Theories of Marketing summary
Week 1 Marketing Theory
The effect of market orientation on business profitability (Narver & Slater,
1990)
Market orientation: the organisation culture that most effectively and efficiently creates
the necessary behaviours for the creation of superior value for buyers and long-term
superior performance of the business the very heart of modern marketing
management and strategy!
Behavioural elements MO
Customer orientation: the sufficient understanding of one’s target buyers to be able to
create superior value for them continuously (commitment, value, needs, satisfaction)
Competitor orientation: seller understands the short-term strengths and weaknesses
and long-term capabilities and strategies of current and potential competitors
(competitor info, -actions, -strategies, and opportunities for competitive
advantage)
Interfunctional coordination: the coordinated utilization of company resources in
creating superior value for target customers
Decision criteria
Long-term focus for profits and behavioural elements
Profitability objective of a business
Market orientation is an important determinant of profitability for both businesses
Commodity: sell physical products
Noncommodity: can adapt generic product/service somewhat or add customer benefits
Furthermore relative costs are also an important determinant both businesses can
pursue either or both differentiation and low cost strategies
Conclusion
MO is important for profitability in both types of businesses, businesses with the
highest degree of MO are associated with the highest profitability
Relative costs are important determinants of profitability for both types of businesses
Market growth is also important, but for noncommodity business short-term market
growth is profitable and for commodity business (less adaptable than noncommodity)
it reduces profitability
Diminishing effect of MO on sales and profit over time, did MO become obsolete?
No, Market orientation is a basic requirement. The way marketers engage customers is
changing because of the digital age. Tools/strategies become are fast becoming obsolete,
so it’s important to do market orientation!
The Ultimate Marketing Machine (De Swaan et al. 2014)
Huge change: Digital age with access to a lot of data and social media it’s still about
customer info but now a lot more data is available because of technological changes
Goal: what are ingredients for marketing success in new environment? Research
among executives globally, difference between high/low performers Structure must
follow strategy!
High performance marketing principles
Big data, deep insights: use customer data to find out customers’ needs and how to best
meet them (Nike+ community: personal coaching)
, Purposeful positioning: engage customers and inspiring employees with a powerful and
clear brand purpose delivering manifestations of brand purpose: functional benefits,
emotional needs, and societal benefits (Unilever Sustainable Living Plan)
Total experience: enhancing the value of their product by creating customer experiences
by personalizing offerings and adding touchpoints (Netflix)
5 drivers of organizational effectiveness leaders of high-performing companies:
Connect marketing to the business strategy and to the rest of the organization, which
create trust and communication strengthen across all functions
Inspire their organizations by engaging all levels with the brand purpose so all
employees are more likely to express pride in the brand
Focus their people on a few key priorities
Organize agile, cross-functional teams: allow leaders to tap talent as needed from
across the organization and assemble teams for specific/short-term marketing
initiatives
Build the internal capabilities needed for success
Important aspect: alignment of whole organisation to deliver. Not only focussing on the
product, but also on the whole story behind it.
Measuring Marketing Productivity (Rust et al. 2004) Conceptual paper
The perceived lack of accountability has undermined marketing’s credibility and
threatened marketing’s standing in firms
3 issues
Long-term impact: most investments start to pay off after a few years
Unique contribution: it’s hard to isolate the effect of one activity from other actions
Non-financial metrics: marketing is not only measurable with financial metrics
Marketing actions (advertising, product launches) can create long-term assets (brand-
and customer equity). These assets can also be leveraged to deliver short-term
profitability marketing actions both create and leverage market-based assets.
Brand equity: the differential effect that brand knowledge has on customer response to
the marketing of that brand. 4 components: brand awareness, perceived quality, brand
associations, and brand loyalty
Customer equity: the sum of the lifetime values of the firm’s customers
It’s important to distinguish between effectiveness and efficiency of marketing
Price promotions can be efficient because they deliver short-term revenue and cash
flows, but not effective because they invite competitive actions and destroy long-term
profitability and brand equity
Marketing productivity chain
Strategies and tactics: to win/retain customers, ensure business growth/renewal,
develop sustainable competitive advantages, and drive financial performance through
business processes
Primary challenge: to direct resources toward the right customer, with the right offer,
at the right time
Besides the marketing-mix, customer touch history (any contact between customer &
firm) is also important to predict customer profitability
Customer impact: impact on perceptions and attitudes (value, brand, and relationship)
& impact on summary judgements (satisfaction, loyalty, preference, and purchase
intention)
Marketing assets: customer focused measures of the firm value
, Brand equity: the differential effect that brand knowledge has on customer response
to the marketing of that brand. Consist of: brand awareness, perceived quality, brand
associations, and brand loyalty positively associated with market value
Customer equity: the sum of the lifetime values of the firm’s customers
Market impact: elements above influence market share and sales, thereby the
competitive market position. Difference between long-term and short-term impact
Financial impact: involves not only the increase in revenues but also the expenditure
required to produce that increase return on investment (ROI)
Impact on the value of the firm
Other factors: environment and competition
Conclusion
Two systems address the important issue of linking short- and long-term outcomes:
Financial: based on forecasting long-term outcomes and discounting cash flow
Nonfinancial: represents the future in the state of marketing asset today
Net Promotor Score: the measurement of marketing how likely are you to recommend
to a colleague of friend?
