[1] History reveals the foundations of business

People trade with those they know & trust

History provides many valuable lessons and whilst many think ‘marketing’ is new – it is an ancient custom – interestingly, a customer describes a person who knows, trusts, and, therefore, makes a custom of frequenting a business.

A brief history of marketing – around 12,000 years ago, in a number of locations, nomadic hunter-gatherers evolved into sedentary peasant farmers – they built shelters and domesticated animals and plants. Whilst the hunter-gatherers were pure consumers the peasant farmers were both producers and consumers. They began to cultivate plants and animals, bred from the best, and modified their environment to maximise their effort. Peasant farmers were largely self-sufficient – they preserved and stored food; for example, cereals were cultivated and baked into bread, vegetables, fruits and dairy were pickled and/or fermented – meat and fish were salted and dried  – they made their own clothing. With time peasant farmers began to trade [initially furs and hides]. Interestingly, many food products that are consumed today originated in this era – think cereals, breads, pickled vegetables. As people became sedentary, storage was necessary, pottery became one of the first human inventions. As settlements grew and livestock numbers increased, the water in wells became unsuitable for drinking – beer, wine, spirits were produced to reduce the risk of contaminated water.

In time, peasant farmers began to exchange surplus production – products. Markets needed to be within walking distance. To record transactions writing developed. To enable transactions services emerged. Others traded their skills and labour [the origins of the word ‘tradespeople’]; some specialised; for example, pottery, brewing, butchering, leather tanning, carpentry, transport. With time and availability to resources some craftspeople specialised in the production of metals [the Iron Age] – some metals were cast into tools for farming and precious metals were crafted into jewellery and coins.

In the last 3,000 years markets evolved – markets became more formal, conventions and regulations were introduced to ensure value and fairness – standard weights and measures and coins emerged to ensure ‘a fair exchange’. Products were ‘branded’ to differentiate them from copies and communicate provenance, quality, and value – products were trademarked.

The key theme is that buyers innately approach sellers they know and trust and avoid sellers they know and distrust.

The business lessons are [1] To be considered – a product/business must be known. [2] Being known and also trusted is a long-term strategic objective. [3] Businesses who fail to build customer trust are locked into a more expensive business model – more dependent on advertising, sales promotion, selling tactics, sales promotions, and discounting.

To be considered a business must be known

however, being known and trusted helps to develop a sustainable competitive advantage.

[2] The best of times – the worst of times

History reveals that customers, organisations, markets, and products are in a continuous state of evolution. To survive and succeed an organisation must manage the prevailing challenges of the times – often the challenges require a series of small-step and continuous improvements. However, there are also notable events when a market or an industry is disrupted – where the status quo is challenged, and radical change is needed. When we analyse the notable events 4 recurring patterns emerge – the challenges could also be described as ‘market quests’. Being aware of the 4 recurring patterns will assist marketing practitioners to audit the prevailing market challenges and develop strategies and tactics that best meet the needs of the customer, the organisation, the market and the product category.

The 4 market quests that marketing practitioners must manage are:

1. The quest to better serve the customer
2. The quest to overcome the challenges facing society
3. The quest for better use [application] of existing resources/knowledge/practices
4. The quest for more effective distribution of: information, products, & people

When we delve deeper, we see that consumers [therefore markets] quickly adapt and adopt when it is in their best interest – they continually search for and select best satisfying products. Through this selection process markets evolve through a series of small step improvements and big step innovations. Innovations often disrupt the status quo – innovations often provide new opportunities, however, innovations often disrupt existing industries – the best of times for some is often the worst of times for others. Marketing history highlights that products have a life-cycle. In their quest to design, develop, and deliver best satisfying products marketers should be constantly scanning the markets and adopting and applying the resources/knowledge/practices from other industries. This practice of small and big step improvements requires marketers to be vigilant and to ensure they are meeting consumer expectations.

Interestingly, many of today’s everyday products, organisations and public institutions emerged by overcoming one or more of the 4 quests. As societies evolved new business standards/benchmarks also evolved – for example: [1] creating value for their customers and employees, [2] creating value for society, [3] having a sense of purpose, and [4] developing a unique product value proposition in the marketplace.

