Understanding the marketplace and customers is critical to winning in today’s highly competitive market environment. The leading companies invest heavily in this area and go to great lengths to understand their target market and learn about their customers’ needs, wants, and demands.
It helps them design product offerings that satisfy their customers’ needs and wants better than the competitors’.
Apart from that, understanding the customers’ needs, wants, and demands also helps companies create value-laden relationships that help them capture customer lifetime value and a larger share of customers. It also leads to higher long-term customer equity for the firm.
Overall, the key thing to learn here is that firms should focus on understanding the customers and the needs or wants they are targeting.
By learning more about customer wants, they are able to design and build products that satisfy these needs better and strike lasting relationships with customers.
Customer satisfaction and customer experience are of paramount importance for marketers. Understanding your target market also helps you design superior marketing strategies and manage customer relationships with higher efficiency.
In turn, the firms are able to acquire a large share of their target market and capture higher customer value in the long term.
The five core marketplace concepts are of special importance in this regard. As highlighted by Kotler these five core marketplace concepts are as follows:
FIVE CORE MARKETPLACE CONCEPTS:
- Needs, wants and demands
- Market offerings
- Value and satisfaction
- Exchange relationships
Needs, wants and demands:
According to Kotler, human needs are a felt state of deprivation.
They are the most basic concepts related to marketing. A lot of marketing revolves around understanding these needs and catering to them efficiently to maximize customer satisfaction.
A hungry person feels deprived of food and decides to grab a burger at the nearby joint. Apart from the most basic needs like food, clothes, water, and shelter, humans’ social and personal needs are also included in this area.
These needs are already there as an inherent part of human life.
Marketers do not create needs but only identify them.
For example, Uber identified the need for an app that could make taxi services more accessible, or Netflix identified the need for a streaming platform that could offer people a large variety of shows and movies.
People have needs throughout their life, and therefore, leading companies focus on managing customer lifetime value and long-lasting relationships.
Needs become wants when influenced by culture and individual personality.
For example, an American would like to grab a burger but an Asian wants rice. Similarly, the choice between burger and pizza is influenced by personal choices and one may prefer a brand of fast food more than the other based on personal taste.
Supported by buying power, wants become demands.
People demand products and services based on their wants and resources. Their choice of products and services depends on the perceived value and satisfaction. They demand products and services that offer the highest perceived value and satisfaction.
In today’s highly competitive market environment, the focus on needs, wants and demands has grown stronger.
Firms and marketers would do anything they can to understand customer needs, wants, and demands.
They use modern technologies like cloud-based CRM to observe how their customers behave while they shop or interact with the brand through different channels.
They also conduct market research and analyze tons of customer data obtained through various channels to find actionable information.
Apart from that, since the customer is at the center of the picture, the focus of everyone from the top to bottom throughout the organization has to be on the customer.
Firms design and create market offerings to satisfy customer needs, wants, and demands.
These offerings include products, services, experiences, information, or a mix of these to satisfy a market’s needs, wants, and demands. Market offerings may include tangible products or intangible services.
When a customer buys a tangible physical product, it results in ownership of the product, but not in the case of intangible products/services.
In contrast, the customer consumes the intangible products, but there is no ownership at the end. For example, you rent movies on YouTube or Netflix but do not own them.
With the evolution of digital technology, the market is now full of a vast range of such products/services. Some examples include banking, hospitality, and airline services.
Marketing of the offerings requires extreme care. In some cases, the marketer may suffer from marketing myopia which means the focus rather than being on the need or the want that the offering satisfies remains on the product itself. Is there a problem with this approach?
Yes. The problem with this approach is that if another marketer/firm designs another product that satisfies the same needs/wants better or sells for a lower price, the incumbent firm will start losing sales and revenue.
So, instead of focusing on the product/services only, the focus must remain on the needs/wants it satisfies. In that case, there will be one more benefit for the firm. It will be able to improve the product if customer needs or preferences change.
Products that do not improve with time may find their sales declining. Increased competition in the market can also make the sales suffer.