Marketing paradigm in the 3rd millennium (Achrol & Kotler, 2012)
From exchange paradigm to network paradigm
Marketing is confronted with a Kuhnian paradigm shift. Prominent features are:
1. Subphenomena (consumer experiences and sensory systems)
From satisfaction to consumer experiences: getting more involved with the brand
(Starbucks, NikeID). The growing impact of digitization and virtual media expand the
scope/impact of sensory satisfaction.
2. Phenomena (marketing networks)
Production & innovation networks: outsourcing
Disintermediation: local production and co-creation with consumers
Consumption networks: social networks to develop relationship with consumers
3. Superphenomena (sustainability and development)
Societal consequences: overconsumption in saturated markets, because this is the
only way for some companies to grow Coca Cola: instead of sell more, they should
sell other products. Companies move to the emerging markets to grow further.
Conclusion
Prominent features of the Kuhnian paradigm shift are consumer experiences,
networks and a macro domain spanning the global commons
The way consumer products/services are created, delivered and consumed is also in
radical shift. Network organization is evolving to a distributed production-
consumption model
Marketing superphenomenon: globalization continues with expanding consumption,
so marketing should step forward with its model for a sustainable consumer society
and base of the pyramid marketing
Implications
Managers need to understand the nature and theory of network organization. Also
questioning what will be the nature of decentralized production-consumption in their
industry
There is a new consumption philosophy of customer care: acting on behalf of the
customers and their long-term interests. Focussing on marketing and branding
Impact of emerging markets (Sheth 2011)
Week 1 Marketing Theory
The effect of market orientation on business profitability (Narver & Slater,
1990)
Market orientation: the organisation culture that most effectively and efficiently creates
the necessary behaviours for the creation of superior value for buyers and long-term
superior performance of the business the very heart of modern marketing
management and strategy!
Behavioural elements MO
Customer orientation: the sufficient understanding of one’s target buyers to be able to
create superior value for them continuously (commitment, value, needs, satisfaction)
Competitor orientation: seller understands the short-term strengths and weaknesses
and long-term capabilities and strategies of current and potential competitors
(competitor info, -actions, -strategies, and opportunities for competitive
advantage)
Interfunctional coordination: the coordinated utilization of company resources in
creating superior value for target customers
Decision criteria
Long-term focus for profits and behavioural elements
Profitability objective of a business
Market orientation is an important determinant of profitability for both businesses
Commodity: sell physical products
Noncommodity: can adapt generic product/service somewhat or add customer benefits
Furthermore relative costs are also an important determinant both businesses can
pursue either or both differentiation and low cost strategies
Conclusion
MO is important for profitability in both types of businesses, businesses with the
highest degree of MO are associated with the highest profitability
Relative costs are important determinants of profitability for both types of businesses
Market growth is also important, but for noncommodity business short-term market
growth is profitable and for commodity business (less adaptable than noncommodity)
it reduces profitability
Diminishing effect of MO on sales and profit over time, did MO become obsolete?
No, Market orientation is a basic requirement. The way marketers engage customers is
changing because of the digital age. Tools/strategies become are fast becoming obsolete,
so it’s important to do market orientation!
The Ultimate Marketing Machine (De Swaan et al. 2014)
Huge change: Digital age with access to a lot of data and social media it’s still about
customer info but now a lot more data is available because of technological changes
Goal: what are ingredients for marketing success in new environment? Research
among executives globally, difference between high/low performers Structure must
follow strategy!
