The Importance of Marketing to Organisations in the Twenty-First Century - Essay Example

THE IMPORTANCE OF MARKETING TO ORGANISATIONS IN THE TWENTY-FIRST CENTURY (Apple Inc) Introduction In the cutthroat world of business, sustainableadvantage is an oxymoron. Competition is worldwide, products are getting commoditized, and customers enjoy an overabundance of choices. And yet, particular business firms stand above the multitude of profit-generating corporations. As airlines declare bankruptcy, Jet Blue thrives and as private labels grabbed share from consumer packaged goods companies, Procter & Gamble delivers strong revenue and profit growth. What separates these leading companies from their less profitable peers? It is believed that marketing excellence makes the difference. These leaders thrash their competition through superior customer insights that have been translated into compelling value propositions and superior customer experiences. Marketing has never been more significant as business firms scuffle and skirmish to differentiate themselves from competitors and obtain organic growth and financial success. Some of the world’s most revered business corporations that include GE, Microsoft, and Intel, recognise the importance of marketing as a top line growth driver. At GE, where marketing was the “lost function” under Jack Welch, Jeff Immelt has invigorated the marketing organisation. At Microsoft, Steve Ballmer repeatedly stressed the marketing organization’s lead role in making the company’s “value propositions shine through for customers.” And at Intel, Paul Otilleni fundamentally and drastically departed from the engineering-driven mindset of relentlessly increasing microprocessor speed to a marketing-led approach designing microprocessors for specific customer end-use applications like mobility and entertainment. While marketing is more influential and strategic at a few firms, the state of marketing at most firms is lacking. There are two evident problems with how marketing is practiced today—the role of the marketing organisation and the value that marketing is perceived to add to the firm’s bottom line. Definition Basically, marketing is a process closely associated with promoting for sale of goods and services. The standard elements of marketing are the 4Ps -- product, price, place, and promotion-the selection and development of the product, determination of price, selection and design of distribution channels (place), and all aspects of generating or enhancing demand for the product, including advertising (promotion). Brief History Modern marketing was set in motion in the early 1900s. In the 20th century, the marketing process developed through three specific areas -- production, sales, and marketing. In the 1920s, firms operated under the theory that production was a seller’s turf. As it is, product choices were nearly non-existent because firm managers believed that a superior product would sell itself. This notion thrived because the demand for products outlasted supply. In this period, firm success was measured entirely in terms of production. The second phase of marketing, ushered in during 1950s, is known as the sales epoch. During this era, product supply exceeded demand. Thereby, organizations presumed that consumers would resist buying goods and services that they consider non-essential. To overcome this consumer resistance, sellers had to utilise innovative and imaginative advertising and competent personal selling so as to get customers to purchase the goods. The marketing period surfaced after firm managers realised that a better strategy was needed to draw and maintain customers because allowing products to sell themselves was not effective. Rather, the marketing concept philosophy was adopted by many corporations in an attempt to meet the specific needs of customers. Supporters of the marketing contend that in order for firms to attain their objectives, they had to satisfy the needs and wants of consumers (Farese, Kimbrell & Woloszyk, 1991). Marketing and the Overall Business There are four aspects of operation within all organisations -- accounting, finance, management, and marketing. Each of these four areas performs particular functions. The accounting department is responsible for keeping track of income and expenditures while the major responsibility of the finance department is to maintain and track assets. The management group handles the creation and implementation of the procedural policies of the firm and the marketing department generates revenue through the exchange process. As a means of generating revenue, marketing goals are set up in consonance with the general objectives of the organisation. Marketing Management Bringing into line marketing activities with the objectives of the firm is achieved through the process of marketing management. It entails the development and enhancement of objectives that promote the long-term competitive advantage of the business firm. An initial step in the process is the firm’s development of an overall strategic plan then the establishment of marketing strategies that can prop up the firm’s general strategic goals. Ultimately, a marketing plan is developed for each product. Basically, each product plan has in it an executive summary, an explanation of the current marketing situation, a list of threats and opportunities, proposed sales objectives, possible marketing strategies, action programs, and budget proposals. Likewise, the marketing management process includes analysing marketing opportunities, selecting target markets, developing the marketing mix, and managing the marketing effort. To analyse marketing opportunities, firms scan current environmental