Smart marketers look beyond the core product/services they are selling and try to understand customer needs better to remain market leaders. They also orchestrate several products/services to create brand experiences. Disney is a great example.
Harvard Business School Professor Theodore Levitt coined the term marketing myopia.
He made a famous quote: “People don’t want a quarter-inch drill. They want a quarter-inch hole!” Smart sellers focus on the hole rather than on the drill. The big problem is that it is quite easy for marketers and sellers to become myopic.
In his article published in 1960, Levitt highlighted this problem that several companies remained just so much focused on producing goods and services that they nearly forgot they should spend time understanding customer needs and wants.
Customer Value and Satisfaction:
For any marketer, it is important to understand the concepts of customer value and satisfaction. Both of these are essential concepts in the field of marketing. For any given need, there are generally several products in the market.
For example, if you want to buy a toothpaste, you will come across several brands, many of which offer similar products under different labels. So, how does a customer decide which product/services to buy?
They decide on the basis of their expectations of value and satisfaction from these offerings. For example, you will buy an electronics product on the basis of which brand you expect to deliver superior customer value and satisfaction.
If a customer is highly satisfied, he will appreciate the products and their attributes and tell other customers about the product. On the other hand, if the customer feels dissatisfied, he is going to criticize the product before the fellow buyers.
This is also what necessitates focus on setting expectations. Marketers must remain cautious when setting standards. It means they should refrain from setting too high or too low expectations.
If a marketer sets too low expectations, he may find it easy to meet them but then attracting many buyers would be difficult for him.
Similarly, if they set too high expectations, the result will be that they might find it difficult to match those expectations and then end up disappointing the buyers. These two concepts (customer value and customer satisfaction) are also of special relevance in terms of building and managing customer relationships.
Exchanges and Relationships:
When and where does marketing take place? Marketing occurs when people decide to satisfy their needs and wants through exchange relationships.
Exchange means the act of obtaining a desired object from someone in return for something.
Marketing includes the actions taken by marketers to create, maintain and grow desired exchange relationships with target audiences involving a product, service, idea or object. Firms try to build strong customer relationships by delivering stronger customer value.
The concept of a market is based on the concepts of exchange and relationships. A market implies a set of actual and potential buyers for a product or service satisfying a particular need or want. The buyers in a given market share a particular need or want that can be satisfied through exchange relationships.
Marketing also implies managing markets in a manner that brings about profitable relationships. However, it also requires a lot of effort on the part of the marketers and firms.
Sellers should search for and engage buyers, identify their needs, design great market offerings, set prices, promote them, store and deliver their offerings.
Some core marketing activities include consumer research, product development, communication, distribution, pricing, and customer service.
Most of the time, marketing is seen as an activity that only sellers are involved in. However, people ignore the role of customers in the activity.
Buyers are also involved in marketing, and market when searching for products, interacting with brands through various channels or buying products in-store or online.
Marketing is now more limited to the seller. It has become a two-way affair involving both the seller and the buyer.
The latest technologies, including websites, apps, and social media, have bolstered marketing and grown the involvement of customers in this activity. Marketers need to listen to all these channels to know what their customers are saying.
This helps them improve their offerings and marketing efforts. Marketplaces have also evolved with time.
The evolution and growth of online marketplaces like Amazon and Shopify have also shown how fast the business world and marketing landscape are evolving.
The involvement of the buyer in marketing has grown a lot with the growth of online marketplaces. These marketplaces encourage buyers to leave feedback and make suggestions.
A few last words:
These five core marketplace concepts are of special importance in the field of marketing. Marketers need to be highly cautious and listen to customer feedback across all the channels.
Today’s business world has grown highly competitive and marketers cannot afford to remain myopic.
As a result, apart from understanding customer needs and wants better, the focus has to be on maximizing customer satisfaction and delivering superior customer experiences.
Market leaders invest a lot in managing strong customer relationships. However, the good news is that marketers have several great tools in their hands that can make their task easier.
From websites and apps to social media, these channels are great for attracting and engaging customers. Customer relationships are of special importance and so the focus on long term customer equity has to be higher.