Contrary to what is written in the media societies have, unfortunately, always had an impact on the environment – for example: access to safe drinking water has been a challenge for 12,000 years. However, often overcoming one challenge, in time, creates a new problem and a new challenge for society.

Also, societal values and expectations evolve and continue to evolve. When a society has concerns or is negatively impacted, new regulations are introduced – regulating market activities has been part of the evolution of marketing [since Greek and Roman times].

The evolution continues – we are presently experiencing  several notable event and a process of natural selection is well underway. For example, in recent years we have seen retailing fracture into [1] traditional marketplace retailers and [2] digital marketspace retailers, and then, [3] omni-channel retailing where retailers are customer focused rather than channel focused. Supporters of an omni-channel marketing approach advocate that, customers no longer belong to one camp or another, instead they move freely between the marketplace and the marketspace during the buying process. When practiced well, an omni-channel approach combines customer convenience and customer experience in both the online user experience and the in-store sense of belonging. Omni-channel marketing employs evolving technologies to reintroduce customer convenience – for example, click & collect, pick-up/return-in-store, home deliveries. Marketing practitioners rarely see marketing as traditional marketing and digital marketing they simply see it as marketing – with one aim – to best satisfy the needs and wants of their customers and their organisation. Keeping in mind that customers are only loyal to value and select which retailers to approach and which to avoid.

Organisations that fail to adapt, adopt, and best satisfy – are on the path to extinction

 [3] The marketing concept is an axiom of business

organisations that best satisfy the needs of their customers are best placed to satisfy their own needs

the philosophy embedded within the marketing concept

It has to be mentioned that not every organisation that goes to market is practicing the philosophy embedded within the marketing concept – some are totally focussed on what they want – and see the customer as a means to an end – a resource to be mined rather than nurtured.

The marketing concept provides guidance + a philosophy. It is generally regarded that the marketing concept is an axiom [an accepted truth] of business. The marketing concept is based on organisations having a relational focus with external customers, internal customers, channel partners, and society. It is not ‘the customer is king’ nonsense.

Consider the opposite of satisfying customers – think about the organisational consequences of dissatisfaction – think about the consequence of leaving customer satisfaction to chance – think about the chaos if every staff member had their personal view of customer service – think about an organisation that does not measure metrics associated with the customers’ experience. It is worthwhile to remember, that whilst the marketing concept is customer and organisational centric – training is required to ensure that what is promised is delivered.

When an organisation has adopted the marketing concept, the planners consider their specific situational factors and then craft and document – a marketing philosophy – a set of principles, attitudes, and behaviours that provide guidance as to how an organisation goes to market – some may refer to this a mission.  As every organisation faces situational factors that are somewhat unique – keep in mind – every marketing philosophy is somewhat unique – every marketing plan is somewhat unique.

A marketing philosophy is process driven – with time and with consistent internal communication a marketing culture of best satisfying and profitable⁴ exchange relationships⁴ is nurtured.

Marketing is about satisfaction² – for the customer and the organisation

measuring satisfaction is a key task

Keep in mind what isn’t measured cannot be managed

[4] Organisations go to market with one or a mix of the 3 business market approaches

the production, the selling, and relational approaches

Different people have different views on how to go to market. There are a number of reasons for the differing views. Therefore, most organisations are an amalgam of the 3 business market approaches – however, when an organisation views customer satisfaction as the means to a competitive advantage they are practicing the marketing concept. The problem lies when an organisation has extreme views for example [1] practices a production approach that ignores the needs of others and the consequences of their actions in pursuit of a low cost/price outcome, [2] practices a selling approach that is aggressive, untruthful, and unethical in pursuit of the sale, and [3] practices a relational approach to the extent that price and sales revenue are given insufficient consideration. Often, the production approach and the selling approach view customers as a means to an end and have little regard for customer satisfaction. Practicing the marketing concept is about profit for the customer, organisation, channel partners and society and relationships that are synergistic, symbiotic, strategic, and sustainable and considers short-term and long term marketing objectives.

The production [low cost/price] approach is based on the premise that if a product meets a customer’s core/basic needs and is priced at an attractively low price – then volume and then profit can be achieved. The problems are that [a] not every organisation has a low-production cost advantage and [b] not every organisation has access to a sufficiently large market. Therefore, not every organisation can profitably achieve or maintain the lowest price – the production concept should be implemented with caution. The production concept is a popular approach for new market entrants with low-costs or low labour costs who wish to gain volume; however, it generally has a limited life as new entrants may enter the market with lower operating costs. Furthermore, as a business grows operating costs often increase require higher prices.

