Changing Market Relationships in the Internet Age|
Chapter 1. Traditional marketing revisited
1The objective of this chapter is to review the traditional marketing concept and to analyse its main ambiguities as presented in popular textbooks. The traditional marketing management model placing heavy emphasis of the marketing mix is in fact a supply-driven approach of the market, using the understanding of consumers’ needs to mould demand to the requirements of supply, instead of adapting supply to the expectations of demand. To clarify the true role of marketing, a distinction is made between strategic and operational marketing. Other issues raised by traditional marketing are also discussed in this chapter.
- 1 Kotler P. and Keller K.L., (2006), Marketing Management, Pearson Prentice Hall, Upper Saddle River, (...)
2Since more than fifty years now, the marketing concept has been heralded by marketing academics and practitioners and its acceptance is still viewed as the optimal marketing management philosophy. In the management literature, the marketing concept has been described in various ways by different authors, but the term has become synonymous with having a customer orientation. The shortest definition of marketing is the one proposed by Kotler and Keller (2006, p. 5)1 is “...meeting needs profitably”. The traditional marketing concept is based on three pillars:
A customer orientation: Implying that an intimate understanding of his or her needs and wants should be the focal point of all managerial actions.
Integration of efforts: Implying coordination with the other functions (R&D, production, accounting and financial activities) within the firm to disseminate the customer orientation.
A profit objective: The marketing concept is intended to make money for the firm, as a reward for its focus on customer satisfaction.
- 2 Drucker P. (1954), The Practice of Management, New York, Harper & Row.
- 3 McKitterick J.B. (1957), What is the Marketing Management Concept? In: The Frontiers of Marketing T (...)
- 4 Keith R.J. (1960), The Marketing Revolution, Journal of Marketing, 24, January, 35-38.
3Developed in the management literature in the 50s, the paternity of the concept is generally attributed to Peter Drucker (1954)2 and to McKitterick (1958)3 a leading marketing executive from GE. The Keith’s article (1960)4 is one of the earliest presentations of the concept in the academic literature.
4For the lay man, the basic idea at the root of the marketing concept is by no means perceived as very original, if not simply a platitude. Any street vendor organises its business to insure that its clients get what they want, where and when they want it, and expects reward in return. Since the beginning of times, people are engaged, through barter or trade, to mutually satisfactory exchange relationships and the customer focus clearly existed “... when the king ordered boots from the boot maker”.
5Under conditions of general scarcity, demand tends to be basic and the identification of attractive markets easy. But in highly competitive markets, under conditions of oversupply, a business philosophy is required which states that supply should be market-driven and that the process of manufacturing should start with a clear statement of customers’ needs.
- 5 Smith A. (1776), The Wealth of Nations, London, Methuen.
6The marketing concept suggests that the pursuit of customers’ interests, in the end serves the selfish interest of the firm: a win-win situation. The same idea was expressed by the Roman Emperor Marcus Aurelius in its Meditations on Stoic Philosophy (160 A.D.): “If you serve others, you serve yourself. In the economic literature, this principle was formalised by Adam Smith (1776)5 and, till today, forms the basis of the market economy system and can be summarised as follows:
...society’ swell being is the outcome, not so much of altruistic behaviour, but rather of the matching, through voluntary and competitive exchange, of buyer and seller’s self interest.
- 6 Chamberlin E.W. (1933), The Theory of Monopolistic Competition, Cambridge, MA, Harvard University P (...)
- 7 Drucker P. (1954), op.cit.
- 8 Abbott L. (1955), Quality and Competition, New York, John Wiley and Sons.
- 9 Alderson W. (1957), Marketing Behaviour and Executive Action, Homewood Ill. R.D. Irwin.
- 10 McKitterick J.B. (1957), op.cit.
- 11 Howard J. and Sheth J.N. (1969), The Theory of Buyer Behaviour, New York, John Wiley and Sons.
7Although in modern economics this basic principle has been amended with regard to social (solidarity) and societal issues (externalities, collective goods, Government regulations), it nevertheless remains the main principle driving the economic activity of a successful firm operating in a free - but regulated - competitive market. Those ideas have been developed and implemented in management by authors such as Chamberlin (1933)6, Drucker (1954)7, Abbott (1955)8, Alderson (1957)9, McKitterick (1957)10, Howard and Sheth (1969)11, the main founding fathers of today’s marketing discipline.
8The term “marketing” itself generates ambiguity. In plain English it refers to the process of going to the market and the concept places implicitly the emphasis on the “downstream” activities of the marketing process, i.e. the marketing mix in action and does not refer to the “upstream” activities, that necessarily precede the market entry, i.e. the confrontation of customers needs with the firm’s creative abilities and skills.
9Many authors and managers do not make a careful distinction among customer oriented, marketing oriented and market-driven. They lean toward the traditional marketing concept to describe the orientation of a firm that stay close to its customers.
- 12 Oxford English Dictionary, Oxford, Oxford University Press.
- 13 Webster F.E., Malter A.L., and Ganesan L.S. (2005), The decline and dispersion of marketing compete (...)
10The linguistic definition of polysemy refers to “...a word that has multiple but related meanings”12. Unlike finance people, marketing people are still divided by their understanding about the meaning of the word “marketing”. One symptom of the lack of consensus on language among managers - and in particular among CEOs - is evidenced by the type of answer received to the following first interview question to a sample of CEOs: “How has marketing been changing in your company in the past three years?” With a comment along the lines of “... that depends upon what you mean by marketing” (quoted by Webster Malter and Ganesan, 2005, p. 36)13.
- 14 Ambler T. (2000), Marketing Metrics, Business Strategy Review, 11, 2, 59-66.
- 15 Kotler P. and Keller K.L. (2006), op.cit.
- 16 Kotler P., Rackham N., and Krishnaswamy S. (2006), Ending the War between Sales and Marketing, Harv (...)
11This level of confusion remains high among marketing practitioners and scholars as well. For example, while we will call “market-driven management” what the whole firm is doing (strategic and operational marketing) to secure customer preference and thereby to achieve higher returns, Ambler (2000, p. 61)14 uses the term “Pan-company marketing” and Kotler and Keller (2006, p. 17)15 the term “holistic marketing”. In many sectors, companies tend to equate marketing with sales; others with brand management and sales; others with advertising, merchandising and sales and others with sales and communication, etc. As stated by Kotler, Rackham and Krishnaswamy (2006, p. 74)16, “All too often, organisations find that they have marketing function inside Sales and a sales function inside Marketing”. This conceptual looseness and lack of semantic rigour are unworthy of a discipline having, since more than sixty years now, scientific and academic ambitions.
- 17 Christensen C.M., Cook S., and Hall T. (2005), Marketing Malpractice. The Cause and the Cure, Harva (...)
- 18 Laffley A.G. (2005), quoted by Christenson, Cook, and Hall (2005), op.cit. Journal of Marketing, 35 (...)
12This definitional confusion about the labelling and the scope of the marketing concept creates problems, not only for the teaching of marketing, but more importantly for its implementation. We have seen many examples of poor marketing practices adopted in the name of the marketing concept. As stated by Christensen, Cook and Hall (2005)17, “... thirty thousand new consumer products are launched each year. But over 90% of them fail - and that’s after marketing professionals have spent massive amounts of money trying to understand what their customers want What’s wrong with this picture? We believe that some of the fundamental paradigms of marketing are broken. We are not alone in that judgment.” Even CEO’s Procter & Gamble A.G. Lafley (2005)18, arguably the best-positioned person in the world to make this call, says, “We need to reinvent the way we market to consumers. We need a new model”.
- 19 McCarthy J. (1960), Basic Marketing, A Managerial Approach, Homewood Ill., R.D. Irwin, 1st Edition.
13The operational counterpart or support of the marketing concept is commonly referred as to the marketing mix or to 4Ps paradigm - product, place (or distribution), price, promotion (or communication) - proposed by McCarthy (1960)19, i.e. the specific techniques by which the firm seeks to satisfy consumers needs (the firm’s commercial arm). The marketing mix paradigm includes the marketing tools that the manager combines in a specific way to deal with a specific marketing situation.
