Introduction

December 30th, 2008

Introduction

This session is divided into two sections: ‘Understanding market orientation’ and ‘Managing a market-led organisation’. In Section 1 ‘Understanding market orientation’ sets out different approaches to marketing. I argue that marketing should not be the property of just the marketing department but an organisation-wide philosophy that centres on satisfying customers. The way in which marketing ideas can be applied to non-profit organisations is also discussed.

In Section 2 ‘Managing a market-led organisation’, I go on to discuss the importance of managing key internal and external relationships.

Learning Outcomes

After studying this session, you should be able to:

  • describe the difference between marketing as a function and the concept of being market led
  • evaluate whether an organisation is market led
  • evaluate the relevance of marketing concepts to your own and other organisations, whether commercial (for-profit) or non-profit
  • identify your own customers and consumers
  • list the tangible and intangible elements of your own products and services
  • evaluate the role of relationships in adding value to market-led organisations
  • identify the key relationships and markets in a case study
  • identify key market-led relationships within your own organisation.

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What does ‘marketing’ mean?

December 30th, 2008

What does ‘marketing’ mean?

Activity 1

Before you start working through this session, take a moment to write down what you understand by the term ‘marketing’, either on the basis of your previous studies or the everyday use of the term.


Now read the discussion

Commentary

Here is what one group of marketing experts has to say:

What does the term marketing mean? Marketing must be understood not in the old sense of making a sale – ‘selling’ – but in the new sense of satisfying customers’ needs. Many people mistakenly think of marketing only as selling and promotion. And no wonder, for every day we are bombarded with television commercials, newspaper ads, direct mail and sales calls. Someone is always trying to sell us something. It seems as if we cannot escape death, taxes or selling!

(Kotler et al., 1996, p. 6)

Next time you are at work and talking with colleagues, ask them what they think ‘marketing1 is. It is likely that many think of marketing as only about selling and promotion. Many people think that marketing is some form of selling or perhaps advertising. Some people even think that it involves getting the consumer to buy or use something they don’t want.

In this session I am going to argue (as Kotler et al. do) that we need a much wider definition of marketing because the process of satisfying customers’ needs covers a much wider range of activities than those carried out by a marketing department.

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1.1 Three approaches to marketing

December 30th, 2008

1 Understanding market orientation

1.1 Three approaches to marketing

This section has been written with the assumption that you have some prior marketing knowledge. As a brief revision you will read how marketing can be described both as an organisation-wide customer-orientated philosophy and as a functional department that handles activities concerned with understanding and satisfying customers’ needs. Studies show a direct link between the success of an organisation and the extent of its market orientation. These marketing concepts are applicable to both for-profit and non-profit organisations.

In the opening activity we started to discuss what we mean by marketing. In the following sections I set out three rather different ways in which this term has been used.

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Marketing as a job title

December 30th, 2008

1 Understanding market orientation

Marketing as a job title

The term ‘marketing’ became common in the UK during the 1960s. During that time it was quite common for businesses to rename their sales departments marketing departments. Communications and sales managers became marketing managers. Stephen King called this ‘thrust marketing’ (King, 1985). Although the functional name changed, managers typically still placed an emphasis on selling what the organisation made or the services it offered, cutting costs and manipulating prices, rather than giving their customers what they needed. This type of organisation can be described as production orientated. A common form of production orientation can occur when an organisation becomes too focused on cutting costs to achieve economies of scale and loses sight of what their customers really need, as the following example illustrates.

Example 1 Manufacturing cartons

Tetra Pak, the Swedish carton manufacturer, makes 68 billion cartons a year for worldwide customers like Del Monte and Gerber. The problem was that the cartons were difficult to open, and tended to spill the contents on the floor. Tetra Pak did not invest in innovation to solve the problem because it was trying to control costs tightly in order to maintain its position as a low-cost provider. The result was that it lost its market share to its main rival, Norway’s Elo Pack, who produced a carton with a proper spout which better met the customers’ needs.

based on Brassington and Pettitt, 2000, p. 14

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Marketing department marketing

December 30th, 2008

1 Understanding market orientation

Marketing department marketing

It is common practice for an entire organisation’s marketing activities, such as advertising, sales and market research, to be grouped together in a marketing department. The department’s function is to create marketing plan activities that are designed to increase the customer’s understanding of existing products and services. The marketing director manages all specialisms. Marketing is seen as ‘what the marketing department does’.

