The first in a series of videos on marketing and strategy is this video on the definition of marketing. We welcome suggestions for future videos.
The definition of marketing may sound like a trivial topic for a post. I mean, after all, who really cares about definitions and aren’t there more important topics in marketing, like strategy and implementation?
Well, you’re right, but the definition of marketing is important because it sets the stage for other discussions of marketing. It also determines what is part of marketing and what belongs in another discipline. Actually, there’s been a pretty big discussion across marketing folks — through the AMA — resulting in changes in the definition of marketing that reflect changes in the way we think about marketing. Value became the central tenant of marketing in the new definition of marketing, which makes a lot of sense.
Definition of marketing
American Marketing Association Definition Marketing is:
the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.
Although this differs from what you might get by asking for the definition of marketing from the person on the street, marketing is NOT just sending out a press release, advertising or selling. And, that difference is important if you want to deliver value to your customers, grow your business, and generate better market performance. And, who doesn’t want those things?
What’s behind the definition of marketing?
Let’s start with that common misperception of marketing as sales and advertising. In fact, these two things that people think is marketing, represent only a single facet of marketing. Depending on which reference you view, marketing actually consists of four facets (termed the 4Ps or marketing mix) or some other multifaceted version consisting of 7 or more facets. The definition identifies the four elements of marketing as creating, communicating, delivering, and exchanging offerings.
I’ll stick with the 4Ps version of marketing here since it’s the classic construction of the marketing discipline and fits the definition. The 4Ps are (in no particular order):
- Product (created offering)
- Price (exchanging products for revenue)
- Promotion (sales and advertising fit here), communicating
- Place, which really reflects distribution, supply chain management, and retailing (delivering)
Below is an image representing another common construction of marketing that contains more Ps. It really doesn’t matter which one you think is “right” as the basic understanding is the same. Marketing consists of multiple actions designed to deliver value by combining the core functions into a cohesive whole.
Let’s not get into the weeds about which of these constructions we think works best. Let’s just move forward to discuss how the definition of marketing impacts how you actually DO marketing.
The value concept
As I said, one of the major differences in the way the AMA defines marketing is the centrality of value in the definition.
Value is defined as the difference between the benefits received from a purchase and the cost (including both the price paid and the hassle incurred such as driving to pick up the product or assembling it). Value is a much better way to think about why consumers buy a product than the price. Think about this from your own experience. You don’t always buy the cheapest product out there knowing it might not give you everything you want.
- There are lots of ways to deliver value besides selling cheap crap at a low price. Maybe you design products that solve a consumer problem or one that better matches their needs. That’s value.
- Or, you do what Amazon did and focus on delivering a wide range of products as fast as possible. They’re even experimenting with drones to get delivery times down to a few hours rather than the days it takes competitors to deliver online orders. That’s value.
- Maybe you offer an outstanding experience to customers, ensure they’re satisfied with their purchases, and handle any issues quickly, thoroughly, and happily. Such superior service delivers value.
Who gains value
Prior definitions of marketing seemed to suggest that the company was the entity getting value from the exchange and certainly that’s the impression many non-marketers have of marketing. In the early days of marketing, this sentiment was pretty common but we see it dying out over time as more companies realize that such tactics are self-limiting. Sure, you can get away with predatory pricing once but customers wise up to the reality that you don’t offer value and switch to a competitor. If you think you can get away with it because you don’t have any competition, think again. It might work for a while but, ultimately, new competitors enter the market by offering a better product or a better price and you face the decline of your business.
That’s why the definition clearly shows that there’s a balance, with the company and its customers each believing they received something they valued. Hence, rather than trying to undercut the competition to offer your product at the lowest price, which results in costly price wars where only the strongest competitor survives, companies should strive to provide the highest value for the products they sell. That means matching your products to the wants and needs of your customer and charging a fair price that allows you to make a profit on the products your sell.
The AMA definition also states that society should gain value. This is the notion of corporate social responsibility (CSR) and socially responsible companies have a leg up when it comes to attracting customers, especially younger ones. Consumers are more apt to buy products from companies that support their values, even paying more on occasion to support companies with shared values, as you can see below.
Partners also gain value from the exchange, according to the AMA definition. Instead of operating in a zero-sum game where partners try to gain the upper hand on each other, the idea is to work collaboratively for the mutual benefit of the partners. This reflects the notion of relationship marketing that became popular in the 1990s. Relationships with partners grease the wheels of commerce. For instance, working collaboratively with partners allowed Chrysler to reduce the time-to-market for their new car concepts because they got the engineers together to find the best design rather than waiting for the design and seeking bids for required components. When a partner can reduce the cost by substituting one component for another in the design stage, they also reduce the cost of the finished product.
Even cost and efficiency savings from knowing what’s required in advance make the process cheaper and more predictable. Concepts like JIT (just in time) rely on collaboration to reduce inventory levels without the risk of stockouts at any stage between raw materials and consumers.
Relationships don’t stop with your business partners. They include relationships with customers, which replaces antiquated notions of loyalty that, at best, are superficial in today’s marketplace. Social media brought customer relationships to the forefront since social media became the big equalizer; giving consumers an equal voice with the brand. Now a brand can spend money promoting its products only to find users on social media telling a different story. A single post that goes viral can destroy millions of dollars in advertising. Plus, social media users can promote your brand in a way that is more trustworthy and impactful than the brand’s own adverting.
Short transcript of the video:
Here’s a link to the Slideshare version (over 12,000 views) of this video along with the key points from each slide.
What is Marketing? Creating Value Consumers buy solutions not products Consumers buy the “Best Solution” Value is benefit-cost
What is Marketing? Communicating value Advertising Promotions Word of mouth Public relations Sales
What is Marketing? Distributing value. Products available where consumers search for them (place utility) Products in a form easily used by consumers (form utility) Products available when consumers want them (time utility) Products can be easily acquired through cash or financed (possession utility)
Who gains value in marketing? Consumers Employees Vendors and distributors Financial institutions and stockholders who lend money to the business Society (concept of Corporate Social Responsibility)
How can this help you succeed? Provide strategic direction for your business What is your mission? To maximize the value provided to some segments. What should you focus on? Value How to distribute assets? In a manner that creates value for at least one stakeholder. All the money coming into a business comes from selling to consumers
Who’s responsible for marketing your business? Everyone plays a part Accountants make sure bills are right and materials are available for sales to happen Finance managers make sure there’s cash flow to keep operations going Managers make sure employees are happy – happy employees = happy customers
Who’s responsible for marketing your business? Operations provide utilities to customers IT – help communicate value and provide utilities to consumers Research and Develop – keeps a steady stream of new solutions coming.
The contents of this post may shock some entrepreneurs and small business owners who never took a marketing course because the content differs from their prior notions of what marketing is and how companies market their products. Of course, this isn’t everything that marketing is but it’s a good start. I’d love to hear your thoughts and ideas. Simply enter them in the comment section below.
Need marketing help to support business growth?
We welcome the opportunity to show you how we can make your marketing SIZZLE with our data-driven, results-oriented marketing strategies. Sign up for our FREE newsletter, get our FREE guide to creating an awesome website, or contact us for more information on hiring us.
Hausman and Associates, the publisher of MKT Maven, is a full-service marketing agency operating at the intersection of marketing and digital media. Check out our full range of services.