market their products. CRM is a management philosophy that is able to propel the profitability of an organization by guaranteeing greater customer loyalty. In the core of the CRM philosophy lays the two very simple principles. The first one is the Pareto principle that 80% of the revenue is produced by 20% of the customers and the second one is that the cost of retaining an existing customer is rather less compared to that of acquiring a fresh one. A particular way of defining CRM could be "selection of management of customers to optimize their life-time value." (Redefining Marketing Strategies: The CRM Way)

CRM implementation in a successful manner needs the redefinition of the operations done by the marketing department. Conventionally the chain of initiatives adhered to by the marketers to devise a marketing plan is finding out the potential customers, determine their needs, design the marketing mix keeping these needs in consideration and respond to these needs. With our journey from the era of mass marketing to relationship marketing, customer segmentation has gained a lot of importance. It poses a great difficulty on the part of the marketers to handle the entire gamut of market wherein the customer profile and requirements change. Thus, segmentation is a viable option that lets them divide the market into identical classes based on demographic, socioeconomic or psychographic characteristics. But over the years it is observed that customers within the same segment also exhibit different buying behaviors. It is beyond the scope of conventional segmentation to address this issue while making strategies to attract these segments. It is here where the future of competition lies and what is known as customer co-creation. (Redefining Marketing Strategies: The CRM Way)

How should the marketing profession amend their current practice in the light of my analysis

The paradox of the 21st century economy is consumers have increasing choices which are producing less satisfaction. The top management has more strategic options which yield less value. The emerging truth is compelling us to reexamine the conventional system of company-centric value creation which has catered us well in the past century. In the present era we are on the threshold of a novel frame of reference for value creation. The solution remains, in a different premise centered on co-creation of value. It starts with the transforming role of the consumer in the industrial system. The fundamental change has been a change in the role of the consumer from being an isolated to connected, from being unaware to informed, from passive to an active one. The influence of the connected, informed, and active consumer is marked in several ways. With the access to never before amount of information, and knowledge, it has become on the part of consumers to make greater informed decisions. (The Future of Competition: Co-Creating Unique Value with Customers)

In case of companies' familiarized to limited flow of information to consumer, this changeover is radical. Hundred and thousands of networked consumers are presently collectively challenging the traditions of industries across entertainment, financial services, and health care. To consider an example, active healthcare consumers who have graduated from passive recipients of treatments i.e. The patients are logging on to the Internet to acquire knowledge to know about diseases and their treatment procedures; to track record of doctors, hospitals and clinics; and the most modern clinical drug trials and experimental procedures and to share their personal experiences with others. Consumers have been empowered to question their doctors in a more aggressive manner and take part more wholly in their self-treatment modalities.

Although there are geographical confines, but they are getting blurred, thereby transforming the rules of the business competition. For instance, wider consumer scrutiny of product range, price, and performance across geographical borders is putting a limit on the freedom of multinational companies to alter the price or its quality from a single location to another. It is but natural on the part of humans to come together whatever that is common within them like interests, needs and experiences. The phenomenal impact of the Internet and progresses in messaging and telephony is giving an impetus to this desire, building an unprecedented ease and openness of communication within the consumers. Therefore, 'thematic consumer communities' wherein individuals share ideas and feelings without geographical or social barriers coming in the way have come to revolutionize emerging markets and changing the existing ones. The power of the consumer communities is derived from their independence from the firm. For example, in the pharmaceutical industry, word of mouth regarding actual consumer experiences with a drug and not its claimed benefits is more and more impacting the demands of patients. Therefore consumer networking reverses the conventional top-down pattern of marketing demands. (The Future of Competition: Co-Creating Unique Value with Customers)

With the increase in the learning capabilities through the various media, they are armed with better discriminating powers at the time of arriving at choices and with their networking they encourage one another to act and speak out. Consumers more and more give unsolicited feedback to companies and also circulate among themselves. Already, numerous websites are bringing about consumer activism; a lot are targeting particular companies and brands. What is going to be the ultimate result of the changing role of consumers? Businesses will no more be able to act unilaterally, designing products, developing production processes, making marketing messages, and controlling sales channels with little or absolutely or no interference on the part of consumers. In the current era consumers want to use their influence in every element of the business system. Equipped with the modern tools and disgruntled with the present available choices, consumers wish to interact with companies and by this means co-create value. The application of interaction as a basis for co-creation is at the crux of our emerging reality.