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Marketing as a management process

December 30th, 2008

1 Understanding market orientation

Marketing as a management process

This last definition is the one that most modern marketing writers support. Piercy (1997) makes a distinction between ‘marketing plan marketing’ – the activities that traditional marketing departments do – and the concept of ‘going to market’ – a much more general management issue. He writes:

‘Marketing’ belongs to marketing specialists but ‘going to market’ is a process owned by everyone in the organisation.

This approach sees marketing as managing an exchange process. In commercial (for-profit) organisations, products and services are exchanged for money and resources. In non-profit organisations, goods and services are sometimes exchanged for money and sometimes also to support ideas and beliefs. An example might make this clearer – why do I buy my Christmas cards from Oxfam rather than from the local supermarket? There is a commercial exchange, i.e. a card for money, but also there is an exchange based on ideas and beliefs. Buying from Oxfam enables me to support their ideas and beliefs and to feel good about spending money on a worthwhile cause. Examples of other exchange relationships are shown in Figure 1.

Figure 1: Exchange relationships

Marketing as the managing of exchange relationships is described in the following extract:

Marketing consists of individual and organisational activities that facilitate and expedite satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas.

(Dibb et al., 1997)

Piercy (1997) describes this approach to marketing as a market-led approach – others refer to it as pan-company marketing. The distinguishing feature of both these approaches is that they emphasise that every department in the organisation is involved with the customer – not just the marketing department. I shall use the terms market-led, market orientation and pan-company marketing throughout the text to describe this organisation-wide customer-led approach.

Another suggestion is that:

Marketing is too important to leave to the marketing department.

(Bill Packard, Hewlett Packard, in Piercy, 1997)

An example of pan-company marketing (from the Chartered Institute of Marketing’s marketing portal website https://www.cim.co.uk/cim/sho/html/boo.cfm/ [accessed 09/10/06]) is given in the following example.

Example 2 Pan-company marketing was pioneered by British Airways

Customer champions

In 1982 the pressure to prepare for privatisation was intense. A fundamental shift in the way BA did business was needed.

Lord Marshall – then Sir Colin – took charge of transforming BA into a totally customer focused organisation.

Insight

Lord Marshall and his top team instituted investigative techniques, mainly in-depth interviews with staff, to uncover what they thought about customers. An insight was generated: speed and efficiency, although important, were of secondary importance to the customer. They wanted to see warm, personal and caring staff.

Innovation and improvement

All existing business processes and operations were disregarded. Only the customers and their needs were used as the basis for redesigning the company.

Customer culture

Front-line staff were now rated as the company’s main assets. The ‘Putting People First’ programme involved them in redefining the tasks which win customers, based on teamwork. This became the driver of business strategy.

Engineers and pilots insisted that they too be involved in the programme. Customer First Teams were created to suggest solutions to customer problems.

Media advertising communicated ‘The World’s Favourite Airline’ to staff as well as to customers. Motivation and incentives were prioritised and company-wide performance-related pay was instituted. Awards for Excellence were conferred by Lord Marshall on 1–1.5% of staff annually.

Measurement

Everything pointed to the need for better metrics and standards. A Market Place Performance Department, reporting to the CEO, was set up. Mystery flyers were created [Mystery shoppers/flyers are researchers who are hired by organisations to pretend to be customers and secretly evaluate the quality of the customer service].

A continuous upward trend in customer satisfaction ratings was now registered right through into the late 1990s. Continuous improvements in market share, passenger traffic and staff productivity were achieved.

Profitability

The direct result of adopting pan-company marketing was a 30% increase in productivity and an increase in market share of 2.4% in a highly competitive market and the posting of improved profits when, for example, from 1990–1994 the airline industry world-wide lost US$15 billion.

An organisation like British Airways (BA), which takes into account the needs of its markets before it plans its processes, is said to be market led or market oriented. It has changed the focus of its marketing from a marketing plan devised in the marketing department to an organisation-wide involvement in creating an offering of superior value for the customer. Studies have shown that being market led is linked to profitability in profit-based organisations and to survival in non-profit organisations (Slater, 1990).

The market-led approach has three components:

  • consumer orientation
  • competitor orientation
  • inter-functional co-ordination.

