The marketing function

The processes of human resource management provide a good illustration of the interactions between a firm's internal and external environments. An even better example is provided by an examination of its marketing activities which are directed primarily, though not exclusively, towards what is happening outside the organisation.

Like 'management', the term 'marketing' has been defined in a wide variety of ways, ranging from Kotler's essentially economic notion of an activity directed at satisfying human needs and wants through exchange process, to the more managerial definitions associated with bodies like the Chartered institute of Marketinq. A common thread running through many of these definitions is the idea that marketing is concerned with meeting the needs of the consumer in a way which is profirable to the enterprise. Hence strategic marketing management is normally characterised as the process of ensuring a

good fit between the opportunities afforded by the marketplace and the abilities and resources of an organisation operating in it.

This notion of marketing as an integrative function within the organisation – linking the needs of the consumer with the various functional areas of the firm - is central to modern definitions of the term and lies at the heart of what is known as the 'marketing concept'- This is the idea that the customer is of prime importance to the organization and that the most significant managerial rask in any enterprise is first to identify the needs and wants of the consumer and then to ensure that its operations are geared to meeting these requirements profitably. Though it would be true to say that not all organisations subscribe to this view, it is generally accepted that the successful businesses are prcdominantly those with a customer rather than a production or sales orientation. Equally, the evidence suggests that the need to adopt such a customer centred approach applies not only to private sector trading organisations, but also increasingly to public sector enterprises and to bodies nor established for the pursuit of profits but for other purposes (e-g- charities, political parties, trade unions).

When viewed from a consumer perspective, marketing can be seen to comprise a range of activities that go beyond the simple production of an item for sale. These include :

·      ldentifying the needs of consumers (c.g. through marketing research)-

·      Designing different 'offerings' to meet the needs of different types of customers (e.g through marker segmentation).

·      Choosing products, prices, promotional techniques and distribution channels that are appropriate to a particular market (i.e. designing a 'marketing mix' strategy).

·      Undertaking market and product planning.

·      Deciding on brand names, types of packages, and methods of communicating with the customer

·      Creating a marketing information system.

As already indicated, in carrying out these activities the firm is brought into contact with a range of external influences of both an immediate end indirect kind. As Palmer and Worthington have shown, this external marketing environment can have a fundamental impact on the degree to which the firm is able to develop and maintain successful transactions with its customers and hence on its profitability and chances of survival.

To illustrate how a firm's marketing effort can be influenced by external factors, the following brief discussion focuses on 'pricing', which is one of the key elements of the 'marketing mix': that is, the set of controlable variables which a business can use to influence the buyer's response, namely, product, price, promotion and place - the 4ps.

Of all the mix elements, price is the only one which generales revenue, whilst the others result in expenditures. lt is therefore a prime determinant of a firm's turnover and profitability and can have a considerable influence on the demand for its products and frequently for those of its competitors (see Chaprer l l).

Leaving aside the broader question of a firm's pricing goals and the fact that prices will tend to varv according to the stage a product has reached in its life cycle, price determination can be said to be influenced by a number of factors. Of these, the cost of production, the prices charged by one's competitors and the price sensitivity of consumers tend to be the most significant.

ln the case of cost-based pricing, this occurs when a firm relates its price to the cost of buying or producing the product, adding a profit margin or mark-up' to arrive at the final selling price. Such an approach tends to be common amongst smaller enterprises (e.g. builders, corner shops) where costs are often easier to estimate and where likely consumer reactions are given less attention than the need to make an adequate return on the effort involved. The essential point about this form of price determination is that many of.the firm's costs are influenced by cxternal organisation, - including the suppliers of materials, components, and energy:- and.hence-pricing will often vary according to changcs in the prices of inputs, Only large organisations, or a group of small businesses operating together, will generally be able to exercise some influence over input prices and even then not all costs will be controllable by the enterprise.

Organisations which take an essentially cost-based approach to pricing will sometimes be influenced by the prices charged by competitors - particularly in markets where considerable competition exists and where the products are largely homogeneous and a buyers market is evident (c.g. builders during a recession). The competitive approach to pricing, however, is also found in markets where only a few large firms operate and where the need to increase or maintain rnarket share can give rise to virtually identical prices and to fierce non-price competition between the market leaders (see Chapter 12). A big cross-Channel ferry operator, for instance, will normally provide the service to customers at the same price as its rivals, differentiating its offering in terms of additional benefits (e.g- on-board entertainment) rather than price.

where this is the case, the external demands of the market rather than costs constitute the primary influence on a firm's decisions; and changes in market conditions {e.g. the actual or potential entry of new firms; changes in a competitors prices; economic recession) will tend to be reflected in price.changes.

This idea of market factors influencing pricing decisions also applies to situations where firms fix their prices according-to the-actual or anticipated reactions of consumers to the price charged for a product - known in economics as the price elasticity of demand (sec Chapter 11). In this case, the customer rather than a firm’s competitors is the chief influence on price determination, although the two are often interrelated in that consumers are usually more price sensitive in markets where some choice exists. Differential levels of price sensitivity between consumers of a product normally arises when a market has distinct segments based on factors such as differences in income or age or location. In such cases a firm will often fix its prices according to the segment of the market it is serving, a process known as price 'discrimination' and one which is familiar to students claiming concessionary fares on public transport.

Whilst the above discussion has been oversimptified and does not take into account factors such as the price of other products in an organisation's product portfolio (e-g. different models of car), it illustrates quite clearly how even one of the so-called controllable variables in a firm's marketing mix is subject to a range of external influences that are often beyond its ability to control. The same argument applies to the other element of the marketing function and students could usefully add to their understanding of the internal/external interface by examining how the external environmenr impinges upon such, marketing activities as promotion, distribution or marketing research.