The selling [communication/persuasion] approach is based on the premise that organisations need to communicate their unique product value proposition to the market to create awareness, interest, desire, and action. The emphasis on selling will vary according to the prevailing situational factors and product demand. The selling approach may gain greater acceptance when an organisation no longer has a cost advantage, no longer has a compelling value proposition [based on being the lowest price], and/or when demand has dropped below production capacity. The belief is that if a product is not desired and demanded then the organisation must aggressively sell the product and overcome customer objections. When there is an over emphasis on the selling approach the aggressive nature generally results in limited customer appeal, low levels of customer loyalty, and a short-term benefit.  Keep in mind, that there are unsought products with societal benefits that may require a more aggressive approach to cut through complacency.

The relational [profitable exchange relationship] approach starts with the needs of the customer and is directed towards the satisfaction of the customer and the satisfaction of the organisation. The relational approach does not imply that the organisation’s needs are secondary; it implies that customer satisfaction is the best route to achieving organisational satisfaction. At first inspection, the production and the selling approaches appear to have much in common with the relational approach; whilst there are similarities there are fundamental differences.

Employees have often been trained by previous employers

Within any organisation there is diversity – staff arrive at an organisation enculturated to the previous organisational philosophy, therefore, many organisations are an amalgam of business philosophies and effort is needed to acculturate staff to the preferred organisational philosophy and with time nurture the preferred organisational culture. Clearly, different employees will vary on their commitment to the customer, the organisation, and society.

The marketing concept is the most adopted business concept.

Regis McKenna, a strategy consultant, who created the strategic marketing plans for many of today’s most respected technology brands, stated that ‘marketing is everything and everything is marketing’. In this statement he highlights the importance of recognising that every interaction between an organisation and a consumer – communicates a message, how messages are cumulative, and how an organisation’s actions speak louder than an organisation’s words. Marketing is not something you do to a consumer but rather something you do with a marketplace.

impatient organisations are often tempted to reach for a ‘business sugar fix’ – discounting and/or overpromising

[5] Understanding customers dreams, desires, and demand

Marketing practitioners must have a thorough understanding of their customers. Understanding needs and wants and the schemas that guide behaviour is an important step. Although best satisfying needs is critical – often a consumer’s wants may be the determinant factor.

An understanding of the consumer/customer is critical – and is often referred to as the 1st Gap of management. Sellers and buyers go to market to satisfy their needs and wants. That’s right organisations also have needs and wants. Needs and wants are terms that are often used interchangeably in our daily lives; however, there are differences that influence the design, development, and delivery of marketing strategy and tactics.

For consumers – needs can be biogenic [for the body] and/or psychogenic [for the mind], satisfying a need will have benefits and they can be utilitarian [function] and/or hedonic [pleasure] benefits – most marketers think of Maslow’s extended hierarchy of needs.

Sure – for a consumer to enter the buyer decision process there must be the recognition of a need – Needs are the motivation to go to market, HOWEVER, for a product to be selected from other alternatives the consumer must want a particular product more than they want other products. The organisation that designs, develops, and delivers a unique product value proposition [UPVP] and can then clearly communicate how their product offering best satisfies the needs and wants of their customer will be better positioned to be the product of choice.

A schema is the result of an innate cognitive process where people attend, interpret, organise, and catagorise information, consider the associations and relationships and store this information in an associative network for efficient retrieval, future conversations, and decision-making. A key task for organisations is to be mindful of consumer schemas and guide consumers comfortably through the buyer decision process.

Customer knowledge is the first step

however, marketing practitioners should be able to identify, measure, & manage the 5 performance gaps*

1. the knowledge gap – do you as a manager really understand your customers?
2. the standards gap – have you documented & distributed the delivery specification, standards, & processes?
3. the delivery gap – are you measuring to ensure documented specifications are delivered?
4. the communication gap –  are you promising what you can deliver?
5. the total gap – are you measuring customer expectations > what is actually received/delivered > degree of satisfaction?