High performance marketing principles
Big data, deep insights: use customer data to find out customers’ needs and how to best
meet them (Nike+ community: personal coaching)
, Purposeful positioning: engage customers and inspiring employees with a powerful and
clear brand purpose delivering manifestations of brand purpose: functional benefits,
emotional needs, and societal benefits (Unilever Sustainable Living Plan)
Total experience: enhancing the value of their product by creating customer experiences
by personalizing offerings and adding touchpoints (Netflix)
5 drivers of organizational effectiveness leaders of high-performing companies:
Connect marketing to the business strategy and to the rest of the organization, which
create trust and communication strengthen across all functions
Inspire their organizations by engaging all levels with the brand purpose so all
employees are more likely to express pride in the brand
Focus their people on a few key priorities
Organize agile, cross-functional teams: allow leaders to tap talent as needed from
across the organization and assemble teams for specific/short-term marketing
initiatives
Build the internal capabilities needed for success
Important aspect: alignment of whole organisation to deliver. Not only focussing on the
product, but also on the whole story behind it.
Measuring Marketing Productivity (Rust et al. 2004) Conceptual paper
The perceived lack of accountability has undermined marketing’s credibility and
threatened marketing’s standing in firms
3 issues
Long-term impact: most investments start to pay off after a few years
Unique contribution: it’s hard to isolate the effect of one activity from other actions
Non-financial metrics: marketing is not only measurable with financial metrics
Marketing actions (advertising, product launches) can create long-term assets (brand-
and customer equity). These assets can also be leveraged to deliver short-term
profitability marketing actions both create and leverage market-based assets.
Brand equity: the differential effect that brand knowledge has on customer response to
the marketing of that brand. 4 components: brand awareness, perceived quality, brand
associations, and brand loyalty
Customer equity: the sum of the lifetime values of the firm’s customers
It’s important to distinguish between effectiveness and efficiency of marketing
Price promotions can be efficient because they deliver short-term revenue and cash
flows, but not effective because they invite competitive actions and destroy long-term
profitability and brand equity
Marketing productivity chain
Strategies and tactics: to win/retain customers, ensure business growth/renewal,
develop sustainable competitive advantages, and drive financial performance through
business processes
Primary challenge: to direct resources toward the right customer, with the right offer,
at the right time
Besides the marketing-mix, customer touch history (any contact between customer &
firm) is also important to predict customer profitability
Customer impact: impact on perceptions and attitudes (value, brand, and relationship)
& impact on summary judgements (satisfaction, loyalty, preference, and purchase
intention)
Marketing assets: customer focused measures of the firm value
, Brand equity: the differential effect that brand knowledge has on customer response
to the marketing of that brand. Consist of: brand awareness, perceived quality, brand
associations, and brand loyalty positively associated with market value
Customer equity: the sum of the lifetime values of the firm’s customers
Market impact: elements above influence market share and sales, thereby the
competitive market position. Difference between long-term and short-term impact
Financial impact: involves not only the increase in revenues but also the expenditure
required to produce that increase return on investment (ROI)
Impact on the value of the firm
Other factors: environment and competition
Conclusion
Two systems address the important issue of linking short- and long-term outcomes:
Financial: based on forecasting long-term outcomes and discounting cash flow
Nonfinancial: represents the future in the state of marketing asset today
Net Promotor Score: the measurement of marketing how likely are you to recommend
to a colleague of friend?
Marketing paradigm in the 3rd millennium (Achrol & Kotler, 2012)
From exchange paradigm to network paradigm
Marketing is confronted with a Kuhnian paradigm shift. Prominent features are:
1. Subphenomena (consumer experiences and sensory systems)
From satisfaction to consumer experiences: getting more involved with the brand
(Starbucks, NikeID). The growing impact of digitization and virtual media expand the
scope/impact of sensory satisfaction.
2. Phenomena (marketing networks)
Production & innovation networks: outsourcing
Disintermediation: local production and co-creation with consumers
Consumption networks: social networks to develop relationship with consumers
3. Superphenomena (sustainability and development)
Societal consequences: overconsumption in saturated markets, because this is the
only way for some companies to grow Coca Cola: instead of sell more, they should
sell other products. Companies move to the emerging markets to grow further.
Conclusion
Prominent features of the Kuhnian paradigm shift are consumer experiences,
networks and a macro domain spanning the global commons
The way consumer products/services are created, delivered and consumed is also in
radical shift. Network organization is evolving to a distributed production-
consumption model
Marketing superphenomenon: globalization continues with expanding consumption,
so marketing should step forward with its model for a sustainable consumer society
and base of the pyramid marketing
Implications
Managers need to understand the nature and theory of network organization. Also
questioning what will be the nature of decentralized production-consumption in their
industry
There is a new consumption philosophy of customer care: acting on behalf of the
customers and their long-term interests. Focussing on marketing and branding
Impact of emerging markets (Sheth 2011)
