What’s the purpose of Marketing?

The November edition of the Chartered Institute of Marketing (CIM)’s magazine The Marketer, dedicated five pages to a single article entitled “What’s the role of Marketing? “

The article was extensive, but concentrated on the definitions of marketing ranging from the CIM’s own 1976 definition, to alternatives suggested by academics, consultants and practitioners. Strangely, the article completely ignored and never dealt with the fundamental purpose of marketing.

Philp Kotler defined Marketing as “the social process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others.”

Peter Drucker gave a broader definition, – “Marketing is not only much broader than selling, it is not a specialized activity at all It encompasses the entire business. It is the whole business seen from the point of view of the final result, that is, from the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise. “
In October 2007, the American Marketing Association Board of Directors adopted a new definition of marketing, as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.”
These three definitions epitomize a lot of current thinking on marketing, concentrating on customers and “added value”. What is meant by “added value” is often never explained, and despite all the customer centric descriptions of marketing, its overlaying purpose seems to be forgotten.

The purpose of marketing in any organization or business is to produce sustainable profitable revenue and nothing else. For many, marketing is still seen as an art not a science where marketing performance cannot be measured in any meaningful way. While this view is demonstrably wrong, the view still persists. Marketing performance is measured by results and those results must include the measurable contribution of the marketing effort to the business objectives and the production of sustainable profitable revenue. The marketing organization generates sustainable revenue by anticipating and satisfying customer demand profitably. This is best summed up in the CIM’s 1976 definition of Marketing as “the management process that identifies, anticipates and satisfies customer requirements profitably”.

The CIM article shows that many marketers are still fixated on trying to define what they do and hopefully, some way of measuring it to justify the business expenditure.

In any business, the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO) are primarily interested in only two things, the generation of sustainable profitable revenue and the necessary investment required to obtain it. The CEO’s task is to maximize sustainable profits, while minimizing the use of assets and investment, while the CFO’s task is to manage the financial resources to support the objectives of the corporate business plan.

The prime objective of the Chief Marketing Officer (CMO), is to maximize sustainable profitable revenue, while minimizing the use of marketing costs and investment. The CMO has the responsibility for achieving the corporate marketing objectives within the budget. Provided that the CMO achieves or exceeds the objectives within the budget, the way that the marketing function is conducted need not be questioned. Only if the targets are not reached, or the budget is exceeded, will actions and investment need to be justified with quantified data by the CMO,

The overall responsibility of converting profitable revenue into profit is the responsibility of the CEO and CFO, but not of the CMO. However it is the responsibility of the CMO to ensure that the profitable revenue is sustainable for the continuation of the business, and this can only be done by anticipating and satisfying customer demand.

Any business organization consists of three elements, customers, shareholders and staff. If the business is to be successful, then the satisfaction of all three elements must be kept in balance, so that no element has priority over another. Shareholders want a share of the profit in return for their investment. Staff must be rewarded, for without them no profits can be made. Customers must be satisfied or there will be no revenue for profit. If there is no profit there is no business, which fails the shareholders who lose their investment, fails the staff who lose their jobs and ultimately fails the customer, who loses the source of product or service.

The emphasis of marketing needs to be changed. Customer satisfaction is not the purpose of marketing. The purpose of marketing must be the generation of profitable revenue, by the satisfaction of customers.

“Not for profit” businesses tend to think that the current definitions of marketing do not fit their organizations. However, a “not for profit” business cannot exist without being profitable, if only to allow for the necessary investment and development, without which any business will die. Similarly, the marketing functions in Government departments do not generate their revenue, which is provided by the taxpayer. But the marketing organizations should ensure that the taxpayer gets value for money and it is therefore responsible for ensuring customer satisfaction through effective quality control of the service to demonstrate and justify the return on the taxpayer’s investment.

Marketing actions do not take place in a vacuum. Satisfying customers does not in itself make a profit. Customers can easily be satisfied by providing free goods and services, but without profitable revenue there will soon be no business. The generation of profitable revenue is the purpose of marketing and for that reason any definition of marketing that ignores profit is incomplete, for it ignores the purpose of the action.

Some may regard it as heresy to say it, but Kotler, Drucker and others in their definitions of marketing, got the emphasis wrong. The CIM’s current definition contains all the necessary elements that define the marketing function, but the emphasis should be changed to include the purpose of marketing within the business organization.

“Marketing” encompasses all those activities which generate sustainable profitable revenue by anticipating and satisfying customer demand.

© N.C.Watkis, Contract Marketing Service 02 Jan 08
Contract Marketing Service, (Specialists in Measuring Marketing Performance and Return on Marketing Investment.)

January 2, 2008   Posted in: marketing management

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