conditions in order to determine potential opportunities. The objective of the marketing effort is to satisfy the needs and wants of consumers, hence, it is necessary for marketing managers to determine the particular needs and wants of potential customers. Various quantitative and qualitative techniques of marketing research are used to collect data about potential customers, who are then segmented into markets (Kotler & Armstrong, 1993). Market Segmentation To competently handle the marketing effort and to satisfy the needs and wants of customers, many firms place consumers into groups, a process called market segmentation. In this process, potential customers are placed in categories based on different needs, characteristics, or behaviours. Market segments are then assessed as to their attractiveness or potential for generating revenue for the firm. Four factors are generally reviewed to ascertain the potential of a particular market segment. Effective segments should always be measurable, accessible, substantial, and actionable. Measurability refers to the degree to which a market segments size and purchasing power can be determined and ascertained while accessibility is the degree to which a market segment can be reached and served. The size of the particular segment in terms of profitability for the firm is called substantiality while action ability refers to the degree to which a firm can design or develop a product to serve a particular market segment. Consumer characteristics are employed to divide markets into workable groups. Common characteristics used for consumer classifications include demographic, geographic, psychographic, and behavioral segmentation. Demographic segmentation classifies consumers based on characteristics as age, gender, income level, and occupation. It is one of the most popular methods of segmenting potential customers because it makes it relatively easy to identify potential customers. Classifying consumers according to their locations is called geographic segmentation. Consumers can be segmented geographically according to the nations, states, regions, cities, or neighborhoods in which they live, shop, and/or work. Psychographic segmentation uses consumers’ activities, interests, and opinions to sort them into groups. Social class, lifestyle, or personality characteristics are psychographic variables used to classify consumers into different groups. In behavioral segmentation, marketers divide consumers into groups based on their knowledge, attitudes, uses, or responses to a product. Product Positioning Once the potential market has been segmented, firms need to station their products relative to similar products of other producers, a process called product positioning. Market positioning is the process of arranging a product so as to engage the minds of target consumers. In essence, firms position their products in such a way as to distinguish it from those of competitors in order to gain competitive advantage over other products in the marketplace. The position of a product in the marketplace must be clear, distinctive, and desirable relative to those of its competitors in order for it to be effective (Simenik & Bamossy, 1995). MARKETING FUNCTIONS Buying and Selling These two functions go hand in hand. Essentially, it takes more than just a good product/service to be successful, meaning, a product might be superior in quality but it can be obsolete, in effect it still is not effective. As a rule, one must have a product that fills a present and a very significant future need. Likewise, one must buy the best raw materials available at the best possible pricing to produce the product. If one doesn’t produce a product then one need to select products that will fill one’s target market’s needs that the sales staff or the seller him/herself can sell at a profit. Distribution/Transportation-Storage If one purchases products for sale or resale, it means they must be moved to the buyer or seller or to customers by some means. In the case of inventory storage, the seller may inventory the product for the buyer or the buyer may be required to take delivery and incur inventory costs. Each of these two functions will have an effect on the marketing and advertising message. If the product is inventoried somewhere else, shipping time may be a factor. If the buyer inventories the products himself then delivery will be faster. There are four other areas that need to be taken into consideration which complete the basic marketing functions and that is to facilitate Quality and Quantity – One may carry quantities of products with a varying degree of quality. Marketing will help determine how much of each will be kept on hand and in what amounts. Financial – The financing arrangements with suppliers will affect marketing by increasing or decreasing product pricing. Volume discounts or extended terms that affect pricing will, in turn, affect advertising and marketing budget. Risk – Assumed are three risks concerning the products or services being provided -- one, customers won’t want the product or service, two, they may want it but won’t pay the price being asked, or three, new products or services make the product obsolete. Marketing information - In this fast moving world of the Internet, faxes, new technology and company mergers, it is more important than ever for the marketing manager to keep abreast of new advances and changes in the market place. One must be prepared to change the message as news or changes in market information become available. Never allow lack of information jeopardize the firm in its tracks (Boone & Kurtz, 1992). APPLE INC. Overview Apple Computer designs, manufactures and markets