This image shows a box outlined with a light pink border labelled ‘Target market’. Inside the box, there is a dark pink triangle. The top tip of the triangle is labelled ‘Consumer orientation’. The bottom left tip is labelled ‘Competitor orientation’. The bottom right tip is labelled ‘Inter-functional co-ordination’. Inside the triangle is a white circle with the words ‘Long-term profit focus’ written within it.

Figure 2: The market-led organisation (Source: Jaworsky and Kohli, 1990)

The first two involve the organisation-wide generation of market intelligence regarding current and future customer needs, and making this information available to all departments. Customer orientation also involves continuously monitoring customer information in order to be able to create superior value.

Inter-functional co-ordination concerns the organisation-wide co-ordination of resources in response to customers. Inter-departmental ‘connectedness’ has a key role to play in the dissemination of and the responsiveness to market intelligence by the organisation (Jaworski and Kohli, 1990).

The Chartered Institute of Marketing (CIM) suggests that:

Marketing is the management process for identifying, anticipating and satisfying customers’ needs at a profit.

Can you see how the CIM has incorporated market-led concepts in this definition of marketing? If you work in a non-profit organisation you may be put off by the word profit in their definition. As we discuss later, the notion of being market led is also relevant outside the commercial sector.

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1.2 Do all organisations need to be market oriented?

December 30th, 2008

1 Understanding market orientation

1.2 Do all organisations need to be market oriented?

As you have seen, many marketing writers maintain that to be successful all organisations (commercial and non-profit) must be market oriented and must focus their attention on adding value to their products and services to satisfy their customers’ needs.

Leaving aside the word profit from the CIM’s definition of marketing, at a conceptual level the process of becoming market orientated is concerned with identifying, anticipating and satisfying customers’ needs. Kotler (Drucker, 1992) believes that changes in funding and the introduction of competitive tendering have forced some organisations to use these customer-focused approaches to help them compete in their marketplace. Kotler explains:

Marketing really is spurred on by the presence and the increase in competition that the institution faces in a way that it never faced before. Most organizations don’t get interested in marketing when they are comfortable. Suddenly they find that they don’t understand their customers very well, and their customers are leaving that church, or they’re not signing up for the college, or coming to that hospital. And these institutions become aware of a competitive situation.

How do you deal with a competitive situation? Well, one way some early hospitals dealt with it was to pray that the world hadn’t changed and that they would just survive. Now, prayer may have a role to play, but it is not the answer. The normal answer is that may be there’s something in this thing called marketing that will help us to understand why customers chose to be with us in the first place and why they’re not choosing to be with us anymore.

(Drucker, 1992, p. 80)

He believes that marketing techniques could be used to facilitate ‘mutually satisfying exchanges’ between the organisation and its publics (a ‘public’ is any group that has an actual or potential interest in or impact on an organisation’s ability to achieve its objectives). This concept of ‘exchanges’ is important. As you have seen, marketing is denned as facilitating the exchange process. In the commercial sector, this means products and services are exchanged for money. In the non-profit sector, this means products and services are exchanged for ideas, values and beliefs.

To run a non-profit organisation effectively, the marketing must be built into the design of the service. This is very much a top management job, although, as in every other area, you need a lot of input from your people, from the market and from research.

(Drucker, 1992)

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The NSPCC’s ‘FULL STOP’ campaign

December 31st, 2008

1 Understanding market orientation

The NSPCC’s ‘FULL STOP’ campaign

An example of a marketing communications campaign is given below. This National Society for the Prevention of Cruelty to Childred (NSPCC) campaign was named a ‘Campaign of the Year’ in the CIM&Sol;Marketing Week’s 1999 marketing effectiveness awards.

Example 3 NSPCC’s ‘FULL STOP’ campaign

The charities market is highly competitive, with a large number of organisations trying to get their message across on a limited budget.

Just prior to the launch of the NSPCC’s FULL STOP campaign in March 1999, the annual Comic Relief Appeal took place. This was heavily televised for a two-week period and intensified the competition between charities to raise public awareness and gain support for their cause. Despite this, the NSPCC’s campaign excelled its target figure for new supporters by 70%.

‘Together we can end cruelty to children’ was the unique selling point (USP) of the three-week FULL STOP campaign launched by the NSPCC in early spring 1999. The charity believes that it was the biggest integrated campaign ever launched by the voluntary sector – and probably bigger than any commercial organisation had ever undertaken in such a concentrated time scale.