What is your organisation’s unique product value proposition and can it be easily communicated, understood, and delivered?

*see the e-book for more on this and references.

[6] Achieving profitable exchange relationships requires a more holistic view of profits & relationships

Organisations have different market approach. in sum – the production concept is based on the premise that people will be attracted by a low-price; the selling concept is based on the premise that persuasion is needed to convince people; and the marketing concept is built on the premise that organisations that best satisfy the needs of their customers are best placed to satisfy their own needs. Implied is that satisfied customers will provide a service to organisations that they have relationships. Whilst the marketing concept is the primary or superordinate concept; profitable4 exchange relationships4should be recognised as the goal.

Let’s discus profits & relationships

profits⁴ – profits for the customer, organisation, channel partners, and society.

Profits – When most people think ‘profit’ they think a ‘financial profit’ for an organisation, for example – a financial profit from an exchange[s], a financial profit in a quarter/year – it infers a profit for the organisation and few think about a profit for the customer. Although attaining a financial profit for an organisation is vital, from a marketing perspective this is a limited view of profit. An organisation that is committed to building relationships should endeavour to achieve four profit outcomes – [i.e., total profits⁴] profits for the customer, organisation, channel partners, and society.

relationships⁴ also have 4 elements – relationships should be synergistic, symbiotic, strategic, & sustainable

Relationships – For thousands of years a marketing philosophy based on relationships has been the cornerstone of commerce. This philosophy goes beyond seeing the customer as the ‘demander’ in a supply and demand economy. From our contemporary [organisational] definition of marketing we can see that often an exchange is more than a one-off transaction and every exchange should work towards building profitable business relationships for the benefit of all parties – building the sales baseline [more on this later].

WARNINGS

[1] There is a tendency to regard one-off purchases as having limited opportunity to develop relationships. This is not necessarily the case – think Word OF MOUTH. Clearly, involvement with a product varies and relationships with products and suppliers will vary, not all relationships are long-term or ongoing, some relationships are short and are unlikely to be repeated – but keep in mind there can still be a type of relationship.

[2] There is a tendency to consider that relationships only exist with high involvement products and to consider frequently purchased low involvement products [e.g., fast moving consumer goods] less dependent on a relational approach. This is not necessarily the case – think about your weekly purchases and consider what you place in your shopping cart each week.

[8] Increase sales revenue & increase margins

Strange as is may seem an objective of marketing is to reduce dependence on advertising, sales promotions, & discounting

building business value through long-term strategies & short-term tactics

Given the importance of customer satisfaction, marketing practice is a mix of long-term strategies and short-term tactics working to achieve organisational marketing objectives [see 9 objectives of marketing practitioners]. Furthermore, we put forward the view that if an organisation measures, manages, and improves collective customer satisfaction [the satisfaction score of all customers] – then the sales baseline will rise over time. The sales baseline is the sales volume/revenue achieved regardless of any other sales enhancing tactics.

the long & short of marketing.

Building the sales baseline could also be referred to as building brand equity – a longitudinal representation of the unique product value proposition of an organisation’s product[s] in the mind of consumers. The sales baseline approach highlights that both long and short-term activities should be measured and managed. Building the sales baseline is long-term – the basic premise is that organisations will be less ‘dependent’ on short-term tactics [e.g., discounting the price, selling and sales promotions], therefore, in the longer-term organisations are able to achieve a competitive advantage by [a] increasing revenue, [b] reducing costs as a % of sales, and [c] increasing the value of the business. In the real world there will always be variations in demand and short-term sales revenue will need to be managed, however, the sales baseline approach highlights the need for short-term sales tactics to be considered and be congruent with long-term sales strategies.

Beware of ‘sugar fix sales tactics’ that do long-term damage to the health of a brand

[10] Managing the buyer decision process is critical for survival & success

the buyer decision process – the consumer/customer’s journey through 3 time-zones

People learn and develop schemas from personal experiences and observing the experiences of others. Consumers also develop schemas. A schema is the result of an innate cognitive process where people attend, interpret, organise, and catagorise information, consider the associations and relationships and store this information in an associative network for efficient retrieval, future conversations, and decision-making. A key task for organisations is to be mindful of consumer schemas and guide consumers comfortably through the buyer decision process.

