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Lesson#3
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International Marketing Orientation of Firms
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INETRNATIONAL MARKETING PROCESS
International Marketing Orientation of Firms
A company’s orientation towards the market:
A company can have one of the following five types of
orientations towards its markets;
The Production Concept. This concept is the oldest of the
concepts in business. It holds that
consumers will prefer products that are widely available and
inexpensive. Managers focusing on this
concept concentrate on achieving high production efficiency, low
costs, and mass distribution. They
assume that consumers are primarily interested in product
availability and low prices. This orientation
makes sense in developing countries, where consumers are more
interested in obtaining the product than
in its features.
The Product Concept. This orientation holds that consumers
will favor those products that offer the
most quality, performance, or innovative features. Managers
focusing on this concept concentrate on
making superior products and improving them over time. They
assume that buyers admire well-made
products and can appraise quality and performance. However,
these managers are sometimes caught up
in a love affair with their product and do not realize what the
market needs. Management might commit
the “better-mousetrap” fallacy, believing that a better
mousetrap will lead people to beat a path to its
door.
The Selling Concept. This is another common business
orientation. It holds that consumers and
businesses, if left alone, will ordinarily not buy enough of the
selling company’s products. The
organization must, therefore, undertake an aggressive selling
and promotion effort. This concept
assumes that consumers typically sho9w buyi8ng inertia or
resistance and must be coaxed into buying.
It also assumes that the company has a whole battery of
effective selling and promotional tools to
stimulate more buying. Most firms practice the selling concept
when they have overcapacity.
Their aim
is to sell
what they make rather than make what the market wants.
The Marketing Concept. This is a business philosophy that
challenges the above three business
orientations. Its central tenets crystallized in the 1950s. It
holds that the key to achieving its
organizational goals (goals of the selling company) consists of
the company being more effective than
competitors in creating, delivering, and communicating customer
value to its selected target customers.
The marketing concept rests on four pillars: target market,
customer needs, integrated marketing and
profitability.
Distinctions between the Sales Concept and the Marketing
Concept:
1. The Sales Concept focuses on the needs of the seller. The
Marketing Concept focuses on the
needs of the buyer.
2. The Sales Concept is preoccupied with the seller’s need to
convert his/her product into cash.
The Marketing Concept is preoccupied with the idea of satisfying
the needs of the customer by means of
the product as a solution to the customer’s problem (needs).
The Marketing Concept represents the major change in today’s
company orientation that
provides the foundation to achieve
competitive advantage. This
philosophy is the foundation of
consultative selling.
The Marketing Concept has evolved into a fifth and more refined
company orientation: The
Societal Marketing Concept. This concept is more theoretical and
will undoubtedly influence future
forms of marketing and selling approaches.
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The Societal Marketing Concept. This concept holds that the
organization’s task is to determine the
needs, wants, and interests of target markets and to deliver the
desired satisfactions more effectively and
efficiently than competitors (this is the original Marketing
Concept). Additionally, it holds that this all
must be done in a way that preserves or enhances the consumer’s
and the society’s well-being.
This orientation arose as some questioned whether the Marketing
Concept is an appropriate
philosophy in an age of environmental deterioration, resource
shortages, explosive population growth,
world hunger and poverty, and neglected social services.
Are companies that do an excellent job of satisfying consumer
wants necessarily acting in the best longrun
interests of consumers and society?
The marketing concept possibly sidesteps the potential conflicts
among consumer wants,
consumer interests, and long-run societal welfare. Just
consider:
The fast-food hamburger industry offers tasty but unhealthy
food. The hamburgers have a high fat
content, and the restaurants promote fries and pies, two
products high in starch and fat. The products
are wrapped in convenient packaging, which leads to much waste.
In satisfying consumer wants, these
restaurants may be hurting consumer health and causing
environmental problems.
Some examples of the ‘marketing concept’:
The marketing concept has been expressed in many colorful ways:
– “Meeting needs
profitably.”