- 20 Borden N.H. (1964), The Concept of the Marketing Mix, Journal of Advertising Research, June, 2-7.
- 21 Boons B.H. and Bitner M.J. (1981), Marketing Strategies and Organisation Structures for Service fir (...)
- 22 A term coined by Eiglier P. and Langeard E. (1987), Servuction, Paris, EdiScience International.
14Borden (1964)20 groups these techniques in the following areas: product planning, pricing, branding, channels of distribution, personal selling, advertising, sales promotion, service, physical distribution, and market research. Recognising the special character of services as products, Boons and Bitner (1981)21 add, in addition to the standard 4Ps, an extra three Ps, totaling seven: People, any person coming into contact with customers, Process, the “servuction”22 process involved in providing the service, and the Physical evidence provided to make the service tangible for the potential customer.
- 23 Constantinides E. (2006), The Marketing Mix Revisited Toward the 21st Century Marketing, Journal of(...)
- 24 Moller K. (2006), Comments on: The Marketing Mix Revisited: Toward the 21st Century Marketing, Jour (...)
15Several criticisms have been formulated against the marketing mix in the academic literature. For an extensive review, see Constantinides (2006)23 and Moller (2006)24. The most significant criticism of the 4Ps or 7Ps paradigm is its lack of strategic content making it unfitted as a planning instrument, in particular in turbulent environments. It is implicitly assumed in the marketing mix paradigm that the business to cover, the customers to serve, the competitors to outperform and the distributors to partner with, are known and well identified. These strategic tasks are the most difficult to assume and will determine the long term future of the firm. It is only once these strategic options are taken that the marketing mix paradigm becomes relevant.
16A second important criticism is that, unconsciously, the marketing mix paradigm emphasises an “inside-out” view of the market, whereas the marketing concept pretends to be an “outside-in” approach giving the primacy to customers. In the market orientation concept described below, the 4Ps or 7Ps paradigm is analysed in a more customer-centric perspective in the framework of the “solution-to-a-problem” approach (see section 4.1. below).
- 25 Grönroos C. (1991), The Marketing Strategy Continuum: A Marketing Concept for the 1990s, Managemen (...)
- 26 Gummesson E., (1987), The New Marketing - Developing Long Term Interactive Relationships, Long Rang (...)
- 27 Marion G. (2001), Le marketing relationnel existe-t-il? Décisions marketing, 22, Janvier-Avril, 7- (...)
17Finally, a third criticism formulated in particular by Grönroos (1991 and 1994)25, is that the marketing mix paradigm’s focus is more on short-term market transactions than on building relationship with customers, an approach more appropriate for FMCG markets but less relevant for services and B2B markets. Grönroos and his colleagues from the Nordic School (Gummesson, 1987 and 1997)26 view marketing as an interactive process where relationship building and management are the priority objectives. Gilles Marion (2001)27 challenges this distinction between transaction and relationship marketing made by Grönroos. As soon as we have exchange, there is a relationship. A distinction between “limited” and “extensive” relationship would probably be more appropriate (see Section 2.6. below).
- 28 For a review of the changing priority roles marketing, go to: Lambin J.J. in association with R. Ch (...)
18The traditional marketing management model placing heavy emphasis of the marketing mix is in fact a supply-driven approach of the market. The objective is to use the understanding of consumers’ needs to mould demand to the requirements of supply, thereby focusing on the needs of the seller. The true customer orientation concept is concerned with what can be done for customers by adapting supply to the expectations of demand28, in a win-win perspective. To clarify the real role of marketing a distinction should be made between strategic and operational marketing.
- 29 Day G.S. and Wind J. (1980), Strategic Planning and Marketing: Time for a Constructive Partnership, (...)
- 30 Webster F.E. (1981), Top Management’s Concerns about Marketing: Issues for the 1980’s, Journal (...)
- 31 Wind Y. and Robertson T.S. (1983), Marketing Strategy: New Directions for Theory and Research, Jour (...)
- 32 Ansoff I. (1965), Corporate Strategy, New York, McGraw-Hill.
- 33 Andrews K.R. (1971/1987), The Concept of Corporate Strategy, Homewood, Ill Richard D. Irwin.
- 34 Abell D.F. and Hammond J.S. (1979), Strategic Market Planning; Problems and Analytical Approaches, (...)
- 35 Day G.S. (1981), Strategic Market Analysis and Definition: An Integrated Approach, Strategic Manage (...)
- 36 Larréché J.C. and Gatignon H. (1977-1979), MARKSTRAT; A Marketing Strategy Game, Palo Alto, CA, T (...)
- 37 Larréché J.C. and Weinstein D. (1987), The Strategic Industrial Marketing Simulation, Englewood C (...)
- 38 Kotler P. (1980), Marketing Management, Englewood Cliffs, NJ: Prentice Hall, 4th Edition.
- 39 Baker M.J. (2007), Marketing Strategy & Management, London, Palgrave Macmillan, Fourth Edition.
- 40 Best R.J. (2004), Market-Based Management, Upper Saddle River, NJ, Prenctice Hall, 3rd Edition.
- 41 Kerin R.A., Hartely S.W., Berkowitz E.N. and Rudelius W. (2007), Marketing, New York, Milano, McGra (...)
- 42 Lendrevie J, Lévy J., and Lindon D. (2007), Mercator, Paris, Dunod, 8th Edition.
- 43 Raimondi M. (2005), Marketing del prodotto-servizio, Milano, Ulrico Hoepli Editore
19As underlined above, one of the negative side effects of the marketing mix paradigm is its overemphasis upon operational marketing tools (the 4ps) which are appropriate to provide tactical responses in a short-term perspective in undersupplied markets, but are unable to cope with the complexities of the intense competition of oversupplied markets. In the early 1980s, this shortcoming was pointed out by Day and Wind (1980)29, by Webster (1981)30 and by Wind and Richardson (1983)31. By contrast strategic marketing focuses explicitly on the quest for long run competitive or consumer advantage. Thus, a strategic perspective was missing from the development of the marketing thought and practice. The oddity is that the marketing strategy literature has been developed primarily by non-marketers like Ansoff (1965)32, Andrews (1971/1987)33, Abell and Hammond (1979),34 and Day (1981)35 among others. The first marketing scholars having integrated a more strategic orientation in the marketing discipline and in marketing education are Larreche and Gatignon (1977/1979)36 from INSEAD with the highly popular marketing simulation game MARKSTRAT, followed later by INDUSTRAT (Larreche and Weinstein, 1987)37. It is interesting to note that the strategic marketing perspective has been introduced by Kotler38, only in 1980 in the fourth edition of his popular marketing management textbook, i.e. 13 years after his first 1967 edition. Today, most marketing textbooks have introduced the strategic marketing perspective in their content. See for example Baker (2007)39, Best (2004)40, Kerin, et al. (2007)41, Lendrevie, Levy and Lindon (2007)42, Raimondi (2005)43. The differences between operational and strategic marketing are summarised in Table 1.
Table 1. Contrasting Operational and Strategic Marketing
Source: Lambin et al. (2007)
- 44 Levitt Th. (1965), Marketing Myopia, Harvard Business Review, September- October, 26-44.
- 45 Abell D. (1980), Defining the Business, Englewood Cliffs, NJ Prentice Hall.
- 46 Henderson B. (1983), The Anatomy of Competition, Journal of Marketing, 47, Spring, 7-11.
- 47 Day G.S. (1977), Diagnosing the Product Portfolio, Journal of Marketing, 41, April, 29-38.
20Strategic marketing is, an analysis-oriented process focused on the analysis of the needs of individuals and organisations. The role of strategic marketing is to follow the evolution of the reference market (Levitt, 196544 and Abell, 198045) and to identify various existing or potential product markets or segments on the basis of an analysis of the diversity of needs to be met. Once the product-markets are identified, they represent economic opportunities whose quantitative and qualitative attractiveness needs to be evaluated. For a given firm, the appeal of a product-market depends on its own competitiveness, in other words on its capacity to meet customers’ needs better than its rivals (Henderson, 198346). This competitiveness will exist as long as the firm holds a competitive advantage, either because it can differentiate itself from its rivals due to sustainable distinctive qualities, or because of higher productivity, putting it at a cost advantage. The process of strategic marketing has a medium- to long-term horizon; its task is to specify the firm’s mission, define objectives, elaborate a development strategy and ensure a balanced structure of the firm’s product portfolio (Day, 1977)47.