personal computers and related software, services, peripherals, and networking solutions. It also designs, develops, and markets portable digital music players along with related accessories and services, including the online distribution of third-party music, audio books, music videos, short films, and television shows. The company sells its products worldwide through its online stores, its own retail stores, its direct sales force, and third-party wholesalers and resellers. Apple primarily operates in the Americas, Europe and Japan with headquarters in Cupertino, California and employs about 14,800 people. The company recorded revenues $13,931 million during the fiscal year ended September 2005, an increase of 68.3% over 2004. The increase in revenue was mainly due to the increase of iPod sales, which soared by 409% in 2005. The company’s operating profit was $1650 million during fiscal year 2005, as compared to $326 million in 2004. The net profit was $1335 million in fiscal year 2005, as compared to $276 million in 2004. The Americas, Europe, and Japan reportable segments do not include activities related to the retail segment. The Americas segment includes both North and South America. The Europe segment includes European countries as well as the Middle East and Africa. Each reportable geographic operating segment provides similar hardware and software products and similar services. The retail segment currently operates Apple-owned retail stores in the US, Canada, Japan, and the UK. The company has 116 retail stores in the US and eight international stores in Canada, Japan, and the UK. The ’others’ operating segment focuses on Asia-Pacific, which includes Australia and Asia except Japan; and the company’s subsidiary, FileMaker. FileMaker develops, publishes, and distributes desktop-based database management application software for Mac OS and Windows-based systems. Revenues and Market Share Facing increased competition from Windows-based computers, Apple’s global market share peaked in 1993, and revenues peaked in 1995. The next two years marked a period of difficult retrenchment, including losses totaling nearly $2 billion and a $375 million special charge in fiscal year 1997 for writing off R&D that would never be used. After dropping from their peak, market share (both globally and domestically) leveled off from 1997-2000. Revenues and profits improved in fiscal year 1999 and 2000. In 1998, the company restored its gross margins (sales less cost of goods) and once recorded quarterly and fiscal year profits; the year also marked the bottom of its sales slide. The August 1998 shipment of the first iMac helped fuel an increase in sales units and revenues beginning the fiscal year 1999, a trend that continued into the following year. Market Segmentation In the early 1990s, under John Sculley, Apple had pushed hard to win market share in Fortune 1000 companies, but Apple had both a disadvantage of price and the head start of IBM PC compatibles, and made only limited inroads. During late 1997 and throughout 1998, most large corporations that had standardised on the Macintosh (either as the primary computer or coequal status with Windows machines) eliminated support for the Mac, or relegated it to only a few departments. Loyal Macintosh users continued in organisations or positions where such non-standard usage was acceptable. However, by mid-1998, Apple’s sales were concentrated primarily in three areas: • Graphics/design • Education • Consumers (home users). The Macintosh’s high-resolution graphics and ease of advantage over MS-DOS had made it a natural for software developers who created the “desktop publishing” segment, which was widely credited as saving Apple and the Macintosh (Kawasaki, 1990). Apple’s strength in this comparatively high end professional market was complemented by its remaining customers, concentrated in education and consumer segments. The majority of these latter users were among the most price sensitive of any PC buyers. Apple defined its competition as being other name-brand vendors such as IBM, HP and Compaq; even compared to these vendors, Apple had historically charged a premium for its Macintosh, both based on its higher cost structure and its belief that its differentiation (or switching cost of its installed base) allowed it to exact such a premium. The premium grew as aggressive price-cutting periodically swept the Wintel-based PC industry, forcing Apple to reevaluate all aspects of its business model — notably its manufacturing efficiencies and product design — and introduce new products such as the 1990 Classic ($998) and the 1998 iMac ($1299), which by mid-2000 was offered in a range of configurations priced at $799 to $1499. In the consumer market, its existing customers remained because of high switching costs (West, 2000). Beginning with the 1998 introduction of the iMac, Apple successfully targeted new computer users by offering an easy-to-set-up Internet computer. Surveys commissioned by Apple reported that 32% of U.S. buyers and 46% of Japanese iMac buyers in the last three months of 1998 were first-time computer owners (Apple 1999a / 1999b). Overall, Apple ended the decade doing best in the three segments that were its strongholds at the beginning of the decade — although both consumers and education were transformed by the Internet and the design segment had expanded from paper-oriented graphic arts to include web page and video production. But ten years later, Apple’s positions in these segments was far less secure, and it lacked the resources, product differentiation and momentum to expand its reach in other segments such as other large businesses. Marketing in the 21st Century Beginning with