The campaign’s objectives were four-fold:

  • to raise awareness of the problem of cruelty to children
  • to communicate that the NSPCC had launched a campaign to end the problem
  • to generate support, and involvement in, the campaign
  • to create huge PR and media coverage.

The launch of FULL STOP was held in London, hosted by Cilia Black, and attended by Tony Blair, HRH Duke of York (Chairman of the appeal), Baby Spice and a number of key business leaders. Throughout the campaign, on-going support from celebrities, such as Madonna and Ewan McGregor, played a key part in raising public awareness of the cause.

‘Increasing awareness was critical because a campaign like this was only ever going to succeed on the basis of mass support and involvement from individuals and organisations throughout the UK,’ explained Marion Rose, the charity’s Head of Marketing. What we wanted to achieve was partnership. The NSPCC was leading the initiative, but we wanted to encourage everyone to participate in the campaign.’

‘The timing was also significant. The NSPCC had been in business for nearly 100 years – the end of the century was the ideal time to look at what had been achieved and create a vision for the future.’

The key involvement device used in the campaign – asking the public to sign a pledge promising to do something to help end cruelty to children – proved highly effective. A door drop of 23 million items reached every home in England, Wales and Northern Ireland, while a further mailing reached one million existing donors and 1.5 million leaflets were distributed face-to-face.

TV advertising ran on terrestrial and satellite channels, supported by press advertising in national newspapers and ethnic press. There were also a total of 8,242 poster sites used throughout the country.

The advertisements picked up on this theme, all featuring a number of children’s icons – including Rupert the Bear, a teddy bear and Action Man – covering their eyes as a situation of abuse could be heard going on in the background. Viewers were left to infer cruelty from what they saw or heard – a powerful, but not explicit approach. One advertisement depicted a teenager’s bedroom. A Rupert the Bear mug on the bedside table carried the words ‘One word of this to anyone and you’re dead’.

A number of milestone events were arranged during the campaign period to keep its momentum going. These included a ‘Call to Action’ weekend, when campaigners went around the country setting up stalls in 1,500 shopping centres and public areas and encouraging people to sign the pledge.

‘We did have the odd qualm about the possibility of getting a negative reaction to the campaign because the advertising was very strong,’ says Marion Rose. ‘However, it proved to be hugely motivating. We were overwhelmed by support – getting out on the streets and being visible made the campaign more real to people.’

Measuring effectiveness

The effectiveness of the campaign was measured by tracking both the response to it and the amount of PR generated – particularly vital to charities because of their limited resources. According to Marion Rose, the results showed that FULL STOP was the most ambitious and effective awareness campaign that any charity had ever run. ‘It met and succeeded all its targets,’ she claimed.

Television advertising reached an estimated 85% of the population at 7.1 opportunities to see (OTS), while the posters were seen by around 55% of the public at 21 OTS. PR coverage exceeded all expectations. In addition to over 2,000 press articles, the campaign featured in 230 radio programmes and 71 TV programmes.

In addition to CIM&Sol; Marketing Week’s ‘Campaign of the Year’ award, FULL STOP also won the ‘Campaigning Poster of the Year’ title, two Direct Marketing awards, and a Gold Lion at Cannes ‘99.

Evidence of success

The number of new supporters generated by the campaign was 70% above target, as the following figures demonstrate.


  Target Actual
Fund raisers 83,000 100,000
Donors 75,000 103,000
Campaigners 43,000 141,000
Total 201,000 344,000

(Source: www.cim.co.uk)

Interestingly, the huge database of new supporters created included a group of people – the young and single – who usually restrict their allegiance to political organisations and to charities that campaign on the environment. According to the charity, prior to the campaign, its key supporters had been middle class middle-aged women with older children.

As you have read, the charity sector exists in a highly competitive market. The NSPCC FULL STOP campaign is an excellent example of how commercial market-led concepts can be very effectively applied in a non-profit organisation. However, in other areas of the non-profit sector, managers believe that commercial marketing concepts are not transferable to their services. The philosophy of ‘going to market’ creates a number of very sensitive issues – most based around the word ‘customer’.

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Who is the customer?

December 31st, 2008

1 Understanding market orientation

Who is the customer?

