MK1102A

The Evolution of Marketing

How Technology and Social Media Have Questioned the Relevancy of Marketing

Kevin Regan

1/11/2013

Kevin ReganMK1102AMarketing ManagementAssessment #11/11/2013

Word Count: 3,322

After the industrial revolution, marketing’s role in the organization has been

continually redefined. As fierce competition developed in the beginning of the 20th

Century, the need arose to differentiate products and companies. Marketing as a

strategic and core function of the business thus began. The UK’s Chartered Institute of

Marketing defined the subject as “the management process responsible for identifying,

anticipating, and satisfying customer requirements profitably” (2009, p. 2). At first,

companies with excess production hired large sale staffs and aggressive advertising

approaches to sell goods (Brassington & Pettitt, 2003). Later, company’s adopted a

“marketing orientation” to discover the needs of the consumer first, and respond by

producing those requirements (Brassington & Pettitt, 2003, p. 10). However, many have

criticized the CIM definition for failing to reflect the realities of the 21st century

(Brassington & Pettitt, 2003). Branding, relationship marketing, and customer retention

now occupy a spot in marketing lexicon. New and evolving medium such as mobile

devices and apps have questioned marketing department’s ability to reach customers.

Perhaps even more alarming, the growth of social media and data technologies such as

search engine optimization has questioned the very relevancy of marketing in the new

century.

Much of the literature describing marketing management has focused on the

development of the marketing mix—the traditional four-P’s: Product, Price, Place, and

Promotion. By adding People, Process, and Physical Evidence, experts have extended

that concept to 7-P’s (Blythe, 2003). Yet no one can disagree that the product remains

the essential focus of the marketing mix today:

The product is at the heart of the marketing exchange. If the product does not deliver the benefits

the customer wanted or if it does not live up to the expectations created by other elements of the

marketing mix, then the whole exercise has been in vain. (Brassington & Pettitt, 2003, p. 267)

Today, corporations still need to develop an appropriate product line and mix, yet the

life cycle of these products must be closely monitored. Today’s environment of creative

destruction forces business to become increasingly innovative in order to survive. In a

way, everyone can be judged an early adopter, and companies need to be willing to

quickly go from development, to testing, to production. Yet certain well-known aspects

of the product marketing mix have become increasingly obsolete. Packaging, for

example, holds less importance as consumers buy more goods online, which now even

includes groceries at the supermarket. Some elements of the traditional marketing mix,

however, continue to occupy a critical role for the organization.

Many consider branding as the most important marketing strategy relating to the

product in today’s environment. Brassington and Pettitt define branding as the “creation

and communication of a three-dimensional character for a product that is not easily

copied or damaged by competitor’s efforts” (2003, p. 279). Successful brands create far

more than just a relationship with a particular label. They establish a connection to a

consumer that establishes an ethos for that particular company. It’s more than how a

product looks or the quality we perceive, but of the values it represent about our

individuality. Madeleine Bunting describes the world we live in:

Research and surveys repeatedly show that brands generate more trust than any institution -

government, church, politicians all fall before the credibility of some brands… We no longer identify with

churches, political parties or even our local community; we construct our sense of who we are through our

association with brands (2001, p. 2.4).

NY Times author Fred Vogelstein began an article with the quote, “An age of darkness

having spanned centuries…ended with a searing light, which shook the earth…and the

great device was rendered unto thee” (Vogelstein, 2013, p. MM36). Obviously the

beginning of the piece ties into Bunting’s argument of a brand image that has a spiritual

like quality. The article examines the development of the iPhone, which expanded upon

Apple’s brand awareness and launched the massive smartphone market we take for

granted today. However, Vogelstein discusses the risk that the company took…if the

product, which had numerous glitches, had failed, it would have tarnished Apple’s brand

image irreparably. Establishing a brand, like Apple has accomplished, enables a

company to develop new products and charge premium prices.

The price that a company decides to sell its product has many more implications

than a basic economic definition. A high price could be seen as high quality; a strong

brand image will allow a company to charge higher prices and extract larger profits. A

low price could increase quantity sold, however it could also signal poor quality.