21Operational marketing is an action-oriented process that is extended over a short- to medium-term planning horizon and targets existing markets or segments. It is the classical commercial process of achieving a target market share through the use of tactical means related to the product, distribution, price and communication decisions. The operational marketing plan describes objectives, positioning, tactics, and budgets for each brand of the company’s portfolio in a given period and geographical zone. When restricted to operational marketing, marketing tends, however, to degenerate into a sales orientation and an exclusive concern for marketing communication. Operational marketing will be efficient only if it is based on well defined and solid strategic options.
22Born in the 1950s and adopted during the Golden 1960s, the success of the traditional marketing concept can be explained by the fact that both American and European companies were operating at that time in fast growing seller markets, with demand larger than supply and well known needs and wants.
23Marketing has played an important role in the American and European market economies, not only by improving the productivity of the distributive system of goods and services but also because, by doing so, it has triggered a virtuous circle of economic development. The steps of this development process are the following:
The marketing concept helps identify poorly satisfied or unmet market needs and stimulates the development of new or improved products.
The tools of operational marketing (the 4Ps) create and/or develop market demand for these new products or services.
This increased demand generates cost decreases that make possible price reductions, thereby opening the market to new groups of customers.
The resulting enlargement of the market requires new investments in production capacity that generates economies of scale and stimulates further efforts in R&D to create new generations of products.
24These developments were so dramatic in the past 50 years that the period was characterised as the golden years of progress to the Good Life, as evidenced by the wide variety of modern discretionary purchase categories that were not even imaginable 100 years earlier: cars, televisions, videos, DVDs, computers, vacation homes, boats, recreational vehicles, pension funds, health clubs and widespread travel opportunities, etc., with market penetration rates observed well above 60 per cent in most industrialised countries.
25The marketing concept has contributed to the development of a business democracy because (a) it starts with the analysis of the citizen-consumers’ needs, (b) it guides investment and production decisions on the basis of these expressed or anticipated market needs, (c) it is respectful of the diversity of tastes and preferences by developing adapted products and (d) it stimulates innovation and entrepreneurship.
- 48 Ansoff I. (1965), op.cit.
- 49 Webster F.E. (1981), op.cit.
26In the 1970s, the development of strategic planning (Ansoff, 1965)48, with its emphasis on shortterm financially-oriented measures of management performance, contributed to the decline of management interest in the traditional marketing concept. The major criticism (Webster 1980, p. 11)49 was that marketing managers are generally unsophisticated in their understanding of the financial dimensions of marketing decisions and lack a bottom line orientation. They tend to focus more on sales volume and market shares changes than on profit contribution and returns on assets.
- 50 Webster F.E. (1988), The Rediscovery of the Marketing Concept, Business Horizons, May-June,
27The changes in the business environment in the 1990s - saturation of core markets, technology-push innovations, globalisation - have contributed to increase the complexity of markets and to reduce the effectiveness of traditional marketing practice. A resurgence of management interest for marketing has been observed in the 1990s (Webster, 1988)50, with the development of the market orientation concept presented in next chapter.
- 51 Kotler P. and Levy S.J. (1969), Broadening the Concept of Marketing, Journal of Marketing, 33, Janu (...)
- 52 Bagozzi R.P. (1979), Toward a Formal Theory of Marketing Exchanges, Conceptual and Theoretical Deve (...)
28The traditional marketing concept holds that products or services should be created in response to the expressed needs and wants of their consuming publics because that would be the way to meet the organisation’s own needs, whether these needs are financial profits or some other non-financial goals. Is this normative framework applicable for any organisation insofar as they have customers and products? As argued by Kotler and Levy (1969),51 marketing constitutes an applied behavioural science consisting of a set of functions, the core of which is the exchange transaction (Bagozzi R., 1979)52. Such reasoning expanded the marketing concept from the realm of economically based exchange to resources based exchange in a broad range of social organisations. Topics range from public transportation, to political campaigns, hospitals, universities and arts.
- 53 Hirschman E. (1983), Aesthetics, Ideologies and the Limits of the Marketing Concept, Journal of Mar (...)
- 54 Hirschman E. (1983), op.cit., p.
29In contradiction with this view Hirschman (1983, p. 46)53, argued that the marketing concept - as a normative framework - is not applicable to two broad classes of producers, artists and ideologists because their personal goals are not satisfied by commercial success. Typically the artist is motivated by the need to achieve self-fulfilment via his/her creativity. That is the creative process itself is intrinsically satisfying. Artists achieve success in their own eyes. Similarly ideologists formulate beliefs about the nature of reality and values regarding desirable states of reality. These creators, like artists, formulate ideology largely out of a need for self-expression. This includes religious leaders who seek to have their own religion tenets accepted, but would not be willing to modify them to achieve greater market acceptance. These producers are characterised by “self-oriented creativity” and practice “product-centred marketing”. For this category of creators, Hirschman (1983)54 states, “... there are three potential audiences: (1) the self, the creator’s own feelings of self fulfilment and satisfaction; (2) peers and industry professionals, such as other artists or ideologists or professional critics; and (3) the public at large, which may consist of one or several market segments.” To the extent that personal and peer values conflict with those of the public at large, then the customer orientation advocated by the marketing concept is irrelevant.
- 55 Lambin J.J. et al. (2007), op.cit. See chapter 1, sections 1.4.1 and 1.4.2.
30Two other categories of producers will not rely on the marketing concept. The producer who has fixed established inventories or production facilities (sunk costs) and does not have the opportunity to tailor offerings to suit the needs of customers. Also when product offerings are highly desirable but available in limited supply, there is little incentive for the marketer to seek out his/her customer. In these situations, the production-oriented or the sales-oriented concepts will be more appropriate business philosophies (Lambin et al., 2007)55.
- 56 Kaldor A.G. (1971), Imbricative Marketing, Journal of Marketing, 35, April, 19-25.
- 57 Bell M.L. and Emory C.W. (1971), The Faltering Marketing Concept, Journal of Marketing, 35, October (...)
31Despite the undisputable achievements of traditional marketing, several criticisms have been formulated about the marketing practice (see Kaldor, 197156, and Bell and Emory, 197157). The most severe criticism is the charge of manipulative marketing, through hard selling and misleading advertising, with the objective to mould demand to the requirements of supply. In the 1960s, leading corporations have been accused of: (a) misleading and manipulating children through TV advertising; (b) producing merchandise with miracle ingredients which in fact are of little value; (c) advertising ordinary or inferior features in a way to suggest that they are actually superior features; (d) offering warranties for the consumer protection that are not understood by the consumer and, in fact protecting more the seller than the buyer; (e) using advertising in a way that exploit the agonies and anxieties of individuals.
- 58 Ralph Nader (1965), Unsafe at Any Speed, New York, Brossman Publisher, Inc.
32The excesses of manipulative or “wild marketing” have led to the birth of countervailing powers (a) in the form of consumers’ organisations (the consumerist movement) initiated by consumers (in particular by Ralph Nader58) and (b) in the form of legislation which increasingly reinforces the protection of consumers’ legal rights prompted by public authorities. (c) Self-discipline by companies and the adoption of rules of ethics have also contributed to the development of a more ethical behaviour. It is clear today that manipulative marketing is self-destructive for a company or for a brand and goes against its best long-term interest.
33In the popular language, the word marketing has become the synonym -in the best case of selling but also of misleading, deceptive, untruthful, manipulating, boosting, superficial, window dressing,... Why such contempt and how to explain the discrepancy between what the marketing concept pretends to be and its perception by public opinion?
- 59 Lambin J.J. and Herman J. (2001), Faut-il tenir le marketing en respect?, Unpublished working paper (...)