Customers are people who buy our products and services, and may or may not use them. The key to defining these people as ‘customers’ is that each engages in an exchange relationship that adds value to the organisation providing the product or service. Consumers do not give any value to organisations – there is no exchange relationship. They use products and services, but do not buy them.

Activity 2 (revision)

Think about how these definitions apply to both internal and external business relationships.


Now read the discussion

Commentary

If you could complete this activity, well done. You have met these concepts before and probably deal with customers in your day-to-day work, but could you identify your consumers?

If you had difficulty don’t worry, in my experience it’s sometimes quite difficult to answer such a fundamental question. Keep reading, as there is an opportunity to do this activity again later.

For the most part, the commercial sector uses the terms customer and consumer interchangeably. This is because members of this sector have to satisfy the needs of both groups with their products and services. However the non-profit sector makes a clear distinction between the two groups. In the non-profit sector the resource provider is seen as the customer and the resource user as the consumer.

Outside the commercial sector, customers and consumers are often treated as two distinct markets. While market-led philosophies transfer well from customer to customer, many non-profit organisations believe that their consumers are different. This is because it is the resource provider’s job to specify what product or service the consumers need and how they can obtain it.

One of my marketing students, commenting on their first assignment, wrote to me recently:

I was so relieved when I saw that I could apply the marketing concepts internally – we don’t really have any customers in our hospital – we tend to classify people by their illness.

The publicly-funded health sector is a good example of the resource provider / user split. The government is the customer and provides the financial resources to medical practitioners and hospitals. These financial resources are used to provide goods and services to patients, i.e. the consumers. However, with closer investigation, we could say that patients should also be regarded as customers because without patients the hospital would close. The patients have an exchange relationship with the institution. When a patient chooses which hospital to go to he or she exchanges their patronage for the services the hospital provides.

Activity 3

Think of the police – do they have customers or consumers?

List four customers for the police service.

Make another list of four consumers for the police service.

Can you identify the differences in the relationships that customers and consumers have with the police?


Now read the discussion

Commentary

I asked my local policeman if he could answer this activity. He said: ‘I don’t have any customers – they’re either guilty or innocent.’

A common misconception in public services is that, because there’s no price charged for the service provided, managers think that they don’t have any customers. I hope you now agree with me in thinking that they have both customers and users (i.e. consumers).

The government is the customer for the police service – it provides the financial resources to enable the police to run their service, in exchange for law and order in society. You could say that victims are their customers too – victims are looking for retribution and they pay taxes to the government to make sure they get it. You could even say that the general public are its customers – it is our tax money the government uses to fund the police. We want to be able to feel safe in our homes and have the police deal with the people who break the law.

But what about criminals – do they participate in an exchange relationship? They do not intentionally give their patronage to the criminal justice system. They don’t add value to that system. This is an example of a resource provider/user split. The criminal is the consumer and the general public – via the government to whom it pays taxes, part of which are passed on to the police service – are the customers.

Activity 4 (Activity 2 revisited)

Make a list of your customers and consumers. I hope that what you have just read will help you answer this question more fully now.

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Implications of market orientation

December 31st, 2008

1 Understanding market orientation

Implications of market orientation

An organisation that develops and performs its production and marketing activities with the aim of satisfying the needs of its customers is market oriented. However, using market-led ideas in the non-profit sector requires a fundamental shift in organisational philosophy. Identifying those people who add value to the service means renaming some users ‘customers’. It also means that you have to establish what they want before you begin the planning processes and you have to concede that they may have some influence over the goods and services you provide.

Kotler (Drucker, 1992) has no doubt that market-led cultures should be introduced into non-profit organisations:

Most people think that marketing is a tool, but for governments and not-for-profits it is a way of thinking. It goes beyond selling and advertising, it is a mindset that puts the customer first and ensures that the organization’s philosophy is ‘without consumers there is no organization’.

This is a sensitive issue for some non-profit organisations. The problem is that many have missions that encourage them to take a long-term view about what is best for their consumers.

Professional service providers such as lawyers and accountants have to deal with this on a regular basis. Sometimes what their customers want in the short term is in direct conflict with their needs in the long term. Such service providers therefore need:

  • a thorough understanding of what their customers consider as added value
  • open communication channels with their customers
  • to foster an environment where customers trust their services. Think of the services provided by lawyers and accountants, for example. Their customers have to trust that they have their best interests at heart, even when the end result is not what the customer wanted.

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