Likewise, the places to which a company must deliver its products have varied. A

company must be ready to deliver its products at anytime and anyplace. Consumers will

seek out alternatives if their needs are not met. This changes the whole distribution

scheme for companies. The emergence of on-line retailers such as Amazon and

superstores such as Tesco has created more distribution networks for products. Despite

these changes, the promotion aspect of the marketing mix might have witnessed the

most dramatic transformation in the 21st century. As discussed later, consumers

increasingly block out marketing from mass media and potentially ignore all traditional

marketing efforts all together.

As a challenge to the entrenched ideas of the marketing mix, a new term

emerged in the literature of the late 1980’s and through the 1990’s. Companies began

using phrases like customer equity, brand value, and retention rate that were grouped

into an overall philosophy known as relationship marketing. Christian Gronroos, a leader

in the new school of thought, believed the traditional 4-P’s worked well for a system

consistent with “consumer packaged goods in a North American environment with huge

mass markets, a highly competitive distribution system, and very commercial mass

media” (1994, p. 6). The marketing mix geared to a production orientated company and

didn’t fit with the changing realities of the world. As customers demanded mass-

customization and increased attention, leading marketers realized the need to provide

added value to the consumer in order to increase customer retention. In Relationship

Marketing, the authors described the change:

The traditional focus of marketing has been on winning customers, with the emphasis on the

value of an individual sale. This traditional approach has been replaced by a relationship marketing

approach, emphasizing the value of long-term relationships and repeat purchases (Peck, et al., 1999, p.

44)

The organization now focused on the consumer. By creating greater value for the

customer, firms could establish loyalty to increase profitability.

Of course, for many years, companies have focused on providing quality and

customer satisfaction. Recently, however, studies have shown that’s this should be the

firm’s primary concern, Andersen and Fornell believed that improving product quality did

not have the same economic benefits of creating loyalty: “Empirical evidence casts

doubt on whether companies’ efforts to improve customer satisfaction through

implementary approaches such as a total quality management are having the desired

effects”. (1994, p. 53). Customer satisfaction should focus on establishing customer

loyalty and generating repeat purchases. This would create the economic benefit the

firm desires. According to the authors, loyal cosumers would be less price elastic and

less likely to switch to competitors. The firm itself would have an increased reputation

and, in the future, lower costs of attracting new customers. These benefits would

translate into a physical return on investment for the marketing department. A review by

Reciheld and Sasser concluded that every 5% increase in customer retention could

create an increased net present value of 20-125%. (Peck, et al., 1999). The company

could amortize the original cost of attracting a new sale, and retained customers serve

as an important source of referrals (Peck, et al., 1999). Organizations have started to

think beyond the single transaction, and marketers must follow the course.

At its core, and consistent with traditional marketing theory, the business serves

to fill the needs of the customer. The most successul companies will establish a

connection to their customers and forge long-term relationships. Firms should think “not

about selling products but about keeping customers” (Blattberg & Deighton, 1996, p.

136). Yet, to succeed companies must continually attract new customers as well as

retain current customers. This balancing act could prove most difficult in the decades

ahead:

[Organizations] should think of marketing as good conversation, as a process of drawing potential

customers into progressively more satisfying back-and-forth relationships with the company…the goal of

maximizing customer equity by balancing acquisition and retention efforts properly should serve as the

star by which a company steers its entire marketing program (Blattberg & Deighton, 1996, pp. 137-138)

By establishing customer satisfaction and brand loyalty companies can recruit new

customers thorugh the important influence and reference markets—a cost-effective way

of attracting new sales. As discussed earlier, branding will play a large part in this, as

“brands...are magnet to attract new customers and an anchor to hold existing

customers.” (Blattberg & Deighton, 1996, p. 143) The company must carefully monitor

customer satisfaction and not rely too heavily on past brand image. Loyalty in the new

millennium could prove fleeting.

As we enter the 21st century, do advertising and marketing still play a role in

people’s daily lives? Consumers tune out traditional forms of media: iPods replacing

radio in the car, the web replacing newspapers, and digital recording devices blocking

out advertisements even when people still do watch television. Certainly, the

development of search engines has questioned the relevance of marketing today.