Although each step in the buyer decision process will be structurally similar for all products, the process will vary according to situational factors and the degree of consumer/customer involvement with the product; for example, there are clearly differences between searching and selecting a snack bar and searching and selecting a motor car.

The steps consumers take when purchasing is outlines in the buyer decision process. There are 3 distinct time-zones:

1. Searching for & selecting products the buyer decision process begins with the recognition of an unmet need, a need that is of sufficient intensity that a consumer is motivated to attend to it, if it is a frequent need the process is relative simple, however, some needs require intensive problem solving. Consumers generally conduct a costs-benefits-risks analysis and may exit the buyer decision process, postpone the buyer decision process, or commit to the buyer decision process. If the consumer commits they will search and evaluate alternatives, construct a list of considered products, and estimate the value before selecting a product.
2. Experiencing & assessing the product delivery After selecting a product the product deliver time-zone is about experiencing the product and assessing the product. This time-zone varies in time according to the characteristics of the product; for example, a snack bar would be purchased, delivered, and consumer quickly when compared to a motor car that is experienced and assessed continually over many years.
3. Reflecting, evaluating and future purchase behaviour In the post purchase time-zone customers reflect on their purchase and evaluate the outcome of what was expected and was was received. Three outcomes emerge [1] dissatisfaction, [2] ambivalence, [3] satisfaction. Clearly the different outcomes will motivate future purchase behaviours.

The buyer decision process is a process where consumers become customers. This transformation occurs when a consumer enters the buyer decision process as a suspect > then a prospect > to become a customer. The marketing objective is then to advance the first-time customer > repeat customer > member customer > advocate or evangelist for a product or organisation.

Understanding the buyer decision process is critical for anyone involved in business

[11] the total product is everything delivered and received in an exchange 

understanding the total product is critical to value creation

Understanding and managing the total product is critical – it is the basis for organisational success or failure. Furthermore,  an organisation’s products are continually monitored by an organisation’s competitors and, therefore, the total product is a basis for marketplace competition.

The total product is the totality of what an organisation delivers to the customer – what is promised, therefore, what is expected, what is delivered, and what are the total benefits and costs to the customer. The total product is the totality of what is offered in an exchange between an organisation and a customer.

It is worthwhile to break down the total product into three main areas:

• Product considerations – the characteristics of the product, what a marketing practitioner takes into consideration when designing, developing, and delivering a product
• Product layers – holistically how a product is constructed – what is the core need that is satisfied, what is expected as an industry standard, and how a product is augmented to distinguish a product from competing products
• Product components – the 6 elements or qualities that constitute a product; the product components are goods, services, ideas, experiences, people, and places. Marketing practitioners employ the product components to create a product that is distinct, distinguishable, and desirable – a unique product value proposition.

Marketing practitioners who cannot produce a total product with a unique product value proposition are often subjected to a cycle of discounting and higher cost of sales.

the total product is the basis for organisational success or failure

[12] Understanding quality, value, satisfaction, & expectations

looking at satisfaction through a different lens

When a consumer recognises an unmet need and there is intensity and motivation to enter the buyer decision process – they do so with the intent of receiving the best quality and value available. After searching and considering their situation and the available alternatives they select what they perceive to be the best product. Obviously, other situation factors such as the organisation, the market and the product are considered.

Therefore, a consumer  enters an exchange with positive expectations of quality, value and satisfaction.  In everyday conversations we employ the term quality if a product is ‘fit for purpose’. Additionally, a quality is an element, a feature, a property, a characteristic of a product. Total quality is the sum of the qualities/elements [-+] received in an exchange – a quality product may not be considered if it is not affordable. Value is the qualities received compared to the costs outlayed. Costs include money, time, and effort. Satisfaction is a post-purchase evaluation of total qualities received and total costs when compared with pre-purchase promises and expectations.

no one would enter an exchange if they expected to be dissatisfied

100% of customers enter the buyer decision process expecting satisfaction

Therefore, understanding customer expectations, delivering quality, and ensuring value are critical to customer satisfaction. Most organisations would also enter an exchange with the intent of satisfying a customer. Therefore, any episode of dissatisfaction is not only a deviation from customer expectations but also organisational expectations.

Remember an objective of marketing is to be best satisfying for the seller and the buyer.