34This insidious fear of marketing is in everybody’s mind. A first explanation of this mistrust is clearly due to the too numerous cases of manipulative marketing still observed from time to time in industrialised markets. A more paradoxical explanation can be suggested, however (Lambin and Herman, 2001)59. If marketing, viewed as a process of market conquest, is guided by the rules of science - a belief generally held by public opinion -this would imply the existence of forms of determinism in the functioning of the market. In other words, cause and effects relationships or laws (even probabilistic laws), observable and measurable would exist, that the firm can exploit to influence even to manipulate consumers’ behaviour in order to achieve its own growth and profit objectives. This idea is worrying and is in contradiction with the free market ideology of the consumer-king, viewed as an independent economic decider. The marketing concept would disturb and parasitize the natural spontaneity of the “invisible hand”. The claimed individual freedom and the postulated autonomy — “I choose therefore I am” — seem to be incompatible with a deterministic marketing process.
35We have to recognise however that the axiom of complete individual freedom is unrealistic because any individual in his or her role of decision-maker is a human being socially and culturally formed. This implies that the motives of his or her choice are more influenced by imitation and social conditioning than by rational deliberation and by psychic spontaneity. A reality sometimes difficult to accept and this state of affairs can also explain the instinctive mistrust vis-a-vis marketing. Moreover, the marketing professionals know perfectly well that the scientific nature of the marketing is very relative and that few companies today are able to measure the profitability of their marketing efforts, even more modestly, to evaluate the effectiveness of their marketing and advertising investments.
- 60 Henochsberg M. (2001), La place du marché, Paris, Denoel.
36A market is a social arrangement that allows buyers and sellers to discover information and carry out a voluntary exchange of goods and services. Some leftist economists (see for instance Henochsberg, 2001)60 hold the view that, in a capitalist system, a market is in reality a “free market” that runs under laissez-faire policies. They challenge the self-regulating role of the market leading, supposedly, to welfare equilibrium. This view is simplistic and the market reality is much more complex.
- 61 Rachline F. (1996), Service Publics Economie de Marché, Paris, Presses de la Fondation Nationale d (...)
37A market is not an unorganised space of economic flows where exchange partners randomly meet (Rachline, 1996)61. It is a solid market place structure, based on well-defined principles and operating rules. There is no market without administrative, legal, and fiscal regulations, without logistic support of exchange transactions, without guarantee of last resort, without legislation specific to the sector of activities, without well-defined relationships between parties engaged in a transaction, without financial and accounting rules, without advertising, without competition and anti-trust legislation, without more or less explicit rules of conduct, etc. This list of constraints is long but not exhaustive. A market is not created from scratch, but is the output of a long process of negotiations among the market actors between powers and countervailing powers. The destruction of a totalitarian State will not spontaneously create a market, as evidenced by the situations observed in Central Europe and in Russia. The collapse of these planning economies has not given spontaneous birth to a social market economy system.
38The traditional marketing concept has meant little more than looking to the customer for guidance as to what can be sold at a profit, but several ambiguities remain in the interpretation of the concept. Also key issues are left out and this reduces substantially the operational value of the concept for guidance of the firm. Several important questions remain unresolved.
Does the marketing concept imply creating needs?
Does the concept refer only to “expressed” needs or also latent or unarticulated needs?
Does the concept assume that consumers know what is needed and are able to express their needs?
Are consumers able to conceptualise and evaluate highly innovative product ideas and concepts proposed by R&D and laboratories?
Is the objective short tem or long term satisfaction? How to define and to measure customer satisfaction?
Who is the real customer? No distinction is made between the different customer roles: buyer, payer, and user.
Does the concept imply protection of customer’s well being and safety in the use of the product?
How far should the firm go in promoting its products and in stimulating needs?
Are individual needs’ satisfaction always compatible with the common good and public interest?
What about other buying influences? The concept refers to customers only. Wholesalers, retailers and others actors in the distribution channels. What about influencers like doctors, architects or consultants who do not buy, do not use and do not pay, but recommend products or brands? What about other stakeholders like consumerists, ecologists?
Profit for whom? For the shareholder only or for other stakeholders as well?
Does integration of the marketing function implies that marketing should take over the other functions or simply direct these activities? How to organise the required cross functional coordination?
Should marketing be held accountable of the environmental side effects of its activities?
39Particularly restrictive in the traditional marketing concept is the exclusive focus on customers, completely ignoring the influence of other key market actors. Knowing what customers want is not too helpful (a) if competitors are already providing the same product or service; similarly, (b) if powerful distributors refuse to list the brand preventing the firm to reach the targeted customers; or (c) if powerful influencers do not certify or do not shortlist the product, or (d), last but not least, if powerful stakeholders decide to boycott the brand. The dominant orientation towards customers in the traditional marketing concept has deflected attention from the pursuit of competitive advantage.
- 62 Riesz P.C. (1980), Revenge of the Marketing Concept, Business Horizons, June, 49-53.
40Dependence on customers’ expressions of their own needs and wants suggests that many marketers have failed to take the long view of the marketing concept and have been induced to move from “science push” to “market pull” research to develop “me too” products for existing markets, where the odds of success are much better (Riesz, 1980)62. As a result of this short-term perspective, applied research has become more dominant and focused primarily on existing products and markets and on process improvements to reduce costs, rather than on the development of new ventures based on emerging technologies. Technology push innovations by definition are more risky and more demanding since the innovator has an unfamiliar offering and has therefore to educate and persuade potential customers. An intimate understanding of the potential customers’ problems and needs is an essential condition for success. Thus, anticipating future or latent needs is consistent with the market orientation concept.
41These questions will be reviewed in more details in the following sections, but it is already clear that the traditional marketing concept does not address these issues. The operational statement and labelling of a revised concept is necessary that more clearly shows what it is and what it is not, while taking into account the challenges of the new market environment.
Table 2. The Credibility Gap of Traditional Marketing in the literature
- 63 Rust R.T., Ambler T., Carpenter G.S., Kumar V. and Srivastasa R.K. (2004), Measuring Marketing Prod (...)
- 64 Cassidy F., Freeling A., and Kiewell D. (2005), A credibility gap for marketers, The McKinsey Quart (...)
- 65 Webster F.E., Malter A.L., and Ganesan L.S. (2005), op.cit.
- 66 Credoc 2004, Des consommateurs au discours toujours plus élaboré et critique, Cahier de recherche, (...)
42In recent years, several studies published in the USA (Rust, et al. 200463; Cassidy, Freeling, and Kiewell, 200564; Webster Malter, and Ganesan, 200565) and in Europe (Credoc, 200466) have evidenced a growing dissatisfaction from CEOs and from board directors with its lack of financial accountability and with the low productivity of traditional marketing departments.
- 67 Lambin J.J. with R. Chumpitaz and I. Schuiling (2007), Market-driven Management -Strategic and Oper (...)
43The main criticisms can be summarised as follows (Lambin, et al., 2007)67:
To have taken the marketing concept to mean that marketers should take their lead from the “expressed” needs and wants of customers, neglecting latent and unarticulated needs.
To have moved away from “science push” to “market pull” applied research with the risk of diminishing the firm’s awareness of important technological innovations.
To be risk-adverse by placing more emphasis on minor market-pull innovations over more revolutionary (but more risky) technology-push innovations.
To have privileged tactical marketing instruments over strategic ones, by giving precedence to advertising and promotions over product innovations.
To have confined customer orientation to the marketing department, thereby preventing the integration of the customer culture within the organisation.
To be a big spender and to have failed to put in place metrics and processes to track the impact of marketing initiatives.
To have responded to environmentalism by green advertising unsupported by prior product redesign, thereby undermining the credibility of green marketing.
To have neglected in B2C markets the “fewer frills, low price” segments, thereby opening the door to private labels development.
To lose the battle of the brand in the B2C markets in several product categories.
- 68 Court D.C., Gordon J.W., and Perrey J. (2005), Boosting Returns on Marketing Investments, The McKin (...)
44As put by Court, Gordon, and Perrey, (2005)68, marketers need a more rigorous approach, one that jettisons mentalities and behaviour from advertising’s golden age and treat operational marketing not as “spend” but as the investment really is
- 69 Webster F.E., Malter A.J., and Ganesan S. (2005), op.cit.
- 70 Christensen C.M., Cook S., and Hall T. (2005), op.cit.
