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Theories of Marketing Summary

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  • February 7, 2015
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  • 2014/2015
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Theories of Marketing summary

Week 1 Marketing Theory

The effect of market orientation on business profitability (Narver & Slater,
1990)

Market orientation: the organisation culture that most effectively and efficiently creates
the necessary behaviours for the creation of superior value for buyers and long-term
superior performance of the business  the very heart of modern marketing
management and strategy!

Behavioural elements MO
 Customer orientation: the sufficient understanding of one’s target buyers to be able to
create superior value for them continuously (commitment, value, needs, satisfaction)
 Competitor orientation: seller understands the short-term strengths and weaknesses
and long-term capabilities and strategies of current and potential competitors
(competitor info, -actions, -strategies, and opportunities for competitive
advantage)
 Interfunctional coordination: the coordinated utilization of company resources in
creating superior value for target customers
Decision criteria
 Long-term focus for profits and behavioural elements
 Profitability  objective of a business

Market orientation is an important determinant of profitability for both businesses
 Commodity: sell physical products
 Noncommodity: can adapt generic product/service somewhat or add customer benefits
Furthermore relative costs are also an important determinant  both businesses can
pursue either or both differentiation and low cost strategies

Conclusion
 MO is important for profitability in both types of businesses, businesses with the
highest degree of MO are associated with the highest profitability
 Relative costs are important determinants of profitability for both types of businesses
 Market growth is also important, but for noncommodity business short-term market
growth is profitable and for commodity business (less adaptable than noncommodity)
it reduces profitability

 Diminishing effect of MO on sales and profit over time, did MO become obsolete?
No, Market orientation is a basic requirement. The way marketers engage customers is
changing because of the digital age. Tools/strategies become are fast becoming obsolete,
so it’s important to do market orientation!

The Ultimate Marketing Machine (De Swaan et al. 2014)

Huge change: Digital age with access to a lot of data and social media  it’s still about
customer info but now a lot more data is available because of technological changes

Goal: what are ingredients for marketing success in new environment?  Research
among executives globally, difference between high/low performers  Structure must
follow strategy!

High performance marketing principles
 Big data, deep insights: use customer data to find out customers’ needs and how to best
meet them (Nike+ community: personal coaching)

, Purposeful positioning: engage customers and inspiring employees with a powerful and
clear brand purpose  delivering manifestations of brand purpose: functional benefits,
emotional needs, and societal benefits (Unilever Sustainable Living Plan)
 Total experience: enhancing the value of their product by creating customer experiences
by personalizing offerings and adding touchpoints (Netflix)

5 drivers of organizational effectiveness  leaders of high-performing companies:
 Connect marketing to the business strategy and to the rest of the organization, which
create trust and communication strengthen across all functions
 Inspire their organizations by engaging all levels with the brand purpose so all
employees are more likely to express pride in the brand
 Focus their people on a few key priorities
 Organize agile, cross-functional teams: allow leaders to tap talent as needed from
across the organization and assemble teams for specific/short-term marketing
initiatives
 Build the internal capabilities needed for success

Important aspect: alignment of whole organisation to deliver. Not only focussing on the
product, but also on the whole story behind it.

Measuring Marketing Productivity (Rust et al. 2004)  Conceptual paper

The perceived lack of accountability has undermined marketing’s credibility and
threatened marketing’s standing in firms

3 issues
 Long-term impact: most investments start to pay off after a few years
 Unique contribution: it’s hard to isolate the effect of one activity from other actions
 Non-financial metrics: marketing is not only measurable with financial metrics

Marketing actions (advertising, product launches) can create long-term assets (brand-
and customer equity). These assets can also be leveraged to deliver short-term
profitability  marketing actions both create and leverage market-based assets.
 Brand equity: the differential effect that brand knowledge has on customer response to
the marketing of that brand. 4 components: brand awareness, perceived quality, brand
associations, and brand loyalty
 Customer equity: the sum of the lifetime values of the firm’s customers

It’s important to distinguish between effectiveness and efficiency of marketing
 Price promotions can be efficient because they deliver short-term revenue and cash
flows, but not effective because they invite competitive actions and destroy long-term
profitability and brand equity

Marketing productivity chain
 Strategies and tactics: to win/retain customers, ensure business growth/renewal,
develop sustainable competitive advantages, and drive financial performance through
business processes
 Primary challenge: to direct resources toward the right customer, with the right offer,
at the right time
 Besides the marketing-mix, customer touch history (any contact between customer &
firm) is also important to predict customer profitability
 Customer impact: impact on perceptions and attitudes (value, brand, and relationship)
& impact on summary judgements (satisfaction, loyalty, preference, and purchase
intention)
 Marketing assets: customer focused measures of the firm value

,  Brand equity: the differential effect that brand knowledge has on customer response
to the marketing of that brand. Consist of: brand awareness, perceived quality, brand
associations, and brand loyalty  positively associated with market value
 Customer equity: the sum of the lifetime values of the firm’s customers
 Market impact: elements above influence market share and sales, thereby the
competitive market position. Difference between long-term and short-term impact
 Financial impact: involves not only the increase in revenues but also the expenditure
required to produce that increase  return on investment (ROI)
 Impact on the value of the firm
 Other factors: environment and competition



Conclusion
Two systems address the important issue of linking short- and long-term outcomes:
 Financial: based on forecasting long-term outcomes and discounting cash flow
 Nonfinancial: represents the future in the state of marketing asset today

Net Promotor Score: the measurement of marketing  how likely are you to recommend
to a colleague of friend?

Marketing paradigm in the 3rd millennium (Achrol & Kotler, 2012)

From exchange paradigm to network paradigm

Marketing is confronted with a Kuhnian paradigm shift. Prominent features are:
1. Subphenomena (consumer experiences and sensory systems)
From satisfaction to consumer experiences: getting more involved with the brand
(Starbucks, NikeID). The growing impact of digitization and virtual media expand the
scope/impact of sensory satisfaction.
2. Phenomena (marketing networks)
Production & innovation networks: outsourcing
Disintermediation: local production and co-creation with consumers
Consumption networks: social networks to develop relationship with consumers
3. Superphenomena (sustainability and development)
Societal consequences: overconsumption in saturated markets, because this is the
only way for some companies to grow  Coca Cola: instead of sell more, they should
sell other products. Companies move to the emerging markets to grow further.

Conclusion
 Prominent features of the Kuhnian paradigm shift are consumer experiences,
networks and a macro domain spanning the global commons
 The way consumer products/services are created, delivered and consumed is also in
radical shift. Network organization is evolving to a distributed production-
consumption model
 Marketing superphenomenon: globalization continues with expanding consumption,
so marketing should step forward with its model for a sustainable consumer society
and base of the pyramid marketing

Implications
 Managers need to understand the nature and theory of network organization. Also
questioning what will be the nature of decentralized production-consumption in their
industry
 There is a new consumption philosophy of customer care: acting on behalf of the
customers and their long-term interests. Focussing on marketing and branding

Impact of emerging markets (Sheth 2011)

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