[13] identify, measure, & manage the types of satisfaction – episodic, cumulative, aggregate, & collective satisfaction

critical for a competitive advantage & building brand equity

The overall premise of the circle of satisfaction is that an organisation can only achieve a competitive advantage through a process that consistently delivers quality, value, and customer satisfaction.

The following is a brief description of the 4 types of customer satisfaction:

1. Episodic satisfaction – one episode/transaction for one customer
2. Cumulative satisfaction – multiple episodes for one customer
3. Aggregate satisfaction – combination of multiple total products for one customer
4. Collective satisfaction – multiple evaluations for all customers

Whilst some products are only purchased once, there are other products that are purchased more than once and some that are purchased frequently. Satisfaction takes on a different dimension when a product is purchased more than once. For a product to be selected there has to be a need, and the perception of quality, value, and satisfaction. Next, there has to be an initial episode of satisfaction that motivates the customer to repurchase, then after the initial episode each subsequent purchase is reevaluated – this reevaluation process is referred to as cumulative satisfaction. Marketers often quantify this as customer lifetime value. Most organisations have more than one customer, therefore, delivering cumulative satisfaction to all customers is referred to as collective satisfaction.

Consumers buy from those they know and trust. Cumulative customer satisfaction results in trust, and trust leads to loyal customer behaviour. Often people talk about ‘service’ as something an organisation performs for customers – this thinking misses one of the key objectives of marketing – that loyal customer behaviour is a ‘service’ – a service that increases revenue, lowers the cost of sales, and builds the value of the business – and delivers organisational satisfaction.

The total product is the totality of what a customer receives in an exchange. However, sometimes a customer will ‘mentally bundle’ a number of consumption activities together – these are referred to as aggregate products. This brings in a new type of satisfaction aggregate satisfaction. For example, imagine a holiday to Singapore – the post-purchase behaviour of visitors to Singapore is dependent on multiple episodes/transactions whilst in Singapore [e.g., flights, airport service, taxis, hotels, meals, attractions] and each episode will contribute to the overall [aggregate] evaluation of Singapore as a destination.  Identifying, measuring, and managing collective aggregate satisfaction is critical to ensure that the all organisations are performing to standard and that post-purchase behaviour is favourable.

Whilst many understand the value of customer satisfaction to an organisation, less understand the types of customer satisfaction [1] episodic satisfaction, [2] cumulative satisfaction, [3] collective satisfaction, and [4] aggregate satisfaction and even less have processes in place to measure and cultivate each type of satisfaction.

Some ask which type of satisfaction is the most important? Actually all types of satisfaction come together to form brand equity – the total value of the business, however, organisations only get one chance to make a good first impression, therefore start with episodic and build from there.

The most valuable service is the one that the customer performs for the organisation

[16] it is critical to identify, measure, & manage the appropriate marketing metrics

each tactic should be measured to ensure that it meets specified objectives

The objective is to make timely and better-informed decisions – decisions that may be long-term and strategic or short-term and tactical.

The importance of identifying and analysing appropriate marketing metrics in order to make informed decisions cannot be over emphasised. Furthermore, drilling-down and evaluating the effectiveness at a micro tactical level is critical. Keep in mind that an organisation will only achieve the objectives of the strategic business plan and strategic marketing plan if it is measured and corrective action is taken at a micro level. The metrics should be appropriate – for example, [1] sales performance may need to drilled down to identify branch and salesperson performance, whereas [2] people involved in social media will need a different set of marketing metrics/analytics.

Importantly, the COMP data that is collected and analysed in a marketing audit includes the collective data that was once collected to manage, measure and improve the day-to-day performance of the organisation [i.e., historic and current marketing metrics]. However, as the Strategic Business Planning Group requires a holistic perspective the marketing metrics data is reassembled/repurposed to reflect the historical and current performance of the organisation. Therefore, marketing metrics that were once micro and tactical in nature are collated into a macro and strategic format.

Accessing high quality and relevant information is particularly important in today’s dynamic marketplace/environment with short planning cycles, increased competition, higher consumer expectations, and increased public accountability [at all levels]. Given the increased importance of data, it is therefore critical that marketing practitioners clearly identify and articulate their requirements to ensure that their IT needs are delivered