Consumers can bypass any traditional forms of media, type a query of exactly what they

are searching for, and have an algorithm deliver relevant results. Instead of admitting

defeat in the face of this new behavior, marketing departments can seize on this

opportunity and incorporate search technology into the traditional marketing mix. As a

Mickinsey report stated, “Search and search advertising raise awareness…web

searches are the most influential touch point, even higher than in-store touch points

such as meeting with a sales representative” (Bughin, et al., 2011, p. 23). Firms must

understand this new environment and must see that search rankings are a new form of

promotion. Developing the theme of relationship marketing, companies can better

serve their customers’ needs by matching their search to relevant products. Firms can

also develop a strategy to reach niche markets and engage in a form of mass

customization that consumers now expect. The companies that can make effective use

of this new technology will thrive in the new age.

Generating a high ranking on search engines such as Google has become an

important goal for companies. A high search engines ranking serves a clear advertising

purpose: “When Internet users are primed to search along a particular brand attribute,

they are more likely to recognize an unknown brand if it is displayed before well-known

brands in the SERP [Search Engine Ranking Page]” (Dou, et al., 2010, p. 274). This is a

powerful tool for emerging companies to get brand awareness and recognition, but the

authors also suggests that large firms should continually monitor their SERP positioning

for potential threats (Dou, et al., 2010). A 2010 study by the Chitka Network reported

that moving from 11th to 10th in the SERP will increase web traffic by 134% (Qualman,

2009). Even more powerful, recent research suggests that consumers do not look past

the top few search results (Panda, 2013). Rather than taking a reactive approach and

hoping their website attracts a good ranking, firms must look forward and seize the

opportunity to use search as a powerful marketing tool; “search has proven to be an

extremely effective means of matching relevant information with user needs, helping

advertisers target the right audience” (Bughin, et al., 2011, p. 23). Despite the

innovative new method, firms should view search engine optimization as another tool in

the promotional aspect of the marketing mix.

Savvy use of new technologies to impact search results and drive consumer

behavior will be a powerful force in the promotion of the brand in the 21st century. A high

search engine ranking may result in a greater economic benefit than just click-through

to the website: “Web designers are recognizing that search result can have branding

implications…because the results offer a natural way for internet users to gather

information about brands” (Dou, et al., 2010, p. 263). A high place on the organic results

of a Google search carries a prestige—an implication of quality that in the past might

have been secured by placing a product on the cover of a magazine. Also new

monitoring technologies will enable organization to target consumers on a more

individual basis. People are 14 times more likely to click on an advertisement that

matches their profile (Freedman, 2005). Also, according to a survey by the Penomenon

Institute, consumers believe “targeted ads would be less annoying, and 45% would

exchange personal information for advertising relevance” (Freedman, 2005, p. 74).

Collabritive filtering on sites such as Amazon use past searching data as a way to

match consumer’s interests with new products. These new technologies enable a

marketing department to reach consumers in a new and ever expanding way. Instead of

relegating marketing to the back of the organization, these new tools should force

companies to recognize the need to stay increasingly aware of their message to their

customers and to the channels open for competitors to attract defectors. The methods

may have changed, but the ability to interact with and retain customers will give

companies the competitive edge in the 21st century.

The growth of social networks has placed the most serious challenge to the

organization’s marketing role. Consumers are “reducing their reliance on advertising as

a source of information to guide their purchase decision making” (Mangold & Faulds,

2009, p. 361). Customers can now search for information online, read reviews and blog

posts, and form opinions from their networks through Facebook and Twitter. As

customers begin to exchange information so rapidly, and as organizations lose the

ability to create this content, does this limit the role of the marketing function? To the

contrary, firms should see the growth of this media as an opportunity rather than a

threat. To survive businesses must switch from traditional mass media to a “new

communications paradigm that acknowledges the pervasiveness of information now

being exchanged among consumers in the social media space” (Mangold & Faulds,

2009, p. 364). Just as firms began to realize the importance of relationship marketing for

all types of industries, organizations must nurture these virtual relationships through a

consistent message. They must use the platform to engage with the customer in an

information sharing partnership, and switch the thinking from a one-to-many mass

market media strategy to a one-to-one relationship with customers. As Eric Qualman,

author of Socialnomics says, “Business don’thave the choice on whether or not they do

social media, the choice is on how well to do it” (Qualman, 2009, p. xxii). Rather than

throwing up one’s hands in the face of this new consumer power and declaring the

marketing function dead, savvy companies should embrace this new form of

communication as a powerful new tool in the marketing mix.