the introduction of the Macintosh in 1984 through the 1984 Super Bowl commercial, Apple has been recognized for its efforts towards effective advertising and marketing for the Macintosh. Think Different was an advertising slogan created by the New York branch office of advertising agency TBWA\Chiat\Day for Apple Computer during the late 1990s. It was used in a famous television commercial and several print advertisements. The slogan was employed at the end of several product commercials, until the advent of Apples Switch ad campaign. Apple currently does not use the slogan, and their commercials usually end with a silhouetted Apple logo and sometimes a pertinent website address. Even today, Think Different remains an intrinsic part of Apples identity, alongside flagship products like the iPod and iMac. The use of the phrase, “Think Different,” however, has ceased. Television Commercials Significantly shortened versions of the text were used in two television commercials titled “Crazy Ones” directed by TBWAs Jennifer Golub with a voiceover narrated by Richard Dreyfuss. The one-minute commercial featured black and white video footage of significant historical people of the past, including (in order) Albert Einstein, Bob Dylan, Martin Luther King, Jr., Richard Branson, John Lennon, R. Buckminster Fuller, Thomas Edison, Muhammad Ali, Ted Turner, Maria Callas, Mahatma Gandhi, Amelia Earhart, Alfred Hitchcock, Martha Graham, Jim Henson (with Kermit the Frog), Frank Lloyd Wright and Picasso. The commercial ends with a young girl opening her closed eyes, as if to see the possibilities before her. The thirty-second commercial used many of the people above, but closed with Jerry Seinfeld, instead of the young girl. In order: Albert Einstein, Bob Dylan, Martin Luther King, Jr., John Lennon, Martha Graham, Muhammad Ali, Alfred Hitchcock, Mahatma Gandhi, Jim Henson, Maria Callas, Picasso, and Jerry Seinfeld. This commercial aired only once, during the series finale of Seinfeld. Print Advertisements Print advertisements from the campaign were published in many mainstream magazines such as Newsweek and Time. Sometimes these were traditional advertisements, prominently featuring the companys computers or consumer electronics along with the slogan. However, there was also another series of print ads which were more focused on brand image than specific products. They featured a portrait of one of the historic figures shown in the television ad, with a small Apple logo and the words “Think Different” in one corner, with no reference to the companys products. 2001 - Present Switch was an advertising campaign launched by Apple Computer on June 10, 2002. It featured what the company referred to as “real people’ who had ‘switched’ from the Microsoft Windows platform to the Mac. An international television and print ad campaign directed users to a website where various myths about the Mac platform were dispelled and disseminated. The television commercials were directed by Errol Morris. Apple has promoted the iPod and iTunes with several advertising campaigns, particularly with their silhouette commercials used both in print and on TV. These commercials feature people as dark silhouettes, dancing to music against bright-colored backgrounds. The silhouettes hold their iPods which are shown in distinctive white. The TV advertisements have used a variety of songs from both mainstream and relatively unknown artists, while some commercials have featured silhouettes of specific artists including Bob Dylan, U2, Eminem, Caesars and Wynton Marsalis. Successive TV commercials have also used increasingly complex animation. Newer techniques included using textured backgrounds, 3D arenas and photo-realistic lighting on the silhouette characters. The latest series of ads, “iPod Nano - Completely Remastered,” have a totally different design. The background is totally black. The colored iPod Nanos shine light and glow, showing some of the dancers, holding the iPod Nanos while a luminescent light trails made by moving iPod Nanos. This is to display the fact that the 2nd Generation iPod Nanos are colored. The Apple iPod silhouette commercials are a family of commercials in a similar style that form part of the advertising campaign to promote the iPod, Apple Computers portable digital music player. The commercials include television commercials, print ads, and posters in public places and wrap advertising campaigns, and are unified by a distinctive, consistent style. References / Readings Boone, L. E. and Kurtz, D. L. (1992). Contemporary marketing. 7th ed. New York: Dryden/Harcourt Brace. Churchill, G. A., and Peter, P. J. (1995). Marketing: Creating Value for Customers. Boston: Irwin. Farese, L., Kimbrell, G. and Woloszyk, C. (1991). Marketing essentials. Mission Hills, CA: Glencoe/McGraw-Hill. Kotler, P. and Armstrong, G. (1993). Marketing, an introduction, 3rd ed. Englewood Cliffs, NJ: Prentice-Hall. Semenik, R. J. and Bamossy, G. J. (1995). Principles of marketing: A global perspective. 2d ed. Cincinnati, OH: South-Western. Kawasaki, G. (1990). The Macintosh way. Glenview, Ill.: Scott, Foresman West, J. (2000). “A Comparison of PC Standard Switching Decisions by U.S. and Japanese Computer Users.” Unpublished Ph.D. dissertation, Graduate School of Management, University of California, Irvine Apple Computer, “800,000 iMacs Sold in First 139 Days,” press release, Apple Computer, Inc., Jan. 5, 1999 (a), URL: http://www.apple.com/pr/library/1999/jan/05imac_momentum.html Apple Computer, “46 Percent of Japan iMac Buyers Are First-Time Computer Owners,” press release, Apple Computer, Inc., Feb. 18, 1999 (b), http://www.apple.com/pr/library/1999/feb/18japan_buyers.html Read More