45Today, an increasing number of firms believe that the marketing function must reinvent itself in a way that reinforces the overall market orientation of the firm. Thus the problem is not with marketing, but rather with the marketing function (see Webster, Malter, and Ganesan, 200569; Christensen, Cook, and Hall, 200570). In the new competitive environment, market-driven management has become too important to be left to the marketing function alone.
- 71 Cassidy F., Freeling A., and Kiewell D. (2005), op.cit.
46As put in a recent McKinsey report (Cassidy, Freeling, and Kiewell, 2005)71, “... marketers have a credibility problem because the creativity that is their lifeblood often runs counter to the discipline required to excel in other parts of the organisation.” Today’s marketers must tailor and integrate their strategies with a more complex set of approaches to product development, supply chains, manufacturing, and relationship selling, etc. These approaches imply close cooperation with the other functions. In the McKinsey survey (2005), most CEOs expressed some variation on the concern that many CEOs, for instance, expressed frustration at being asked for funds in absence of - or even in contradiction to - data regarding the proposed initiatives.
47The criticism most frequently formulated against marketing is to have transformed the market in a system to create needs instead of a system of need satisfaction. This subject is fundamental and must be addressed and clarified by priority before analysing the new market orientation concept.
48At the heart of the debate is the notion of generic need. According to the dictionary, a generic need is a requirement of nature or of social life. This definition distinguishes two kinds of needs: innate or absolute needs, which are natural, inherent in nature or in the human organism, and relative needs which are cultural and social and depend on experience, environmental conditions and the evolution of society.
- 72 Abbott L. (1955), Quality and Competition, New York, Jon Wiley & Sons
49In the framework of the market orientation concept, it is practical to view generic needs - both absolute and relative - as problems for potential customers who try to solve them by acquiring different products or services. If we take this view, then, following Abbott (195 5)72 we can define a derived need as a particular technological response (the product or the service) to the generic need, as well as being the object of desire. For example, the car is a derived need with respect to the absolute generic need of individual mobility. Similarly, the ownership of a costly and prestigious car can be a response to the relative generic need of social recognition.
50Generic needs are stable and cannot become obsolete. Obsolescence relates only to derived needs, in other words to the dominant technological response at the time. At a given point, one may detect a tendency towards the saturation of the derived need, because of increased consumption of the good at a particular stage in its life cycle. The marginal utility of the derived need tends to diminish. But the generic problems (personal mobility, social recognition, protection, and so on) do not disappear, which means that generic needs remain unaffected. Thanks to the impulse given by technological progress, the generic need simply evolves towards higher levels due to the arrival of improved products and therefore new derived needs.
51Thus, the popular view that is the firm’s marketing activity aims at creating needs has to be revised. Marketing cannot create generic needs that pre-exist and are inherent to human nature, but it can only create demand for the derived need, that is the demand addressed to a specific technological response. This does not exonerate marketing from its social responsibility. Exacerbate derived needs among consumer groups who cannot afford the advertised goods is a social irresponsible behaviour.
- 73 Keynes J.M. (1936), Essays in Persuasion - Economic Possibilities for Our Grandchildren, The Collec (...)
52Going further in the analysis of generic needs, Keynes (1936, p. 365)73 underlined the fact that satiation is possible only for a certain part of them, for the absolute needs. “... needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative in the sense that we feel them only if their satisfaction lifts us above, make us feel superior to our fellows.”
- 74 Cotta A. (1980), La société ludique, Paris, Grasset.
53Absolute needs are satiable, while relative needs are not. Relative needs are insatiable, because the higher the general level, the more these needs tend to surpass that level. This is how individuals, even when they have in absolute terms enjoyed net improvements in their standard of living, often tend to think that their situation has deteriorated if those who normally serve as the yardstick have improved more relative to them. Cotta (1980, p. 17)74 writes, ‘others’ luxury becomes one’s own necessity. The distance between reality and the level of aspiration tends to move continuously with growing dissatisfaction.
54In these conditions, producing to satisfy relative needs tantamounts to developing them, that is to trigger a process of escalation and of higher bids in the process of relative needs satisfaction.
- 75 Scitovsky T. (1976), The Joyless Economy, Oxford, Oxford University Press.
55Needs of a psycho-sociological origin may be felt just as strongly as the most elementary needs. For example, being deprived of stimulation, intimacy, and attention may provoke death or serious deficiencies in psychic and social functioning in the more extreme cases (Scitovsky, 1976)75.
56The distinction between absolute and relative needs remains interesting in two respects. On the one hand, it shows that relative needs can be just as demanding as absolute needs. On the other, it brings to the fore the existence of a dialectic of relative needs which leads to the observation of the general impossibility of satiation. Even the tendency towards material comfort cannot objectively define a state of satisfaction. When an individual reaches a predefined level, he or she can then catch a glimpse of a new stage of possible improvement.
57Understanding customer needs and wants is not always a simple task and it is useful to establish a distinction between latent and expressed needs. Latent needs or latent solutions are defined as needs and solutions of which the potential customer is unaware. Latent needs are no less “real” than expressed needs. But they are not in the consciousness of the potential customer: For example, at the outset of the development of personal computers, mobile or digital photography, the need for the benefits of these new products categories was a latent need.
58Unfortunately, many marketers have taken the marketing concept to mean that marketers should find guidance from the expressed needs of customers, as if market research and customer surveys were the only way to analyse customers’ needs. The drawback of classic market research is that it merely reflects common knowledge.
- 76 Pellemans P. (1998), Le marketing qualitatif, Bruxelles, De Boeck.
- 77 Goffin K. and Lemke F. (2004), Uncovering Your Customer’s Hidden Needs, European Business Forum, (...)
59To analyse latent needs different approaches are needed drawn largely from anthropology and psychology, like repertory grids, contextual interviews, observation of body language, lead user behaviour, etc (see Pellemans, 1998)76, (Goffin and Lemke, 2004)77. Different methods exist to identify unarticulated needs
Helping customers anticipate developments in their markets.
Continuously trying to discover additional needs of customers of which they are unaware.
Incorporating solutions to unarticulated customer needs in new products or services.
Brainstorming on how customers use our products and services.
Innovating even at the risk of making our own products obsolete.
Searching for opportunities in areas where customers have a difficult time expressing their needs.
Working closely with lead users who try to recognise customer needs months or even years before the majority of the market recognise them.
60Latent needs are universal. They exist in every customer and the role of proactive strategic marketing is to discover them and to analyse their profit potential though an inter-functional dialogue between R&D, market analysts, and operations people, as discussed later in this book (see section 2.5. below). The objective of strategic marketing is to provide customers with an appropriate solution based on a good understanding of their real needs, be they articulated or not.
- 79 Henochsberg M. (2001), La place du marché, Paris, Denoel.
- 80 Attali J. and Guillaume M. (1974), L’anti-économique, Paris, Presses Universitaires de France.
- 81 Rosa J.J. (1977), Vrais et faux besoins, in: L’économique retrouvé, Rosa J.J. and Aftalion F. ( (...)
61We have seen above that the argument of needs creation can have some validity for derived needs but not for generic needs. One of the extreme views is put forward by Henochsberg (2001, p. 69)79 who states that the real objective of the economy is to sell and not to satisfy needs. The same idea was proposed in the 1970s by Attali and Guillaume (1974)80. These authors believe that producers exploit the dynamics of wants to find markets allowing them to preserve their economic power. Rosa (1977)81 notes that this analysis makes the implicit assumption that there are “real” needs and “false” needs and that the false needs are created by society and by the producer
62This analysis, which is still widespread among so-called “left intellectuals” in Europe has one important weakness, in that it never indicates how to distinguish true needs from false needs. Given that the vast majority of our present wants are indeed of a cultural origin, where should we draw the line, and especially who will be the enlightened dictator of consumption? Clearly it is very difficult to answer these questions objectively. It should also be added that the hypothesis of individual consumer impotence is daily rejected by facts such as the figures available on the rates of failure of new products; more than one in two products fails to enter the market successfully. The discretionary power of the consumer is a reality and firms know it well. We must therefore recognise that the debate of “true” versus “false” needs is in the first place an ideological debate.
- 82 Murray H.A. (1938), Explorations in Personality, New York, Oxford University press.
