Market View: Do You Really Understand Marketing?

April 28, 2016
It's making what consumers want to buy, not making them buy what you want to sell.

Someone once asked me, “What is all this marketing crap?” It occurs to me a vast number of a company’s employees may not really understand what marketing is … and quite frankly I would include people in the marketing department. So I asked a few people, “What is marketing?” If I asked 10 people, I got 10 different answers

The concept of marketing is actually a bit complicated by the fact there are two distinct meanings of marketing in the business world. One meaning is a strategic or philosophic approach to how the company approaches the market. The other meaning is the tactical things that are often done to execute or carry out this marketing strategic approach, for example developing advertising for trade promotions, etc.

My definition of marketing is “making what consumers want to buy, not making consumers buy what you want to sell.” Within this definition one can see there's a number of tactical activities which must take place to be a marketing-oriented company. For example, you must have consumer research activities in order to determine what the consumer wants to buy. And unfortunately for us, since the consumer appears to be so fickle we have to continually monitor them.

We also need research and development to ensure we are able to make all of the products. We need the production activities that allow us to “make the products consumers want to buy.” Of course we will need to tell consumers how good our product is at satisfying their needs and wants, so advertising and promotions, etc., are all part of marketing activities.

How did this concept of marketing -- i.e. focusing on the consumer -- come to be? There are actually a number of stages that business and specifically the food business have gone through in the past 50 or so years that led to the proliferation of the marketing concept.

Stage I was the production era. Shortly after the Second World War, American business was in high gear. It was hard to produce enough product to satisfy the demand that was coming from soldiers returning from the war and setting up new households. They bought houses and everything that went in houses.

In this case where demand exceeds supply, the focus of the American industry was to make production both more efficient and effective. The leaders of many companies were engineers who could figure out how to do this.

However as demand slowed and competition increased, companies found they needed to not just wait for retailers and consumers to buy their products, but they had to do something proactively to keep the company successful. Thus began Stage 2: the sales era. This was where success was measured not so much by how many products you could make, but how many products you could sell. The sales force was created to convince retailers to buy more of a company’s products or give the company more space in the stores, and the advertising department was created to convince consumers to buy more. The common thread, however, was to buy more of the product that was coming off those assembly lines at record speed.

However just like Stage I, the bliss of success slowly wilted, as competitors also sent salespeople to the retailers and companies spent more on various forms of advertising. A primary solution to making more profit in a highly competitive market was to cut costs. The problem with cost cutting is it frequently meant your sales force and advertising had a weaker product than they previously sold.

For example if you were Acme Soup Co., you might replace chicken with more vegetable or more broth as part of the total weight. As you might expect, consumers were less willing to spend money on the weaker product and demanded it be sold at a lower price. This simply encouraged top management to demand more cost cutting. This process of cutting costs and reducing product desirability, which leads to lower prices, is frequently called “the death spiral.”

Some unknown company -- I'll say P&G because they seem to take credit for everything anyway -- asked the question, “Instead of trying to convince consumers to buy a single brand we make, could we make a variety of brands targeted to different consumers?” And this began Stage 3: the marketing era. So instead of just making Tide, the company makes Cheer, Bold and Gain, each targeted to a different group with consumers wanting different things from their laundry detergent.

And so here we are today, with companies creating food products for very specific target audiences. These “marketing-oriented” companies appear to be doing everything that every non-marketing company is doing. They are producing products, they have sales forces, they advertise, etc. The difference is in not what they do but how they think.

For a marketing-oriented company, profit is the reward for doing a good job!

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