Organisations and management accounting
Organisations and management accounting

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Organisations and management accounting

4.5 The Marketing function

Marketing is concerned with identifying and satisfying customers needs at the right price. Marketing involves researching what customers want and analysing how the organisation can satisfy these wants. Marketing activities range from the ‘strategic’, concerned with the choice of product markets (and how to compete in them, for example, on price or product differentiation) to the operational, arranging sales promotions (e.g., offering a 25 per cent discount), producing literature such as product catalogues and brochures, placing advertisements in the appropriate media and so on. A fundamental activity in marketing is managing the Marketing Mix consisting of the ‘4Ps’: Product, Price, Promotion and Place.

  • Product. Having the right product in terms of benefits that customers value.
  • Price. Setting the right price which is consistent with potential customers’ perception of the value offered by the product.
  • Promotion. Promoting the product in a way which creates maximum customer awareness and persuades potential customers to make the decision to purchase the product.
  • Place. Making the product available in the right place at the right time – including choosing appropriate distribution channels.

In order to be successful, a business enterprise must either have a lower price than its competitors, or a product that is in some way superior – or both! A competitive strategy based on low price is known as a cost leadership strategy. A competitive strategy based on developing a superior product is known as a differentiation strategy.

The historical evolution of marketing

Several writers (e.g., Harrison, 1978) have argued (and it is now widely accepted among management theorists and practitioners) that there have been three distinct eras in the history of advanced capitalist countries, such as the UK, which have affected the status, role and responsibilities of the Marketing function. These were:

  1. The Production Era (pre–1930). This refers to a period of time during which products (and services) were relatively scarce (thereby constraining consumer choice) and the most important function of business was that of production. Marketing, in so far as it existed, was considered the least important function.
  2. The Sales Era (1930–50). This refers to an era characterised by a shift in emphasis of business management from the production function to that of selling. With continued industrial development and innovations, many new consumer oriented products became available and a much more competitive selling environment resulted. This made it necessary to seek out customers and make significant use of advertising, promotion and personal selling.
  3. The Marketing Era (1950–present). This period marked another significant change in the attitude of senior management towards the status and responsibilities of marketing. This change, referred to by many writers as the Marketing Concept (Kotler, 1967), meant a departure from the previous concept of marketing as being the sales function of a business, to one where marketing had a much greater responsibility in total company policy formation and operation. Under the Marketing Concept, marketing was placed at the beginning of the process of determining the products (services) which were needed by the market, the price at which they should be sold and the way in which they were to be distributed.
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Figure 10 ‘We produce an inferior line of goods. That’s why we’re looking for a real first class marketing man.’
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