– “Find wants and
fill them.”
– “Love the
customers, not the product.”
– “Have it your
way.” (Burger King)
– “You are the
boss.” (United Airlines)
– “Putting people
first.” (British Airways)
– “Partners for
profit.” (Milliken Company)
“Selling focuses on the needs of the seller; marketing on the
needs of the buyer. Selling is preoccupied
with the seller’s need to convert his product into cash;
marketing with the idea of satisfying the needs of
the customers by means of the product and the whole cluster of
things associated with creating,
delivering and finally consuming it”
The international marketing concept rests on four pillars:
– target market (The
potential customers)
– customer needs
– integrated
marketing (Approaching customers
through product offers, marketing communication,
distribution and pricing)
– profitability
Types of customer needs:
Although marketing is about meeting needs profitably,
understanding customer needs and wants is not
always a simple task. Some customers have needs of which they
are not fully conscious. Or they cannot
articulate these needs. Or they use words that require more
interpretation
Consider the customer who says he wants an “inexpensive car. The
marketer must probe further. Five
types of needs can be identified:
– Stated needs (the
customer wants an inexpensive car)
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– Real needs (the
customer wants a car whose operating cost, not its initial price, is low)
– Unstated needs
(the customer expects good service from the dealer)
– Delight needs
(the customer buys the car and receives a complimentary gift)
– Secret needs (the
customer wants to be seen by friends as a value-oriented savvy consumer)
Importance of customer retention:
Attracting a new customer can cost much more than pleasing an
existing customer - it may cost even
much more to bring an existing customer to the same level of
profitability as the lost customer -
customer retention is thus more important than customer
attraction.
The key to customer retention is customer satisfaction. A highly
satisfied customer:
– Stays loyal
longer
– Buys more as the
company introduces new products and upgrades existing products
– Talks favorably
about the company and its products
– Pays less
attention to competing brands and advertising and is less sensitive to price
– Offers
product/service idea to the company
– Costs less to
serve than new customers because transactions are routinized
International marketing value chain:
‘Value Chain’ is tool for identifying ways to create more
customer value. Every firm is a collection of
activities that are performed to design, produce, market,
deliver, and support its products. Just like a
metal chain, the strength of a business value chain is the
strength of its weakest link. In order to improve
the delivery of final customer value, the business value chain
needs to first improve its weakest links
(activities).
The business value chain identifies nine strategically relevant
activities that create value and cost in
specific business:
• Primary
activities (through which a product / services passes during various stages of
manufacturing and delivery)
– Inbound logistics
– Operations
– Outbound
logistics
– Marketing and
sales
– Service
• Support
activities (that are not directly involved in manufacturing and delivery of a
product or
service, but support such activities)
– Firm
infrastructure
– Human resource
management
– Technology
development
– Procurement
Five different levels of company investment in
customer-relationship building:
The customer-relationship building is a process involved in
attracting and keeping customers involves.
The objective is to move the customer from just a suspect (in
terms of a potential to become a buyer) to
an advocate for other for the company and its brands. The
various stages of customer loyalty are in the
following;
– Suspects --
prospects -- first-time customers -- repeat customers -- advocates
A company can opt to adopt a simple selling orientation towards
its customers or may work to develop
an active partnership with them. The five different levels of a
company’s investment in customer
relationship building are;
– Basic marketing
• Simply selling
– Reactive
marketing
• In addition to
selling encourage the customer to contact for any question, comments,
complaints
– Accountable
marketing
• After-sales calls
to check if the customer is satisfied
– Proactive
marketing
• Contact customer
from time to time to seek inputs for future improvements in products
– Partnership
marketing
• Work continuously
with customers to discover ways to effect customer savings or help the
customer perform better
A customer that becomes a partner with a firm buys more of the
firm’s products, the transaction and
advertising cots are lower, becomes forgiving, gives higher
profits margins and also advocates others to
buy the firm’s products.
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