Every once in a while, someone asks me if marketing is really just advertising. Of course, my answer is no. Recently, the question has been raised with more frequency because the chief marketing officer title has been getting more attention (see our July cover story). The confusion may arise because marketing has two very different meanings.
The more obvious definition of marketing includes the tactical activities of the firm, which provide consumers a reason to buy the product; mostly, this is advertising, promotions, etc. Or, as many textbooks define marketing, “the action or business of promoting and selling products or services, including market research and advertising.”
Another definition is more philosophic and defines how a food company operates. Marketing in this context is defined as "making what people want to buy and not making people buy what you want to make." It should be the way you do business. Make no mistake about it, both are essential to the operation of a successful business. But understanding the difference between marketing tactics and marketing strategy can be the difference between flourishing in business and just getting by … or not.
After the Second World War, it was difficult not to be successful in business. For the most part, demand exceeded supply. Soldiers coming back from the war were setting up homes, buying cars, buying appliances and, of course, fine food. American business was production-oriented. The big shots in a company were the engineers who could make products faster or cheaper ... and therefore more profit. There was less emphasis on selling, since a company could often sell everything it could make. Not surprisingly this was the production era of business.
However, as time passed, consumers eventually purchased much of what they wanted and needed and demand naturally slowed down. At the same time, consumers now had more choices, and companies needed to persuade consumers to buy "their product." Corporations developed advertising to persuade consumers and sales departments to persuade retail customers to buy what they were already making. This is often referred to as the selling era.
But it was also the beginning of what I refer to as the "death spiral." Two things happened during the sales era: Competition became even more fierce, and each dollar spent on convincing people to buy what a company made was less effective. While companies were realizing increasing sales, they were also seeing a reduction in margin as they were forced to reduce prices to compete.
As profits failed to grow as fast as revenues, management saw the "obvious" -- cut prices or reduce expenses or both. Reducing expenses was often translated into "reduce the quality of the product." The net result led to even lower profits. Apparently, management thought the solution was simple: Just reduce costs further -- that should increase our profit. And so, the death spiral began. This led to cost-cutting, lower profits, further cost-cutting, even lower profits, etc.
Then someone said, instead of trying to get consumers to buy what we make, why don't we find out what consumers want to buy ... and make that? This was the beginning of the marketing era.
There were a number of implications to this revelation. Production went from producing the same products to producing a variety of products. Marketing research and consumer insights became a major corporate activity. And advertising changed from “you should buy this” to “look at how perfectly this fits YOUR needs.”
Peter Drucker said, "The two most important functions of a business are Innovation and Marketing." They are the only two functions that contribute to profit, while all others are costs. He didn’t mean the R&D and the marketing department but rather the process of finding out what consumers want and then figuring out how to make it.
Marketing is not universal. There are many companies still in the sales era. A good deal of what is called “marketing” today is at best organized, systematic selling in which the major jobs — from sales forecasting to warehousing and advertising — are brought together and coordinated. But the starting point is still products, not customers, and technology.
Some companies understand. Seiko has thousands of different types of watches, each one targeted to a well-defined consumer. Marriott understands as it has a different brand of hotel for all the types of travelers, from those visiting grandma to those on a high-end business trip.
Food companies can tell if they are truly marketing-driven by asking a few questions:
- Am I spending a significant amount of time understanding the consumer, and not just buying IRI or Nielsen data to track our sales?
- Is our advertising focused on specific consumers or is it product-focused?
- Do we discuss consumer types and preferences or do we primarily discuss sales?
- For each product we sell, can I quickly state who the targeted customer is (besides gender and age)?
Make no mistake there will always be a need for a sales force, advertising and sales promotion and even financial executives. Marketing doesn’t eliminate anyone, but it does change the starting point in the business process.