- 83 Maslow H. (1943), A Theory of Human Motivation, The Psycological Review, 50, 370-396.
- 84 Rokeach, M.O. (1973), The Nature of Human Values, NewYork, The Free Press.
- 85 Sheth J.N., Newman B.I., and Gross B.L. (1991), Consumption Values and Market Choices, Theory and A (...)
- 86 Kasser T. (2002), The High Price of Materialism, A Bradford Book, The MIT Press, Cambridge Mass.
63Well-being means having a product or service to satisfy each need, so a natural approach is to develop a list of needs and to compare it with available goods. The word “goods” here has a special meaning. They are not only physical entities or services, but may be also abstract, social or psychological entities, such as love, prestige, and so on. The seminal works of Murray (1938)82, Maslow (1943)83, Rokeach (1973)84, Sheth, Newman, and Gross (1991)85 and Kasser (2002)86 are representatives of this approach.
64Maslow (1943) groups fundamental needs into five categories: physiological, safety (absolute needs), social, esteem (relative needs) and self-actualisation needs. Maslow’s analysis, however, goes further and is not limited to a simple classification. Maslow postulates the existence of a hierarchy of needs, which depends on the individual’s state of development. According to Maslow, there is an order of priorities in needs, in the sense that we begin to try to satisfy dominant needs before going on to the next category. Once the needs of a lower order have been satisfied, they allow needs of the higher order to become motivators and influence our behaviour. There is a progressive abatement in the intensity of needs already met and an increasing intensity of needs of a higher order not yet satisfied.
65This analysis is interesting because it puts forth not only the multidimensional structure of needs, but also the fact that needs have different degrees of intensity in different individuals. In reality, there is always some coexistence of these categories of needs, with one category or another becoming more important according to the individual, or according to the circumstances of one particular individual.
66Products to be developed for satisfying needs must therefore be planned accordingly. A good or product may have more than one role or function beyond just the basic one. Individuals use goods not only for practical reasons, but also to communicate with their environment, to show who they are, to demonstrate their feelings, and so on. It is important for marketing to be aware of the role played by goods and brands, not simply for their functional value, but also for their emotional or symbolic values.
- 87 Braudel F. (1973), Capitalism and Material Life 1400-1800, New York, Harper & Row.
- 88 McKendrick N., Brewer J., and Plumb J.H. (1982), The Birth of a Consumer Society: The Commercializa (...)
- 89 Belk R.W., (1985), Materialism: Trait Aspects of Living in the Material World, Journal of Consumer (...)
67According to Braudel (1973)87, contemporary patterns of happiness-seeking via consumption first emerged in the West in fifteenth and sixteenth century Europe. Such consumption-based orientation is commonly labelled materialism. For other historians, acquisitive desires can easily be traced as far back as ancient civilizations, as can be isolated pockets of conspicuous consumption (McKendrick, Brewer, and Plumb 1982)88. Belk (1984, p. 291)89 defines materialism as: “the importance a consumer attaches to worldly possessions. At the highest levels of materialism, such possessions assume a central place in a person’s life and are believed to provide the greatest sources of satisfaction and dissatisfaction.” The issue involving materialism that is of relevance here is whether marketing (or advertising) creates materialism or exacerbates it.
- 90 Kasser T. (2002), op.cit.
68People are constantly bombarded with advertising messages claiming that their needs can be satisfied by having the right product, conveying the idea that possessions and wealth reflect success in life and yield happiness. “Worried that you will die young? Eat this cereal and buy insurance from that company (security need). /.../. Your lawn looks bad in comparison with your neighbour’s? (Connectedness need), Buy this lawnmower /.../. No adventure in your life? Take this vacation, buy that sport vehicle (self actualisation need), etc.” (adapted from Aasser, 2002, p. 26)90. Although striving for money and possessions constitute the core message encouraged by the consumption and the capitalistic cultures, two other goals are also typically encouraged in the materialistic culture: having the right image and being well known socially.
- 91 Belk R.W. and Pollay R.W. (1985), Images of Ourselves: The Good Life in Twentieth Century Advertisi (...)
69Materialism which results from a pursuit of the good life can be good or bad depending on its purpose. Using material consumption to derive direct satisfaction by having the good life (terminal materialism) is ultimately disappointing, while using material consumption to facilitate living the good life (instrumental materialism) can be rewarding. Belk and Pollay (1985)91 have analysed advertising promises in a sample of 411 ads to see if they imply that having the product or service or displaying to others (1) is its own reward, (2) allows one to do things that are rewarding, or (3) elps one be (or become) a better person. These existential promises reflect an emphasis on terminal materialism (having), instrumental materialism (doing) or non materialism (being).
- 92 Belk R.W. and Pollay R.W. (1985), op.cit., p. 889.
70There is some evidence for the claim that the use of materialistic appeals in US advertising has increased during this century. Belk and Pollay (1985)92 found a rise in the relative use of luxury and pleasure appeals in US magazine advertising over the past 80 years.
- 93 Belk R.W. (1985), Materialism: Trait Aspects of Living in the Material World, Journal of Consumer R (...)
- 94 Kasser T. (2002), op.cit. , p. 26.
71The issue of materialism - and in particular of terminal materialism -should be addressed because existing scientific evidence on the value of materialism yields clear and consistent findings. People who are highly focused on materialistic values have lower personal well-being and psychological health than those who believe that materialistic pursuits are relatively unimportant (Belk, 1985)93. The studies document that strong materialistic values are associated with a pervasive undermining of people’s well-being, from low life satisfaction and happiness, to depression and anxiety, to physical problems such as headaches and to personality disorders, narcissism, and antisocial behaviour (Kasser, 2002, p. 22)94.
- 95 Layard, R. (2005), Happiness, New York, Penguin Books.
72In the US, despite huge increase in income there has been no increase in the number of “very happy” people or any substantial fall in those who are “not very happy”. The story is similar in Britain where happiness has been static since 1975 and is no higher than in the 1950s. These findings are surprising because in any given society, richer people are substantially happier than poor people. In the US, for instance, some 45 per cent of the richest quarter of Americans is “very happy” compared with only 33 per cent of the poorest quarter. These figures have barely changed in the past 30 years. So the richest quarters have roughly doubled their living standards but they have become no happier. The poor have also become richer, but no happier. In the other countries the story is similar (Layard, 2005, pp. 29-30)95.
- 96 Darke P.R. and Ritchie Robin J.B. (2007), The Defensive Consumer: Advertising Deception, Defensive (...)
73The implications of these observations for marketing are clear. In their communication, firms should resist pressures to exaggerate the promise of their products and to refer exclusively to aspiration values, by carefully pre-testing the expectations that a new advertisement creates. Darke and Ritchie (2007)96 have recently presented empirical evidence showing that deceptive advertising generates distrust which negatively affects people’s response to subsequent advertising, not only from the brand or company, but also from any other firm that rely on advertising to sell its products. Deceptive advertising undermines the benefits of a social market economy system by making advertising less efficient. Marketers have a powerful self-interest in upholding truth in advertising.
- 97 onPhilanthropy (2006), Special Repòrt, Consumer Philanthropy: Nonprofits Spend Billions to Reach Co (...)
74The marketing know-how - both in theory and in practice - can be applied to noble causes, as suggested by the spectacular rise of cause marketing sponsorship by American and European businesses. In the US, according to a report published by on Philanthropy (2006)97 cause marketing sponsorship is rising at a dramatic rate. Quoting an IEG study, $1.11 billion was spent in 2005, an estimated $1.34 billion spent in 2006 and the number is expected to grow. Cause-marketing sponsorship is now outpacing sport sponsorship in the US.
- 98 Varadrajan P.R. and Menon A. (1988), Cause-Related Marketing: A Coalignment of Marketing Strategy a (...)
75A Cause-Related Marketing Programme (CRMP) can be viewed as a manifestation of the alignment of corporate philanthropy and enlightened business interest. It is basically a marketing programme that strives to achieve two objectives - improve corporate performance and help worthy causes - by linking fund raising for the benefit of a cause to the purchase of the firm’s products and/or services (Varadarajan and Menon, 1988)98.