As consumers have more access to information and feel more empowered about

buying decisions, the companies that can establish a personal connection will be able to

attract and retain customers in the new century. Jagdish Sheth and Rajenda Sisodia

believe a company must develop “virtual empathy” on a one-to-one basis to succeed

(1997, p. 88). As marketing departments in the past attempted to create a relationship

ladder to develop potential customers into eventual advocates, they should now seek to

create a social network contributions ladder, where “lurkers” would become “celebrities”

citing a company’s brand in the social network (Harridge-March & Quinton, 2009, p.

176). How does a company establish such a presence in the social media landscape?

Hoffman and Fodor:

In a well-designed social media campaign, consumers are likely to spread viral videos, create

additional brand related content, tweet about the brand, and post about their experience on Facebook

(2010, p. 49)

Many articles have pointed to the campaign of blender-maker K-Tec as a successful

social media strategy. The company’s CEO posted You-Tube clips entitled “Will it

Blend?”, showing its product blending everything from golf balls to iPads and ultimately

reached 100 million views. The company reported increased sales of nearly 20% the

following year. The costs of production and distribution for that advertisement would be

a fraction of a traditional television advertisement and blanketed a much wider

audience. Not only did the company benefit from the increased web traffic and added

sales, but also from gaining a prestigious brand image in a crowded marketplace that

should help to build customer loyalty for new products in the future.

The development of long-term relationships with customers remains the most

important benefit from establishing a social media presence is. Marketing departments

need understand the long-term impact, not just the short-term goals of attracting

customers and increasing sales. As studies into relationship marketing have shown,

retaining customers could potentially be far more lucrative:

Instead of emphasizing their own marketing investment and calculating the returns in terms of

customer response, managers should begin by considering consumer motivations to use social media

and then measure the social media investments customers make as they engage with the marketers’

brand (Hoffman & Fodor, 2010, p. 42)

Having a social media presence after a sale, such as maintaining a Twitter account to

interact with customers can help increase loyalty. Harridge-March and Quinton believe

this strategy can “create a barrier to entry to other consumers or even organizations and

potentially lead to a sustainable competitive advantage” (2009, p. 175). If businesses

believe they can ignore social media and rely on a mix of traditional media and search

engine optimization, they will be mistaken:

Users are increasingly navigating to web sites from links on social networks, a role that search

engines had traditionally dominated. Algorithmic search engines are now starting to incorporate social

cues—for example, information about content that users have tagged—into their relevance-ranking

algorithms (Bughin, et al., 2011, p. 13)

Clearly, having a social media presence is a necessity. However, the companies that

fully embrace social media, as much as they have traditional media in the past, will

succeed. Marketing departments must look at this new form of media not as an affront

to the traditional theory of marketing, but as one more tool to profitably reach and

engage customers.

Clearly the subject of marketing has seen an incredible transformation through

time. In today’s world of data mining, search engine optimization, collaborative filtering,

behavioral targeting, and social media, some have questioned the relevancy of the

marketing function. Yet, the core principles remain the same. Marketing departments

still seek to identify and satisfy customer requirements. Today, however, the

organization must adapt quickly, and can use social network as a way to learn and

anticipate customer needs quickly—the same way as traditional customer surveys and

market research would have done 50 years ago. The ability to generate a high search

page ranking may seem out of touch with marketing, but in reality is it any different than

struggling to place a product in the right aisle of the supermarket, or on the right space

of a trade floor show? A vibrant social media campaign can maintain customer loyalty

and engagement far more effectively than the old call center with a toll-free number

pasted at the bottom of a product’s package. Rather than diminishing marketing’s role,

these new developments have enhanced it. Marketing departments must be experts at

managing relationships and generating loyalty to one’s brand. They must take the lead

to create content that will be disseminated throughout the virtual landscape, both

strengthening existing relationships and generating new ones. The tools have become

more complex, and the time to accomplish goals has shrunk, yet the theory and function

of marketing have remained as relevant today as when the first ads hit television over

70 years ago (Wikipedia, 2013).

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