76The possible benefits of cause-marketing for non-profit organisations include an increased ability to promote the non-profit organisation’s cause via the greater financial resources of a business and an increased ability to reach possible supporters through a company’s customer base.
77An example of cause marketing would be the first Coca-Cola-Ireland campaign launched in 2004 to reward designated drivers and encourage others to become one over the Christmas period. Drunk driving is an issue that is regularly in the spotlight for road safety in Ireland, particularly during holiday seasons. To provide incentive to drivers, each was offered up to three free non-alcoholic beverages during any one visit to a participating licence premise. The range of products on offer included Coca-Cola, Diet Coke, Sprite, and Sprite Zero. The campaign was supported with significant funds invested in both above and below the line promotion activities. Vital to the success was the cooperation, endorsement, and support of licensed premises and their trade associations. Further endorsement came from the Beverage Council and from a partnership with Mature Enjoyment of Alcohol in Society (MEAS). The campaign has taken place every Christmas since 2004 and has grown from strength to strength each year (www.csreurope.org/solutions).
- 99 Varadarajan P.R. and Menon A. (1988), op.cit.
78From the sponsoring firm’s point of view, a CRMP can be used for a broad range of objectives. Having examined a large number of case histories reported in the literature, Varadarajan and Menon (1988, p. 60)99 have observed that, as expected, the most frequently stated objective is increasing sales by improving brand awareness, image and recognition and/or by promoting repeat purchase, multiple unit purchase, etc. More sophisticated objectives have also been observed.
Supporting popular and respected cause can help enhance the stature of a sponsoring firm as a result of the association.
- 100 Williams M.J. (1986), How to Cash in on Do-Good Pitches, Fortune, 114, June 9, 71-80
A CRMP can be very effective in countering negative publicity, for instance, to end a boycott of the brand as experienced by American Express in the UK (Williams, 1986)100.
When customers or specific customer groups have been offended by the firm’s marketing practice or activities, a CRMP can be used to appease the offended public.
Increasing the level of trade activity for the brand promoted is also an important consideration in a CRMP.
79Surveys have shown that most consumers, if price and quality are equal, are more likely to switch to a brand that had a cause-related marketing benefit, as evidenced by the data of Table 3.
80In a 2000 survey of 12,000 consumers in 12 European countries, CSR Europe (www.csreurope.org) reported that in one year period, two in five consumers bought a product because of its links with good causes, or a product labeled as social, ethical or environmental. One in five consumers said they would pay more for such products.
Table 3. Consumer attitudes to corporate support of causes
Source: Quoted by Bronn and Vrioni, 2001.
- 101 Mohr L.A., Eroglu D., and Ellen S.P. (1998), The Development and Testing of a Measure of Scepticism (...)
81When properly executed, a CRMP sells products enhances image and motivates employees. However a CRMP can be a very dangerous area for companies to venture into if not properly conducted. The frontier is thin between cause-related or cause-exploitation. Mohr, Eroglu, and Ellen (1998)101 observe that “sceptics doubt the substance of the communication; cynics not only doubt what is said but also the motives for saying it?”
- 102 Varadarajan P.R. and Menon A. (1988), op.cit.
82There a several reasons for CRMP’s vulnerability to scepticism. For an exhaustive list of the main concerns about adverse effects on a CRMP, go to the table 3 of the Varadarajan and Menon article (1988, p. 70)102. Several concerns deserve special attention.
Since a CRMP is a strategy for selling, company decisions could be based strictly on marketing potential, with no consideration accorded to the value of the cause.
Voluntary organisations, tempted by the possible financial gain, might change their objectives to meet the demands of corporations.
An organisation could allow its cause to be identified too strongly with a corporation that it could be perceived by the public as having “sold out” to the company.
The public might begin to view philanthropy as the business of business and take the easy way out financial obligations to charity.
83Also, disturbing are the facts that (a) the sponsoring corporation often spend more money on advertising their contribution and their association with the cause than on actual contributions to the cause. Moreover, (b) the contribution and the promotional expenditures are tax deductible. Not surprisingly, many consumers perceive the firm’s motives as self-serving and some view a CRMP as a tool for corporations to get the government to subsidise their marketing programmes.
- 103 Bronn P.S. and Vrioni A.B. (2001) Corporate Social Responsibility and Cause Related Marketing: An O (...)
- 104 O’Sullivan T. (1997), Why Charity Schemes Need a Delicate Touch? Marketing Week, 20, 22-24.
84Several studies (Bronn and Vrioni 2001)103, indicate that consumers believe it is important for corporations to seek out ways to “doing well financially by doing good socially” and perceive that cause-related marketing is a good way to solve social problems. For consumers, it is important to feel that a CRM campaign is trustworthy. Honesty, transparency and long-term commitment to a cause and involvement of non-profit organisations are factors that help to overcome consumers’ scepticism toward a CRMP. Scepticism can be decreased as knowledge increases. The balance is difficult to maintain between too much or too little information. If corporations don’t say enough about their charity links, consumers believe that companies are hiding something and if they say too much they believe that charities are being exploited by the big corporations (O’Sullivan, 1997)104. Care and discretion should be exercised by the firms and causes in the design and implementation of a CRMP.
85In today’s global market, firms operate in a market economy system having evolved over time but which is today the dominant economic model, even if differences exist among regions or countries over the world. It is important to clarify the ideological and political framework within which firms operate.
86In Europe, the project of European Treaty recently approved during the Lisbon summit uses the term of “social market economy”, a significant change - but little noticed - from the Maastricht Treaty which used the term of an “open market economy”. Is this an indication of new political direction specifically European or simple cosmetic effect? A market economy is a form of capitalism relying mainly on the market laws and assimilated to economic neo-liberalism. In this system, as stated by the Nobel Prize Milton
- 105 Friedman M. (1970), The Social Responsibility of Business is to Increase its Profits, New York Time (...)
87Friedman105 “The social responsibility of the firm is to increase its profit”. The European model of a social market economy is a more complex system constituting a compromise between socialism and capitalism and presenting important features valued by citizens.
88The objective of sustainable development is undoubtedly at the core of the ideological framework of the European social market economy model. Established during the UN conference in Rio in 1992 with the participation of 178 countries, the Agenda for the twenty-first century (called Agenda 21) is a guide towards sustainable development, proposing for its implementation, practical recommendations often explicitly mentioned by responsible companies in their code of ethics. The Agenda 21 comprises 27 principles and the first one states that “...the human being is at the core of preoccupation in the respect of present and future generations”. The importance of this text - that each citizen should know - can be compared with the Human Rights Declaration of 1789, because the agenda proposes a road map for society which constitutes a new world partnership. By reaffirming the preponderance of collective needs over individual needs, the objective of sustainable development makes unacceptable forms of wild capitalism that would neglect their economic side effects.
89A solid social security system is at the core of the social market economy and is viewed as the indispensable complement of any economic activity. Individuals, as social actors, are perceived as rational but myopic, unforeseeing, and predicatively exposed to social risks. Hence, a set of compulsory rules aiming at protecting them against themselves, the State assuming its complementary role to offset the lapse and failures of the market, unable to provide by itself such a protection. This European social security net, differently implemented in each EU country, is currently evolving under the pressure of several factors: the changes in the labour market and in the family structure, the growing financial deficit of social security systems and the intensified competition caused by the globalisation of the world economy. The challenge today is to organise the coexistence of a reliable social security net with enough flexibility in the labour market to stimulate entrepreneurship.
90Building an economy aiming at sustainable development implies structural changes in the consumption modes and the awareness by the different economic actors of the threats confronting the planet: industrial and health risks, progressive diminution of the non-renewable resources, loss of biodiversity, global warming, uncontrolled growth of wastes, and a high social cost of consumption. Emerging from the market, this socio-ecological awareness modifies the vision of consumption which is not any more considered as an end in itself, but as dependent from its upstream implications (an opportunity cost) and downstream consequences (a prevention or repair cost). In order to have this neglected social cost acknowledged, the social market economy system proposes to fix a price to the use of the environment which, until recently, was considered as a free good.
- 106 The McKinsey Global Survey of Business Executives (2006), The McKinsey Quarterly, 2, 33-39. The sur (...)
91The European social economy model is based on the idea that the economic system should create value not only for the shareholder but also for the community of stakeholders involved in the market. In other words, shareholder value creation is the consequence of the value creation for the community of stakeholders and not the priority objective. Who are these other stakeholders? Any person or group of persons susceptible to affect or to be affected by the objective: customers and shareholders of course, but also employees, suppliers, the local community, the environment. As evidenced in the McKinsey Global survey of Business Executives106, business executives across the world overwhelmingly believe that corporations should balance their obligation to shareholders with explicit contributions to the public good (see section 3.5. below).
- 107 de Woot P. (2005), Responsabilité sociale de l’entreprise, Paris, Economica.
- 108 Vogel D. J. (2005), Is There a Market for Virtue? The Business Case for Corporate Social Responsibi (...)
92Companies having adopted a stakeholder’s focus are naturally induced to go beyond the sole objective of their financial performance and to reflect on their societal responsibilities (de Woot, 2005)107. There is a growing awareness that a sustainable economic development cannot be achieved on a social disaster and that being a better corporate citizen is a source of competitive advantage. A more responsibly managed firm will face fewer business risks than its less virtuous competitors: it will be more likely to avoid consumer boycotts, be better able to obtain capital at a lower cost and be in a better position to attract talent and retain committed employees and loyal customers (Vogel, 2005)108. Moreover, citizens-consumers are better educated, informed, and behave as smart shoppers increasingly able to make tradeoffs between price, quality, and ethics. Consumers expect from firms they are dealing with an ethical behaviour and a commitment with the main societal problems. Doing well (financially) by doing good (socially) is the new message. This expectation comes from the other market stakeholders who induce (force) firms to become a better corporate citizen, as evidenced by the proliferation of charters and codes of conduct and by the growing adoption of Triple Bottom Line (TBL) that takes into account social and environmental responsibilities along with financial ones. Similarly, international certifications like the SA8000 proposed by Social Accountability International (SAI) based on nine social criteria (see section 3.5. below).
- 109 Ponson B. (2003), Fighting Poverty through Entrepreneurship, European Business Forum, Issue 15, Aut (...)
93The European model of social economy places the emphasis on entrepreneurship and on innovation as the best means to eradicate poverty. It is well established today that a country’s economic growth is closely linked to innovation and to the creation of new business firms. Stimulating entrepreneurship could therefore be a powerful means to reduce poverty, because it not only promotes values like autonomy, creativity, and responsibility, but also social solidarity. It is through education, research, and an increased sensitivity to market needs that the entrepreneurial culture can be developed in a given country (Ponson, 2003)109.
94The social economy model puts an end to the traditional antagonism that exists between the “all State” (le tout Etat) or the “all Market” views (le tout marche) by promoting a positive role of the State as the protector of public interest and the complementary role of private enterprises as efficient entrepreneurs, in charge of innovation and of the production of private and public goods and services. The creation of the European single market has put an end to national State monopolies in the public utilities sectors and in the infrastructures required to meet collective needs (electricity, gas, water, rail, air and urban transports, urban heating, waste management, etc.). Those privatisations take generally the form of public-private cooperation, through public service delegations, a system in which a government service is funded and operated through a partnership of government and one or more private sector companies, while maintaining public accountability for essential aspects of public services provision. These schemes sometimes referred to as PPP or 3P also exist when public and private sectors can cooperate on common projects on long-time conditions, in domains where users cannot pay for the services provided, typically schools, prisons and hospitals. By requiring the private sector to put its own capital at risk and to deliver clear levels of service to the public over the long term, PPP schemes help to deliver high quality services and ensure that public assets are delivered on time to budget.
- 110 Attali J. (2006), Une brève histoire de l’avenir, Paris, Economica.
- 111 Billanthropy: The New Powers in Giving (2006), The Economist, July 1.
95In the social market economy, new actors are joining, the “relationship organizations”, as called by Attali (2006, p. 371)110, having profit as a constraint and not as an objective, but whose long-term goal is to improve the world functioning by solving problems unresolved by the market through civic, cultural, medical, and ecological missions. Social and environmental entrepreneurs and organisations like the Red Cross, Medecins Sans Frontières (MSF), Greenpeace, World Wide Fund (WWF), the not-for-profit sector, and the thousands of NGOs existing in the world, innovate and offer free services, thereby contributing to the individual and collective welfare, while coexisting with the merchant economy. Not forgetting billanthropy111, the philanthropic billionaires who want, during their life time, allocate their resources and their managerial expertise to the defence of causes that fall beyond the competences of the national States. The resources and the know-how of these private philanthropists are of great value for causes like the eradication of malaria, AIDS and hunger in the world or, more modestly, for the protection and the management of cultural sites.
96Marketing and the marketing concept are born in the US and adopted by European firms. Are there significant differences between the European and the US market? We believe that three differences can be identified.
- 112 Breyer R. (1934), The Marketing Institution, New York: McGraw-Hill Book Company.
- 113 Duddy E.A. and Revzan A. (1953), Marketing: An Institutional Approach, 2nd Edition, New York, McGra (...)
- 114 Bloon H., Calori R., and de Woot Ph. (1994), 10996, EURO Management, London , Kogan Page
97First, marketing as a discipline does not have the same intellectual or social roots in Europe than in the US, where marketing, as early as the years 1930s, was seen as a set of social and economic processes centered on commodities (farm, forest, mines, sea, etc), on the institutions through which these products were brought to markets and on the functions performed by these institutions. This is the origin of the word “marketing”. Authors representative of this school are Breyer (1934)112 and Duddy and Revzan113 (1953). Marketing was recognised in the US as a managerial discipline by the American Marketing Association (AMA) only in 1948 and was imported in continental Europe during the 1950s, largely by the American advertising agencies operating in the international market. As a result, the dominant culture in Europe was more sales-oriented than customer-oriented, even less market-oriented. Still today, marketing in Europe is often assimilated to selling and advertising and marketing, as a concept, suffers a strong credibility gap when presented as a “customers’ needs satisfaction” instrument (see for instance, Bloon, Calori and de Woot, 1994)114.
- 115 Forrester V. (1996), L’horreur économique, Paris, Fayard.
- 116 Friedman M. (1970), op.cit.
- 117 de Woot Ph. (2005), op.cit.
98Second, in Europe there is no political or social unanimity regarding the benefits of a market economy system, while in the US this debate is non-existent, in particular among marketing scholars. Under the influence of socialist and communist ideologies, the social sensitivity to the side effects of economic activities is much greater in Europe (see for instance, Forrester, 1996)115, and the concept of corporate social responsibility is vigorously supported and promoted by political parties and by public opinion. In the US, the traditional shareholder model promoted by the Nobel Prize Milton Friedman (1970)116 is still the dominant culture. On the contrary, as discussed in more detail later in this book, in continental Europe, the stakeholder model is gaining growing acceptance as opposed to the shareholder model (de Woot, 2005)117.
99Third, since 1957 (the Treaty of Rome), Europe is engaged in a major integration strategy, the regrouping of successively 6, 9, 10, 11, 15, 25, and 27 countries in a single market, progressively abolishing between these countries tariff and non-tariff barriers, sometimes existing since centuries, and creating (in 2008) among 15 countries a single European currency. A pacific revolution that has been absolutely positive. In this context, geographic market boundaries, reference market definitions and competitive positions have dramatically changed in few years, thereby creating major repositioning challenges for European companies. Thus, not surprisingly, the strategic dimension of the market orientation concept has taken a growing importance.
100Thus a truly specific European economic model seems to exist, making a dynamic market orientation compatible with the objectives of sustainable development and of social protection. Is this objective realistic? It may be a myth, but a “driving myth”, susceptible to guide political and social decisions.
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Table des illustrations
|Titre||Table 1. Contrasting Operational and Strategic Marketing|
|Légende||Source: Lambin et al. (2007)|
|Titre||Table 2. The Credibility Gap of Traditional Marketing in the literature|
|Titre||Table 3. Consumer attitudes to corporate support of causes|
|Légende||Source: Quoted by Bronn and Vrioni, 2001.|
© Presses universitaires de Louvain, 2008
Conditions d’utilisation : http://www.openedition.org/6540